please stand by.

>> good morning, and welcome to the -- i can't even talk -- to the wednesday december 6th meeting of the audits and oversight committee and i'm joined by supervisor aaron peskin and the president of our board, london breed and i acknowledge our clerk, john carole, and thank the staff at sfgov tv, who ensure that the meetings and the transcripts are available online. and mr. clerk, are there announcements? >> clerk: please make sure to

silence all cellphones and devices and any documents to be included as part of the file should be submitted to the clerk. the items appear on the board of supervisors agenda unless otherwise stated. >> thank you, mr. clerk. we -- i just want to call item number 7 out of order. please call item number 7. >> on the grand jury report, accelerating san francisco government performance -- taking accountability and transparency to the next level. >> we will continue this meeting to allow more time for the controllers and the mayors office to review the implementation of the recommendations and so at this time i want to open up this item for public comments. seeing no public comment, public comment is now closed. colleagues, can we take a motion to continue this item to the call of the chair.

>> so moved. >> clerk: for clarity, madam chair, to the january 17th meeting or the call of the chair? >> in my meetings it says the january 17th meeting but i'm not sure who will chair the committee so i'll leave that flexible. so i'm changing the motion to continue to the call of the chair. >> clerk: thank you. >> so we have a motion and a second and we can do that without opposition. mr. clerk, can you call item number 1. >> clerk: resolution receiving and approving the annual reports for the north of market/tenderloin community benefit district for fiscal years 2015-2016. >> we have chris corgas here, the senior director of the office of economic and workforce development and i see that we have steve gibson, executive director of the north of market tenderloin community benefit district who will present.

mr. corgas. >> good morning, i'm part of the team that oversees the community benefits district program. today we're reviewing the annual report for the north of market tenderloin c.b.d. from 2015 to 2016. the c.b.d. assesses approximately 677 parcels and is a property-based district. it's assessment budget in its initial year was approximately $981,000, 981,437-dollars and it was established in 2005 and it expires on june 30, 2020. the staff of the district is executive director steve gibson who is here today to address the c.b.d.'s program attic achievements and the service areas are public rights of way and sidewalk operations, district identity and streetscape improvement and management and operations. there was the benchmarks for the c.b.d., and benchmark one, whether the variance for the budget amounts was within

10 percentage points from the management plan. and benchmark two, whether 5% f the actuals came from sources other than assessment revenue and been mark three, whether the amounts for each service category was within 10 pertentage points from the actual. and benchmark whether the c.b.d. is indicating the amount of funds carrying over and the projects to be spent in the upcoming fiscal year. for benchmark one we have a comparative since 2010 through 2011 and for fiscal year 2015-2016, the c.b.d. did meet this bench mark. and they have historically met that benchmark. and bench mark two, 2015-2016, the c.b.d. did supercede this benchmark with a 19.47% of revenue raised and they have

been hitting it on and off since 2005 to 2011. and benchmark three they were in compliance for fiscal year 2015-2016 as they have been historically. and they did indicate that their carryover, what items it would be spent on and that was indicated in their annual report as well. and o.e.w.'s findings is that the c.b.d. did meet all bench marks and they were late in providing the data which was due to an accountant change as they explained to the oewd staff and we recommend that they have organizational processes to eliminate turbulence and we recommend that the governing board begin preparations for a renewal campaign. they have the implemented the service plan in the district and have shown improvement to u.p.c., urban place consulting and they have increased with community stakeholders and have

projects such as the living innovation zones and banner projects and have increased greenscaping and we believe that the c.b.d. will successfully carry out its mission and service plans. if there are no questions at this time i am happy to introduce mr. gibson. >> supervisor kim: good morning, mr. gibson. >> good morning, it's good to be here. i will quickly go over two or three things, you know, chris was pretty thorough on his part of it and you have seen the map already. one of the things that i wanted to talk about is how urban place consulting, my firm, got here and what that difference has made. so we begin working in august of 2015, the board of directors, asked us to come in and to look at the organization and it was a strategic plan and to make some implementation recommendations to improve the c.b.d., its

programs, its organization, and we did that in october of 2015. we held a board retreat and they accepted all of the recommendations and after that they issued an r.f.p. for interim management and we proposed on that and we were fortunate enough to get that contract. so my firm has been providing the intermanagement and i'm the executive director since december 2015. or about half of this fiscal year that we're talking about. as part of that strategic plan and the implementation, one of the issues they had is that they were short of funding in order to really develop the programs and implement the programs that were needed in the tenderloin so one of the first things we did was to develop something that we called operation leadership, it was a fundraising campaign in this fiscal year that you have

before you, for $300,000 goal that we talked about here and we raised $60,000 in this particular fiscal year. when we come back in a couple months and talk about the following fiscal year, you will see where we raised almost -- more than $300,000, close to $500,000 in the next year. this chart is what we call our framework. everything that we do at the district has to fit into this framework. so we took a hard look at what is it -- the core purpose that the c.b.d. -- do they have the tenderloin community for all to facilitate that. so we tack a hard look at how we create a healthy neighborhood so that we can get to the goal of a community for all and we looked at physical environment and neighborhood pride and economic opportunity, and then what it takes in each of those categories and you can see that

before you. and so basically all of the programs that we do, new programs that we think about taking on, have to fit into this framework and so these are the areas that we are currently in -- probably forever will be working in. one of the -- one of the projects that we're actually proud of all of our projects, the movement that made a big difference throughout the beginning was the banner project that we designed and implemented. you can see the banners down at the bottom. what we wanted to do was to create a better program that was positive, make positive statements about the tenderloin, but also had a little bit of whimsical and a bit of makes you smile when you look at them and we played on the idea of the tenderloin and tender. so, you know, around here we tend to support our businesses around here and we tend to nurt ourure families and we --

nurture our families around here and we support our families and you can get an idea how we approach this and where we're going on that. another program that was -- had started before we came on board but we took it over and it's our camera project, it's a sub-grant from the union square business improvement district. we have seven locations with cameras and maps -- so they're on golden gate and leavenworth and up by our new office on allison wheels, at the corner of ellis and leavenworth has cameras. we just received -- an oewd grant for the last go around for cameras so we'll put up somewhere between two and four more locations, depending how much we can leverage out of the property owners to put the cameras up. but these cameras have been very

effective and we work closely with the san francisco police department, they're in our office quite often to get the tape to use in the prosecutions. our biggest budget item always has been and probably will be is cleaning our sidewalks. you have seen this before, basically sweeping great feety and removing and pickup of the needles and we continue to do that in this fiscal year and we're successful at that. and that's it. i'm open to questions, thoughts, comments, on any of our work or anything that we're doing. thank you very much. >> supervisor kim: thank you, mr. gibson and first of all i just want to thank the tenderloin c.b.d. for its work and it's really grown since 2005 and i still remember alana, and

delilah that kicked off the work that we saw around artwork and making sure that the c.b.d. is also a convenor for the many community-based organizations that really lovingly provide services in the neighborhood, but bringing i think our neighborhood resident leaders as well as our c.b.d. leaders is incredibly important to building the resiliency and the stability of the neighborhood and the work of really growing safe passages and i acknowledge kate robinson, of course, for her work on that from just something that struggled to get volunteers on fridays to the full-fledged program. every single afternoon. it's really amazing and seeing the tent at the park in the afternoon which has just been a dream for the residents to have constant supervision over the few playgrounds that we have the tenderloin for our families and i really see the difference that

the c.b.d. is making and, also, congratulations on hitting the benchmarks and the camera program also incredibly important to our office and sfpd, and, anyway, just being a convenor and helping to strengthen our partnerships and working on security and safety and resiliency is really important. so thank you for your work and your leadership. >> you're welcome. and it wasn't in this period as you well know and there was the grand opening of our office on ellis to do just what you said -- to connect better with the community and have a place for the community to convene so we're proud of that too. >> supervisor kim: i think that it's great to have a store front and i know that it's difficult to find but being in a basement before was challenging but having a storefront location is great and i have to say that i love the tend in the tenderloin campaign and it's great to see that is moving forward. >> thank you. >> supervisor kim: thank you, mr. gibson. at this time we'll open up for public comment on item number

one. seeing no public comment, public comment is now closed. colleagues, i'd like to make a motion to move this item forward with recommendation. so we have a motion and a second and we can do that without opposition. thank you mr. gibson. and mr. corgas, at this time, clerk, call item 2. agreement-owners' association -- administration/management of japantown community benefit district. resolution approving an agreement with the nonprofit owners' association for administration/management of the established property-based community benefit district known as the "japantown communit benefit district." >> supervisor kim: and i acknowledge president breed in whose district it is within. superviso>> supervisor breed: ty we're hearing the agreement of the owners' association for the administration and management of the c.b.d. and the owners' association agreement allows the

c.b.d. to receive funds for the city. this step comes after the group has completed a robust process and formed a strong, stern committee. years of hard work and community organizing have brought us to this point today and i'm really excited to see this continue to move forward and thank you to all of the -- from the office of economic and workforce development, who have been involved, and this, along with other steps will continue to get us to the point where we can finally establish this collective revenue and pay for the things that we need to do most in japantown. i'm really excited about this. so thank you so much and looking forward to the implementation. >> thank you, good morning, president breed and supervisor kim and supervisor peskin. i work on the c.b.d. team. i'd like to thank the president breed for sponsoring the

resolution to authorize the management contracts for the establish japantown community benefit district. as you may know on july 25th, 2017, the board of supervisors adopted a resolution to establish the tran-town c.b.d., to levy parcels within the proposed boundaries. forward for in ordein order to y must enter into a management agreement of the owners' association of the japantown c.b.d. and the document attached to the resolution is used for all c.b.d.s in the city and it's adjusted according to each c.b.d. and the general benefit language for the japan c.b.d. is different to reflect their specific benefit requirements which is 1.56% of their total budget. if approved by the full board this allows the city to transfer the collected funds in january 2018, and we anticipate that the delivery of approximately $4 million to the japantown c.b.d. over their 10-year duration. if there's any question my

manager, chris corgas and i, would be happy to take them. >> supervisor kim: seeing no questions from the members of the committee, i will open up for public comment on this item. is there any members of the public who wish to testify on item number 2? seeing none, item -- public comment is now closed. cool colleagues shall we make a motion. >> so moved. >> supervisor kim: we have a motion from president breed to move this forward with recommendation and we can do that without opposition. mr. clerk, can you call item number 3. >> clerk: for a grant acceptance agreement to execute a grant acceptance agreement and

permit to enter with the asian art museum foundation, whereby the city would indemnify asian art museum foundation trustees, officers, and employees for claims related to construction impprovements to the asian art museum. >> supervisor kim: we have dr. jay schu who will present on this item and our commissioner, and the trustee, and i know that we have nick makkovik, the foundation trustee as well. you have joanne schu, the operating officer and she's the financial officer who is all with the asian -- also with the asian art museum here today. first of all, i want to congratulate you on your work to expand the asian art museum. the design is beautiful. and i'm incredibly excited about this next stage for the asian art museum and thank you so much for being here today with our committee. >> thank you very much, supervisor kim, and thank you very much, supervisor peskin, and thank you very much, president breed. and i'm delighted to be here on behalf of the asian art museum. and today the purpose is to request the committee to

recommend approval of our grant acceptance agreement between the city acting through the asian art commission and of the asian art museum foundation. the agreement applies to the museum's transformation project. the charter established the relationship between the commission, foundation and the museum. the city acting through the commission owns the building and the collection. the private foundation will establish to operate a museum, including overseeing the exhibitions and fundraising. the request of the acceptance of the agreement includes the city indemnity to protect the people of the foundation who are raising funds and overseeing the construction project in a way that is similar to the protection provided to commissioners. the indemnity is important to encourage the foundation to continue to participate and contribute to the transformation

project of which we're ultimately becoming as part of as the city and citizens of san francisco. the transformation project is a museum's first major capital project since its move from the golden gate park to the renovated space in the civic center in the form of a public library in 2003. the physical transformation of the museum space consists of what we're constructing a new 13,000 square feet addition at the back of the museum facing the street. most of the space would be used for new special exhibition gallery, atop an existing lower level structure. this is a continuation of the building's original renovation plan which anticipated additional height at the back of the museum's building. the roof of the new addition would become an outdoor art

gallery, adding vision iblghtd visibility and presence to the building to display the capability for serving schoolchildren. a new facade facing hyde street transforming our current back of the view into one of the transparency and vibrancy and enlivening hyde street. the asia art museum connects art to life. our mission is to connect diverse communities to historical and contemporary asian art and culture through our world-class collection and exhibitions and programs. in the past 15 years i'm proud to say in pursuit of this mission, the asia art museum has had an excellent record. the transformation project is essential to provide up-to-date gallery space to create exhibitions that draw contemporary audiences for

contemporary experiences. in particular, the actual construction project is modest and staying within the existing footprint and the building on top of the existing one-story building on the back of the street. but the impact would be huge. but only where we have the new pavilion for special subscriptions and above it a terrace for contemporary art. we would be doing also renovation in our educational classrooms, the lobby, and first floor public spaces as well as a brand-new display for our world-class masterpieces in our collection. in addition the gallery currently uses those exhibitions to be further utilized for other purposes such as exhibitions and education and particularly for community engagement. a major role of the foundation is fundraising for the museum. beyond annual fundraising for operations and exhibitions, our

board has long-term perspectives for the growth and the sustainability of the asia art museum. as part of the business plan approved by the city, the museum is pursuing four main goals. in housing special exhibition spaces and staff capacity and grow the museum's endowment. of november 30th i'm pleased to say that we have raised the cash and pledges close to $68 million, including $38 million required for the transformation project. that is out of the total fundraising goal of $90 million so we're more than two-thirds on the way. we are funding these goals through a multiyear capital campaign that is just beginning its public phase. however, the participation 100% participation from our 54 trustees and the commissioners.

the trantransformation project l allow the museum to present multiple exhibitions at the same time to serve diverse audiences locally and nationally and internationally. the conversation between the world-class historical collection and the cutting-edge contemporary art. connect visitors personally through multilayered art cultural interesting and digital tours and we will serve as the cornerstone of the city's reenvisioning of the civic city commerce, in this case helping to enliven the hyde street. the pavilion for special exhibition will be the new home for major undertakings in our special exhibition areas. the new space would be three times larger than any of our existing galleries, dedicated for special exhibitions and it will be flexible anda as well as

historical art and contemporary art that is often large and heavy and allow the existing gallery to be used for other exhibitions and community programs. the art terrace on top of the new special exhibition pavilion includes 7,500 square feet of programmable space and features contemporary art. it will be the largest art terrace in san francisco. it will include all door galleries to commission art and allow the museum to expand its rental program as part of the revenue stream and to also create safe spaces for educational spaces for almost 40,000 school kids that we serve annually and we're looking forward to growing our service to our school kids to 55,000. so the purpose in summary of the grand acceptance agreement is for the foundation to raise private funds and overseas execution of the transformation

project, give the completed transformation project to the city, and we have now tripled our directors' assurance from $5 million to $15 million in case anything happens. in correspondence the commission will allow the foundation to implement the transformation project, accept the gift of completed transformation project from the foundation and endem endemmified trustees, officers, employees, are equal footing as the protection provided to the commissioners. and this work, this drafted grant acceptance agreement, is a result of the collaboration with foundation staff and external counsel and the city attorney's office, coordinating with the city's risk management and the construction experts, terms have been finalized and we just need indemnity resolution for the

foundation and the commission to sign. we have received historical committee's -- architectural committee approval in may and the preservation committee's approval in july and going through the permitting process right now. negotiating with the general contractor for guaranteed maximum contract based on this. and we hope to lock in those favorable bids as soon as possible. planning to break the ground in the first quarter of 2018. so we must have the g.a.a., grant acceptance agreement, in place before start of the construction. so receiving the g.a.o.'s positive position today would help us to keep the project on time and on budget. havingit's a great privilege to present in front of you and is joining me is mr. nick arcovant,

the trustee and he provides legal services and the foundation trustee and the commissioner, miss joanne chow, our museum c.o.o. and c.f.o. and also here is miss lauren curry, the assistant attorney, and all of us will be delighted to answer any questions that you may have. thank you. >> supervisor kim: thank you so much, dr. schu and thanks to the entire art museum family for being here today to answer questions. first of all, congratulations on the progress of the capital campaign having raised $63 million is not a small feat. i'm not sure how you did it, but it is a huge accomplishment and this extended wing is going to really help to transform the museum but also the backside of larkin street in this intersection that faces u.c. hastings and it's currently an area that we want to continue to

activate so dr. schu, thank you to coming to our office early to get our input and advice and really working to enliven this corridor, and making it more friendly and welcoming for so many of our residents that live in the tenderloin neighborhood and also for being committed to providing free passes to both the public school kids but also our residents so that they can enjoy the museum as well. and i'm particularly biased because there's a korean couture exhibit going on which is incredibly exciting and i can't wait to visit it. so i don't see any questions from members of this committee, but -- >> i want to associate myself with the words of chair kim and thank you for the private briefing that you gave me and congratulate you on what is not only a boon to the museum, but to the people of san francisco. and the folks that visit here. so, congratulations. >> thank you very much. during the process, the board of

supervisors has provided such strong support and guidance and it really took a village to make it happen. thank you very much. >> supervisor kim: i should note that this is a big turnaround from when i first started on the board and we were seriously working with asian art museum to support you during the economic crisis and really dr. schu, i think that your leadership has been tremendous in moving a large ship and turning it around and really garnering a large supportive community to come to the aid of asian art museum to ensure that it has long-term vitality and you really have an outstanding board of trustees, having attended and commissioner louis, having attended some of your events, it is one of the hardest working boards that i have seen and they are truly dedicated and committed toic maaing sure that we have -- committed to making sure that we have a long-term asian art museum in san francisco. and we will open up for public comment on this item. if you would like to speak on

item number 3... seeing no public comment, public comment is now closed. colleagues, can we entertain a motion to move this forward with recommendation to the full board? >> so moved. >> supervisor kim: we have a motion from president breed and a second from supervisor peskin and we can do that without objection. thank you so much and congratulations. mr. clerk, can you call item number 4. mills act historical propert contract with the owners of 215 and 2019 hm 2019 haight street, formerly 55 laguna street. resolution approving an historical property contract between alt a la gonea, l.l.c., the owners of 215 and and 229haight street, formerly 55 laguna street, and the city and county of san francisco, under administrative code, chapter 71, and authorizing the planning director and the assessor-recorder to execute the historical property contract. mills act historical property

contract between raintree 973 market newco l.l.c., the owners of 973 market street and the city and county of san francisco, under administrative code, chapter 71, and authorizing the planning director and the assessor-recorder to execute the historical property contract. >> supervisor kim: thank you so much, mr. clerk. my apologies, we have tim frey here from the preservation -- historic preservation commission as well as shannon ferguson, the preservation planner with the pline department and edward mccaffrey and michael gin from the office of the assessor-recorder who will be presenting on these two items. i also note that bill bard, the chief of staff to supervisor jeff sheehy wanted to speak on item number 4 and i'll call him up when he's here. >> good morning, the two items before you today are the

historical property contracts and the mills act legislation authorizes the local governments to enter into contracts with private owners and it has a reduction to the owners to allocate the savings towards a maintenance plan. the contracts are 10-year revolving contracts that are renewed annually, essentially from perpetuity. every landmark building as those on the national registrar of historic places is eligible to apply for the mills act program. the department has 25 active contracts that include single family houses and multifamily buildings and large-scale commercial buildings. the program creates an incentive for proper maintenance of our architectural land marks and prevents the property owners from delaying large-scale projects that when put off may cost greater and more costly damage to the building. the department received the two applications by may 1, 2017 filing date and the applications were reviewed by the department

staff and staff conducted preapproval inspections and the department forwarded the applications to the assessor-recorder on june 1, 2017. the applications were recommended by the historic preservation commission on october 4, 2017. the first property is 215 and 229 haight street and known as woods hall and woods hall annex. the buildings are owned by alt a la gonea l.l.c. and the buildings were constructed in 1926 and 1935, by the works progress administration for the san francisco state teachers' college. the annex has a mural known as a dissertation on alchemy. the applicant completed rehabilitation of the interior and the exterior in 2016. the proposed rethat billation

plan -- rehabilitation plan had completion of the mural. it has inspection of the roofs and the walls and exterior walls and windows and roof and the care of the palm tree. inspections and painting of the walls and roof joint system and windows occur every 10 years, and any needed repairs will be made in kind. and avoid altering or removing or obscuring the character defining features. in the case for 155 laguna street, unit 59 for illegal office use in a residential units, the tenant has vacated this unit and the case was abated and closed on december 1, 2017. regarding the recent enforcement case for richardson hall this is owned by mercy housing and located on a separate parcel, the enforcement case is for a temporary gate that serves as the emergency emergency egress e

construction of the adjacent affordable housing development. the department has contacted the property owner and is working with them on other methods for securing the temporary gate that does not involve attaching it to the building. the second contract is for 973 market street, it is a seven story plus basement steel frame building designed by willis polk in 1900. the facade survived the 1906 earthquake. it's a contributing building to the national market area. the applicant has completed substantial work to the property including seismic upgrade and terra cotta repair and window replacement and storefront system replacement and masonry and fire escape repair and roof replacement. and the proposed plan includes replacement of windows and storefronts, to mirror the historic configuration. >> supervisor breed: is there any way, though we have some of

the photos in our packet while you're doing your presentation, i think that it would be helpful to share those with the members of the public. thank you. >> the proposed maintenance plan for 973 market includes the inspection of the foundation, terra cota windows, storefront system, masonry, fire escape and roof on a five to 10-year cycle. regarding the enforcement case for 973 market, october 2015, the office of short-term rentals imposed a penalty of $191,664 on raintree as the property owner of 973 market for illegally offering nine short-term rental units at the property. and on november 29, 2017, raintree paid the full penalty imposed by the office of short-term rentals and that same day the office of short-term rentals closed its enforcement

case and thus -- >> supervisor breed: so they paid $190,000 -- >> they paid the full penalty. there's no outstanding penalty against raintree and raintree dismissed its legal actions. the department has revised its application procedures for 2018, and instituted performance measures to produce high-quality information packets for the committee. and to maintain an ongoing line of communication. the h.p.c. has directed the planning staff to schedule a hearing to discuss how the program can better align with the committee's intent for the program. we anticipate that hearing will be scheduled early for 2018 and to allow for improvements to the program to be incorporated into the 2018 application cycle. we will notify the committee when the hearing is scheduled and we'll follow-up with the committee regarding the h.p.c.'s recommendations. this concludes my presentation and i'm happy to answer any

questions and the property owner for 973 market is also here today. >> supervisor kim: jason chek is here and i see that bill barnes from the supervisor sheheey's office is here and wants to speak on this item. >> thank you,. >> marthank you madam chair and. i wanted to put in context the mill street contract. as many people know there was a project at 55 laguna which is commonly known as open house and that's the lgbt senior housing but in addition to that there's a number of other components that were built along with that. tomorrow in the finance committee there will be a gift of in kind open space that the sponsor put forward, the frontage was part of this mill program where they would maintain that property to community standards, the

interior standards and the two enforcement issues raised a few weeks ago, we investigated with the planning department and i wanted to report on those. in the issue of the office -- the illegal office use, that case remained open at planning each be though the planning -- even though the planning had concluded that person had vacated the unit and the other issue with the 4-by-4 is on property owned by mercy housing so once the project was built, the land was subdivided so the individual lots belonged to individual owners and the enforcement action was on a different legal parcel. so whether or not to approve the policy matter for the committee but because it was part of a larger project in district 8 that we inherited we wanted to put that information in the record if you think about whether or not to grant the mills act contract in that case. that's all i have. >> supervisor kim: thank you, mr. barnes, and we want to give mr. chek an opportunity to speak as well and to answer questions.

>> thank you, president breed, supervisor kim and supervisor peskin. my name is jason chek and i work with raintree partners and we're the owner of 973 market street known as the wilson building. i wanted to take a minute and talk briefly about the history of this project and our excitement to be part of it and also address the commentary earlier about the fine, rather large fine, paid by our company -- >> supervisor breed: can you speak directly into the microphone, thank you. >> it's a property that we were involved with in 2011. at the time we purchased the property it actually was delapidated to the point where the city was considering demolishing the building. i have a picture here of the original building and then on the left-hand side here is just a representation of holes that were cut through the building by the prior owner prior to raintree taking ownership. and in the bottom picture you can see that the building had been exposed to the weather for many years and seismically.

a lot of the structural elements inside of the building were taken out. when we lookeda it the project it was quite an effort, both technically and in terms of resources, to bring this building town par and retro fit it to allow the conversion that we had. today, just briefly, you can see the exterior facade is quite striking and that's really one of the key features of the building is that the exterior terra cotta facade that took a lot to repair during part of the rehabilitation that is already taking place and going forward if this action is approved, we'll be spending money towards replacing the window system to something that's more traditional as those windows reach the end of their useful life. there were some requirements that were associated with the original entitlement that required us to keep the exterior windows that you see in place which is why those weren't a

part of the original rehabilitation plan. down below is just showing you the interior of the property, it's currently 67 rental apartments with on-site affordable housing as well and we have on the ground floor one commercial tenant which is fellow barber. and i have one more picture here just to show you that on the roof we actually worked with local arts community as well as an international graffiti artist to put in place historic mural which we think will be historic. it's actually opening of the golden gate bridge opening day. and this feature cascades down nine stories into the lightwell of the building. down below here i just wanted to make you aware, last year this property was one of 50 properties nationwide that was

ranked among the highest in terms of views and as well as online participation and we manage our reputation online and when we became aware of the fine that was recently paid, that was a result of the action by a resident at our property. we did appeal the fine initially and we spent some time working through that process with the city and i appreciate supervisor kim's help and her staff in terms of clearing that violation, allowing us to get on the hearing agenda today. >> supervisor kim: could you provide for the sake of the committee, a few more details about this violation? >> sure. >> supervisor breed: and you said that it was one individual but i thought that it was nine units so how is one individual able to do that with nine units? >> sure, so the situation was a result of a single tenant who leased multiple apartments at our project.

under a pseudonym, effectively, and then started leasing those units -- and let me take a step back and say they entered into those leases on an annual contract similar to any other resident who would enter our leasing office from the street. and in this case this particular resident chose to then sub-let those units, not withstanding that being a direct violation of our lease term with that resident and they were doing so in violation of their lease with us and also, you know, they were doing so against the city policy. so when the city became aware of that before us, they tracked back how long that resident had been in place and then levied a fine that effectively was, you know, the duration of how long that tenant had been at our property. we were not aware of what that tenant was doing until such time that we got the violation from the city and i spent some time trying to dig into the details and figure out -- really push that issue on to the resident

who was violating the city policy. so we are still pursuing that claim against that particular resident. we have elected to just pay the fine in full with the city to move this issue forward today. >> supervisor kim: just a follow-up question to, that so one individual leased several units in this building and was that kind of an understanding? was it a corporation that was going to lease it out to their employees -- i'm just wondering -- >> that's correct. so it's typical for some owners to -- in a lease situation, which is the case when this tenant started leasing at the property to provide some units to a corporate provider and the name of that tenant was loomie, and that corporate tenant had apartments in other projects, other than ours, throughout the city. and so in this case they had the nine apartments in at our

project and they were in the process of -- we were in the process of actually rolling them out of those leases to house individuals, rather than corporate tenants, which is not our policy generally, but during the course of a lease, when you have a lot of vacancy it's typical to do to lease to a corporate tenant for a small portion of the building initially. >> supervisor kim: and those leases have expired? >> that's correct. >> supervisor kim: all right, thank you so much for being here and for answering all of our questions. >> sure, thank you. >> supervisor kim: so colleagues do we have any questions for our historic preservation staff, planning or the assessor-reporter on these items? super peskin. >> supervisor peskin: i'm not sure that i have questions and i have some kind of general policy observations that may lead to questions. i think what happened at the last hearing where we had a batch of these was a number of different policy considerations

and i want to thank miss ferguson and mr. frey for hearing those and working with h.b.c. to both further the cause of historic preservation through tax incentives while not rewarding bad behavior. so in both of these cases the fact that there were unresolved issues with notices of violation or short-term rentals, we don't want to see those come before the committee until they've been resolved and, of course, the committee -- or the board has ultimate jurisdiction whether or not we feel that we're financially rewarding people for bad behavior, but we also had a separate conversation which was a conversation about the duration of a mills act tax credit and whether or not, indeed, we actually have a piece of trailing legislation that we need to get on, and i'll get with mr. gifner with relative to

the individual that agreed that a 10-year term was sufficient to recoup the type of capital investment. so i want that to kind of be something that both the h.p.c. considers and this committee and future committees consider. so this may now be evolving into a question which is, relative to the 973 market situation, i mean, this is precisely the kind of place that you want to use the mills act because you're taking a building and breathe new life into it and it cost a lot of money and there's more work to be done and this makes perfect sense. and i also note that it's approximately $150,000 a year of tax deduction to the city, $147,000 and change. so part of the question then, yes, there's ongoing every five to 10-year maintenance requirements but is a 10-year tax break that when all told will be worth more than a million dollars, is that sufficient to do the capital

investment in the window system? would it be fair for this committee, who has to balance money and preservation incentives, to ask you whether -- this is a question for the project sponsor or the applicant -- whether or not after a period of 10 years you would be sanguine with that mills act contract terminating? >> so the question, just so i understand it clearly, is at the end of this 10-year term, should it be granted, are we okay with that going away? is that general li generally th? sure. so take a step back and just say that our initial investigation of this property anticipated that we would be before you, albeit a little sooner in the process, to discuss a mills act hearing for this project. there were substantial costs exceeding our original expectations to move forward the

project along the timeframe that we did and put in place the restoration of the building that is already in place and we want to maintain that to the level that i think that the city expects and we expect going forward and there's significant costs in doing so. on an annual basis. and, frankly, that was our anticipation going into the project that we would have those added costs and we did anticipate the potential benefit of the mills act and, you know, how we thought about this project going into it. so, you know, i think that as it relates to the ongoing preservation of the building beyond 10 years, i mean, there's no question that a building like this has substantial operating costs to keep it in the form that you see today going forward, so if there are other components of the building that require a significant investment in order to keep them, you know, up to the standard that we'd all expect, i could see a scenario

in which there could be an extension of that contract with very specific reasons to address the added costs of operating a building like this. does that answer your question? >> supervisor peskin: yeah, i mean, we could drill down into what those costs actually are and tailor it accordingly. i guess that this is maybe more of a policy direction that as we now have -- and, thank you to mr. mccaffrey for the information, 25 mills act contracts in san francisco -- that perhaps the h.p.c. and the planning department staff can also drill down into those numbers. so rather than using the formula that we can actually say this is a real-life guess of recouping the capital costs and what the out year maintenance actually looks like and we can tailor, given our broad latitude and discretion, the mills act grant

accordingly. so rather than it -- and i'm just using you because you happen to be here, but rather than it being $147,000, that the department says, hey, this is what maintenance really looks like relative to adhering to the accepted standards and we, therefore, say to the committee, look, they're eligible for $147,000 but if you want to scale it to where they can effectuate the kind of maintenance that we want to see at year 10, to be reduced to a lower amount, we have that discretion. so at any rate, food for thought, and maybe not for today and i will support whatever the chair whose district 973 market resides in and i appreciate the fact that you have resolved the short-term rental issues and actually note to staff and my colleagues that were it not for

chair kim refusing to put this on the last agenda because of the s.t.r. issues and same with the unit number 59 at 55 laguna, i mean, this should be treated in the same way that you guys treat everything else, which is that you can't come if and get a new building permit until you have resolved all of your outstanding violations and the mills act should be no different. i know that you got that message but i'll defer to whatever chair kim wants to do in this matter but as more and more mills acts are applied for -- and, by the way, the board should look at the other 25 and look at them through the same lens. and maybe staff could help with that. >> supervisor kim: i concur. president breed. >> supervisor breed: thank you, i appreciate supervisor peskin's concerns and questions because i have some very similar concerns just in general about

this process and i appreciate the department's willingness to make the appropriate changes in 2018 to address some of the things that we mentioned that we were most concerned about because when these matters come to us it implies somehow that the deal is done and it's not necessarily the case, especially because we're talking about a lot of money, a tax reduction, but one of the points that i brought up before that i'll bring up again that i am most concerned about is these projects have been done and they're just getting here and it looks like the work not only would have been done anyway, but it adds value to the property. and i don't understand why we would do this. and why would we give up the opportunity too