office. i ask for your resignation. back to you, madam clerk. >> thank you for your comments. next speaker, please. >> the city's obviously broken. it's not functioning directly. it's never been more unlivable. there's never been nor misery -- more misery in the streets anded board has done nothing to alleviate this situation. the first good decision you guys have made was making my political enemy the mayor. that's the first solid decision you guys have made. i say that because of the mad cow stampede that ensued afterwards. that was a disgraceful exhibition that was a total disrespect to those halls and to the democratic processor what we're supposed to be doing. i digress. i want to get back to all this you guys worrying about trump

and the sanctuary city and all that stuff. you don't care about all that. if you did, you wouldn't let these poor immigrants walk through filth, people shooting up, selling crack, going to the bathroom in the streets. i suggest you start doing your job. put out a couple more out houses, maybe a public bath, a needle place where people can shoot up or put their dirty needles instead of leaving them in the street. this is a total ruin. you guys are presiding over it. so i suggest you get out of the developer's hip pocket and start addressing some of the issues that are facing us. the placement center, what good is a placement center when the public, the homeless can't use the bathroom. they have to go in the alley in the back and use the bathroom. or, you know, they can't go in the front because people are

selling crack out there. 600 feet for a pot club? everybody is selling crack anywhere they want. this is a disgrace. are you guys -- have you guys been outside? have you walked up larkin street or hyde? thank you. >> thank you for your comments. next speaker, please. >> auto duffy, neighborhood activist. historically going back, you know, about the time i was born, the golden post warriors, there were a lot more jobs and those jobs didn't require extreme academic skills or any other india of great skills the average person could find a way to raise a family. i had a neighbor who drove a milk truck. part of our problems is those jobs are gone. they're gone. i know about the time i moved here there were two people on every bus. there was a driver and a conductor. they all made incomes good

enough to raise families on. then, you know, so that's -- so that's the problem with the housing right there. you can't -- what i think is that, i'm representing a demographic that's below the demographic this project -- recent project we just talked about is made for. maybe the upper third of the people i represent might have a chance to get into that housing. but, you know, probably not. making it worse is that the people who are in that 100% of median income range, 125%, they're taking up the housing that the lower demographic used to live in, for instance, the president of the board of supervisors. so what i'm saying is i want to put a marker out there and say if we're going to do things like mission rock project, we have to do more than that. the behavioral health component that somebody mentioned right now, that's kind of what i'm talking about. thank you. >> thank you for your comments.

next speaker, please. >> if there are any other members what who would like to address the board, now is your opportunity. >> we're pushing the limits. overhead, please. timing is almost everything. i may have blown the time. tell the guys at the giants that's me in 1955 after they won the -- i was all decked out. you might say i was baptized a giant back in new york. so i'm partial to them. here's another photo. that's the health club. they were a mom and pop marijuana club that got knocked

out four or five years ago when the last feds moved in. they were the oldest club. that's the love shack. that's where i can go and i can get weed out of a jar. it's not -- it's not packaged in a package like this. it is fresher. if you went to the building and you bought all of your ingredients in plastic -- wrapped in plastic, that's the difference of what the feds are doing. so basically, growers that like to grow their weed and make a gift of it can't do that anymore. we're losing moms and pops. the brothers have been doing brownies for 10 or 15 years. they may lose out because of the new ingredients. i brought in a couple of joints last time. those joints would last me two weeks. they cost about $20 each.

a cigarette is smoked within ten minutes, 40 minutes later you need another one and it's destructive. we need to take marijuana away from its being a radioactive. it's a help to living. thank you. >> thank you for your comments. madam president. >> thank you. are there any other members of the public who would like to provide public comment? seeing none, public comment is closed. madam clerk, read the items for adoption without reference to committee. >> items 46 through 48 with being considered for adoption without committee reference. these may be approved by a single roll call vote. otherwise, a member may have an item considered separately. >> okay. madam decker, on the item, supervisor peskin. >> i would like to sever item 48. >> on the remaining items, madam clerk, call the roll [ roll call ]

>> there are 9ayes. madam clerk call item number 47. >> item 48 is the resolution to designate michael rios of the city and counsel -- >> ameritus. >> apologies. >> i neglected when we honored mr. rios. >> supervisor pes kin. >> thank you supervisor ronen. >> can we take this item same house same call. it's adopted unanimously. madam clerk, read the in

memorium. >> the late dr. jack mcconnell, on behalf of supervisor cohen and supervisor safai for jeremy gordon. >> and supervisor breed. >> and president breed. on behalf of supervisor cohen for the late mr. jeremy gordon. >> thank you, madam clerk. is there any other business before us today? >> that concludes our business for today. >> thank you, everyone. we are adjourned.

>> clerk: rned. [ roll call. [ roll call. ] >> item 2, approval of minutes. >> so moved. >> there are no minutes. >> the minutes of the january 30th, 2018, will be presented for approval at the next meeting. item 3, public comment on executive session. since there was no executive session today, we are skipping items 3, 4, and 5. item 6, pledge of allegiance.

[ pledge of allegiance ] >> please be advised that the ringing and use of all cell phones, pagers and similar sound producing electronic devices are prohibited at this meeting. please be advised that the chair may order the removal from the meeting room of my person responsible for the ringing or use of a cell phone, pager or other similar sound producing electronic devices. please be advised that a member of the public has up to three minutes to make pertinent public comment on each agenda item unless the port commission adopts a shorter period on any time.

item 8, public comment on items not listed in the agenda. >> is there any public comment? seeing none. >> item 9, executive director's report. >> good afternoon, president brandon, rise president adams, commissioner woo ho. i am elaine forbes, and i am the port's executive director. first i would like to congratulate the hit toric pier 70 and the -- historic pier 70 and the orton project. >> on march 7th at 8:30, they will receive an award honoring their outstanding contribution and other outstanding winners. i'd like to explain why they

won this award. the award rationale is despite challenges, historic constraints, environmental and structural challenges, a complex capital stack, tax credits, these buildings were historically renovated and successfully leased, and they have served as a catalyst for the reextremity of the larger site. these revenues have been put back into rehabilitation for the port of san francisco. these proud structures inaccessible to the public since their original construction can now be viewed, experienced, and appreciated by future generations. so congratulations to orton development, eddie orton, to

plant construction, to the port team led by phil williamson, and i believe we have a representative from orton development here. yes, hello. i think this is mr. mora, would you like to say a word to the port commission? you're not obliged to, sir. come to the microphone, please. >> hello, everyone. my name is everardo maora, andi thank you for this opportunity to stand before you and also for the opportunity to bring these buildings back to the community. restoring them was a very meaningful, difficult project for us, and we're happy to be on the final stretch with them. we also look forward to coming back within about two months

once we finalize the project to give you an update on where the project stands overall, and we look forward to future opportunities on the waterfront. and just, you know, just want to really, really give a big thank you to the port staff at all levels, the port engineering department, the environmental review department, historic department, they all had an incredibly important part of our success, so thank you very much. >> thank you so much. >> congratulations, and thank y you. >> thank you. we're extremely proud of this project. i'd also like to update you on the status of mission rock. since the port commission approved the transaction documents and accepted ceqa findings just at our last commission hearing on january 30th, the project team has been extremely busy. last monday, on the 5th of february , the board of supervisors land use and transportation committee recommended the project to the full board of supervisors. they acknowledged the project's many public benefits. on tuesday, the next day, the

6th of february , the sfmta board approved the project development agreement and interagency cooperation agreement, complimenting the team on its careful approach to right sizing the future parking structure. the following day, the 7th, our team, led by rebecca benecini, and for the giants, fran wells, appeared before the budget over sight committee to explain the plan's structure, and they approved the plan to the full board of supervisors. yesterday, they received a positive recommendation on the project's financing mechanisms, which is vitally important to the project's success, and the project was forwarded to the full board with a recommendation today, cu culminating from 11 years of thoughtful presence and

efforts, and thanks to a purposeful and thoughtful discretion of the board commission, the project is before the board of supervisors to hear the final approval. at the second -- the bored's second hearing, the project will occur on final read on the 23rd of february , and then, mayor farrell will have ten days to sign the transaction documents. the team is currently working with state land commission to explain the structure in a firm compliance with state legislation, leading to an april request for state lands commission approval. in may, my team anticipates approval of a major approval from bcbc for the project's permanent open space plan, and in october, we anticipate initial site work to commence, so we're very busy and pleased with the progress we've made just since your last hearing. this room is going to get an audio-visual upgrade.

after dealing with equipment that was put in in the late 80's, i believe, it's time for an improvement. the upgrade will occur from february 26th through march 30th. the modernization will improve the quality and consistency of sound and the video experience in this space. it will also improve what the viewers see on channel 26, and the recording quality of the meeting for the public. we'll also now have high speed wifi in the room, which will be a nice upgrade. during the upgrade project, we're going to be relocating to pier 1 for our port commission hearing, and that means for the meeting on february 21st, march 13th, and march 27th, we will be in the bay side rooms at pier 1. we look forward to reconvening the commission meeting with full services here in april,

and i'd like to thank all for skillfully overseeing the project, and that concludes my report. thank you. >> thank you. 9-d? oh, i'm sorry, any public comment on the executive director's report. no? 9-d, port commissioner's report. commissioners, anything to report? commissioner adams? >> vice president adams: first of all, i just want to say to our president brandon, it was an honor to attend your 20th anniversary on the san francisco port commission, madam president, and a special how'd o shout out to renee, to make that a very, very historical evening. for me, it was historical in the sense that this being black

history month, and president brandon's contribution to this community, and to see her friends and family. corrine spoke, jack blair from the giants spoke, mayor brown, and then kim's partner in life, mimi, and it was just an honor to be a part of that, so thank you so much for allowing me to be there and playing such a small part. and also, i would just like to say that madam president, when you get done speaking, could we have a moment of silence for madam secretary amy posada's mother who passed away? thank you. >> thank you. i, too, thank elaine and renee and all the port staff that had anything to do with the event last week. it was -- it was just so magical and memorable and just such an honor, and i'm just so humbled and thankful to have

been able to take this journey with all of you for so long, so yes. in -- i really want to thank everybody. it was just a great event, and sorry that everybody couldn't attend. and i would like to take a moment of -- go ahead. >> no, i was just going to -- before you spoke, i was just going to say congratulations, not only on the event, but on -- which, unfortunately, i had a prior commitment, so i came at the tail end, and people were still having a great time and talking about how wonderful it was. but really, just congratulations on 20 years. that is, i think, extraordinary in terms of the amount of dedication and commitment that you've given to the port and the city of san francisco, so just really want to thank you for your commitment to public service and service to the port and really just take a moment to reflect on how significant it is for somebody to give 20

years of service to a commission like this. it's no easy feat while carrying on all of your other community activities as well, but i guess it just goes to show, if you want something done, ask a busy person. congratulations on 20 wonderful years, and perhaps 20 more. >> thank you. i'd just like to add, i think that everything should be said has been said, but just add my own personal congratulations. i remember kim when she came on the commission, she was really helpful to explain because she had the history, she had the knowledge, and she had the culture, and she's very persistent, so i have a tremendous amount of respect for what she has done and contributed for the commission, for her community, and for each one of us, and so it's very appropriate that she also gets to celebrate this anniversary as she is president this year,

so congratulation again. >> thank you. now, can we have a moment of silence for amy's mother. thank you. >> items on consent, 10-a, request approval for a member of the port commission to travel with port staff to attend the sea trade cruise global conference on march 5th through #t8th, 2018 in fort lauderdale, florida. 10-b, request approval for the port commission to travel to --

[ inaudible ] 10-c, request approval for the port of san francisco drone policy relating to the port's use of drones on port property pursuant to the city and county of san francisco's citywide employee drone policy, adopted by the city's committee on information technology. >> may i have a motion? >> so moved. >> second. >> is there any public comment on items 11, 12, or 13? seeing none, all in favor? any opposed? resolutions 18-11, 12, and 13 have been approved. >> item 11-a, informational presentation on the port's fiscal year 2018 through 2019 and 2019 through 2020 biennial

operating budget. >> good afternoon, i'm megan wallace, the port's manager, and i'm here today to present on the proposed fiscal year 2018-19 and 19-20 budget. today, i'll really be focusing primarily on the operating budget, as our capital manager, anonda hirsch, will be presenting on the capital budget shortly after me. i also just want to note just putting together any budget is really a team effort, and i particularly want to thank tar anavarro and mayrilyn yates frm the real estate and maritime division. margaret doyle, she's supported me, and it's been an amazing

experience, as well. so i guess, you know, just really quicking it o really kicking it off, the mayor office and staff do a rigorous review of the city's economic and fiscal outlooks, and what we've been seeing we've been on a really long growth period for our local economy, and we're starting to get warning signs, so we need to be more conservative in our opening outlooks, and that is also being paired with, as you're familiar with the ongoing story of growing personnel in expenses, those two drivers are really putting a real squeeze on the city's general fund, and while we aren't a general fund department and aren't being held to the same requirement of cutting our budget, we are being held to control our personnel growth, given that's one of the key driver's of ongoing growth within our budget. so heading into the port's

budget process, we really did try to take a fiscally prudent approach of controlling our expenses. you are going to see we're recommending strategic increase increases. in terms of managing personnel, we're asking more along the lines of substitution of existing staff, so we are not seeing growth in our ongoing support, but we are requesting a good number of funding positions, and they're contingent upon project funds. so we really held to the budget instructions, and i think that overall, we're managing trying to repair our budget for a potential downturn moving into the next two fiscal years. i think one great thing about the budget is it really is making policies, putting -- it's putting our money where our mouths are in terms of our

strategic objectives, and it's really important that we look and make sure that we are investing in the areas that we want to see ourselves grow and improve in, and so when it comes to sustainablity, resiliency, also economic vitality, we are making some key changes within the structure of the department by consolidating real estate and development together so that we can have more -- a strategic approach to those leasing initiatives. we do have a new chief operations office to try to coordinate efforts between divisions more effectively, and really, just all of these efforts do improve the overall economic vitality along the waterfront and in san francisco, we believe. but i think really the key focus for the budget, you would tend to lead to, is stability, and we've continued to really stick to our policies of we

have a 15% operating reserve requirement to protect us in an economic downturn or other y uncertainties. we do meet or capital policy requirements, and as you'll see in this presentation, as well as in the capital presentation, we really are making an effort to invest in our facilities to stablize our revenues into the future. so getting into the details of the budget, first, i'm going to start with sources, and not to site a bunch of numbers, i think it is important to note that the fiscal budget for 18-19 is 192.6 million, and this is compromised of approximately 160 million of ongoing sources and 32.8 million from one-time sources, and this is a $46 million increase over yauall, really driven by fund sources and other things that weren't

in the prior budget. for fiscal year 19-20, the budget is 161.3 million. that's a 31.3 million decrease from the proposed 18-19 budget, and that's because you'll see that our capital program tends to be sort of lumpy, that we're spending down accumulated finances from previous year in the first year of the budget. we're requesting general fund support in the first year of the budget, and so in the second year, you see a drop in those sources. and it's important to note the ongoing sources primarily support our operation, so we really look to obtain funding sources to keep that going. so these pie charts show total funding over the two-year proposed budget. as you can see, the largest source really are our operating revenues.

fund balance is the next largest source. just quickly to note, fund balance supports or capital program and it's the source for our operating reserve, but for our operating fund, that biggest piece, it's mostly compromised of commercial and industrial rents from our 500 some-odd leases along the waterfront, parking, and then our various maritime business lines that each contribute about 20% of ourov overall revenue -- operating revenue. i do want to mention we're missing a familiar business name on the maritime line. this does not reflect ship repair. as you know our shipyard is currently closed, and we did not assume any funds in this line for the proposed budget. >> i -- >> yes. >> do you mind.

i know you didn't assume any on this line. are you projecting out not seeing any revenue as we have to do some repair on that, as well. >> yeah. i haven't done a five-year outlook review. i think it's time will tell? i'll look to our deputy director and see if he's like to be informed, but for budget services, we have not assumed anything. that would be an improvement if we get. clerk: s heading into the spring, it's not too late to update the budget before we get it done before it's approved through the board of supervisors, but for now we're taking the conservative approach and not accounting for it. >> thank you. >> so overall, you know, over the two-year period, we're looking for a net increase in revenues of only 2.2 million. that's significantly less than in prior years, and i think it's important to note that the key drivers of that is actually

some revenue lines that are pulling that growth down. parking is one, as we see development coming in, we're actually going to be taking some facilities offline. some of them are shipping to commercial-industrial rent so that helps the growth on the commercial-industrial rent side, but overall, it does appear to be a reduction, but ship repair, cargo and cruise are all maritime lines, where we've either seen declines in business, such as in ship repair. cruise, we're adjusting our parking assumptions, and we are seeing some dips in passenger volume. cargo, it's important to note that our overall business is doing quite well, but we had to change the structure of how we budgeted for that business, so it appears that our revenues are going significantly down, but our -- but overall, it's really just because we had to shift how we're reflecting this

revenue line. our gross revenues continue to be very strong. and for the commercial industrial rents, i do want to note that while we're being conservative on things like ship repair, we're actually being fairly aggressive lion things like our projected less revenue, and that's really going to call on our staff to push and get these facilities ready for leasing and get them up and running with new tenants. and i think it's important that we push ourselves. we're seeing some dips in our -- you know, some easing in our revenue growth, but i think bottom line, it's important for our ongoing stability to knack suknack -- make sure that we're getting these facilities leased. on the uses side, the -- again, the budget in the first year is 192.6 million; in the second year, it's 161.3. and this is compromised of operating expenses, the capital

budget, and our reserve. and you know, really just noting that while we are seeing growth on the operating expense side, we really did continue to make it a priority to make sure that we're designating sufficient revenues to capital so that we are having ongoing support for our capital improvement program. so over the two-year windows as these pie charts show, about half of our budget is actually invested in our operating expenses. the capital budget is 22%, and then, the third largest line is the designation of capital, as i mentioned, so that's really net revenues that we're putting away for future capital budgets. and within operating expenses, you can see personnel compromised half of that budget, so that's why it's so crucial to keep control of our

expense line, and then as you can see other expenses are a major expense line. again, in terms of trends, the real drivers here for growing costs, primarily salaries and inexpenses. we have very high insurance needs. that's one of the key drivers of this growth. director forbes has actually asked us to look into this and see if we can control growing costs in insurance in future budget years. but some good news is we do have some other current expenses that we're actually able to reduce by the second year of the budget.

[ please stand by ]. >> -- instead of adding staff to help us deliver the work we need to get done, we're asking for substitutions to meet our staff to rhea line our current needs to be able to deliver our work. we also have reassignments within the budget, and this is in part because we're consolidating development staff into the real estate division, and we're actually redistributing staff from the operations division that had been created. we're putting staff back into the original divisions that they had been located in. we are actually asking for some additional positions, but we're actually going to offset those by an assumption of salary saving, so for every new position we're putting in the budget, we're assuming we'll have to hold a position vacant to offset it. and then, lastly, we are requesting 12 new project funded positions. actually, ananda will talk

about this in capital, but it's for a budget management office, also for staff who can deliver our work products. we have a lot of staff needs that we're requesting to staff up so we can make sure we're getting through projecting, administering the project correctly, and things like that. and then lastly, the capital designation, i just want to highlight that again so we're really making sure that we're meeting our capital policy requirement. it is a significant portion of our budget, and as you can see here on this slide, since the school year 14-15 when we've started to implement this strategy, we've seen significant growth in this designation, and even though that program can have its ups and downs, the one time sources

have given us extra strong years in budgeting, all in all you can see we're building up a sustainable source to make sure we're funding our capital program. the next step, staff is actually requires to submit the budget to the mayor's office next wednesday, on february 21st, that's before i'll be back before you on february 27th, for formal approval. i do want to note that if you have any changes to the budget after we've submitted to the mayor's office, we'll work with mayor's staff to reflect those changes. we're just trying to follow city timeline requirements. and then, the mayor will submit the budget to the board in may, we'll go through, and we need to -- the city needs to formally approve the budget by july 31st, and in september, i'll be back before you with a budget update to let you know what happened in all those months in between. so if you have any questions

for me, i'm happy to answer, otherwise, we have other staff that are ready to help out as needed. >> thank you. is there any public comment on the budget? no public comment. commissioner katz? >> commissioner katz: thank you so much, and as always, really fantastic presentation. it makes it easy when we're prepping in advance and here, so i thank you for that. i have a couple questions that you may have answered, but one is i noticed in term -- it's not a huge differential, but what has allowed us to decrease our funds on the south beach harbor and marina? is that sort of getting where we want it to be? is it sort of stablized and we're now in a good operational place so we don't have to put

as many funds into it? >> well, i think part of what you might be seeing, if i'm looking at the overview table, is south beach harbor actually shows up in two places within the budget. on the uses side, it's an operating expense. there's 3.7 million; and then in the capital budget, there's 1.1 million. >> right. >> so it looks like a decrease on the operating side, and maybe that does actually lead to your point, but there was about 300,000 more that we were able to allocate to the capital program, that we were trying to facilitate ground repairs to the harbor. it is self-sustaining, and we're just trying to find ways, just as with the port harbor funds, we're trying to create a similar structure for south beach harbor c.

>> commissioner katz: and then, can you articulate a little bit more the general increase in funds. >> actually, anana will go into more detail, but for the capital program, for the seawall, and for the mission bay ferry landing project. >> and then there's not a significant increase in our operating reserves. does that keep it as a comfortable level, though. >> yeah, it's supposed to be 15% of our operating expenses, so we've been controlling those expenses, we haven't seen significant growth year over year in the reserve requirement. >> and then going back to -- on the revenue side, right now, we are getting about 22% revenue

from our parking, and i'm anticipating that change, but as we move forward, it seems it's going to be incumbent on this to figure out how we adjust to this decreased revenue for a pretty significant period of time until we start seeing an increase from the projects coming in. do you have any thoughts on that or what we should be looking to do to kind of adjust for that or just be aware of it? skbl yeah. i think what we saw with the five-year financial plan is that a lot of these deal impact the parking increase the commercial-industrial rents. the best way to bridge that gap is to try to get the structure ideals to make sure we're constructing rent as construction occurring, not just as we don't have a period of time where we're not generating revenue from a site. >> commissioner katz: okay. thank you. so i think we've taken that into account in most of the deals that we've been looking

at, but are there any that are coming up, and i guess not that you have to address it now, but perhaps when it comes back to us, ask that we take that into account and be reminded, and something that we should be cognizant of as we go forward. >> right. >> commissioner katz: and then really just sort of an open-ended question, that you would highlight us to be aware of as we go forward over the next couple of years. >> i think ultimately, the challenge for this budget is the demands on the port is growing. we're such a diverse department and we have so many needs that we're trying to meet, yet we're trying to control our costs. when i first started, i was gung ho, let's get so much money into capital, but yet to deliver our work, but i think

we need to continue to conduct those trade offs of conducting operations but needing to deliver on capital, so if we start to see an economic downturn in our revenues due to declines, maybe we need to consider repriority the work we're doing, but that'll be a citywide discussion. >> we have bigger problems are, i guess, if that comes up. >> yes. >> commissioner katz: all right. well, thank you very much. appreciate it. >> commissioner woo ho? >> commissioner woo ho: thank you. obviously, i think you've put together a very detailed, and jennie learned we're pretty conservative in terms of when we do budgets. in a separate conversation, i'd like to compare how we've done in the past versus our budget particularly on both revenue and expenses, but generally we do better. i'd like to peel the oni on a

little bit more and understand that there's some negative trends and downturn in the market that we think are going to negatively affect us in the negative couple of years. does the city give you some assumptions so that every department use those same supgs assumptions and you translate those equally or try to in your particular budgets without having each one of you do your own subjective analysis, so that's question number one. >> i think the answer is yes, the city does give guidance to the controller's office in particular. >> so how do they translate? what do they tell you? >> well, i think personnel is the most complicated because when it comes to salaries and fringe benefits. >> that's a negative of saying you either keep your salaries either flat or your fte flat, but how do they translate what the impact of the economy is. what trends are they pointing to? >> impact on the economy?

they're not necessarily expenditure -- >> well, you're saying the economy is going to slow down. how does that translate to each enterprise departments or even that aren't enterprise. i'm just trying to understand how the city's budget process work. i understand how they say let's control personal expense. i understand that. >> well, it's a little trickier than the controller's office or the mayor's office do not give us instructions on how to project our revenues, but we as a department are structured we right lane to look at -- [ inaudible ] >> we are very well -- >> commissioner woo ho: so we

try to look at the negative trends, for instance, you just mentioned a couple, but do we assume know that vacancy rates are going up, our rates increased are slowing down. what are some of the assumptions? >> oh, i would need to turn to tara navarro. >> commissioner woo ho: i don't need to know all the specific numbers, but i just want to know what are you considering when you say there's a slow down. vacancies going up, rents are slower, less properties coming up for renewals. >> i think the proper way we see it in our budget -- [ inaudible ] -- in recent years to show that in the five-year financial plan, for example, our percentage rents were very strong, but now, in the last year, we're seeing them ease a bit, and so our -- >> commissioner woo ho: so we're assuming our tenants are not going to do as well on the

revenue side. so what are we saying? that they're not going to be participating in the sales side, but we haven't obviously heard specifically from them, but we're just projecting on their behalf. >> that's right, yeah. >> and i would just say that we're projecting they're not going to do as well as they've done in prior years, so we're not saying that they're not going to be growing, it's just that -- >> commissioner woo ho: their rate of growth is slower. >> yeah. and tyrone, you can add more to that. in terms of what the city provides us, the, we convene an economic summit for all the city staff in that year. in that forum, it's a half-day session, they bring in experts from tourism, hotel, office, and all the sectors of the economy to discuss what kinds of trends they're seeing, and that really does help the

finance staff align what we're seeing at the department level with the larger city trend, so that is one form that we get revenue projection advice, but in terms of this budget here, tyrone, you can add more in the real estate portfolio. the maritime portfolio is very stable, because we actually know how many cruise ships are coming in, and cargo, as megan said, we've redone how we put the revenue and expense. the cargo volume is actually on the rise. so there's a range from projection to very, very dill tailed information that causes us to know almost to the dollar what we will receive. >> so the real estate side i can understand what you mentioned. with the maritime side, we're struggling with what's going to happen with ship building, and

whether we can get a tenant, and on the cruise ship side, it seems like the special events are lower. we're not seeing as much cruise ship volume come in because it is booked in advance. i'm just wondering what other -- besides this budget, should we be doing a strategic review of what our maritime view should be in these longer terms of business. i think we have something to address that is not just budgetary for the next two years, but something strategically that is important. i think you've got -- you've got the south beach marina, you've got the cruising, the special events, you've got the ship building, and missing one. >> harbor services. >> harbor services. we've always known that it's a hodgepodge of things, but i think we should be rethinking our maritime strategies. it's supposed to be a priority of this port, and we want to

make sure that we're not just swimming upstream. >> it is absolutely a priority, and i've already been speaking to our chief operating officer about the cruise strategy and how the port can grow in cruise. we know we'll be receiving bigger ships, but where are our berths to welcome bigger ships, and i think it would be something great to put on the calendar so you can hear some of our bigger thinking on how to grow in the cruise business and also to stablize the business that we have. we know cruise is cyclical, and when there is a recession, definitely, cruise declines, but we want to stablize a certain volume of trips to san francisco, so we can ensure a profit to our cruise investment in pier 27, so i think it would be excellent to come back and talk specifically about cruise strategy, it's something staff

is working on. >> i'm sorry, and the other one was cargo, because we had these conversations with pascha and dmw. if there's offsets, we should understand where that all fits into this. i guess i'm used to, in the corporate world, you do your budget, but you have risks and opportunities, and you show what -- the sensitivity and analysis of what could hurt you, because some circumstances are beyond your control, as you mentioned, the market conditions, but others are opportunities that you don't want to book because you're not sure, but you want to know that you're on top of them. it would be nice to know what the opportunities are besides just the submitting in the formal budget. i understand that's a requirement we have to do, and we're always conservative. we're never going to stretch too far. that's my experience in looking at these budgets for five years, because every time we look at the actuals, we do better; and even on the expense side, that's the other thing

where i said at some point, not in this meeting, we have a historical perspective of the trend line that we're seeing over the last five years so we're seeing the trends of the organization and how it plays out, and not what we think is going to happen. we only hear what is going to happen, not what is actually happening. i think on the personal expense, i know you mentioned, you know, the project management office, and i can understand the need for that. i think in the past we've also talked a lot about -- and i don't know whether this is a factor in this year's budget, employee benefits keep going up for the city of san francisco. is that an issue for us in terms of the employee benefit ratio and, you know, is that also what's causing personal expenses to go up a lot? >> it's very much what's driving. >> does the health care cost, pension cost, etcetera, that's another factor there, so it's more than just adding head count? >> that's correct. so by maintaining our head

count, even with our existing head count, we're seeing expenses grow because or pensions need to be -- you know we're trying -- the citywide goal on funding pensions needs to be -- you know, needs to be met. >> even the unfunded pension liability has been incompetent creased and at some point, you need to do something about it. >> and health care costs is something we're all familiar with, so these things are being incorporated into our existing employee expenses, and so in that regard, citywide, everybody is being asked to try to solve many of these -- >> well, the mayor's office look at the whole picture and figure out what to do, because it's not something you as a department can figure out about pension and health care costs. there has to be a plan citywide to figure out how to reduce

growth. what you presented is all very, very reasonable and understandable, but we have to put it in the bigger landscape of where we're headed. since we're concerned about having enough money for the capital budget, and now you're saying you're a little concerned about the operating budget, yet for the first time we've hit over $100 million in revenue. a few years ago, it wasn't that big of an issue when elaine was the ceo, but now it's an issue. i hope we keep looking for nuggets. >> i do want to add that the commercial and industrial rents, you have a very strong optimistic place holder for future leases that we don't yet have. there's about $5 million of revenue that we're assuming there for facilities that have

not yet been filled, so those are opportunities that -- that create a net revenue in our budget, so it's designated to capital. if they don't come through, it means less money to capital, but we want to be optimistic to set those goals and have targets for ourselves. >> so i know the orton development has some timelines, not been as fast as we would like, but as i recall way bockmanny years, when we presented, it should start to generate revenue. where is that in this budget? is orton a contributor at all? >> it's not a contributor yet. >> okay. and if this timeline was -- i mean, two years -- we've been at it for how many years now. >> we're going to get an update in march from orton development, as our guest today said, and i know their revenue projections are stronger than what we've seen in the past. >> okay. [ inaudible ] >> that's something that we should be keeping our eye on. >> yes.

>> okay. okay. i rest. >> commissioner adams? >> vice president adams: well, i really appreciate the interaction between the commissioners. i have a different point of view on this first of all, i think your prevention, very calm, and i like people that speak that don't say uh, uh, uh. clearly, you know what you're talking about. clearly, the port is going through some changes, and i think we seem to be adjusting with that. you can kind of see what's happening with the stock market, and what comes up is definitely going to come down. i like some things you can be conservative, other things, you can be a little bit more out there. and i just wanted to say to commissioner woo ho, this is just my humble opinion. corporation, they answer to their shareholders. port, our shareholders are the public, so it's a totally different concept, and i just

wanted to throw it out, that's how i see things. and then, the maritime aspect, clearly pasha hasn't grown as fast, but i think there's a plan in place, and i think a week ago, two weeksing, president brandon and director forbes, we met to discuss that. i think it takes time for us to get to where we really need to go, and i think it's continuing to grow. i know i will be going with the port staff, metro will be there, and i know local ten, we will be down in florida here at the sea trade conference, meeting with the ceo's of the cruise ship companies, trying to promote san francisco as the number one destination on the west coast, so we have to continue to do that, and that's a thing that i think is a work in progress. i think we keep working on it.

i think pasha, they're still out, trying to get customers. i think we got good news with hanson and others, so i think it's going to take a little time, and i think we have to be kind of patient. i think we have to have a very, very really, like, coming to jesus meeting about the shipyard. the way we know the shipyard as it was in the past is going to be different, let's just face that. when we sent out the last rfp, we had one bidder put in, okay? we know that. there may be a change the way we do things around here. that is okay, but we've got to figure out what will work. but you know what? we regrouped. the port staff, they thought about it, they put their heads together, and they'll try again. i don't know what it's going to look like. i agree with you, commissioner woo ho, but we've got to find something that works. the ship repair is to competitive with all the other places that are