there might have been an increase at the beginning but i think over the long term we actually may have saved money over this 10-years of occupancy month to month. nonetheless the department of health pledged to accomplish this in a timely manner in the future. my colleagues are here to address any public health questions you may have. >> supervisor cohen: great, thank you. i don't have any questions for the lease but i think the budget legislative analyst has a couple questions. >> yes, supervisor. the summary of the provisions of the lease are on page 14 of our report. rent is $36 a square foot over the initial 5-year term. but as mr. updike said, we did raise an issue this lease had been month to month for 11 years before it was brought forward. there was, rent goes up by 50%

or 150% of the final rate 2007, stated that rate. we don't have the calculations but seem it's was a pretty hefty rent increase at that time that could have been avoided if there had been an opportunity to enter into a longer term race. the rent is going up additional 30% over the current rate. our recommendation is simply as mr. updike said the department of public health may only have two remaining month-to-month leases. there were a number in 2014 that had been resolved but this director requested department of public health to report back, they have 21 leases during the budget review, otherwise we recommend approval. >> supervisor cohen: thank you very much. i'm sorry, you guys, denise and raul? no? >> good afternoon, dave, department of public health. >> supervisor cohen: got it,

got it. >> [inaudible] >> supervisor cohen: state that louder in the mic. >> i'm with the department of public health, children youth family, i'm assistant director -- [off mic] >> supervisor cohen: perfectly great. thank you. i don't have any specific questions at this time. i will go to public comment. i see none of my colleagues have questions. public comment is open. all right, seeing none, public comment is closed. let's, i'll accept the b.l.a.'s suggestion and approve and send with positive recommendation. >> i don't believe this recommendation requires an amendment to the legislation. >> supervisor cohen: is that right? okay, thank you for the correction, mr. clerk. we will send to the full board with a positive recommendation and we can take that without objection. thank you. thank you, mr. updike.

please call item 5. >> item 5, hearing to examine the true cost of mayor farrell's proposal and requesting mayor's office of civic innovation, department of technology and budget of legislative analyst's report. >> supervisor cohen: all right, thank you very much. good to see you. >> ladies and gentlemen, thank you for attending this hearing. i called it today so we could begin to drill down into the true cost of a major undertaking providing universal broadband to shine a light on what to me has been a process that's been moving forward without much public attention and quite frankly without much transparency, the city has a poor track record when it comes to delivering big infrastructure projects on cost and on time, i will simply point to the central subway project. i feel it's our responsibility as budget committee members to

ensure there's transparency, accountability, as well as fiscal responsibility in all of our financial undertakings. that's why it's prudent for us to openly discuss the financial undertakings of this particular proposed program. there's a few things i want to layout before we get into the presentation to help frame the conversation. first, what is the current plan for fiber? who are the actors? and who will be in charge moving forward? for what reason was this particular technology chosen? of course, how much is it going to cost the city. i'm also curious to know what the cost to the rate payers will be and most importantly, overall, the build out. what is that cost going to be. so today we have got a really great lineup presenting. we will hear from the department of technology, budget legislative analyst.

sf city and d.p.w. i'm not sure if sf city is still here. if be could call the representative, she has a plane to catch. let's start there. and don't worry, don't go too far, linda, i definitely want to hear from you. please come on up. >> i really appreciate that. good afternoon, everyone, my name is jennifer stojkovic. we have been in existence since 2012 and work diligently to represent engage and convene the broader tech community and to motivate our members to play a meaningful role in the social fabric of our city. our member companies both large and small all do business in san francisco and employ tens of thousands of individuals, many of which are san francisco residents. i'm here to express concerns on behalf of our collective membership around the citywide fiber network.

while well intentioned we believe this concept needs further vetting. prior to financing such a major undertaken, there ought to be a comprehensive dialogue among the top spending priorities. in june and november our ballots will include two duelling commercial rent tax increases for housing and child care and a 0.5% gross receipts increase for homelessness. further transportation network companies will also see another gross receipts increase though it's unclear where the revenue will go. the benefits include housing, homelessness, universal child care and transportation. which begs the question, what are the city's top priorities. and is a multibillion dollar effort to build a municipality owned fiber network the best expenditure of tax payers at this time. in the midst of extreme housing

shortage we think not. our membership regularly communicates their priorities to us, as their trade organization and representative. the concerns of our members mirror those of the broader public. homelessness, housing and transportation. our concern is such a tremendous public expenditure as a government-owned fiber network will take an inordinate amount of time, funding and will most likely embed a technology that will soon become antiquated. that said, we enthusiastically support bringing high-speed internet to all of san francisco. 5g technology is the future of connectivity and something all san franciscans can benefit from and it could be delivered more quickly and less cost to the tax payers. we just need to look to our neighbors to the south in los angeles, and sacramento, san jose.

who capitalize for the public private partnerships bringing 5g to their communities to the tune of hundreds of millions for general fund purposes. they were negotiated in good faith and financial resources and include up front lease agreements to enact small cell technology working collaboratively to maintain the neighborhood character. in return 5g will connect all corners of the city. we could be a smart city of the future. and 5g technology through a public private partnership would be built by established internet providers with the resources and equipment to get such a network established. these same providers are also better equipped to handle not just installation but customer service, infrastructure maintenance, data management,

security and much more. i'm here today to advocate we engage industry and partners with expertise in their field to quickly implement a better and faster citywide network in partnership with the private sector. let's move ahead with cutting edge technology instead of municipal owned system i fear will be slower, going to take more time to implement and will need updating much sooner, so soon so that san franciscans can start benefiting as soon as possible. >> supervisor cohen: okay. >> most importantly we agree on city priorities and will ensure tax payer dollars are spent efficiently and with tangible out comes. there's no question we need to be on the forefront of closing the divide. we do sincerely commend the city's efforts to bridge this divide. >> supervisor cohen: thank you

very much for your words. at this time i want to go ahead and we will call up the director of the department of technology who will then set the stage from a policy perspective about what we are undertaking here. thank you, jennifer, i appreciate it. so let's see. we have linda. jorrell, chief technology officer for city and county of san francisco as well as director of the department of technology. thank you, linda, it's good to see you again. i'm looking forward to your presentation. >> thank you, supervisors and i would like to also thank the project team that is here with me today, we are happy to be here to answer your questions. i would like to give you an overview of the whole project and be able to answer your questions as we move through to the end here. just to move forward, what is

the problem we are trying to solve. there's many aspects of the problem we need to solve, primarily closing the digital divide, 15% of public school students lack internet access. a third of african american and latino students lack access. 25% of households making $25,000 or less lack access and over 50,000 residents have sluggish dial up speeds. so you have to say why is this important and what is the impact? in our world today this is an essential utility and technology. medicine, if you are a kaiser client, you will be able to get, and i can get care over video. and it's also about work. how do you apply for a job if you don't have internet access and look at all the jobs are

online. that's where this world is moving toward and we will talk about what the value and benefit of high-speed internet access is. so another problem we are trying to address with this project is cost. we have limited choice of provider. we do have in the city a rich ecosystem of providers but not across the entire city, they don't provide access to all cities and residents. commercial providers really don't have any incentive to close the digital divide, this is why we have the problem today and there are various levels of speed. all of this really contributes to a situation where our residents do not have access to high-speed internet. so what is the opportunity.?

i would like to suggest the opportunity is really the problem of today which is closing the digital divide as well as closing the problem of the future. how do we prepare the city for the future that is coming and it requires internet speeds. it's about speed and capacity, we do have lots of providers but they have various speeds in the city. it's about digital city services. providing so much more to the community with digital services, whether that's transportation, housing, we already have housing, internet services how would you look up your affordable housing and know if you were now on the list for affordable housing if you don't have internet access? emergency services are moving more and more to these end points and devices which we will talk about and certainly

utilities. telemedicine and education as we have talked about really is the heart of closing the digital divide. it will provide wifi to an extent. it has its limitations but it will be serving as a way to connect, devices in your home, retail, construction and all of those devices will need the back haul services of a very robust fiber infrastructure. we also need to look forward to new business services and opportunities as we have mentioned the technology is transforming, the digital landscape and i just came back from a conference where u.p.s. talked about how they have transformed their business with

the internet of things and it is a remarkable story of savings, resiliency, redundancy, reliability and resiliency that i think we need in the city and will be coming if we have the infrastructure to support it. so what are the policy goals for the fiber sf project? first deliver fiber to the premise. close the digital divide. one gig speed as a baseline service to all residents. create an open access network of choice and i will talk about how the technology works and how we are able to support multiples of providers and give that choice to our residents. provide free discounted internet access for low income residents. guaranty net neutrality and we can talk about the importance of that, ensure data privacy and network security and

deliver quality of service and transparency, so these are the policy goals the project team is working towards the goal as we move forward in this effort. [please stand by for captioner switch...] .

test test test captions. test captions. it may be that the controller's office could speak to that. >>speaker: perhaps it is

controller's office can. how are we going to pay for this? are you part of the conversation ben in any way? are we paying through revenue's tax or general fund, you heard estimated price tag is $1.9 billion. >>speaker: we have been thinking through different models about how to pay for this. a lot of exercises the city is going through. fundamentally here you have a large infrastructure component typically the city would seek authorization to borrow for to stretch over the life of the asset and then there is another component of the cost that is likely to be ongoing annual operating expense, where we couldn't borrow money and would want to have a pay as you go source available. >.as linda has noted, there is a

number of unknowns that are intended to become clear through the procurement process. >>speaker: is that the $44 million operating costs. >>speaker: yes, $44 million operating cost will become clearer as the process prosodass based on estimated work. the other is what is buildout cost going to be like. that is nottiest the result o na hard build, and that is a significant financial unknown regarding what we are looking at. using the numbers from today there is lots of different ways to think about how to pay for it, but probably two pre

dominant way. one would be general obligation bond that could be used to pay for the infrastructure. that would be an assessment on all property owners in the city and you could pay that with a smaller utility user tax and we do have one in the city currently, so would be an increase to that to pay for property tax. one would be a large geo bond. >> how large are you talking? sounds like the largest the city has put to owners. >> 1.5 billion. >> do you remember when supervisor kim proposed a $1 billion bond and she was laughed at. do you remember. [laughter] >>speaker: the largest bond pursued was just under

$1 billion. the other model would be to use a utility user tax only model where you have a larger utility tax increase that would generate annual revenue stream and you could use part of that to pay for the operating cost of the network and then issue a revenue bond secured against that for the remainder. those are the two pre dominant model. >>speaker: how long have you been looking at these models? >>speaker: the project team has been working on this for a number of years, and we have had much more focused attention through the rfp process. >> that seems the squishy part working on it before you got here but working on it in the dark. >> we are drafting an rfp to be released to possibly go to voters in november. do you see what i'm saying?

>>speaker: i do understand what you are saying and the more clarity we have regarding a lot of these questions regarding components of cost and the more certain we can be about managing our risks and we know a lot more today than we did six months ago or three months ago as a result of the rfp process and we will know much more at the end of this rfp process both about the business model and about the assets that one of the providers is going to bring to bear. >> have you read the draft language for the rfp. >>speaker: i have been involved. >> do you have a copy of the language of the rfp process and rfq? >>speaker: i do have the rfq, the rfp process is in draft mode. >> ben have you seen the rfp process language? >>speaker: yes, we have been involved in reviewing the rfp

process draft. linda has been good at including us in it. >>speaker: i think you are correct we will know more about the cost of the project and the operating model and how the risks will be shared between the city and the collected provider at the close of that process. >> based on this question and based on answers it sounds like the rfp to try contract with the vendor to help us think this through. >> i think, well and linda can speak better to it than i. >>speaker: i think we do know what we want the network to do and now we want it to be constructed. we know that we have our construction specif specificatid how it needs to be dug into the ground or on the poles, so all of that helps inform what will be bid, so then it becomes a

question of how the model will play out and how we will share those costs and what we will require and what we believe the revenues will be. that is where we start to talk to them about what their expectations are and what ours are, and it will be a conversation and there is lots of opportunities to bring that forward and have more decision makers in that process. >> linda, i know you just got to the team on this. thank you mr. ben. what's been your personal involvement with the municipal broadband fiber measure? i mean you are the boss, granted so, people are reporting up to you. >> right. i am intimately involved and attend the weekly meetings and we have the city attorney on there, two attorneys, outside council under contract, ctc under contract. >> what is ctc?

>>speaker: columbia telecommunications company. >> that is a vendor, contractor? >>speaker: they are neutral and not trying to push one product. >> how much have we already spent in this dream? i want the overall big number. >>speaker: my understanding from work with the department of technology to understand expenditures to date 1.2 million of the 2.5 million of the project allocated has been expended and $1 million to the fiber consultant. >> thank you. appreciate that. any other allocations out there? >>speaker: the actually uses to date is $1 million for the fiber consultant and 200,000.

>> how is the outside legal counsel collect? >>speaker: the city attorney and league council has experience with p3. >>speaker: okay. all right. t i want to go back to the revenue tax measure that is going to be on the ballot. so we don't really know what the project costs are exactly. we have a round figure. do you have any idea of an estimated figure of what the exact cost may be to customers to the rate payers? >>speaker: we really don't at this point because the revenues are still unknown. >> will there be tiered costs? >>speaker: that is an opportunity. deaf thatldefinitely a lower coe

lower income. >>speaker: a subsidy for lower income. >>speaker: yes. >> if you don't mind, i would like to call up connor to ask him questions about the revenue measure. hello mr. kennedy. i think you have been working on this project for the last year-and-a-half. >> yes, i am project-specific staff. >> what does that mean? >>speaker: it means my task has been since i came in august of 2016 to help to do the basic block and tackle and helping whoever is in charge of this project to get it off the ground. >> okay, so you have heard my line of questioning and linda has done a good job. i am looking for specificity where there is some gray areas. why don't you start at the top.

>> i think when we started, dt ran an rfp process to come on as consultant to help to guide us and ctc run by joanne hovis who is nationally recognized broadband expert and testified in the senate on this issue and have been intimately involved in a number of municipal fiber project. her firm along with img rebel, who are financial experts i think came in as the lowest bid. they helped to put together a series of reports. at that juncture dt was part of the project and we were certainly at the tane and watched as they helped the city over time to consider the difficult and complex technical

and financial trade-offs in assessing some of these larger question. i think there was a really great powerpoint that synthesized a lot of work that's been done over the past two year. i think an important part of that has been getting a handle on what the problem is in san francisco. >> what is the problem? >>speaker: california emerging technology fund identifies that cost statewide is the biggest barrier to access. in my own personal experience living in bay view, i think you do see folks outside of the library before and after closed hours, and that is true across the entire city who have their backs up against the wall and accessing the internet which tells me that home access to the internet is the problem and it's not just concentrated in one district, it's across the entire

city. sort of getting to what ctc also identified, we out liked a number of important policy goals for the city. this started a few years ago well before the trump administration took over and before the trump designated fcc -- barred states from enforcing their own rules locally that almost underscores an entire different rationale which the municipal broadband project is almost the only game in town. this is really about closing the digital divide. >>speaker: connor, let me interject here. are you working on a revenue tax measure for the ballot? >>speaker: i am not but i am

in the room with professionals who are. i think that from conversations that i have sat in. >> who is in the room? >>speaker: the city attorney. >> because they are drafting the language that makes sense. >> to be frank the city attorney can't even e-mail my sfgov account. even if i was sent a copy i wouldn't get it. >>speaker: i don't understand why they couldn't e-mail it? >>speaker: just from the beginning of my time here there is certain technical issues with e-mail.. i know that your staff left me a voice mail and my pin i keep trying to protect it. >>speaker: i will tell that to my constituents that my technology for the city. >> we have to fight the good

fight despite the limitation. these are tiny hiccups worth the energy spent. >> you may not have had a chance to look at the language so you can confirm there are plans to put a revenue measure on the ballot,. >>speaker: i can confirm what ben laid out as the lay of the land that it was essential as this initiative became real that the city's all-star team of financial experts were consulted about what the the issues were, looking at net neutrality and privacy and these important issues, i only have a vision of that whereas the city financial

leaders have a vision of everything. ben summed it up almost in a way that i wouldn't want to correct or add specificity to because that is the most accurate state of play right now. >> my understanding is that you are in charge of the entire city's tech policy. >> oh, i would love that. as acting project director i have limited authority and at the same time o a lot of influee and on wednesday's at 3:00 the ability to sit in the room. most responsibilities overvie thoverseethe contract. >>speaker: ctc put out a report in october 2017 does