>> item 2, approval of minutes for the january 20, 2014

meeting. >> so moved. >> second. >> all in favor? item 3, pledge of allegiance. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. >> please be advised thatd ringing of and use of cell phones, pagers and similar sound-producing devices are prohibited at this meeting. please be advised the chair may order the removal from the meeting room of any person responsible for the ringing of or use of a cell phone, pager or other similar sound-producing advice. please be advised a member of the public has up to 3 minutes.

item 5, items be listed on the agenda. >> item 6a, executive director's report. >> good afternoon, commissioners, port staff and our two member s of the public that have joined us -- three, sorry, thank you for coming. you can always tell when we're doing our financials by the incredible turn out that we have of the public. having said that, i do have a very short executive director's report and then i want to mention a new section of our agenda called the commissioners' report. first is that the on february 13th, which is this thursday, we will be welcoming the maiden call of the asmara club west. this will be her first call to the port of san francisco and

she will be arriving february 13 and staying for two nights so she and her guests will be here for valentine's day, what a terrific place to celebrate. it's a much smaller ship than some we've seen lately, she carries 702 guests and 400 or so crew so that's about a thousand total apblds we're pleased to be welcoming her for the first time. in 2014 we are going to have 75 cruz calls and have 260,000 passengers, which is the highest number of passengers since the late 1960's. we've been very pleased to see our passenger volume growing and as we reported some of that is due to the fact the ships are bigger and some of it is due to the fact we have more volume. so we're very pleased to be welcoming the azamara, she will be the only maiden cruise call

for the port of san francisco for 2014 and is the 2015 princess news public? yes or no, nod or shake? so that means they're not public so i have great news about the princess when the time comes. so that concludes the report on the azamara and secondly i'm very proud to say the pier 92 grain silo public art project is completed and is ready to be lodged for the public's enjoyment. a lot of people have been enjoying it already just from even driving in on 280 or the 280 extension or just around the neighborhood. so on february 26th at 5.30 pm we are going to be hosting a ribbon cutting with district 10 supervisor malia cohen and port commissioners. i hope all of you can join. xhirp brandon

commissioner brandon will be hosting with us, we will be officially lighting the grain silo project called, what do we call it? sorry, i lost thought -- baby rise -- at the grain silos down at pier 92. so it will be a great event again, february 26 at 5.30 pm at the corner of amador and cargo way down by the fire station. we hope you can join us for that. lastly, commissioners, we have added an item we call the commissioners' report. this is an opportunity for you to talk about things of new business outside of new business where you are making assignments to the port staff. it is a common item on a lot of other city commissions and we thought it was appropriate to bring it forward here because you have been so terrific in sharing

information and educational information with us and so we thought we'd just give you your own dedicated time right at the start of the meeting when we hope to have a full house. thank you. that concludes my report. >> thank you. commissioners, this will be the first time we have our -- any public comment? public comment is closed. now we have our commissioners' reports. commissioner adams, would you like to -- this is a report we put you up to last time when you weren't here. >> first of all i'd like to start off by thanking ex-president doreen woo ho, vice president brandon for your years of leadership. the port commission, we found ourselves the last couple years going through a typhoon and your leadership led us through it, very firm and very strong, and

i thank you for it, doreen and (inaudible) for all your hard work. then i'd like to say a few words. at our december meeting we were talking about the heron and tern park project. it was right after that that i had the opportunity with national geographic as a tourist, 17 days at the arctic and the south pole. it gave me a different perspective as a person about the last frontier, how important our environment is, whether it's global warming, protecting the environment, and i'm just a kid that grew up in the streets of city city, missouri, and going to antarctica was my 7th continent, i was with

researchers and scientists and people that really care about the environment and to see the orca whales, the humpback whales, to see the penguins, to see leopard seals and all type of wildlife it was just something that i can never really think about. then i read the book of sir ernest shackleton and talked about his expedition down to and arctic ka and i would like to read a deal from his book, sir ernest shackleton and i felt like he felt, being one of a million people that get to set foot on antarctica. in memories we were rich. we have pierced the veil of things. we have suffered, start and triumphd, grown bigger in the bigness of the whole. we have seen god in his splendor, heard the test

that nature renders. we have reached the naked soul of man and that was the way i felt having an opportunity going to antarctica. i know a lot of people go on cruise ships and stuff like that but i was on a working vessel of only a hundred people, i did a dive of 200 feet, i went snow boarding, i climbed summits and really getting to be out there hands on because when hilary clinton was secretary of state, everybody wants to claimant arctic ka, chile, everybody has this treaty so to see that and understand how important it is and prince harry had been there like a couple weeks before we got there and he did a true and correct with some guys from england andary to try to reach the south pole and they ran into a storm. one of the things about being on this expedition, there were a lot of young people and that made me

really feel good. the youngest person on this expedition was 4 months old, the old st was 90 years old. when this whole issue came up in december about heron park, i live here in san francisco, i've never been to heron park, but now i feel like an ambassador, i feel engaged, i just got back from cape town, south africa, on friday i went shark diving in a cage and that was a totally different experience for me again because we were in a sankary swimming with these 30-foot great white sharks and see them in their nature and how important it is and in south africa they really care about the environment and protecting the sharks where in australia right now they have had several shark attacks recently and now they are killing sharks down in australia, they are catching them, pulling them up to the side of the boat. so i've learned a lot and as i've said, i'm really thankful for going,

i wanted to share that with my commissioners but as a person i've grown because i've had a shapblds on experience to go where maybe one in a million people get to go to antarctica. thank you. >> thank you, commissioner. >> i don't have anything to share, i just want to commend commissioner on his trip and while he was gone to and arctic ka, which is probably a continent that i will never advise itd, there was a ship that was stuck for a few days and i was concerned maybe his ship was stuck and he might not be coming back any time soon. >> and i did the same checking. >> but, no, that was a wonderful report. that's all i have to say. oh, i had the pleasure of attending the naming of the bay bridge, the willie lewis brown junior bridge this afternoon and it was a great event. it was, the author of the bill,

assembly member isadora hall, gave a speech why it's so important the bridge is named after mayor brown and lieutenant governor newsom was in rare form and did a great job and it was a wonderful event. after all the rain and cold the sun came out and it was just a beautiful afternoon and i'm honored to have been a part of that. >> i will echo commissioner brandon's comments. it was a wonderful honor to be bestowed on somebody who has done so much for the state but i think the thing that struck me so much at all was really the impact of the naming of the bridge for speaker brown, the impact that will have on young people seeing what is possible and looking at his life story and how much he achieved. so whether you've been on the winning side of an issue with him or not, i think everyone certainly respects him and recognizes what a tremendous honor that was and what a tribute to all the work that he's done and the legacy he

leaves behind. for me it was an interesting moment when dr. clarence jones also spoke about the legacy from dr. martin luther king, he was dr. king's personal attorney and then lieutenant governor newsom spoke about how so many people were touched by mayor brown in terms of his getting them involved in political leadership and where many of them ended up and it was sort of a full circle for me because my father was also one of dr. king's attorneys and clarence jones remembered when my father was a young attorney and then it was willie brown who appointed me to the board of supervisors many years ago so it complete like a complete swinging of the pendulum too. and executive director moyer moyer was there as well. >> i just want to say i want to congratulate you on being the new president and willie,

the vice president and i want to say thank you to my two mentors for my first year here, former president doreen and kimberlee helped me a lot when i first came here, sort of pointed me in the right direction and i appreciate that. i don't have any transfer going down to the majority, i have a lot to do right here in san francisco and i am involved in a few gigs right here that i'd rather not talk about publicly but i have my hands full here. as far as reports, next week -- next month. >> and i like when you talk about swimming with the sharks perhaps it prepares you for san francisco public service. call the next item. >> item from the consent calendar -- public comment. >> oh, public comment? seeing none.

>> item from the consent calendar, item 7 a request approval of travel for a member of the san francisco port commission to shanghai, china to attend the breakbulk china 2014 conference and make marketing advisities to port shipping customers with members of port staff. >> let's do 7a first and then call the others. >> sure. >> so moved, 7 a. >> second. >> public comment? all in favor. opposed? motion carries. >> item 7b, request authorization, subject to board of supervisors approval, to accept and ex pend $698,625 in

2013 infrastructure protection program port security grant program funds from the u.s. department of home land security for security improvements at the port of san francisco. item 7c, request authorization to amend contract with langan engineering and environmental services, inc., for consulting sftions related to the pier 70 masseter plan area to extend contract term by one year. item d, request approval of a supplemental appropriation to reallocate $1,089,250 of 2008 general obligation bond funds within the southern waterfront from bay front park and blue greenway projects to bayview gateway and tulare park projects to allocate savings. >> so moved. >> second. >> public comment? seeing none, all in favor? aye.

opposed? that item carries. >> item a a, information presentation on trends and implications of the port's audit edify napx statements and future financial projections. >> good afternoon, commissioners, elaine ford, deputy director of finance and administration. and i'm opening with this item because it gives you a look at where we've been and where we're projected to be going with the port's finances to set up your review of the 10 year capital plan and the 2-year operating and capital budget. i wanted to thank commissioner woo ho

for suggesting that we look at the projections from a financial basis, accrued financials instead of just bringing the typical cash-based projections. it's been a very, very helpful exercise to turn back to the port's income statement and balance sheet and look at where we've been and where we're headed, so thank you for making that suggestion. and i'm joined here today with really the whole finance team. our fiscal officer, john wu is here, ann cary who will be presenting the 10 year capital plan is here, megan wallace, nick cruz from real estate and marilyn ye are also here, as is daly dunham who has shepherded this capital plan for many years. as we look to the last 5 years, it's very hard not to

stress enough how the decision that you, that this commission has made has really made an impact on our results. in 2006 the port didn't have a capital plan. we cataloged our capital needs for the first time. i'm sure felt quite a bit of concern with the size of those needs and since that time we've guided 195 million dollars of investment, non-developer investment, toward our rehabilitation and enhancement of our assets. in 2012 you approved a capital policy which required us to constraint our operating budget and set aside 20 percent of revenue to capital, both in the capital budget year and a set aside for future capital and that's really having a result. we've also leveraged public private partnerships with the 2008 and 2012 revenue bonds

which have had significant results to our positions, as well as had many successful completions of capital projects. since 2008, revenues grew $17 million for an average of 4.8 per year and expenses grew 13.8 or an average of 3.9 per year. you will see this careful management really allowed oir revenues to outpails our expenditures, especially in the last 3 years. we held back expenses in the early years due to a desire to hold operating expenses and then allowed expenses to grow as we ramped up our capital program and acquired design and engineering and work of other departments. if you look at this chart operating and maintenance is what the port needs to operate and pay for the maintenance

costs and depreciation and amortization is in the light green line and that's a very good indicator of what we should be spending on capital renewal and then operating revenues is the blue line that's even a little below in 2009, a little bo below in 2010, then skipping up in 202011, 12 and 13 and showing positive revenue. so on the real estate revenue, it's really the diversity of our portfolio that continues to help us perform so well. and this last 5 years includes a recessionary period and despite that we have seen continued growth in our real estate revenues and it's also the policy of this commission to require market rate adjustments in our lease terms that have really helped to grow this revenue stream. also as the city begins to recover we're seeing enhanced performance in our real estate revenues.

we also experienced strong growth in maritime revenues and really the two business lines that have shown the most growth are ship repair and cruise and both come from strategic investments from this commission. cruise revenues, as you know, we're making a strategic investment in the pier 27 cruise terminal and in past years it's come from increased ship calls and passenger volume and we expect this trend to continue. dredging and investments to expand dry document capacity and shore power at pier 70 really yielded results in that business line. since 2008 operating expenses have grown by 13.2 million or an average rate of 3.9 percent per year. and it's really three areas that have drilled cost escalation and that's personnel expense, professional services and charges for other

city services. for salaries it's really mandatory fringe benefits have been continuing to rise as well as pension and health plan costs and the report goes into some detail on pension contributions which have had notable increases. the use of professional services is really to get the services of other city departments and for this prior period was to supplement the port's internal work force for our capital projects. much of the front end costs that we're seeing were for due diligence work, conceptual design and other preliminary costs associated with capital. preparations for the 34th america's cup event also contributed to expenses in 12 and 13. the operating and expenses

look -- are held back because of a non-cash adjustment that was from, reducing the environmental liability of pier 70 so this chart shows -- i'm sorry, this table shows our growth rate without that non-cash adjustment. so you can see we had more notable cost increases, expense increases, in 2012 and 2013, 10 percent for 2012 and 4.6 percent for 2013. so the result of this positive net income in the last 3 or 4 years totaled 8.4 million and it really shows that we improved our ability to contribute to capital because of all of the management and all of the policies that this commission has put in place because of the partnerships and

the line below grant and contributed capital that grows 21.9 million, that's all the other external sources of revenue that enhanced our operating position. and this chart is showing the incredible benefit of leveraging other sources. operating revenue is in the blue color and grants and contributed capital so other sources of funds, the light green line is our operating and maintenance expenses and then you see dmrerb identification and amortization above that and this is really showing that the port has had the ability in the last 5 years to meet our operations and our state of good repair and it's other sources of revenue that have really allowed us to make other enhancements to our assets and to address our back load as well.

now turning to the balance sheet, the port's net position improved 75.5 million since 2008 and i think that's a really notable result. we've made very significant capital investments that also contributes to liability with debt, tenant improvement credits comprise the majority of increases in liepblts and grants and other capital contributions have really driven significant improvements in our position. i just wanted to give you a look at the investment we have made since 2006 and the sources of that investment. this pie chart shows the 195.6 million of investment and you can see the result of this very conscientious and focused effort on getting external resources to make really critical investments. to date the port has secured 91.8

million in contributions from federal, state and local agencies. we have held a very, we have maintained a very healthy cash position. total cash and investment balance was 123.6 million at the close of last year. this represents 461 days cash on hand and it's a very strong position and we project that will continue. as you know, the port re-entered the bond market in 2010 following about a 20-year hiatus and in order to achieve that we had to really improve our financial position and we've been able to use this bond program to push more and more capital investment. and it's really been a decision to create the capital plan, to express the need that was required, to improve our financial position, to enter

the bond markets and all of these things together with yielded really impressive results. we have very strong debt service coverage levels historically, looking toward 2013 at 6.54 times. so now turning to the financial projections, so just to be clear, you will see the budget documents later, this budget, budgets focus on current spendable revenue sources and their uses and these projections are prepared on accrual basis of accounting and they merit the audit ed financial statements. looking forward, we see less, we see a declining ability to generate net revenue. we see

that revenues are projected to grow about 16.7 million or an average of 3.8 percent per year, but expenses are projected to grow 21.3 million, or 4.9 percent per year. so this graphic indicates that we're not that far off if you look at the operating revenue line. it shows we're certainly able to meet our operating and maintenance costs and almost pay, almost invest appropriately in renewal costs, but we're not generating that net income result that would allow us -- we're not projected to generate that net income result that would allow us to invest further. and this is really a cue for management, careful management intervention, the same way we've managed the last 5 years. the diversity of the port's

portfolio, low vacancy rate, economic recovery, commission policies are all -- work together to show very strong growth on the real estate side. these assumptions assume interim releasing generating 25.4 million in 2018. they also assume investments we're proposing come online, for example pier 31, pier 33, pier 38, new restaurant at pier 50. the projections do not assume other opportunities such as the back lands or further utilization of pier 35 once it's a secondary cruise terminal or development of pier 31 and 33 so those opportunities can help us over the next 5 years. we didn't include them because either they are speculative or we believe they are outside the