told me this morning they were playing around with the idea of a waiver to the city's ordinance and decided -- talked to him over the phone, this is the way things are trending, and he said you know what? you're right. we're on short staff to make sure we comply. we will supply domestic partner benefits to do business with san francisco. good news. >> congratulations, that's great. thank you. >> 1440 as amended, all those in favor of resolution of 1440 as amended say i. >> i. >> opposed? . passed as amended unanimous. >> 11b request approval of amendment to lease [inaudible]

and protective association for space located at pier 9 located at foot of vallejo street to reduce the size oaf premises, change the instrument type, specify rent adjustments and make other chaks. changes. i >> i want to [inaudible] so many years ago at midnight that the dry dock was on shore underneath the admiral's house. it was not a great birthday. but we will take you up on your offer commissioner and take you out on the boat with some champagne when it sails under golden gate bridge. on to more mundane matters, pier 9 is one of the state's most valuable pieces of assets. it generates welcome $3 million a year to the port. it has a wide range of tenants,

everything from the san francisco water transit agency, to the blue and gold fleet, san francisco bar pilots, architectural resources, arg, and most recently auto desk, you know, fortune 500 company that we all know of, proud of, being a port tenant. they are currently investing upwards of $16 million into the pier for their applied sciences development center. you know how amazing that premise is. this past december the port commission agreed to an agreement with the auto desk to further expands their premises at pier 9 and this further expansion called for auto desk and san francisco bar palace to come to some agreement as to the gate and ingress at the end of pier 9. it became pretty clear as both

parties started to look at the expansion that as envisioned, the expansion could cause some serious vehicular circulation issues. we've gone back and forth on solutions to this problem and the bar pilots and auto desk come to the port and come to a solution where the bar pilots reduce their parking lot area by about 5,000 square feet. awe uto desk has agreed to take on financial responsibility in terms that would financially benefit the port. as consideration the bar pilots have asked h their lease rent readjustment that happens in 2020 be reset to the prevailing

market rates rather than just the higher of the current base rent or the prevailing market rent, which could result in a decrease in base rent to the port, depending upon market conditions at this time. the rest of the business rooms are in the staff report, well documented in the report. it's a tricky situation where a victim of earned success in that pier. we tried to come up with a solution that splits it in half and solves the problem. we will take your guidance and real estate staff and myself are here to answer any questions that you might have. thank you. >> excellent. motion and a second? >> so moved. >> second. >> any public comment? hearing none, any commissioners comment? >> i just want to comment that we did make some suggestions at the last meeting and i think we have seen some improvement and i would say that we obviously

do feel that auto desk is a very important client and we're glad to see there's some ability to see there cease some pace that will work for them, the bar pilots and others. i think we feel we're captive in terms of what the bar pilots have asked us. i think we want a win win solution and move forward for everybody in this regard. >> i think she summarized it very well. i think we have had a lot of discussion on this lease and it has come back to us a few times and i think that the port has done a great job in trying to negotiate better terms on the port's benefit, but we do feel that, you know, our arm is twisted and we have two tenants that we want to help resolve a situation and it may be to the port's loss, but to both -- they're both two tenants of the

port that we want to keep so i hope in the future that prior to us approving new leases, we take all matters into consideration so that we are not in this position again, but, you know, nothing's perfect and i want to thank the staff for doing their best effort to make this matter work. thank you. >> the exhibitioners, there was a lot of discussion and that's one of the things, i like being on this port commission and everybody speaks and there's good discussions and i got a question here and i don't know if it should be either you or to [inaudible]. your lease includes the city stan darpdz of non discrimination language and

proposed amendment includes [inaudible]. someone provide information regarding the make up of your work force, your pilots. >> yes, [inaudible] that information. >> i know that the bar pilots in our discussions with them discussed extensive amount of small business and local business procurement that they do in san francisco and gave us a number of port tenants and a number of small companies in san francisco that they generate economic benefit from. in terms of employment, i do not have that information. >> okay. what i was asking was because maybe john, somebody from the bar pilots come up. >> what was the question again?

>> can you give me the make up of you pilots that work for you? >> it's almost all male. it's mostly white. we do have two latinos, pacific islandser. we had the first female pilot in the country and there was, i believe only two others in the world. and we are more diverse than the pool we draw from. you go to cal maritime and despite all the outreach efforts and having for scholarships there for the last 20 years, the deck -- you know, they have -- at cal maritime they have deck logistics and engineering and the deck program, it's not very diverse and they've been trying to change that. i was on a panel that looked at

that and they are making some progress, but not a whole lot. and, you know, i think there's a misperception that we go out and we train the pilots. we do train the pilots, the pie hot candidates that come to us, it's the state of california goes out and they hold the exam. it's a very competitive exam. you have to have two years of command time to be eligible. during that two -- or then we get those -- we only get the candidates that the state provides. you know, la's somewhat different. that's a city and a municipal [inaudible]. they are exclusively white male and even though they go through whatever process the city of la does, long beach is pretty much

the same thing. i mean, there's just not -- the pool of candidates is -- we actually reflect better than that pool of candidates so it's -- i don't want to say -- it has been an issue that goes back a long time, but it's still -- there has not been a lot of change in the maritime business. >> so as far as your bar pilots you don't have any african americans or asians, they're predominantly white male. >> and two latino pilots and one female. >> no more commissioner comment? on resolution 1441, all those in favor of resolution 1441 say

i. >> i. >> opposed? resolution 1441 passed. next item, amy. >> item 12a, request approval of the fiscal year 2014, 15 monthly [inaudible] and special events and filming rate. >> hi commissioners, nate cruise, i'm a financial analyst. we were here before you two weeks ago to present the parameter rent schedule. during the course of the presentation a couple of questions came up so we're back here today to respond directly to those questions and address your approval for the rent

schedule for the next fiscal year. the first question had to do with how the parameter rent schedule fits into the overall register portfolio. the parameter leases and the parking stalls which are a very small component represent about $9 million of the total $63.5 million. the remainder is lease revenue and non lease revenue, non lease being parking meter and parking fines. it doesn't represent a huge amount of -- it's a large amount of money, but not the lion's share of revenue, it represents a very large portion of the lease count. while we talk about the diverse and stable revenue base at the port, it comes from these parameter deals, it's where the local businesses and small businesses have found a home at

the port. the second question that came up was requesting a little bit more depth in how to compare the market rates you see in the city and how they're published and how they compare to the rents. the biggest problem we have is our assets don't easily fit into intoo the traditional classifications of class a or b offices. we don't have the amenities on the typical checklist. that's sort of the first challenge. the second piece is a mathematical one. on the private sector side lan lords will provide tenant improvements up to a certain space. on the port side of the embark dare row we don't have that option so tenants pay out of pocket for that. one of the [inaudible] include the financial district and there's a lot of marquee properties in there bringing

the rates up. the market data is an asking price, equivalent of, like, a list price on a house. not the final transaction price. there's just naturally going to be a gap there. those are some of the big factors. another question came up about tech sector tenants and how we market to them. we don't have a specific incentive program or recruitment effort for tech center tenants. aside from, you know, our maritime tenants, we want to maximize port revenues so the extent that the tech sector does that, we'll gladly take their money. however, because our space often has this industrial look that seems to be desirable by tech center tenants we have become the home to a number of nationally renowned tech center

companies such as auto desk as well as others. the last question had to do with how we charge for views. relates a little bit to the classification of our space. sometimes we have class c space, but class a views so how do we reflect those views within our rates. within the rent schedule there's a view rate and a non view rate and the agricultural building in pier 35, a mark up for the view is anywhere between 25 and 60%. the big mark up on the agoly cull so the relative value to the base facility condition is pretty large, that's the 60% increase. 35, the condition's a little bit better, the view isn't as

good. that concludes the specific questions that were asked two weeks ago, but're available to answer any further questions you might have. >> so moved. >> second. >> okay. are there any public comment? no public comment? commissioners comments? >> yeah, i just had a question. i mean, i understand that we don't give outright what you would call as tenant improvements, but we often obviously give out rent credit and, which is in a way, recognizing that since they're putting improvements in, we're putting in credit. what is the formula that we think of when we decide to give a rent credit, which in essence is recognizing the fact they're putting in the tenant improvement? how do we calculate that? is it e kwif lent to -- how do -- it may not even be 100% but what is the formula we think about when we do this?

>> well, for most of the deals that are in the parameter rent level there's the smaller level deal, bread and butter deal. there's not a significant rent credit. anything that -- anything that's within the parameter rent schedule, you know, we have the delegated authority or have in the past to allow for a few months of free rent to make up for the tenant improvement allowance that you might have on the private sector side of things. when you look on the schedule there's a net e effective come lum that's slightly less than the gross minimum. there's a delegated amount that the -- >> okay, so i guess my question really is probably relating both to parameter as well as non parameter as far as how we think about it. my question was looking at the schedule of the fact that parameter rent is a lot of

transactions, but be not as far as percentage of revenue. if we were to look at the month parameter rents that come up versus the parameter rents, what is the equivalency of the rates being charged. i understand we're being asked to look at the parameter rent schedule and i'm looking at it in terms of the whole picture are the rental rates we use outside of parameter very similar in terms of what we would charge [inaudible]. >> i'll start that one. thank you for the question, commissioner. i think it's a very good one. there isn't a hard and fast mechanism that we follow, but for the most part our requirement is that a credit that we're going to give to a ten ant has to apply to a real property improvement that has a useful lifelonger than the lease term and is specific to

the tenant. an example of that may be that new new space is built out in an otherwise vacant shed, but if it's customized to have a kitchen of x nature, the walls would be something we would consider as improvement to the port's asset, but the customized kitchen has no resale value to us afterwards. one of the things important to note in the non parameters as they come to you is that oftentimes we are bringing you a transaction that changes the use from storage to whatever else it is. in the case of the parameters, by definition the use is remaining the same so the are carpeting and painting and maybe some minor upgrades to the asset itself, but nothing as dramatic as converting storage space into office space

or something like that. so we get into that second realm of non parameter. as you know we have a of uses. >> all right. >> sorry to steal your thunder. >> thank you. >> that is helpful to know and i guess we're trying to understand more and more how we -- because obviously this is the primary source of revenue for the port, to understand the factors we're considering and how we're being competitive and make sure we're also keeping up with how the market operates and thinking about -- and my question which you tried to answer in your slides? in terms of the amount of tech space.

my question is more strategic in the sense of how it's being applied today and knowing what space is being used by what sector or type of real estate it is, as we think about future, whether we want to keep that space as it is utilized today or as we look at in the future do we want to change it because we could upgrade it into something else so it's more strategic. if we were to think about the industrial warehouse space, would we want to say that leasing out to more tech tenants, as an example, not the only usage, would be a better use of that space. let's try to figure out how the keep the revenue not what it's been, but the components of the future differently and thinking about the portfolio in a more strategic sense. >> we heard that question at

the last hearing and we'll have to do homework on that to identify really which port funded capital upgrades might yield the best return to the report so stef will have to come back with that item, but as it relates it'll be on these smaller deals. a: >> thank you for that great report and answering our questions and further clarification. really appreciate it. >> thank you. on resolution number 1442, all in favor say i. >> i. >> all opposed. resolution number 1442 passed as is. next item amy. >> item 12b with pacific gas and electric company for embark dare row project of submerged

land between 28.5 of 23rd street, 52,272 square feet of underground access for horizontal directional drilling and 3 for a four year term with a 26 year option subject to be approval by the board of supervisors. >> good afternoon, brad benson, director of special projects. we've been in front of the commission two times before on this project. we were here on the initial term sheet for this project in 2012 and last september the commission endorsed a revised term sheet that included substantial new terms and that was endorsed by board of supervisors in february of this year. we're back with the finance proposed license agreement for

the project and we're excited about that. the project's been approved by the california public utilities commission after a very exhaustive process. to refresh your memory, san francisco has two different transmission systems, 115 kv system and 230 kv system, which is largely devoted to the downtown area in san francisco. the two systems don't speak to each other. you'll see on this map in blue are the two lines that serve the 230 kv system to the embark dare row substation . those lines are running through the city [inaudible] one or both could be severed in a major earthquake and this project is really designed to provide redundant service to downtown and to connect these

two different transmission systems so they speak to each other. so it's find on this slide, this is downtown san francisco. there's a faint red line around it. that entire area is served by the embark dare row substation. the project is before you today and the license agreement is a 3.5 mile, 230 kv submarine and underground cable that would connect the embarcadero

substation enclosed. there's the bus station that pge is planning to build. we're very pleased they've hired some high quality architects to build these substations because they should fit in with the surrounding neighborhood. this is the proposed 230 kv substation on the nrg site, also has a high quality look and feel to it. so the cpuc approved the project on january 16, they conducted a mitigated neg deck analysis for the process. both pge and other committees responded to that and responded to all comments. you'll see the route of the proposed cable here. pge is planning to do something called horizontal directional

dripping and if you look in the bottom left of this, they would drill down just north of the pier 30, 32 complex and really they would be drilling down beneath bedrock in this area of the project to get out the water. and then travel that 3.5 mile route and there would be a new horizontal directional drilling along 23rd street, fairly deep down below bedrock and deep out into the bay so that's the route along port property. as i mentioned earlier there's a great deal of seismic risk that the 230 kv system is exposed to. pge hired an independent firm to do that seismic risk analysis which was part of the cpuc record and the numbers are pretty scary.

there's a [inaudible] probability of the failure of both existing substation cables in a 7.8 earthquake, a 48.2% probability with a magnitude 7 earthquake and over the next 30 years, a 28% risk of both cables being cut. if that happens it could take two to four months to restore service to downtown. that would have severe impacts on businesses and residents in that area. the estimated for a maximum outage, a seven week of a $3 billion hit to local businesses. thinking about the petrero neighborhood, the southern connection, we have focused a

lot of our thinking on how to improve that neighborhood. it's an area that's been used for industrial purposes for quite some time, including power generation for the city. you'll see in yellow the pge ho down yard and in red is the existing open air potrero switch yard. compare that to the small green square on this, which is the proposed new gis enclosed station at the site. this is a view from illinois street of the open air substation, which is something that has typically more industrial kind of neighborhood and of course this neighborhood's trying to transition to something else. so we've negotiated terms for the license agreement that are consistent with the terms that you adopted and that the board of supervisors endorsed with

the term sheet. most of the land over 400,000 square feet of the land is submerged land. there's about 50,000 square feet of underground land that's the hdt drilling areas and just 21,000 square feet of lands along 23rd street that's mainly for sidewalk use. pge would pay the port prepaid rent for a 40 year term of approximately $7.6 million per installment for a total of $15.2 million. we'd receive the first payment on the effective date of the license, sometime after the board of supervisors approves the license and received the second payment before january 1, 2015. there is contemplated that pge option for 26 years te