life >> the view is the 20 basis points is a legitimate, fair fee to pay and necessary for the participants? >> yes, to have the book value protection >> we look at this with a critical eye, any managers we should be aware of in terms of underperforming or consider to replacing in the future? that can incompass performs and key people leaving. which ones would you like- >> of course part of the watch list is highlight from a qualitative and quantitative perspective where we focus and have a higher alert. rustle investment is managing the glide path, they had a ownership announcement so that is on page 5. the other ones we don't have concerns from the

qualitative perspective thrmpt are a couple that are flagged for performance and that is low price stock funds and that has a underperformed the last 3 years relative to peers. that fund is unique with 35 percent outside the u.s. but the benchmark is 100 percent oaf the u.s. there is also about 9 percent in cash and in the rising market that is a negative to performance as will. of all that is the highest alert but we are comfort now but are watch tg closely. >> one of the speakers brought it up, should interest rates rise and they must, we had the one fund to choose-there are 2 chooses, one, stable value and the bond fund.

>> and the [inaudible] brokerage. the retirement fund, is that what you mean? >> no the self directed brokerage fund >> the 20 investment vehicles members have the chance to choose from, stable value and the bond fund? >> correct. >> would you consider a shorter 1? >> we did in the june deferred comp committee meeting, we evaluated stable income which is short duration. the committee agreed to continue and stay with stable value, but it is something we are constantly evaluating because of the cost of stable value.

>> i think that makes sense going forward. thank you for your answers i appreciate it very much. thank you >> any other comments or questions on this item? >> just one quick observation about stable value, we spent a lot of time talking about stable value and whether it is good fit for deferred comp and the one thing we decided on is people in stable value care about one thing and one thing only and it is capital preservation and they understand that they're herning a very low return at this time but the majority of participants are stable value. it is because they care about nothing more than capital preservation. we spent a lot of time thinging about that and looked at a lot of different providers and fees and think the decision that we made was

we went with who we thought was the best provide frr stable value and increase the book valuef thoassets which was a issue for us. it isn't a perfect solution, i think for the people in stable value it is very good solution and something we talk about every time we have a deferred comp meeting. what are the fees and book value and what is the return and why is it so low and where is it going. it is the natcher of that one fund. >> first off, thank you-pages 24 and 25, thank you for putting that breakdown. it is step that we need to monitor. [inaudible] invest in a reasonable cost so we are

monitoring fees. the issue of stable value, the number now is 1.3 net of fees based on comments made and e-mails received, statements are made that money marketerize a better operation or offering. do you bow what money markets are offering? 0 or.1. meaning 001. some of the money market funds are insured like our wrap recovered stable value fund, do they pay for that? >> i don't know of a money market >> someone is paying, you just don't see it. it is insured and paid so think the cost is 7 basis point but it is paid. what is a member left with? 1.3 may or may not look like a good return for those risk adverse, it is good. i would

like people to invest more but that is a individuals choice. as for adding another market fund, we try today reduce the number of offering to increase participation. there is a lot of studies when there are too many choices people do not invest. it is a behavior thing. as well as trying to reduce cost meaning the net fees. we have been trying to approve the whole program for everybody, one to get participation up and making sure members don't pay fees that do not add value for them. >> i think this is worth pursuing because the stable value fund is the largest holding so think it is worth considering. you talk about the fees and the more fund the more difficult the decision is and the more you say i don't know which to invest in but

there are just 2 choices for bonds. stable value or the bond fund. this came up a long time ago. fdic is 250 thousand dollars mptd it is by participant so let's say we were to buy cd's and role them over, it isn't just you are limited with 25 othousand, it is 250 per participant. this came up a long time ago and that is my recollection. you would get the fdi insurance if lets say you bought certificates of deposit and role them over you have the insurance because eerfben though it is a large dollar amount t is per participant, if you will. no individual would have 250 thousand dollars on average in a rolled over cd or staggered set of certificates

of deposit in a new fund. i want to put that on the table in terms of dealing with low rates of return on bonds and cd's mpt if you have short term money you get zero, buy a 5 year cd which is a cheers and applausee risk to the stable value fund that you can dpet numbers that are biggerinate of the 1.3 percent we are talking about here. i was checking the 5 percent cd or 2 percent issue, if you want to allocate 100 million in a staggered cd account with a 4 or 5 or 6, 7, 8 year mu churty you would get a bigger return. my recollection that based on the participants, it is based on that so we would have the insurance which'd would totally oviate the need for wrappers.

i see the executive director and our dc manager knauding on that, is that your understanding as well? >> there are some participants that have more than 250 thousand invested. >> i understand it is 250 thousand average, we will look into it it see if that is something that makes sense. >> thank you very much. >> okay. let's take public comment. at this time a member of the public can comment on this item. no comment? claire, nothing? public comment is closed at this time. thank you. this is a

discussion item. mr. clerk can you call the next item? >> item 11, discussion item sfdcp manager report. >> thank you. commissioner jouz before you the monthly report. i'm not sure there is a lot extrahere that we would want to talk about so happy to answer questions, but did want to point out that the 2015 fund is migrating into the retirement fund at the end of september i believe, is that correct? >> which one? >> into the retirement fund because the idea being if you have a target date fund for 2015 you retire in 2015 and it is redundant to the retirement fund and investment is the same >> what is the retirement ?

>> there is a retirement fund that has allocation for those in retirement. >> anyone else? >> this report prepared by predential and there are a couple pieces of information and work with them to improve the report >> i talk today commissioner driscoll and in the process oaf trying to obtain that information and put it in reports going forward. >> thank you. >> any other discussion? let's open up to public cam unt. seeing no public comment, it is closed. mr. clerk call the next item >> item 12, discussion item, review of dem graphic experience study for july 1, 20 09-2014. >> [inaudible] good afternoon

commissioners. dem ographic asemption, using a evaluation is a poncht part to measure how much money to put aside to pay for the promised benefits, rates of retirement, disability, moore taelt, what percent of members are married, how many have a domestic partner, job bromotion kwr marriage increase, [inaudible] how large we expect those benefits to be and how long we expect to pay those benefits. [inaudible] the last study present today the board in 2010. i called out the dem

ographic assumption because the recommended moore taelt changes have the largest impact on cost, larger than any of the other changes put together. i would like the note that i showed stats on a survey done by the center of retirement research that 22 of 150 national public systems use generational mooretalities projection and improvement and that is from a 2013 database so those stats are already out of date. i would like to welcome bill halmark and an harper, they are here today to present the demo graphic study. >> thank you. [inaudible] this is once every 5 year study. the full report has been proited provided to you.

the powerpoint is trying to hit key elements because there is a lot of data and analysis so want >> student focus your attention where there are significant changes. it is useful with the 5 year cycle, these assumptions we recommend are used for the 2015-19 assumptions. each year we bring a eview of there economic assumptions prois and wage inflation and expected return, but this is getting at all the other assumptions. we are not asking for board decisions today, this sadis cushion item. we would like to get ideas from you about additional information you would like to see or need in

order to make a decision and a chance to answer any questions you have as we go through this. our key findings, the big one that genet rr eluded to is mooretalities is faster than wealtyed in prior asumtions so the recommended changes on mooretality have the most significant impact. we also saw higher retirement rates for certain members, lower salary increases, which also tied into colis for [inaudible] safety members than we expected, but the big impact again is the moretality chaipgs and because of how that has come out in the study by the society of acwares, we recommend the cost impact be phased in over

something like a 5 year period. >> members can you tell me what old safety numbers are? >> they were police and fire fighters hired before 1976. >> okay, and- >> their cost of lisking adjustments for tied to pay increases from the last position they held and all the newer members their cost of living adjustment, their basic cost of living adjustment is 2 percent >> they get half of the dollar value or half the percentage of pay increases for active police and fire fighters. >> you retirement rates are higher for longer service members, do you mean the rate that people are retiring more.

>> more people are retiring than we expected sooner. >> do you have a explanation? >> we have some, we'll get fl to that-we have details on retirement rates and it is easier to see what is going on there. there is a broader issue about the time period of this study where we did see not just in year system but across other systems higher retirement rates >> we took into account during this period all were layoffs. there were layoffs across it city those this goes back 5 years, but at the same time they normized that and have recommend aishzs that folks who have lodger service with the city are retireering sooner than we thought they would. we

thought having put in a longer career worked longer and those were the adjustments we recommended. how to explain that, i don't know. you would think, but-- >> i wouldn't think that. >> the goal is when we moved the highest age factor to 62, the intent is to encourage people to stay until they achieved the highest age factor or maxed out. 62. it used to be 60 where you maxed out and they put the incentive if you work to 62 you get 2.3 percent for every year of service to encourage folk tooz achieve that age or try and get the longer service. the dem ographics show that isn't successful inlonger service folks that they are leaving sooner than we anticipated

>> may i ask a definition? when you say moretality improved faster than expected you say people are dying sooner? living longer, okay. why don't you say that, living longer? >> go ahead. >> so, that is a great segue here. it will fit right into it. the assumption overlaps 20 years was that moretality rates would decline by about.9 percent a year. in fact they have declined by 2.4 percent. these are broad national numbers, these are not your numbers, but in fact our studies finding something very similar to you. >>.9 percent or.9 years? >> we set a probability that

you will die at each age, that probability has been declining -was expected to decline at a rate of.9 percent per wreer, but over the twen year period it declined at 2.4 percent per year. we have people living longer and collecting pension benefits longer. the major work on this was published in november of 20 twaen by certify of actuaries creating a new moretality table used in the private sector, it doesn't have public sector data in it and not required to be used in the public sector and new moretality improvalment projection scales so we'll get into how that study influences

and applies here. pension plans across the country are effected by this. just to set that broader context, we have a graph from the staff of acuitary study where they looked at how it improvement is taking place over the last century. the graph starts assuming you have 100 thousand people born and shows the projection of how many would still be alive at various ages until somewhere around 105. they assume they have all died. you can see that the initial improvements in the early parts of the 1900's were in the younger ages and that significantly improved moretality, but what happened more recently is you are seeing that curve-it is squaring the

curve. we get more people living into their 70's, 80's and now 90's. it isn't extending out the ultimate lifetime all that much. some you can see some movement from like age 100 to 10 5 but not a lot. the big change is we get a lot more people living in to their 80 and 90 which effects pension plans because we pay a lot more benefits out those additional years. these are aggregate figures and there are a lot of variations by income level and geography and other factors but these are the aggregate national figures. so in our analysis for your plan, we developed separate rates for

males and females and separate rates for 3 classes. people collecting benefits, disabled and everyone who is not collecting a benefit right now. we use similar processes for each group because it is somewhat complex and there is a lot of stuff going on chblt we want to illustrate the process for hethy annuitant that is the most impactful. we focus on that. you can get the same information out of the report for the other groups. there are 2 basic steps we use to put toort p together our recommendation, the first is to develop a base stable. it represents the rates or probabilities at the time of it stud squae the second step is apply a projection scale for how we think those rates will change going into the future.

in developing the base table, we take a standard published table and compare it to your actual experience. in this case for the most part, we chose to use cal pers because it represents public employees so it is presumed to be more similar to you as compare d to other table s. we weighted the experience by benefit amount and this is pornl because as a pension plan we are not concern about the number of people who dies or continue wliv libing about the continuation of the payment of pension benefits and there has been study after study showing that the people who receive the higher pension benefits tend to live longer.

we need to take that into account to estimate the liabilities. in applying the projection scale, we'll go into this in a few slides here. historically what we have done is called a, static projection where we project improvements for a certain number of years, say 20 years and apply the rates to everyone. we recommend you go to something different called a generational table where we have a separate table for each year of birth that incorporates those improvements as they go along and we'll talk about why we are recommend that and why we think it is a better approach. first, in developing the base table-we take the standard published table, in this case i

show cam pers as the purple line here and compare it to your data and if your moretality raetsd are higher we move the table up and lower we move the table down. we are not moving rates at individual ages because you don't have enough experience to have information with those ages but you is do experience to assess and adjust the table as a whole. what we take from the cal pers table is the pattern of how the moretality rates change from age to age. >> can you define [inaudible] >> ham, stands for healthy annuitant moretality. >> what does that mean? >> it meanatize is the moretality we apply for healthy annuitant in the system so people receiving benefits and

not disabled. >> healthy means non disabled? >> yes. >> we are not doing a health squeening on the individual, we just categorize whether they receive a disability pension or not >> it is legitimate clarification. thank you >> yes. here is a table summarizing the results. the top table is for male jzs and the bottom for females. i want to focus on the bottom line in each table that total because as i said, there isn't enough data in each age grouping to set assumption by age grouping. the first column shows the number of exposures. that is

the number of people times the number of years that they were in the data, whether they continued living or they died. the second column looks how many of those people died and the third column is under the current assumption how pleny did we expect to die. you can see those comparisons there. then the next section is the section that we really focused on, which is to weight those number pz based on the benefits that each individual was receiving. we just multiplied them by their monthly benefit amount. we are just looking essentially at monthly benefits that ceased or continued. we first look at the exposures, the actual, the current and the recommended. the place the decision is made in the actual

to expected ratio where we decide the actual number by the expected either the current or recommended. what we want is for that to be 100 percent. we want the actual number of benefit payments that cease to equal what we expected. under the current assumption, for males it was 89 percent so moving to the recommended assumption is moved to 100 percent. if it is 89 percent, that means that we are going to be experiencing losses in the system and expecting people to die faster than they actually are. the bottom has the same analysis for females. the current assumption is 93 percent. we adjusted that

assumption by applying a straight factor to the cal pers healthy annuitant helthsy female table to make it 100 percent. you can see for the individual age groupings, it goes above and below 100 percent. they actually all average out. >> [inaudible] the question is how many people total are we paying out to? >> over the 5 year period for the males there were about 51 thousand exposures, so about 10 thousand per year. >> per year, okay. so per year we pay 20 thousand people? >> round numbers in the non disability category. >> how about disability

included? >> i think it is 5 thousand. [inaudible] >> this includes continuous [inaudible] >> my recollection is 25 thousand retire and 5 thousand continuance being the spouns of domestic partner of a city employee. >> continuous or [inaudible] >> about 3 thousand continuous and about 1400 disabled

retireees. >> 1400 miscellaneous. that sounded low. >> what about total figure? >> number of pension checks we cut? >> disabled? >> 2600 is what we have from last year. >> total disability pensions paid? >> yes >> both together is 23 thousand if you take out the disabled? >> right. . >> around. >> yes. >> 23 thousand hams. >> [inaudible] >> 3800 as of the 2014 [inaudible] >> may i ask a couple questions

about the chart? i got lost along the way. if i look at the the age of 50-59 for males what is the exposure? >> the number of people for each year in that age band so we cover 5 years, so you are averaging a little over a thousand people in each year who are between age 50-59. >> if you were 57 in year one you are in that number until you moved into the 60 band and count ed for the remaining 3 years. every year they take a snap shot of 3 years. every year they take a snap shot of muany helty annuitants are in the age band and looking at that year after year after year. there is a movement but these are bands of 10, you can stay in one for the entire

period but also move from one band to another. >> no one less than age 50? >> because they are not eligible to retired. >> if you are a ham you can't retire until age 50. if you are a disabled annuitant you can retire regardless of age if you are safety and-that is why these start to miscellaneous showing 50 is the minimum age for retirement. >> what about if wow are disabled and not fire or police? >>io need 10 years of service regardless of age. >> 5610, that is the number of pay checks-it is 5 year sample

so if you take that number and divide it by 5 that is your head count on average? >> roughly between age 50-59 >> during the 5 wreer period you lost 48 people? >> correct, you expected to lose 25 but lost more? >> yes >> the exposure is the 5 year total of the pension checks? >> ya. when you get to the exposures that are benefit weighted it is those 56 00 multiplied by the monthly benefit amount. >> okay. >> the actual is those 48 multiplied by their benefit amount. >> one last question, can you-can somebody in safety retire in the first 10 years and still be eligible? >> the safety disability

provides you coverage from day one. if you are injured in the course of duty you can retire with disability pension after being a police or fire fighter for one day. there is no minimum service requirements. >> what about [inaudible] >> safety again is age 50 for service pension and need at least 5 years of service and age 50. on the hand side of their division it is still 50. >> you have one sheet that says that? all these questions? >> [inaudible] we have about 5 sheets that will summarize it but not on one sheet otherwise you can't read it. actually if you go to the annual evaluation, this is a paid political announcement, if you look that evaluation there is

whole section that defines each tier of benefits appendix c. that is more than one page. i will warn you, it is more than one page. >> it is quite a bit more than one page. >> quite a bit more. >> there is a briefer summary in the annual report. >> that is true. >> the actual number is 149480, that is multiply ied y by the payments? >> the 48 is multiplied by the monthly benefit amount >> over the 5 year period 149, 480 in benefits is what went away? >> right. out of 24.6 million. >> okay, thank you very much. >> there is a dollar sign? >> ya, you can put a dollar

sign. >> any other discussions or questions for staff? we'll go to public comment at this time. okay, come on. wishful thinking, sorry. >> so, the slide shows the comparison of the actual probability of death at each of the sample ages between the current assumption and the recommended. this is as of-for the recommended, the study period is 2011 so we are saying these are approximations of the rates in 2011 before we look at any projections of improvement

beyond that. then, the next step is to look at what do we assume for projection and moretality. the society of acuary waged presenceples of looking at experience and assumption over a transition period. they selected as their best estimate that the ultimate rate would be a 1 percent per year improvement up until age 85, it grades down after that and they would transition from 2007 to 2027. the argument they gave is when you look at the data, there is a generation that as of 2007 was about 70

years old that had significantly better moretality improvement than the generation before or after it. they wanted the 20 year grade down so those 70-year old s would be 90 and phased out of the system before you got to the ultimate rate. there are significant debated among acuaries whether the parameters or praept or other parameters are appropriate and that debate continues. the society did give us a tool so that you can modify the parameters and develop different projection scales. we have prepared 3 options all of which we believe are reasonable. fr the board to consider. the first option is the societies recommendation, it is called

the mp 2014 scale. they consider it their best estimate. then we considered a couple other combinations, first changing the convergence period because much of the moretality improvement fades out at older ages and so rather than going to age 90, you could phase out to 85 or to 80. those are options 2 and 3. the ultimate rate we looked at social security data and historical rates of improvement for ages 65 and up have been around.8. social security assumption in the 2014 trustees report is.8 8 as the ultimate rate of improvement. options 2

and 3 are built around social security data with lower rates of improvement and the faster convergence. option 3 is similar to projection scale developed by another large national acwarial firm fl the privement sector clinets and their auditors agreed it was a reasonable scale for last years disclosures. we think this brackets the range of reasonable projection scales that could be considered. just to give you a little bit of flavor, i won't go into a whole lot of detail. you can look at this at any age you want but this is showing moretality improverment rate at age 70. the top is male and the bottom female. the black line lines

historical daty data and the 3 colored lineerize the 3 optional scales of how to carry it forward from the current rate of improvement represent by theened of the black line to get to the ultimate rate of improvement and that is compare ed to other scales. we can do a lot more on that if you want but i suspect i have more interest in moretality improvement than any of the board members. the last piece i wanted to talk about with moretality is this generational versus static approach. in the static approach we apply one set of rates to everyone as opposed to looking at it by year of birth. the recommendation for best practice is generational for the last 10 or 15 years. we as

acuaryies have been slow to adopt it because there had been administrative complications, the systems were not prepared to handle the complication initially. there are administrative complications but we have gradually figured out how to overcome those. we are recommending the generational approach as being more accurate. the static approach is intended to be a simplified estimate of the same number you get from a generational approach and the way it works is illustrated in this box to the right where we look at the probability of death for someone age 80. if we were doing a static approach, we might say on a weighted average we need to look 20 years forward and so we look 20 years forward to someone born in 195 fiver 5 and

they turn 80 in 20 wreer jz select the rate from that point and apply it to everyone regardless of when. the generational takes our best estimate at each age. >> [inaudible] >> the static, yes. what it tends to do is for your current retireee it says they will live longer than we expect them to live and the younger people die sooner than we expect and we hope those things balance out. the generation is adjusting for those age differences. with that, i'm done with moretality until we come back to cost implications. i'll let ann run

through other assumptions >> as bill stated earlier in the presentation, the retirement experience that we are seeing is-there is a lot more retirements than expected based on the current assumptions we have. we set separate assumptions for each group listed there in the presentation and our current assumptionerize not only age based but service base and what we recommend now is splitting the service groups into 3 different service groups instead of 3 as stated in the presentation. we see increased retirements for members who have longer service with the system and we are seeing only mynor changes for people with lower service. these graphs show the retirement experience for the miscellaneous group for members with 20s-29 wreers sperns on the e left side and

30 or more on the right side. i want to walk you through the process that we go through when we review the assumptions and look at the experience. what we do is we take and compare what we are actually seeing in retirements to what we expected to see based on the currents asimptions and if there is a difference see if a change should be considered. helping make that decision we use the confidence interval around the rate during the experience study period. jen real we generally we propose changing or modifying if the current assumption falled outside the confidence interval range. there are other things we consider. we consider the experience not just in this study but preechbious studies. we look at what we may know

about the near future in terms of experience and we also look at special circumstances or events that took place during the experience study period. for the miscellaneous graph for 20-29 years of suvs, the gray bars are the confidence intervals and in the middle is the rate of retirement. the green line represents our recommended assumption after we analyzed the experience. for both groups we are seeing that rates are generally high er for ages over 60 and are recommending changing the assumption as such. >> can go back and explain to me the graph, age 69 for 20 hrf

29 years of service? >> age 69 that is members age 69 and they're retired with 20 percent of the people who are eligible to retire did retire. that is the block box is 20 percent. our current assumption is the red line and the current assumption now is 20 percent that for that same age so it is in line with the assumpson. we try to smooth our recommendation as well and look at one specific age >> if you have 20-29 years of service and age 69, there is 20 percent-20 percent of those people will retire? >> in the period of the last 5 years, yes

>> at age 69 >> at age 69 >> the confidence interval is-you have 9 percent cfds betwone 11 and 27 percent? >> yes >> the think about the cfsds intervals is that 20 percent was 1 out of 5, the confidence intervals high because we-if you have one more retirement it goes to 40 percent. if that is 20 out of 100 then the confidence interval is much smaller because if you add one more retirement it doesn't have as big effect on the rate >> because you is a smaller head count that year? >> yes >> the band of the crfds interval, there is less data available >> age 69, why increase it from 20 to 30 percent? >> it is based on the speens we

see from age 65, 66 and 67, that whole group is on average a higher rate so it is more smooth pattern. >> okay. thank you. >> there is no hypothesis we could come up with why 69 year olds would have such a lower rate of retirement than 68 year and 6 7 and 66 year olds. >> this next slide is showing the retirement fraets the police and fire groups. for the police and fire people between 25-29 years of experience during the experience study period. what we are seeing here with the police group is the rates were significantly higher than expected. the cofds

intervalerize the plouter bar squz much higher than the red lines. however, during this experience study period, there was a special event and that is the [inaudible] program sun seted and there is no longer availability for people to be members in [inaudible] what we saw was a [inaudible] in the last year [inaudible] was available to people and that was drifening driving up the retirement rates. the date they enter drop in terms of the study-you see that special events spike the retirement rate so taking that into consideration we recommend a increase in rates but not recommending a increase all the way tupe the confidence intervals because we don't believe the past experience is a indicator of what will happen into the future due to the drop sun setting in tis time

>> what this graph is saying is [inaudible] if you took out drop you are probably-it is going to drop back down? >> we are not saying the retirement rates will drop after drop, but we say it won't increase as much as you are saying during that period. there were some other increases in retirements as well for the police that the fire wasn't seeing because when you look at the fire retirement rates the experience is right in line with the current and the recommended assumption are the same line in this case. the green line represents grown and green and red. we don't recommend change to the fire assumption- >> the rate was all most 80 percent for police? >> for people ages 62-64. you

have see the confidence interval go-there isn't a lot of people in there. >> right. this is similar experience that you see here in the slides with the police and fire group jz these are for people with 30 or more years of service. you see the same type of thing with the police group and that driven by the drop program. we don't want to change up to what we experienced in the last 5 wreers but recommend a increase based on the other retirement experience and you are also seeing more increases in the fire with people that have 30 or more years of service. the service band with 30 or more years of service, this is when the safety members may hit the benefit cap which is 90 percent of salary if they are age 55

with 30 or years of service. in section 3 of the dem ographic experience report, there sh the same analysis for the other groups, for the [inaudible] and other police and fire groups with less service wree not showing, but if you are interested you can look in the report. we are just not recommending any major changes. moving to the merit and slry increases. merit increases are the additional increase over and above wage inflation and we also set this

assumption separate for the groups listed here. we recommend because of what we have seen in the experience in the last 5 years and reduction for miscellaneous and craft group and mynor changes for muni, police and fire. this graph is different. it kuzant have the confidence intervuls but shows the actual merit increase for the miscellaneous group by years of service. years of suvs is the bottom access and the vertical access shows percent increase. the blue line shows merit increase and the red line shows the current assumption which is above what the actual is so we show a shift downwards so the proposed assumptionerize less and more in line with what we are seeing. what is important to note here is on the very

last service piece, 20 plus years oaf service is ultimate assumption recommend a 0 percent merit after-20 years of service. basically people get wage inflation increase but after twen years we done see additional merit increases happening. the last dem ographic assumption that has a significant or material effect on the evaluation cost is the old safety cola. those are the cola's for the old safety charters that are not the basic 2 percent most of the other groups get. what we propose is decrease this assumption for each of these charter groups, but more importantly to make a change in the structure of the assumption because we use a constntant percent but want to base it on a formula base

assumption to be more consistent with the structure of the plan provision. when i say that i said that the-they don't receive 2 percent cola, their cola is based on is the active wage increases of the current active. for each retireee that increase is based on the last position they they held. for example, in the group where someone retired before 1975, their basic cola increase is half of a percent of what their active member counter part would receive in a wage increase. what we propose is that their cola would be half of the total assumed wage increase. it is very similar for the other 2 charter groups

where their colas are based on half the different increase of the active counter part salary increase. we are proposing a similar formula but adding a factor to account for the relationship for average benefit to the average salary. this slide shows the list of all the other assumptions we studied and what our recommendation are and don't want to go through this in detail, but if you have questions or refer to the report everything we studied is in the dem ographic experience study report. >> i don't know if i understand one half of the wage increase versing one half of the dollar increase. >> if someone is a lieutenant

and a active lutenent receives a 3 percent increase, if you retired [inaudible] you receive 1 and a half percent cola. if is a dollar amount you calculate what the dollar is and receive half the dollar amounts >> after 1975 what is it? >> it is dollar amount >> basically people who retired after 1975 on the old charters, they get a dollar increase regardless of what their benefit is so you all most have specific cola increases for each of the old safety people on a percentage basis. >> it is 1976, isn't it? >> [inaudible]

>> what we see is for the folk frz example have been retired for 20 wreer year and their base pension is 2 thousand dollars half the increase is 500 dollars which represents a significantly higher percentage of the underlying pension and over the years those have been compounding but what they found is our assumption of how rich these colas are is over stated so we are trying to fine tune them. the period measured where we have long periods of no wage increases for active employees and that may be part of the reason why they didn't see the increase in the colas >> there were periods during

the study period where there was no wage increase so there was no cola for these members which created a significant gain in evaluation. we didn't to just reflect based on the experience during the 5 year period so instead we created these formula based on the assumption about future wage increases and how to adjust those and apply them for these old safety groups. that is a lower cola based on our current set of assumptions. >> just to note, under the proposed assumption formula, theimator increase is based on the assumption, it isn't based on hch >> the wage inflation

assumption 3.75 and the ultimate varies dependent on the group. the wage inflation assumption is 3.75 percent right now but in the last 5 years we have changed it from 4 down to 3.75. >> got it. >> this slide summarizes the impact of the proposed assumption changes. there are 3 option frz moretality on the top and all the other assumptions are down at the bottom. if you look at the other assumptions there is actually a reduction in the ac warial liability attributable

to them and a reduction in the expected contribution rate attributable to them. all of the increase is really due to the proposed changes in moretality assumptions, which if you do option 1 it is all most 8 percent increase in the acwhael liability and 6 percent of pay increase in the contribution rate. >> that is a gigantic number. let's say the liability is 20 billion, 8 percent of 20 billion >> 1.8 billion >> 1.8 billion increase >> it is 1.5, 1.6 increase in liability >> i think that is big. >> ya. >> [inaudible] increase in employer contribution for shared cont ributions at this

point. that is why there is- >> that is wie we spent as much time on moretality >> that is why their continues to be debate over the adoption of these tables. >> that is why there is relevancy to this mpt some of the bncher may see seem this is blah blah blah but this is big impact on the fund >> woe shared this information and report with the city and continue to discuss the options that the consulting acware is recommending but yes, it is significant impact going forward for the next 5 years even if it was selected to phase those in over 5 years. >> so, slide 24 gives you a little breakdown on the impacts because there is a couple things going on here in the impacts. one, is the experience we had since the

last study so in the last 5 years what happened. the moretality improvement is significantly greater than expected and if we use the same approach than the prior study we increase the contribution 2.8 percent of pay just doing that. we changed from doing a counts weighted basis to benefits weighted because all the studies said that is a important thing to do with pension system because you want to know when the pension stopped being paid not when individuals stop being paid and that added.8 percent to it. the other piece to it is what do you expect future improvements to be going

forward and that's-dependent on the scale you get you get a different impact. those are where the pieces are and it is really this combination of catching up for the improvement than we expect ed for the last 5 year jz how you translate that going forward in the future. they are like 2 distinct pieces both with a significant impact going forward. >> if i look that chart, aupgds 1 is 2.5 percent, that is increase of contsbution rate? >> due to that projection scale. you need to add the 3.6, so the total is 6.1. they match 6.1 on the previous page. it shows 6.1, 5.4 and 4.7 >> increase in the

contribution rate is over the period that it is implemented? >> it is a 20 year amortization of the change. >> so, can we go back to the previous slide? the moretality option one, the way i read this if we implement moretality option one the contribution rate is 6.1 percent higher each year for the next 20 years because of the implementation of these new rates. >> each year for 20 >> let's say we implement this and the following year let's say the contribution rate is 20 percent- >> now it is shared >> it is shared so it-dependent on what threshold you cross it

has a different effect on the city and employees >> are we talking about the compination of the employer? >> the term contribution rate goes up 6.1 percent. >> because the employee contribution rate is set it triggers cost sharing. in times past it was born by the city but now dependent on the plateau you hit it is shared by the employee. if the gross employer contribution rate was 23 percent, the impact of cost sharing could bring their percentage down to 20 percent but in this case the city is going to be paying the majority of the 6.1 or whatever the number is based on the options, but the employer will probably kick in additional money also. >> let me go through just a couple more slides and then we'll come back. >> so, if we implemented

moretality option 1 and combined contribution rate between employee and emplorer it goes up 6 .1 percent to 26.1? >> yes. now i'm showing on slide 25 the different options if you include all the other assumption changes we are making which brings down a little bit,.8 percent. it is 5.3 for option 1, 4.6 for option 2 and 3.9 for option 3. then we suggested because this is a significant change, and you're dealing with the experience for the last 5 years and reassessing how things project forward you can phase this in over a 5 year period. it is also consistent with the way the california acwareial

adrisery panel suggests you can deal with this . you can phase it up to 5 year jz not past your next experience study. here we look at the impacts by year compared to the total and so it would in fiscal year 2017 which is the first fiscal year it would effect it is 1.9, 1.6 or 1.4 but increase over the years. the advantage of doing that is we projected because of the invesment gains stored up and not recognized, we projected declining rates so the increase phasing in matches up somewhat with the declining rates that we had projected as we recognized the assets. we

have charts here showing what the projections would be with 5 years phases under options 1, 2 and 3. we have the models so we can show you other scenarios if you like. that is the end finally of the presentation. it is a significant change that we are suggesting resetting both the expectations going forward for moretality improvement squz what happened already. we understand the significance of that change. >> what do we select or implement moretality option 1, 2 or 3, they all don't-how do i say this? the effect on the

liability isn't the same for all 3 options is that correct? >> correct. >> so the moretality option 1 will have the greatest increase in the liability? >> ya. really the purpose of setting the assumption and setting that liability is to set the target you are trying to fund to so that you have a plan to pay the benefits. if you set it too high as you get experience your contribution rates go down and if you set it too low the contribution rate go up so you aim to get a best estimate so that you have the target right in the future. >> knet r bet looking at the

last part, city anticipates that without this change the emplorer contribution rate would have gone down to liss than 29.9, but with isthe change it goes from 22.8 to 22.9. we are on the downside of all these stored up investment gains. we have 5 state positive gain years that we are moving in at 20 percent and what we notified the city is this do 5 year budget planning and they rely on our projections and the last projects showed there would be a more rapid decrease in employer contribution rate and with this proposed change it will continue to decrease but not decrease as dramatically

and quickly as we originally projected and like i said t is the tune of 150 million dollar difference, which is significant to the city and to the the employees. the good news is we live laupger longer and that is where the good news ends. but we get pensions longer also, i guess that the other piece of the good news, but from our perspective we pay pensions longer. luckily we are well funded. >> commissioner driscoll. >> there is difference between generational and [inaudible] i focus on contribution rates, you may say the end result. it is good people are living longer but there is impact about contributions. generational and static have

different effects, cost. >> in theory when you set the static you are trying to estimate the impact of the generational so there wouldn't be an effect. in practice you don't match perfectly. i think the example we put in the presentation we used a rule of thumb to get static assumption and it didn't match exactly. the piece that happens with the static though is in 5 years when we do another study we have moved down this chart another 5 yire years so there is a an adjustment and hit you are expecting. with generational and 5 years we'll do a studyfelt we are not expecting a hit, we may get a gain or loss, it can go either direction. >> i look at page 24 when you

put down at the bottom here, the static method, the increase is 2.1 oppose today choices above options 1, 2 and 3? >> right, if we >> we have to choose one or the other, that is why i try to understand. your recommendation because it is best practice is generational? >> yes >> i will say to your point the ones who adopted generational in california are the ones just completed but there isn't a majority of plans who adopted the generational approach and the issue is do you want to expect a pleasant surprise at the end of 5 years because there is a like lihead you hood you get oo gain or adjust every 5 years trying to get as close and that is the

methodology. >> last week i was at the national association of state retirement conference and several systems spoke about changing moretality. every one said they were changing to generational >> my point is it is more conservative way to fund the liabilities. >> all 3 of the options we recommend are generational. that is the direction but not everyone has adopted it. i think on the corporate side just about all of them have. all the large plans for their accounting evaluations adopted it. the public is going through now and some had it for some time. cal pers didn't

adopt it because their evaluation system couldn't hantdal it so didn't know how to calulate it. organ had it since 2008 and washington is in the process of adopted it now. >> do the point on the bottom on page 24, they said if we stay with static instead of 2.5 percent that is 2.pun 1 percent. it is 40 basis points we are talking about. >> yes. >> generational versus static >> trying you are try-you are choosing one number and know it is imperfect way but every 5 years we try to hone in on that number versus generational assumes yes, in moretality

>> yes >> there is reason why society

and3 4 f1-there is research tha drove that number. i would say it isn't prudent to play for gains or losses. the second question is whether to go option 1, 2 or 3 which effects contribution. next question, do these projections count the supplemental cola issue? >> no, that is a issue that's will effect contribution frz the city and all most all active employees. in termoffs the other tables driven by our assumptions, that is based on life expectancy. when we adopt this are obliged to change this as well >> the table will change every year rather than now when there

is a change in economic assumption or demo graphic assumption. operationly we load them in the system so it isn't a issue but this is the life expectancies would change annually >> that will effect how much money you get. [inaudible] all those things are effected boy the table. that is where it effects the active and retired members. is the rule we must change at the same time? >> no the acware tells when the assumptions have changed and need to adopt new tables so this is a annual events, they change annually so the tables will all be redone annalially >> are we talking about fq 16, 17? >> we have the tables effective july 1, 2015 and these are available july 1, 2016.

>> all this work focuses on a year from now because it effects the cities budge squt the members pay check. this is all discussions and decisions and a part of a series of decision that must be made >> the timing is february next year we vote on which to implement? >> we hope to bring back decision to the october board meeting and then that will give instructions to [inaudible] as to what assumption tooz wrus to run evaluation and you will be accepting the evaluation report in february. we will report to thitsy what the contribution rate for 16/17 will be after that discussion >> the short story is february the is the decision date and until them we have time to chew on this? >> october is the month you

have to decide what assumptions ciron uses to run the evaluation. they run the evaluation over november and december, present the result tooz the board in february traditionally and so it is too late then because then they would have to go back and rerun it. >> on the timing process on decision making, is this next budget, the 2 year budget-we do 2 year budget but the mayors office and board of supervisors have to do more work? >> they do a 5 year budget projection jz they have a rolling 2 year budget. we rin the second year of our 2 year budget but there are some departments in the firs year of their 2 year budget so there is a overlap so every department doesn't have to be before the city every year >> the point is if this effects

the contribution rate-one year we kdelayed a mupth and caused problemwise the city working on the budget plan so maybe we need to shoot for january. we have a way of kicking things back a month which normal for us but not good for the budget process of the city which we have a relationship with >> they are hopeful. this is the voice from the city. they would like this retirement board to have made their decision as to which of the options earlier rather than later. i told them october is when we present it anthey said that is timing for them to revise their budget projections so a lot of folkerize watching this and we are hope fal we can get the decision of the board in october at the very latest ilate november but that delays

the city to update their financials >> [inaudible] may or may not be [inaudible] >> i can give a preview of my--we know that thehering is late september so if we have gotten the court decision we could have tried to pay it in september but now we know we can't so we believe we are going to pay it during the fiscal year or the plan year as so it is reflected as a unspected expense when we do the 2016 evaluation >> [inaudible] >> [inaudible] we have to disclose it as a known event and a adverse event and have to

estimate the value and increase in liability associated with the fact that it is a smap shot of july 1, we know at the time we release the report this liability is there and the impact it will have. >> thank you. >> can i ask a question in closing? we look at the 3 moretality aungz squz talk about the [inaudible] more tally aupgds 1 is grade down 1 percent. i'm looking at page 25 for example. that is a 1 percent improvement in the rate of moretality across the board? >> per year >> per year. i did see something further back that was 2 and a half percent. that was

the observed, right? >> it varies brie age and varies by gender but if you look at the historical rates for age 70, at 2007 which is when the historical data stops, you are looking at around 2 and a half percent averaging between males and females. when we say grade down to 1, it is starting at that poipt and following the green line and getting down to 1 percent over a 20 year period. >> because we don't expect a rate of the increase of moretality to continue at the current rate? the improvement slows down? >> that is what we are expecting. >> thank you i had to hear that in my own words.

>> comments? ready to go to public comment? ladies and gentlemen of the public, it is your turn to comment on moretality projections, scales, assumptions, suggested changes. seeing none, public comment is closed. thank you very much for your thorough presentation. at this time lets take a 10 minute bathroom break and we'll reconvene at let's settle down and get back in our seats. let rr get started again. so, we left item 13. thank you very much. >> approval of recommended revisions regarding

qualification for dependent adult child or [inaudible] >> caryn are you making this presentation? >> i can. these are very simple changes. when the policy was firs adopted we didn't have plans relate today the sheriff and [inaudible] and the changes include them >> thank you very much. can we accept this report as submitted? >> i move we adopt staff recommendations. >> second. >> thank you very much. all in favor, aye. let's go to public comment on item 13, anyone? everyone? public comment is closed. all in favor? >> is there a change in the liability as a result of this implementation?

>> not significant >> small? >> we are probably paying less than 4 adult dependent child benefits and so in the-in the entire system. since i have been here you had one on your consent calendar today which i believe is the third one in the 16 years i have been here that is presented to the board. >> potentially a couple dozen times whatever the benefit is? >> it isn't a significant increase. >> that's it. thank you >> it is limit today the older plans. it isn't available in the newer plans so it is a benefit that has a finite or limited exposure to the total population of the plan. >> thank you. >> thank you. just by a recap

for commissioner paskin joreden there was a motion made to accept the recommendation from staf and seconded so now we take a vote. all in favor aye. opposed? the aye's have. item 14 with would like to continue to the next board meeting. >> my i ask why we are continuing this for the second month in a row? >> we are continuing because commissioner makras would like to speak on the item and as a courtesy- >> i'll for continuing item to give members of the board to speak on them about at some point as a board it isn't good guv rns to continue deferring items until someone can be here. as member thofz board said you can choose to be here or not be here, but for the board to run, we need to vote son things and talk about

things. i don't think it makes sense to continue it another month but understand that is your prerogative >> that you can for sharing your comments. do we need it take public comment on this? could you call item 15 >> discussion item and [inaudible] >> very briefly, this is the fiscal year of travel. you can see we had expenditures in the last quarter that equaled total expenditures in the first 3 quarters. we had travel expenditures of 250 thousand dollars against a 700 thousand

any questions? let's talk public comment on item 15? the travel expense report. seeing none, public comment is closed. no vote is needed. mr. clerk can you call the next item >> executive directors report >> the 3 things i repaired a update has been discuss. the ordinance that creates the cancer heart and [inaudible] was approved by the board och supervisors on july 28. signed

by the mayor on august 6, 2015 and will become effective september 6, 2015. that is a change to give them parody with the presumption provision in the state plan. i updateed you on the timing of the benefit lawsuit. the only other thing is i wanted to let you know as they did last year the city elected to prepay their employer contributions and they prepaid them effective july 1 and we are in the process of reck in sileing the previous years through june 30 contribution required to score up with the city to find out whether they overpaid or under paid us so that is a process

that we believe will be retune because the city indicated they intend to prepare those contributions >> any discussion on the executive directors report? >> i have a couple comments, first wanted upidates on the minutes. there was follow up on the minutes specifically page 11. president of the board supervisor cohen asked for a follow up regarding-this page 11 of the minutes to be very specific. president cohen directed staff to prepare a follow tupe be presented at the next board meeting so i have 3 things if you can give a idea when you will follow up on that. item 2 is on page 13.

commissioner makras asked for staff-this is the first full pargograph, staff develop a list of the worst offend rbs for climate change. last is page 16 i had a request. commissioner miburger requested a update on ownership change in the last 2 years. if you can give a idea when you will follow up on the 3 requests. page 11 is supervisor cohen's comment. president cohen directed staff to plepair a follow up report to be presented at the next board meeting. this was regarding the mohcd and i have notd seen a report on that, that was the first one >> staff repaired a report and president cohen had indicated

that she wanted it continued until the september board meeting so we anticipate we will fulfill that request. >> number 2 is page 13 regarding commissioner makras request. this

committee? the last on page 16. this is regarding my request for managers who exspessed a ownership chaipg in the last 2 years. this is regarding the issue with a change in the equity ownership that would be and relevant to staff putting them on a watch list. 3 4 f1 >> we'll get on it and have it by the end of the week >> the other issue i have is the forward calendar. at the july meeting there was going to be a-you had something on the agenda for this meeting, a report on the currency overlay program. nothing was presented and don't see anything on the

forward calendar. the issue is lessens learned from the program. if you can give a short story on what you think the lessons were and when aioanticipate it should be calendared for the full board. >> the lessens learned are contained in the report to the board and that isn't a priority to have on the forward calen defrr october. >> i'll continue on this on theorder of request. thank you for your response. >> anyone else have comments or questions? all right. seeing none let's take public comment on item 16 executive directors report. seeing no public comment public comment is closed. discussion items no vote needed.

>> item 17, discussion item retirement member >> commissioner miburger did you want to- >> thank you madam president. there are 2 issues regardsing the good of the order, one is regarding public comment having the board materials on line. the board of superizvoors has the board materials on line and they scan them and members of the public have access to that so if you can answer that, is that feasible? can you get the board materials accessible by the public? number 2 is currency overlay program. we terminated this program 2 years ago and the issue is lessens learned. this is on the forward calen deder at least 2

times, nothing is done, there is no oral or printed report. i thing this is relevant to hedge frunds. the currency ovlay is a hedge fund and believe if we don't learn anything from this we will commit those same areas forward. the currency program lost 60 million dollars. no lessen learned on that so i suggest is i would like under rule 8 to request this be calen deer. if staff doesn't present a written report i'll present mine. i request a agenda item currency ovlay, lessens learned as well as going forward as terms of implementing this. i this can those are good for the

orebder because i don't see how we can go into a hedge fund program without learn thg lessens from our first hedge fund because i see a lot of similar effects. number 1-i'll expand on those when it is calendared but our turn ovfor and change in style. all these thingerize relevant to the hedge fund program and if we don't learn anything from the 60 million dollar project then i fear that we will make the same mistakes going forward. in conclusion, 2 things, number one is discussion or on the online presentation of documents, number 2 a item be calendared in the next 3 months on currency overlay, lessens learned. >> thank you. anyone else want

to add anything? >> one of the things that i receive phone calls about the most is retireees troying to schedule appointments and they feel like when they call the to system that it is a very long and lengthy process to get through the someone and then when they do get through i'm sure there are a lot of people-the couple people i hear from to them it a big deal. just a couple points i think that there are things you working on, but things to think about and bring back to the board at some point is fixing our phone tree. i called and i'm just going to ball park the times. it took me about 3 minute to get to the initial greeting. it took me another approximately 3 minute after that before i got to a point where i could press a button to try to transfer to someone and when i transferred to someone

ieneded up in a voice mail. it took about 6 minutes to get to voice mail. i know there is a -is there a proposal to try to revamp the phone system? i remember i heard you were in the process of looking into that. >> we are look toog propose a initiative to upgrade the phone system. >> i'm sure that would make a lot of members happy. in the interim something to look into is how to cut down on the timeframe that members have to stay on the phone to transfer to someone. ? second part is when people retireees get ready to retire and contact the system there is frustration with scheduling a appointment and some has to do maybe fl are a couple new employer and maybe

the wrong message got relaid to the retireee. if is good if you guys can try to figure out is there a way to improve the training of people answering the phones? when you deal with member thofz public can be a challenging job at the time with all different personaltiess and needs. those are things i received the most phone calls about. that being said, i never received a phone call saying they received a good experience because people have good experience never off that. all we hear about are complaints. i know all ralot of people doing a great job and it is unfortunate we never hear about that. if you can work on those other things and give food for thought as you thipg about where we are going. thank you.

>> thank you. you mentioned a proposal coming before this body to upgrade the voice mail system, do you know whether that when that will be? >> it is on the calendar pr the septumber board meeting and it is a presentation of what we consider updateed a strategic plan including initiatives we completed and new initiatives we are proposing. we receive very few phone calls, we done get enough phone calls to be like a call center but we understand we designed this phone tree easily 15 years ago. we looked at it 2 or 3 times over that period and it was mostly for people to get information rather than conduct business so we would like to

refocus the phone system so people can conduct business rather than just hear information or leave ophone message so that is something we'll present and hopefully the board will approve it so we can make sure the money for this is included in the budget for the coming year. in the mean time i would like to go off line to find out what staff tolds these folks because if it was misinformation then we need to find out how they were given misinformation. i do hear a lot of comments about very pleasant experiences have coming here, but i also hear about folks who are very frustrated with various reasons, how long they have to wait for appointment jz how long it takes for staff to return their messages so we are trying to improve that. >> just so i'm clear is that

rarely has anyone called me at work and tod me i have done a great job, i only hear people complaining about something they perceived i have done wrong. not trying to take way from the hard work, it is just a realty of public service. >> okay, is there other further discussion? >> this service issue has come up before. we tested the system. the phone business can't be news to you. the 6 minute thing isn't wrong. we have sometimes the advantage of knowing who the too call bullet if you go to the system it is very long. maybe the system too old. if you don't want to hear the message hit 9 and you skill to where you can start sorting and selecting.

>> we don't give that hint until later. the system was designed and purchased actually before i got here to communicate nrfckz information so that is why you list toon a 3 minutes mess object thf news we assume most of the folks are calling about so we hope if they hear that information that 1099 r was delayed or whatever the message is that they hang up and we answered their question but that is a outidated approach to customer service and we are looking to allow people sort of the same way we are on the website to actually do a certain level of business over the phone and get information over the phone so that is why we look to upgrade it >> we have no idea how many calls come in every day? >> we do. that is why i

say-whee considered call centers so we can guarantee people get a live person but we can't justify someone or 2 people full time job answering the phone because we don't get that many calls. they go to different areas like i didn't get my check or getting a divorce or need a mortgage so need a verification of my pension so we never phone useage to justify looking at a call center. >> maybe we can do website improvement. >> it is definitely 15-20 year old technology. >> take public comment? thank you. public comment is closed.

please call the next item, 18 >>ite nl 18, retirement borebd member reports and comments >> commissioner paskin jordan. you have a report? >> i thought i did that last time >> you did, it wasn't calendared. commissioner miburger >> thank you. i atepd thd pacific pension snult conference on diversification through real assets and it was very interesting. [inaudible] a member of the public make presentation of ways to deal with the melt down. to me the direct answer is invescing in real assets. i xoe he isn't here but that sh the best way

more than hedge funds. research has shown that is the greatest effect. a lot of very nertesting presenters were there . i did moderate a session so it was interesting lingening to the different approaches about investing in real assets. to me infrastrugture and agriculture is the ways to invest in real assets. those are the issues. weak on commodities. its more short term oriented like golds and silver are real assets but more so on using futures and augzs to deal with that so don't think that was substant tchb. the key note address was former ambassador chaz freedman who was the ambassador during the first gulf war. he talked

about the iron silk road. anyone heard of this before? i never heard of this before. this is the biggest infrashuckture project on gods green earth. china has been spending a lot of money on rails, high ways, fiber optics connecting asia to europe and it is amazing. i was very impressed and unaware of that. i thought was the key note address for cheenas commitment to infrastructure is fascinating. there is a lot of money need ed for the projects. that was out standing because i never heard of that before. i notice we had the par-i don't think it is necessary to

include the participants but the number members public funds around the state and around the world and i looked at canada. the canadian pension fund invested in infrastructure for a long time. they have totally different governance. it isn't appointed elected, it is like a business which is not what we-we don't run ours like a business to the extent the canadian pension funds do. they haveophorouss around the world and thereat is difcult for us to doompt they have offices around the world and we have the presentation. they use a totally different discount fraet all liabilities. we use the same for likets and assets and phase in for the discount rate the liabilities. they use a discount rate for

the libets around 3 and a half and 6 and a half to 7 for assets. if we did that, we would have a tremendous impact on funding t. is good seeing a lot of different public funds mptd cal per squz stirs were there and shared some of their progress on infrashuck structure. we heard a speaker from cal stirs. very informative and effective and thank you for approving my attendance there >> thank you for the report. let's go to public comment. public comment on item 18. seeing none public comment is closed. on the ajepda now we have closed session so we'll take public comment on closed session at the time. seeing

none public comment is closed. thank you ladies and gentlemen. we need a vote to go into closed session. >> [inaudible] >> i second that vote. all in favor of going to closed session? opposed? we'll go into let's take a motion to disclose dis[inaudible] >> i like to the move we not disclose what is discussed in closed session >> i'll second that motion. all in favor say aye. opposed? aye's have it, the motion passes. the meeting is adjourned. thank you ladies and gentlemen.

. >> this is the regular meeting of san francisco small business commission it is monday, august 10, 2015, and the time is sfoufks it is televised thank you to the staff for televising today's meeting members of the public please silence our sfoenz and use of cell phones, please be advised that the chair may order the removal from the meeting room responsible for the ringing or use of a cell phone, pager, or other similar sound-producing electronic devices. speakers are requested 42 not required to submit a card please deliver the speakers to me and the sign-in sheet for those who

want to be added to the mailing list mr. president, commissioner adams. commissioner dooley commissioner president dwight commissioner ortiz-cartagena is absent commissioner tour-sarkissian commissioner white and commissioner yee-riley mr. president, we have quorum general public comment time, members of the public may address the commission on items of interest to the public that are within the subject matter jurisdiction and suggests new agenda items for new items and members of the public who wish to comment on tonight agenda >> in today is chronicle an article about the expansion of no cars on market street i don't

think this is very good for small businesses small businesses that are on market street and small businesses that want to do business on market street no yellow zones on 349 for regular commercial vehicles only 6 wheeled vehicles if you're a - i have a business that wants to drop off anything on market street from the golf course to the embarcadero it is on boeblt no white zones on market street so both businesses having people droufl technically no place to do that and also the new signs that are depicted using o consciousness not wording and the thing it says okay for commercial vehicles a 6 wheeled vehicle so it discourages people with

regular four wheeled commercial vehicles i don't think that is very good for the small business community thank you. >> all right. thank you stephen well noted all right. any other members of the public would like to comment on anything not on this earnings agenda public comment is closed. >> approval the july 2nd approval of the minutes. >> i motion second. >> commissioner adams made a motion>> all in favor, say i. >> i. >> item number 4 discussion and possible actions for the recommendations of the board of supervisors on bos file planning code establishing a new citywide transportation sustainability fee this is an ordinance amending the planning code by establishing a new citywide transportation sustainability

fee and spending the impact fee with some exemptions as long as the fee a amenable added a independence to reflect those and amending section 6 for homeless shelter exemption from the sustainability fee making and coming from amendments to the area plan fees and planning code article 4 and that's it presentation today is adam senior planner citywide planning division. >> if i may welcome. >> thank you if i may before we start, of course, this here this commission we're interested in what are the impacts on small business we're all familiar with the situation in the city don't need too much discussion on the growth effecting us we want to discuss and know what are the proposed fee changes and how they effect small business so

thank you very much. >> thank you very much good afternoon good evening. i'm victor wise i'm the chief of staff for the sustainable streets mta i'm joined by two individuals from the planning code i was going to give you an overview but quickly move through that to the question you've asked us about so power point please. >> thank you i will stick to the slides on growth you know all that about that the municipal transportation agency has been working hard to figure out how to accommodate all that growth and make sure the transportation system r067b89 part of the program the sustainability program we 7, 8, 9 to talk about it is a joint program by the mayor's office, by the planning department and the county transportation authority and the

mta it has 3 components other mike is on if you feel comfortable. >> thank you very much. >> the very first component the line it is really rising the environmental impact report under the california environmental quality act a state level reform wheel not spend too much time on that only to say it occurs at the state level in 2016 the second part is the transportation management that has nothing to do with has to do with the development of the features to make sure that people have options to traveling different ways in vehicles and asking people to travel by bike and walking and transit we really need to provide the infrastructure and to provide the transit and bike facilities by to provide them and fund them

that's where the fee part of program i'll skip to that part of the presentation to give you the information i'll unite adam to talk about this. >> while adam was on his way up changes that are not rventhd in the binder 0 so what you see on the screen may be different than your binders. >> thank you altered from the planning department your last portion of that was accommodating the new growth. >> making sure that people get around the city comfortably we're calling the transportation sustainability fee an expansion of the impact fee and i'm going

to turn it over to corey the assistant zoning administrator and our planning code expert you'll talk about the specification of the fee and how to applies to small businesses as many of you may know there's a huge transportation need we're asking the development partners to help to fund that as the city grows on the impacts of the transportation we're proposing to place the where had with a new transportation sustainability fee it capitalizes that to expand the market rate no change to the nonprofits this is an issue that came up in profess iterations we're building and standing the small business corey will talk about that generates $400 million in revenue in the next few years it goes go the

system to help build the improvements more the trains to get around faster a portion goes to the regional partners and part to the building streets that are safe for pedestrians as well those are the proposed fee rates their based a nexus study we're legally required to do and an economic feasibility study for the economic impacts across the r across the city to see the impact of the fee on the development and make sure that new investments are not costly to build another issue less jermaine for this body projects that have filed their applications in the pipeline we're suggesting they receive a certain amount of gathering if you're in the pipeline you'll get a discounted fee and that is part of the

built in performance and maybe with a certain date so the records have to change that's a high-level of overview i'm going to turn it over to corey i'll walk you through the exception how that effects small businesses. >> good evening, commissioners i'm corey the assistant zoning administrator i spend a lot of time with the impact fees one of my jobs right now to keep track of the current policy credits that we receive applications for for the 81 d f i'll go over first of all, the main changes that the t s f changes that will impact small businesses the first thing the second point we

don't have a blanket small business exception but policy comments for small businesses but a moderny limit of 3 percent every year for the policy credits so the new ss f eliminates that the small business exemption that applies it is a significant change for small businesses second big change is that we are collapsing our land use into much fewer categories for the impact fees because as many of you may know the t d i f was created in the 80s before the impact fees in the administrative code by mta this didn't move into the apply department until 2010, 2012 we're thank you for the opportunity to try to correct

that to illustrate this on this slide on the left you'll see all the land use or technically they're called economic activity areas that we have to deal with today, there are quite a few on the right the 3 symbol categories we use in our other knocks and using the t s f the residential and non-residential pdr the interesting thing about the list on the left except for pdr they fall under the residential that collapses the uses down but often means fewer instances in the future where a change of use will occur per this code as a trigger for the fee other issue that is relative to the change of use the existing t

d i f if you want credit it is for the prior it had to be active within the years ever our application if you imagine there are a lot of places that make that for a while and that was off in situations people come into for example, converting a pdr to a retail if not an active pdr actively occurring in that space in the last 5 years they don't get the credit they pay the whole rate that is consistent and proposed to being removed those are the 3 changes that impact small businesses the most i can go through the triggers and specific in that area as well. >> so again generally, the fee

who applies to all non-residential the residential developments creating 21 or more dwelling units and large nonprofit private universities with the institutional master plans will be subject and there which is a charitable provision in the std f we're essentially fact that away if the large nonprofit that universities who does it not apply to the restricted and middle-income housing as part of the explore housing if you're got 2012 permeation of the onsite units are affordable if you're building 81 percent of the units and their derestrictive that will be exempt from the knees

inaccurate 20 or fewer their examine and less than 5 thousand square feet we'll get into the detail in a moment and again, the way we treat nonprofits will stay basically, the same explicit for the large nonprofit universities so when did the if i and the triggers to trigger the fee any new construction greater than 8 hundred square feet that's the vast majority and similarly expansion or additions to building larger than 8 hundred square feet anytime under is a change of use and generally from the lowest to the highest pdr we'll take the highest rate so looking at the small business exemption to point out this is essentially the way it exists in

the t d i f it politics all the time the pdr use it expands less than 5 thousand square feet will be exempt and 5 thousand is the key and non-residential that resonates within an existing space for example, retail use for the pdr use it ultimately is 5 thousand square feet less than that is exempt and they don't apply to the retail so pdr to retail for example, starbuck's that would not be exempt so a few common development scenarios one is that kind of the change in tenant more than a change in use for example, if you have let's say you have a corner grocery store on valencia street to convert it to a toy store not a change of

utilization because we were able to collapse those uses including the office and retail and medical and institutional you can go in and out of the changes and not a perfect impact fees so in this situation no fee applies no expansion and no change of use so what if you want to capitalized to small business maybe you're adding into the building again as long as the ultimate result of the expansion the use and business will be less than 5 thousand square feet the fee will not apply i want to mention a little bit elder a change of the use from pdr to retail as long as it is less than 5 thousand square feet go into a former you know warehouse space in selma are you

or a trendy coffee shop less than 5 thousand square feet not subject to the fee something important to point out excuse me. we are actually going to be image doing substitute to address the typo in the language the draft it doesn't make that happen fully only an error and caught already and on our to do list to get it done so the language is correct again that didn't happen your crux a new building for a small business it will only not apply for a building less than 8 hundred square feet an example the pictures are proximity and for the substitute a fee if their large enough generally buildings more than 8 hundred

square feet are subject to the impact fee this is common if you're leasing space in this situation generally mother applying to the business because when that building the building permit was approved and issued for the new constructionists they're generally determined the collapsing of the uses so all the impact fees are paid through the permit with the actual construction of the building often the 81 ti work is later so it didn't flow to the business owner taken in by the developer when the permit is issued for the new construction and with that, i'm going to turn it over to adam to complete. >> yeah. that is basically the end of our presentation as you

are aware mayor and supervisor wiener and supervisor breed introduced it on july 21st we did the introduction and will go woke backing no september and bring to 0 with that if you have any questions, i'll be happy to answer them or answer any feedback you may have. >> commissioners, any questions. >> in you're on the formula retail does it include franchisees fachz. >> yes. that formula retail includes franchises any businesses that meet the criteria for the formula retail or the establishment they have otherwise they'll fall under that i should pout that is the way it is for the credits as

well as long as we have fund available you can't receive it if if is a formula retail. >> commissioner tour-sarkissian. >> i have a question about the threshold of 5 thousand square feet what does it include storage? a lot of those retail businesses included. >> generally for all the impact fees we use gross storage which is our kind of most expansive category for the floor area it generally include everything from the exterior and for storage if you have a back storage room for stock or stwra space or the part time space that is in the calculation of the 5 thousand square feet.

>> so possibly it can involve a lot of retail businesses because a lot of them voluntary large storage area 5 thousand threshold can capture a lot of small businesses with the commercial space maybe half 1/3rd and the rest stores a lot of restaurants basement have i screwdriver that possibility. >> sure there will be some retail uses that are larger than 5 thousand square feet we don't very specific numbers on the proportion but the large portion of those uses are in the c district and the neighborhood corridor those tend to be you know just the ground floor and that is usually a maximum of 25 hundred square feet rather than large parcels that are definitely an opportunity for

businesses to expand and go over 5 thousand square feet unto a higher number of formula retail that fall into that in the neighborhood commercial districts yeah. the same image the 5 thousand square feet threshold and the formula retail component we're basically carrying that over exactly how in the counter policy of the small businesses that's the idea. >> commissioner dooley. >> can you go over the projects in the pipeline how those work in the 3 different categories i'm just asking about the project with the planning entitlements will not pay the existing t d i f but the residential projects quite large will not be paying any of the

use; is that correct. >> hold on maybe i can find the slide here. >> so - essentially this is the consideration for projects have received their entitlements e.r. submitted an application for the two departments the residential and non-residential the residential uses which you may be less concerned with if they have their entitlements from the planning department this fee whether not apply there maybe other fees in place like the aerial impact fees they'll pay those but an application into

the department we're paroling proposing they'll pay 50 percent the fee rate for the residential use that's $3 sloping to $7 plus for the non-restricted residential uses the projects with entitlements again not pay the new fee but if subject to the p d i f we're saying the same thing for the development applications into the planning department if they have an application in we're saying today, the rates that are there today hopefully that make sense. >> can you give me a quick comparison of difference between the two p d i f for in this. >> maybe if you could give us an example let's say i have a restaurant 4 thousand square

feet and expanding to 8 thousand square feet so, now i've set the limit. >> right. >> is this a one time fee how do it effect me today and post this transition give us an order of magnitude. >> it would be - the mablt will be the same so you'll be paying today and tomorrow with the scenario the rates vary as you can see the middle line on the power point. >> a non-residential. >> a non-residential the current those are collapsed i don't have the exact fee it is also 14 to $18 with a one time fee. >> okay. a one time fee on the total square footage or the credential. >> you have 4 thousand existing

and 8 thousand you'll pay on the 4 thousand square feet. >> not over 5 thousand but on the increments. >> so i'll pay 4 thousand times 14 today, 4 thousand times 18 so the increment is 4 thousand times 4 an infrastructure woments fee and yeah. yeah. >> okay got it. >> director. >> thank you for the - mr. president. >> i'm not sure which one will answer this one the triggers of the new construction over 8 thousand square feet i get the idea not the trigger for residential but with the example how to affect small businesses like if you take the proximate

in hayes valley do a pop up of 8 hundred square feet with the t s it will apply i'm wondering this seems a little bit counter in active for the businesses might be investing in the small business spaces to apply this you know probably our 5 hundred or 8 hundred square feet we move to encourage or perhaps an example we heard about property or we did some sdrrlg around city college to allow garages to be converted into retail will this trigger the t s f as well i want to make sure we're keeping in mind something that might be

counterintuitive for the versus the retail space. >> is this triggered this isn't triggered by the signing of the lease but by a renovation any thank you. i asa sure the last one first, the trigger technically is a building permit the impact fees are tied to the cremates. >> so if the building permit proposes the creation of or expansion or changes of use so where there's an non-remain or pdr any building permit that represents one of the applicable types of work. >> i have a retail space and sign a lease to be a retailer

and need to do thank you uss is that going to trigger that. >> not a change of use. >> you can expand that it can be a dentist office and not to do a toy store not residential no change of use it will in the trigger it. >> it will trigger a building - >> so. >> most businesses you're talking about are outside of the purview. >> you're talking about the small businesses in the temporary setting like the proxy. >> yeah. like the generated. >> the mission rode. >> wouldn't proxy pay a fee they'll host the retailers so, now this plot of land has been approved for retail i come and plop an 8 by 10 container a 20

by 18 container over the limits that will be kind of like leasing a space that is zoned for retail why would plopping that container on it change cause this to happy a. >> for the purposes of the container we're treating it not as new construction like you're taking timber but fit out to meet the required codes for a structure that people occupy. >> wouldn't the landlord be involved. >> well, the property owner all the impact fees are technically the landowners responsibility and obviously a private agreement you know with those situations where is it contingent on the tenants but the property owners requirement 8 hundred square feet requirement is something that go look at it and studied a little

bit with the impact fees with the planning code to deal with triggers we're conforming with that as to make it consistent with all the other impact fees to keep is triggered there maybe situations as small building of that size is over 8 hundred i can't think of a good example that happened yet it could happen definitely we could look at that more the way we came to look at that we're trying to conform this to those impact fees for consistency. >> i don't see that - that would be like saying hey, i'm a developer and want to build a retail building before that i'll bring in my tenants and not have the impact fees yet that's

backwards i'm assuming you've taken care of onsite fees and not build the building to have the impact fees. >> it is tricky the proxy a space is different if you're building a before you building with the commercial laid out but a space like proxy or mission rock it is meant to be flexible your rely on that business to come in and sort of say hey i want to take up that space and build a proxy container that's a small level of situations that applies to those are also small micro businesses adding in more fees what kind prohibit the economic developments something we may want to think about the business has to pay they're

going - a restaurant is going into a pdr space; right? and so that situation would trigger a change of use the building owner doesn't pay that the lease he pace that there will be sentiments based on the somewhere presented in the creative spaces which are designed to be temporary spaces those big lots are built out. >> the 43 fee is levied on the permit. >> the property owner is ultimately responsible for what is going on. >> is it issued to the tenant or the property owner oh. >> right again, the pdr retail conferees is less than 5 thousand total right now any conversion less than 5 thousand

square feet under the policy credit program under the exemption we've proposed will not pay. >> we have a lot of that going on in the dog patch for the northern industrial center is roanoke county, virginia the entire ground floor foyer pdr and restaurants every one of those is excessive off 10 thousand square feet so it will see a building permit and a fee. >> there are increments but the fee is only if the space is working in they're not expanding more than that 5 thousand square feet. >> this is those small unique things with the kind of like the containers and the pop ups and the economic development how will we assess that for when we do the temporary pop ups for events. >> just to clarify in the case of proxy they were the intention

to be temporary but we don't have a provision in the code it is a limited provision for construction trailers during construction and christmas tracy trees and lots things like that most of the things we have to permit it and treat it as permitted the yard is different there are different things for mission bay for a temporary use which is what they're doing there we haven't seen it come up too much but the kind of pop uptrends with the smaller retail is happening more we don't have a lot of space typically a lot of left over freeway space to have the pop up containers it's not an issue yet. >> we have a lot of empty storefronts.

>> it is important we're proposing to remove the 5 year you know active use provision because especially commissioner moran considering the recession i think this is around important provision under the t s 19. >> i think we should pause for public comment i see someone in the audience thank you very much. we'll continue this conversation comments. >> i have a question i'm not sure it is good one thing to realize obviously when fees get button put on in an apartment building but on the building owner the fees have to be paid back through the rents. >> uh-huh. >> the tenant will pay it one way or another for example, oak street they tore the theater

down and put up a part-time they pay high rents that effects the rents on the rest of the block so there's is on effect not only to the tenant that is there but effects everybody around and also as we have a housing shortage not a shortage but the cost housing is going up this is another thing that effects. >> thank you. >> i guess the question is whether it causes the rent to go up. >> good evening jim lazarus chamber of commerce i'm pleased to hear we have a homicide on the change of use it can, scary on a neighborhood by neighborhood basis but they've compacted the categories over 3 categories but i think there are

significant perhaps unintended consequences to rents as steve said the highest rents into a commercial area are the benchmark for the leases when a landlord tears down a building on pongz a r polk street and put in new retail with 6 or 10 units the 10 unit don't pay the residential but the more than 5 thousand square feet of replaced retail pays the fee 10 thousand square feet of not even new it can be replacing 10 thousand square feet of existing retail spaces i understand was there ones before it goes up with an $80,000 fee for the 10 thousands of new replacement square footage that will get passed on to the first tenants of they're

two thousand square feet units the total that was built was 10 thousand square feet of now retail the real question do you get credit for the retail that was there before this is demand based that's the impact of that small business or large business on transit and transportation if there were 10 thousand square feet on sacramento and polk with a new building of 10 thousand square feet why are they paying a fee so i think there are still interesting questions that will impact small businesses on a neighborhood basis when you calculate rents. >> is comment there is actually a replacement use credits so if you there are 5 thousand square feet of retail space existing on the site you tear it down with

10 thousand square feet of rail you'll get credit. >> tim is that - >> okay i object to show you. >> was that will that address our issue jim. >> great neck. >> samantha i want to express a southern in the sense of pdr in retail is as jim mentioned a few things like pdr the restaurants are over 5 thousand square feet had you include the back indians 5 thousand square feet with 18 thousand square feet $10,000 so a raunlt about go somewhere else to keep in mind small if might be only a few kind of concern areas but keep in mind. >> okay. thank you.

>> any comment on that one so this is the case whether you have - ; is that correct we're all learning it here. >> there's a lot of threshold and triggers but that case that she described will trigger the fee and i think that is a question of we've proposed the 5 thousand square feet small business exemption same in the current t d i f that qualifies the business that's the quasi it is today so - >> i mean the fact is you've described as a fee associated with is it today but under the circumstances the fee is $4 per square feet more. >> especially it is less if you get credit for the pdr in this

last few years a few scenarios you take a new project and rerun it under the code and tweak it with a various no matter the threshold you said but you know in that scenario if you have a large restaurants like that you'll trigger it and get credit for whatever use your replacing now under the new code instead of paying for it. >> are you already done. >> commissioner and oh, is there any additional public comment before we precede we'll have more questions from the commissioners seeing none, public comment is closed commissioner yee-riley. >> yes, my question now the 5 thousand square feet is in place perhaps before you make all the

proposals have you done this study to see how many the small businesses was 5 thousand square feet or more will be impacted. >> so again, this is a carrier over from the legislation it's a good question my question the 5 thousand was arbitrary. >> i'm not sure about the origin of the 5 thousand square feet but moving forward that applies to the new and expanded businesses so it didn't you know existing just to be clear the existing businesses doesn't apply only on new businesses i don't have the number in terms of how many small businesses in the city are thousand. >> i know we have inquired with the association to see whether or not 5 thousand is the right number maybe 10 thousand would be a better number especially

for restaurants. >> commissioner white. >> i didn't i think you answered my question so i want to - existing businesses that are over 5 thousand this does not apply. >> for existing businesses no. >> doesn't apply to any existing. >> my second question if you're an existing business over 5 thousand square feet and there wanting to remodel that triggers that going back. >> not unless your expanding. >> it's not a change of use. >> not a change of use. >> all right. >> what if you expand to over 5 thousand. >> then the incremental. >> the amount of the expansion will pay. >> i have a question. >> yeah. >> about construction new construction so if you tear down the building with an existing

retail space than the trigger is 5 thousand it if you're a retail space, however, if no retail space it is 8 hundred; right? square feet do you understand me. >> yeah. there is different threshold. >> if in fact, you didn't have before the tear down any retail space you'll go with 8 hundred and right if you have a vacant lot like a parking lot. >> a residential building. >> and is you build a new building is with ground floor retail 5 thousand square feet that applies so it applies for all the residential and the retail if you have the same proposed development in 10 or 2 thousand square feet of empowering retail built interest before it applies to the

residential but you'll get a credit for the prior use i don't go into that gooesdz but it gave us a replacement and that replacement is the scenario you demolish and replace. >> up to 5 thousand square feet. >> no for example, you had a 10 thousand square feet building same as retail my comment usually a stand alone retail space we want to tear it down and build a new building you get credit the goal for the impact fees and really we're bound to charge for the incremental new impact being created that's why in that scenario allocate scenario you have an existing building with a 2 thousand

square feet addition not charging you more only the extra impact with the expansion. >> thank you for clarifying. >> commissioner yee-riley. >> yes. since your including the residential development so it didn't increase in revenue can we go ahead and do it or put it on the ballot with 2/3rd's vote. >> an ordinance that needs to be approved by the board of supervisors and signed by the mayor so it is not needing to be a valid issue. >> have we exhausted users. >> all right. i think we're done thank you that was very informative and mr. lazarus if he understand that correctly and is satisfied with that anyway i don't have any questions.

>> this is agendized as around action item you can take action on it tonight or you could in terms of how the shape it is in and recommend not recommend you could recommend with if there's any sort of additional considerations or list out the things you think with good encroachments over the thank you d i f it sounds like there is time for working with it any areas that you - i think it might be good to inform the sfmta the things that the commission may want to look at good to do that now and have it on an official records. >> the relative numbers are 8 hundred and 4 thousand and plus dollars. >> can we ask them to consider

and look at the inclusionary of the 5 thousand to 10 thousand. >> we can ask them third degree anything we want and understanding that 5 thousand is a legacy number they didn't undertake a study to see if it is relevant to today is environment i think it is perfectly within our purview to recommend on investigation of where that 5 thousand came from and whether or not it is relevant today and effecting small businesses it is equally relevant to kind of ask the question of 5 thousand square feet effect the initiative frrments frorments coming out today maybe not the trends but a precursor of things to come and finally ask the

question what's the rational between little $4 i'll say $13.00 or a year on average is a small contribution to the overall need here in the city so good on everyone for trying to find pennies where they exist that is a small amount so we can certainly make a motion anyone of you. >> i move to recommend for them to look at changing the 5 thousand to 10 thousand. >> and look at the 8 hundred square feet to see whether or not. >> a point of clarifies are we talking about the beginning what the 5 thousand square feet would be for retail versus storage as your motion to begin what 5 or 10 would be are we talking about

gross or net. >> whatever the 5 is i'd like to have them look at 10. >> before. >> that's gross. >> before we go forward i'll suggest that 10 is no less than arbitrary than 10 we came up with that i'll suggest maybe there be a little bit of research what is a rational number it's not clear where the rational was behind the number 5, 6 or telephone i don't how to determine that tonight but a good request to kind of thinks what the number is if there's a better number to - you can motion anything i want but 10 is as or 5 and what we really want to know what is the number that

has the least impact on small businesses without getting in the way of accomplishment. >> i think we need to incorporate the come back of how much of the square footage is usually versus back area or. >> net versus gross. >> yeah. that's kind of important as we piloted retail that has a huge basement for example, if that is factored in but the upstairs is quite small. >> yeah. that, however, i would if you were in the planning commission i would say well what happens if necessary get a permit and it is a bunch of storage and walk in there and see you took down the temporary wall and it is convert to small

retail i want to comment less storage to storage and more to retail the ability to enforce that is something that would go to the consideration of the planning commission so again, we, move what we have we want you want to make sure that the motion we make is one that he thought about here we're go trying to make a decision in 5 minutes to try to recommend some analysis rather than some specific numbers so perhaps the motion a consideration for active space versus non-active space something like that we should be mindful of the practice outlet so just putting it out there. >> i think and maybe good for

the record for the commission to comment on sort of the change in direction that the sfmta and planning department are taking with the transition they're making some t d i f there are significant considerations they gave them some good thought in the new policy such the you know the 5 thousand credit you're going to get if you expand an extra 2 thousand there has been thoughtful things it is going for the record since we have to provide a written comment it may not be the final comment to provide desecration to the department that is good and solid and other issues to came back before you. >> rights in the spirit