pipeline of capital projects. acknowledging that it can take longer than two years to conceive of, design and deliver capital projects. it's nice to see where we're going. so this is a guiding document for that. first, before i dive into the five-year plan, i want to look that identified in the 10-year capital plan. this identifies what would be our optimal investment in infrastructure, if we had all of the resources we needed to get all of or assets in good repair. then looks at how much revenue and illustrates we have a shortfall. this really motivates us to think about how we use our limited dollars. we see the five year helping us do that. so as this chart shows, our most recent update to the 10-year capital plan was done last year. we do that every other year. it identified $1 billion short

fall in our ability to meet our capital needs. then i was before the commission in february, talking about our two-year capital budget. in this document, our $73.4 million vision for the capital projects that we'll fund over the next two years. this continues to trend investing well and more in capital. so it was a 13% increase over the prior two-year budget. despite that commitment, if you look to the chart at the right, we still are unable to meet the goals laid out in the capital plan for our renewal investment. so we need to think strategically about what we fund so the capital budget were developed through project selection process that the port has used for capital budgeting for several years, where a team works together and uses a criteria based approach to

select projects that are then vetted with the executive director. and come before the commission. and that's how we got to the two-year budget. we used that same process to select in the outyears as well. now, we delve into the big picture. we have big plans. first column shows $179 million of capital projects that have already had funds appropriated and under way. in this five year we envision spending additional $578 million to advance those projects as well as a host of new projects. the big road to note there, is the city-wide projects. and that represents -- that captures the mission bay ferry project as well as the seawall earthquake resiliency program. that's why the number is the size it is. the third column represents dollars where we have specific projects we believe are good

candidates for outside funding sources we'll be pursuing. so that includes the heritage shoreline improvement project as well as the sea wall earthquake safety program. if we're able to secure those funds over the next five years, the port will advance $874 million as capital projects. exciting vision for us. diving into what is behind the numbers a bit. looking at the sources and uses over the five-year period, you notice that the largest source is general obligation bonds and that's thanks to the $425 million bond for the sea wall project. if we look at the uses, you note that the enhancements is the largest slice of the pie. and that is really because the city categorizes any project that brings it above its condition, as enhancement. so the seawall project is considered enhancement under the

city approach to capital planning. that's why the wedge is that large. when we talked previously about the budget, commissioners wanted to think about how this related to what was in our capital plan. in this chart i wanted to step back and look and see how are we doing in terms of port investment in capital, compared to what we thought we would be able to do when we did the last 10 year update? if we compare the five year period, we're projecting being $36 million ahead, doing better than we thought we would. and that's due largely to the port's commitment of onetime revenue sources to capital. in the five-year period we're anticipating onetime sources from the sale of the ferry building and the affordable housing credit from the mayor office of housing. that's largely driving that number. there are more than 40 projects in great detail in the document. i will not go through all of

them, but touch on a few. the first years, one and two, presented to the commission previously when i was here with the budget. but some highlight of those funded work includes leasing improvements for the beltline buildings that we can get tenants into the space. as well as some very much needed repair work, such as improvements to the sewer system as well as repaving that street, because it gets a lot of heavy truck use. and we also are funding the port's first project management office. as i noted we had commitment to investing in capital and been fiscally constrained and not added staff as we added the funds, but this year with help from consultants, we recognized that additional staffing resources would be key to helping deliver all of these projects we're funding. look ahead to the outyears, 3

and 5 we see improvements, roundhouse 2. as well as host of state of good repair improvements, continuing to have port crews available to repair structures throughout the port and enhancements, the cip anticipates there will be a new general obligation bond for parks, allowing us to continue to expand our open space. just throwing in a brief project update. because we did discuss this other waterfront pile removal when i was here previously talking about the budget. wanted to share a couple of photos from the crews. port crews have commenced taking out piles from the creek. at the end of april, since then they removed more than 200 piles. they anticipate being finished on the south side of the creek by mid june. and then the crews will be

shifting back to spending more time on pier 92 and the apron repair there, but will be continuing this the work and anticipate the piles will be out of the creek by the end of the year. a bit of good news. and just finishing off with visual representation of where the projects are anticipated across the port over the next five years. you note that the largest category of port wide projects, and that includes things such as the seawall earthquake safety program, as well as the power removal crews that will be 'do work across the -- will do work across the waterfront. so, this is a guiding document from staff. it's not a new funding commitment. you've already approved the two-year capital budget. we're here today to get commission feedback to integrate it into the document. we'll make changes we need to as

the budget goes through the rest of the city process. and then we'll have a finished report that will be available to the public online. and we will have some limited print copies that will be available to port commissioners. with that, i'm happy to hear feedback. >> president brandon: thank you so much. is there any public comment on the item? is there any public comment? commissioner woo ho? >> commissioner woo ho: i think this is great that you have developed this, so we don't have just the two and the 010-year and this gives us a great chance. i thank you for thinking through and making this presentation that is easier to understand than the written report. that is very important. i guess one thing in terms of your charts here on the sources and uses, you mentioned here, the port harbor funds for roughly 21.8%.

and then the general obligation bonds. so i understand the categories. i guess we're assuming then that we get the -- because we don't have all those bonds in place yet. so this is assuming what is going on the ballot, is that correct? >> that's correct. it assumes reasonably expected funds. so it does include. >> commissioner woo ho: so that's not what we have at this point, but what we're assuming going forward. >> we believe it is, and likely enough we should plan for it. >> commissioner woo ho: right. in terms of -- so it looks like going on the out-years on the next page, where you have port investment exceeding projectses, we're not going to be doing that much better. for a while we had excess capital that came out of -- that we were able to reinvest, looks like your trend line is not showing, but that's going to be

strong going forward in the forecast you're showing us right now, correct? >> so -- >> commissioner woo ho: investment greater than projection. you're going to do some investment greater, but then in terms of going back and other things sitting in the pipeline, because in some cases with we found extra projects you were able to fund more than projected. but we don't have that leeway going forward, am i reading that correctly? >> in the prior couple of years, we've had a lot of onetime sources, so pointed out that we have a policy to spend onetime sources on capital. we've done sup lemental. and the presentation is going to speak more in depth to that, but yes, in answer to your question.

>> i guess this is setting up in the sense of what we're going to see in the financial forecast is the case of -- so i guess we have to keep thinking. we have to keep thinking because we're not showing anything that is naturally coming up as an unexpected source. so the pressure remains. >> indeed. >> commissioner woo ho: so you're still sitting in a pressure cooker? [laughter] but anyway, thank you very much for the report. it's good to see this periodically. so we know where we're headed. and where the pressures are. and it has to be tied with what meghan is going to tell us in a minute. thank you. >> president brandon: commissioner gilman. >> commissioner gilman: thank you for the report. >> president brandon: commissioner adams? >> commissioner adams: page 11, we talked about the geographic diagnosis -- distribution of investments. the water fronts are the two

biggest? >> yes. >> commissioner adams: thank you. >> president brandon: thank you so much for this report. this is exciting. if we can find almost a billion dollars of projects in the next five years, that would be incredible. that would be absolutely wonderful. so happy that we are going to have a project management office and a team to manage all of our projects. i think that will be a great addition. and it was so wonderful to see the piles removed [laughter]. >> very exciting. >> president brandon: so wonderful, thank you so much for the presentation. >> item 13 b, informational presentation on trends and implications of the port's audited financial statements and future financial projections.

>> good afternoon, commissioner, i'm director, the meghan wallace, and i'm here today to provide staff analysis on the port's financial performance. i was last before you in february when i presented on the proposed budget for fiscal years 2 2018-19 and 19-20. while it was positive with growing revenues, capital, commissioner said we try to take the financial statement perspective of applying the income statement and balance sheet lenses to our forecast over the coming two years. so today, i'm going to try to provide that vantage point. and in that effort, i'm going to

cover four key areas. first i'm going to look at five years of historic financial performance. comparing fiscal years 2013 through 2017 from our audited financial statements. i will provide an overview of the port's financial projections. and i'll look at major risks and opportunities that the various business lines within the port are keeping a close eye on. and then finally, i really want to go over some key strategies that staff is keeping in mind and think being ways that we can continue to improve our financial outlook. so in this discussion, it's important to note that the stability goal, which really, you know, this conversation is tied to the stability goal within the port strategic plan is the foundation for the five other goals within the strategic

plan. by taking pressures to protect the port in the event of unforeseen circumstances and maximizing resources, we're making sure the port is addressing these other efforts. notably, the renewable goal. so first i want to provide the historical review. before i go into the trends, i want to note that the port's financial statements are audited annually. they're historical in nature. and provide a means to look back at the port's financial position and the annual operations that changed that financial position in any given year. the most recent audit was covered for the years of june 30, 2017 as well as 2016. and our auditors issued a clean opinion on our financial statements.

>> president brandon: this is a cool accounting? >> that's correct. >> president brandon: what you're normally tracking is cash accounting? >> that's right, this is a new ball game for me. good lesson for a budget manager. so looking at the change in our position over the last five years, looking back at 2013, i hope this chart can help show that the green portions of the columns indicate the net position at the beginning of the fiscal year. whereas the blue portions represent the change in that net position that year. and the orange line represents the position at the end of the year. so you can see the trends really by looking at that orange line, that between 2013 and 2017, the port did increase by $27 million over that period of time. four out of the the five years

showed positive trends. 2015 notably was a year that the governmental accounting standards board required san francisco to reflect liabilities related to employees' pensions and postretirement benefits, so that had major impact on our net position that year. but by 2016, the port actually recovered. very much because, primarily because of geo bond proceeds we received for the parks. i think that was the years we had large expenditures related to crane cove park and we used bond proceeds to improve that asset. and that ultimately moved our position up. so by 2017, you can actually see there was very little change in our net position. and this next slide will sort of

help highlight why. so this chart actually shows the drivers behind the annual change in any given year. and as i noted, while the port's net position grew over $27 million in that five-year period, that change varied year over year. and some key trends that we want through there is growth and -- went through there is growth and operating expenses. we talked about how operating costs grow over time. but that was paired with sources, both operating revenues as well as nonoperating revenues. and while the operating revenues grew steadily over the five-year period, something that our financial statements rereflecteded, i wouldn't necessarily record on the budgetary basis is these nonoperating sources or grants and contributions to capital

that have a little bit more of a lumpy effect over time. and so in 2016, as i noted, that was the year that we really caught up in our net position. there is a nice significant gap between our operating expenses and our sources. and so that gap represents that increase to our net position. but by 2017, our expenses have caught up. and this is actually the reverse effect, where we are seeing the revenues and sources align. and they're much closer, whereas we're striving for more of a gap. we want to see more net revenues, net sources. >> president brandon: your revenues are growing slower than expenses? not a gad trend. >> -- good trend. >> right. we're seeing that by 2017. next, looking ahead, i applied the same methodology. the same structure in the forecast as i did in the

historic figures. and what we're seeing, looking forward is that the net position is projected to decline within this period. so again, i actually was looking at the current year and the two budget years, so applying that budget year perspective to the financial statements. and so we're actually projecting a $25 million decrease in our net position. and this annual decline is driven by growth and operating expenses applying depreciation and applying liabilities related to pensions and post employment benefits. i will note that this includes funding sources from the seawall and the mission bay ferry landing project, however, those are held neutral in this projection because we have sources and uses. they don't hurt or benefit the

outlook. by 2020, the perspective gets a little better. you can see that little orange bump up in the last column, that indicates growth, but you'll see in the next slide, it's largely due to nonoperating sources that we expect to flow in. and so here in this chart, you can see again the orange line represents sources that we're assuming in our forecast. whereas the green represents expenses. and you can see that in 2018 and 2019, we're actually expecting to see declines in our net position, where expenses are growing at a faster rate than sources. by 2020, we have a bump up where we have more sources and uses because we're expecting to have geo bond proceeds flow into the port. and because we're able to capitalize those expenses, it

feels like a benefit. it is actually growing our net position at that time. but overall, because of the years 2017 through 2019, where we're falling behind a bit. where expenses are growing at a faster rate than the sources that we have in those years, you would see a reduction in our overall net position in those years. so risks and opportunities. i really want to highlight that i worked closely with maritime and real estate staff, tried to pick their brains about what are they seeing as risk and opportunities? and so i'll cover those in a minute, but in the meantime, i think personal liabilities are -- we see that those really are a risk from a financial statement perspective, even though the budget does not reflect the pension liabilities and the post employment --

postretirement benefits the same way the financial statements do, we're seeing them require governments to roll these liabilities into our forecast and so we're expecting some more changes to come through. and they won't be smooth. they're expected to be lumpy. so some years will feel harder than others. so from a forecast level, i can't predict when that will happen, but i would see that as impact to our net position. the recession is of course the other big unknown. when will it come? but as i covered in the budget presentation, we're expecting it. we have had nine years of growth. this is one of the longest periods of economic expansion in history. i think that everybody in the city is keeping an eye on, looking for signs of economic

slowdown. so i'll talk about that in looking at how a recession would impact various business lines within the port. but starting with the good news, first. so for cargo, we are projecting growth in our business. doing very well in the last two years, doubled in business, but there is still opportunity out there. maritime staff are working closely together to expand business. it appears 80, 94 and 96, there is opportunity there that could further improve our forecast for cargo. that being said, during a recession there would be contracting demands for automobiles as well as dry goods. aggregate materials that come through our port, that really supports construction industry. so if there is contraction there, we would likely feel decline in our own revenues.

crews i think in the long term, we're seeing growth in the size of ships that are being built and we're trying to prepare for those to come. within this two-year window, however, we believe that we're -- they're already booking. we feel reasonably comfortable with the current estimates of passengers and cruise calls. so really a recession is the thing that would change our outlook at this point. and during the last recession, there was a decline in the number of passengers booking a trips. so we may get a similar number of cruise calls if the cruise lines can't adjust their schedules, but our reliance on the passenger facility charges would draw down revenue for the port. if the upside f the number of cruise calls were to decline in the event of a recession, that would -- there would be more

opportunities and time availability for special events. so it's nice to know that we potentially have that as an additional revenue stream in the event of a down turn. just hope that people are continuing to book events. last time for mayor times, ship repair. -- maritimes, shape repair. we're hoping to cover the operating expenses we at the port are currently covering to keep the facility in a steady state. keep it open and -- or at least keeping people employed. but in an operator doesn't come online, we really have to look hard at what the costs are and how the port is going to move to figure out ongoing maintenance needs, like security as well as capital needs out of that facility. so for real estate, i think that

percentage rents are one of the first obvious things that you could see flex in the event of a recession. that as people are potentially going out less, spending less money, that those leases that we have both on the retail and restaurant side, but also on the parking side, could generate lower revenues for the port. so this is a risk for us. additionally, delayed leases is a risk from the budgetary perspective. we did assume that there would be new leases coming online over the next two fiscal years to support our revenue projections in the budget. so if we don't get those facilities online annaleised out on time -- and leased out on time, we could fall short of our target. additionally in the budget, we're assuming onetime sources as we have $15 million assumed in each fiscal year.

so there is a potential upside and downside there. they could come in higher than estimated, but they could also not happen or come in lower. so we are keeping watchful eye on how those two items progress. and then lastly, for parameter rents, real estate does believe that it's -- that the market would support an increase to our parameter rents and that would improve our financial outlook in the next two years. please stand by. will

. >> and so we're really only -- in terms of our budget and the forecast for the expenditures, some big expenses that we are building in that are really strategic in nature are getting the ceqa approval for the waterfront land use plan, having one year of shipyard operations covered and investi investing in i.t. systems. but one thing that we haven't talked a lot about the commission and staff without is a nexus study that we're performing to really look at the port's contributions to our payments through interdepartmental work orders, making sure that we're paying our fair share, not overpaying and really aligning our payments to the level of services that we're getting out -- out of those agreements with other departments. so i don't know if you guys got the word yet, but it's s and p

have just determined the credit ratings with a stable outlook. fitch already made this assessment earlier in the year, but one of the great things that the port has going for itself that supported those ratings is the diversity of our revenues. so even though we talk about risk in the event of an economic downturn, the number of business lines that could be affected, i think it's also the diversity of those business lines that make us strong, that they will be impacted in different ways and it allows us to adapt in the event of an economic downturn or having any one business line fall out of business. and then, that's -- i guess port staff knows that we already have good diversity in our revenues, but we want to

continue to do more. we are actively talking about how can we get more money from business lines than we already have, where else should we be looking to generate for more n revenue or fees for services that we provide, how do we make sure we cover our costs? maximum external funding is something we've talked a lot about over the years. we all know that having external funding is really critical to be able to deliver particularly enhancements to the -- to the waterfront. so to the extent that we treat the seawall program as an enhancement as opposed to state of good repair, i think this chart helps show that we are really seeking external funds to deliver those programs that the port on its own cannot both address our renewal needs and

state of good repair of our facilities and take care of enhancements and as a mission bay ferry landing is another great example where we're actively pursuing external funds to be able to deliver that project. and we have a lot of really good examples of that. i already noted the seawall and the mission bay ferry landing project. we are looking for external funds, but i think external funds have also had -- we've had a lot of great success with delivering renewal projects, the pier 70 historic core and waterfront site, $200 million is being addressed in renewal -- state of good repair is being addressed in those projects. the exploratorium, i didn't have the number to quite include it in the presentation, but between state of good repair and enhancements, $200 million was being invested into that location. so the next stage of this

really is the r.f.i. that we have out or are preparing to put out for 13 his toric piers along the waterfront. staff studied the impact that that could have on the waterfront plan, $300 million that we could address through that work, and that's real opportunity. we haven't talked about that before, of how that could roll clue and greatly shift our forecast in the capital plan. but i think a real critical strategy here is not just getting other people's money into our facilities but pairing that with an ongoing revenue stream, and i know that the port commission has really forced staff to do that, and we need to do that for all of these potential -- all of these opportunities.

lastly, i just want to touch upon prioritization of capital delivery. we've talked about this real strong effort to put money into our capital program. you know, with a strong economy, one-time sources, the designation of capital, our investments in the capital budget have grown, but we didn't -- we didn't then staff up and put the resources in place and then, there other unknowns such as timing of permitting that have delayed our delivery of projects. so what this chart shows is actually from our balance sheet that our assets have grown over time, but the orange indicates current and other assets which is where our cash balances reside, and that has been accumulating. and so we really need to make sure that we're converting that money into investments into our assets so that we're really preserving our existing

revenues as well as good standing. so the project management office, we've already talked about that. it's really critical to be able to turnover more projects each year, and alternative tools, so thinking about different contracting tools that really make sure that we're maximizing our dollar as well as time, trying to do things quickly and as cost effectively as possible. and the public private partnerships are an example of how you can do that, by partnering with owners and tenants to help with projects. they can turnaround a lot more than the port can do on its own. so in all, i think this was a good learning lesson for me. the budgets do show different outlooks, and i think it's an important exercise to go through recognizing the cash

versus noncash liabilities and how there's -- in a lot of ways, they're aligned, but we need to keep a close eye on on the noncash basis, as well. and we are doing things to implement our financial strategies with the project management office, nexus study, r.f.i. but i think in closing, i just want to note that this was a shorter exercise. it was looking at two years ahead, but this winter, i will be coming back with a five-year financial plan that we'll be doing a deeper dive in the different business lines, looking at our future leasing, and i'll continue to try to apply some of these principles from our financial statement. so thank you. >> thank you. is there any public comment on this item? seeing none, commissioner

adams? >> you know i'm going to say a lot. >> no, you go ahead. >> you want to go last. >> okay. yeah, i really appreciate that. you know, sometime, we have these come to jesus meetings whenever we talk about the finances and where we're going. it's kind of like a portfolio that we have. we have strengths and we have weaknesses, that's why you don't put all your eggs in one basket. i'll just throw out a couple of things. on the cruise business, i think we've been growing every year, but i think we're still another five or six years away from trying to -- i'd like to see us get up to maybe 300,000, but it's going to take time with the cruise business. i don't know what's really going to happen with the shipyard, but at some point -- i'm not sure patience is growing as fast as we've had to

grow, but we have to have patience with strengths and partnerships like we're doing for the city, like orton. i think we might have to look at maritime and other things going in a different direction and maybe looking at how we change and how we improve as we monitor it. i don't think it's ever going to be as strong as real estate, but we want that maritime component. i think it's really important, but i think we have to be honest with ourselves. i think at some point, we might have to realign or find someplace else to grow. it's kind of sobering when you hear everything, but i'm confident, but i also realize, you know, that we don't have the luxury of seattle -- like, they have the port and the airport, and they get revenue

from the port and the airport. so does portland and oakland. we're a very small boutique port. we're doing the best with what we have, and i understand that. i know that commissioner woo ho and commissioner brandon are real numbers people. i also realize it's going to take a little longer in some areas. but i'm confident we will get through that. and i guess it's sobering to really think about if we have to update our piers, spending billions of dollars to take on this seawall. we've got some challenges ahead of us, but we've got some good times ahead of us. i just want to say thank you. it's a lot to digest when you really think about it, but i think we're going to be okay. i got that feeling. i think we're going to work through that, so thank you, commissioner brandon.

>> commissioner gilman? >> as the newest kid on the block, it's just a lot to take in. and i -- i don't -- just more of a question, i guess, than a comment. thank you for your work, and i don't know if there's any way in the future to get some of these materials ahead of time to look at so we can give more thoughtful comments? that's just more suggestion and not necessary, so i'm going to let the other two commissioners -- i'll maybe ask you some questions after the comments. >> all right. commissioner woo ho. >> this is a strategic milestone for you making this presentation. i want to thank you, megan, and elaine and katey and whoever else worked with you. i did request this because i think you yourself have the epiphany of seeing -- i guess one of the reasons to look at it from the audit and financial

statements, we just talked about how s and p rated us and maintained the rating. with the trend line -- i'm not overly concerned but we're going to talk about it. theed trend line that you see looking at it this way is what s and p is going to look at two years from now. if this trend line was to continue, not that we're not going to, but we are going to monitor. but if we just sort of did not monitor it, we could see our bond rating change, and it could go down. so that's why we have to look at this perspective very importantly, and we have to look at the government cash budgeting process, and we have to understand i guess sort of the rating world and in terms of public finance and accrual accounting. this is a great thing. i commend you for your presentation. i know this is not something you were jumping for joy to do, and i know it was a lot of work.

and as i said, i think going forward, we can continue to dive deeper into some of the trends 'cause it's really just think not so much to report this went out, that went down, it's more to understand why is it going up and what are the things going up or down and what should we be concerned with in terms of the financial strategy. part of what you do every day is your concerns and monitor the budget. we're certainly fine. we know that we maintain and monitor our budget and we maintain and do the budgeting process really well. this is sort of peeling the onion. this is understanding the relationship between the income statement and the income statement and the balance sheet and it's really important to be able to understand that so the third party perspective that we have to maintain with the reporting agencies is maintained in the best possible way. number one, i want to say we had this policy, the capital

policy which is the operating discipline that we put 20% aside. we know that that policy is not going to pay for the capital pipeline, but it's very important to have that discipline. but we now need to have that sort of strategic way of looking at things more broadly and outside of our own operations in that where are we going to find the funding to maintain the ports. you've got to operate on two different lines. we've nailed the operating discipline, but we've now got to find the strategic and hone that over time. i think when you look at it the next time, and you look at longer term, you know, we've worked on a number of major projects, and i know that we all expect that some of these projects are going to kick in in the future, but they're not kicking in necessarily in the next very short-term, but at some point, some of these

projects that we've been working on -- but we're giving away a lot of rent krocredits investments up front. it's going to be nice when it turns the tide and get revenue. we're helping them to invest through rent credits and everything else, but over time that's going to come back to us. i just don't know when that is, and it would be nice to know in the future, are we talking ten years from now, 15 years from now? some of these things are a very long timeline. i am very optimistic with commissioner adams, in the long-term in the port, we put that 100 million in the port, as leslie katz said, but we say, when are we going to get that 150, that 200 million? if you do it year by year, inch by inch, you're not going to get there. you have to kind of think of it in terms of the leaps forward that you have to make.

there are some things -- i think one of the things that you mentioned when i was about to interrupt you, you know, i understand on the pension expense which is obviously on an accrual basis. i would like to know what the crossover with the budget side is that when you actually have to payout on the pension side, is -- do you budget for that, or does that just come out -- in accrual accounting it just goes on the balance sheet. it's a cash item for you. you're actually paying out, but it doesn't show in your budget. >> that's correct. >> so that's one thing for us to realize because that's going to be a bigger and bigger number. so you're actually paying it out in cash. it's not showing up in your budget, but it's certainly going to affect your audited statements, and that's a big number. >> the only thing that shows up in the number is our contribution. >> contribution to the -- yeah, but at some point, we all know, and i think willie is -- i saw him perk up because we're all concerned, the pension payoffs

are going to be greater than what funding is available. everybody is worried in this country. your liability is greater than -- so i don't know. i'm not saying that we have an issue, but just upsinderstandi that would be important. i think we already today, as an example tactically looked at a project. i want to support that. as we keep looking for sources, managing project expense is really important for us and to be able to say if we can find any reserve as a result of that, that's important. so that discipline, it's another one of the disciplines that you just have to put in place. i'm not talking about any specific number, but i think that's one you have to think about, how can you? and you also have unemployed project money that's sitting in cash right now. >> that's correct. >> and i understand you don't manage your cash management at the port, you give it to the treasurer, is that correct? so normally, in any company,

you know, if you were managing your own treasury function, you would try to figure out how you can get the most return on your cash that's idle, but we can't do really much about it because you just give it to the treasurer, and you hope they do the best for you. it seems like we're sitting on a lot of money. >> keep in mind they're also trying to generate a return. >> we get our fair share, don't we? >> yeah. so that just means that their strategies for investment will be for a citywide benefit, not just -- they're not ignoring the port. we're folded into their larger strategies for investment. >> so i would suggest a couple things in terms in the future when we look at this. t there are some core revenues, when we all know that when pg&e makes a payment. if you can separate what the

operating is line for the core -- operating line is for the core revenues, and what are your one time expenses. the pension line gives me a lot of pause and a little bit of concern here in terms what that's going to mean for the port in the long run. >> i'm hesitant to dig in that deep, but there -- you can see the operating and maintenance lines and then detail for depreciation. >> which is leading into my next point. as we know depreciation and amortization is a nonline item in accounting. i think the next time we see this, it would be helpful to have a cash flow statement. you sort of achieved that with your budget because it's cash based, but it's not truly a cash flow statement. so if you could think about that. i mean, i think this is -- this is -- just really gives us a

lot to think about, so it's not just saying is it good or bad? it's really more for us to think about how to manage port's financing strategically and to be better at it and to understand some of the implications of it. and i think that if i -- if our net position which is equivalent to equity, equivalent to shareholders' equity in a private enterprise, if it is sort of going down, that is concerning. so we need to figure out well, how can we reverse that trend? so the challenge is not so much to say -- i would say it's a great report, but the challenge is for you all to continue to think about what it's telling you. would you agree, elaine? >> yes. i absolutely agree, and i think for a new area, megan, you did an excellent job this evening. and crane cove park, just to apply a specific project to the principles we heard today, its $36 million budget, four of which is port, and the rest are

outside sources. so while -- but we need to manage that project very carefully because we may be able to achieve savings that we do deploy to other parks and open space that we don't want to spend port capital, so that's one way that we need to think strategically about every investment that we make. i think it's important that we need to think about what this report is telling us and how to react in it and continue to react in a way in which we manage our sources and seek others because the other sources have been a game changer for us. when we look at all of the charts, we are not going to pull ourselves out of a capital backlog. it's the liability side that makes a big dent in the capital backlog, but i do continue to think these financial management strategies have gotten us far more of our own sources, the sources we

completely control, and those are also game changers. even though it's much smaller money, it makes a big difference in the enterprise. >> well, one of the things that i wanted to mention and i don't know what the impact -- you and i talked about this a long time, elaine, see, the port's balance sheet values the assets at historical value, and so there is no updating of the value of the real estate that we own which is in the normal for profit world, there would be a reevaluation to the current market value. and the only way we get that value is if when we do a development project, and all of a sudden that asset -- that's another thing for you to consider in terms of figuring out the balance sheet of the future as some of the these things come on stream, mission rock, we will be able to value some of these asset does -- assets. am i correct? >> some things we record,

assets we own, but things that are fuely purely deappreciated there. >> calle, you're shaking your head. is there something you know. >> we don't have a chance to update the value because of government accounting, but private sector accounting would definitely bring that asset up to current market value, to our assets are undervalues which means our net position is also undervalued. thank you very much, though. i appreciate -- as you said, you did it for me, so i really

want to commend you all for this report. thank you very much. >> i dare say i enjoyed it. >> thank you, megan. this was great. a lot of detail, and thank you so much for putting this together. the charts and graphs really make it a little easier to follow because this is a lot of information. this report was very sobering, and we're very lucky that we have such a diversity in funding streams so that if, you know, one funding source is down, the other is up, and hopefully we just keep going. but definitely, we're going in the right direction. so i just want to thank you for putting this together. congratulations to the finance team for our a rating. that is absolutely phenomenal. yes, so thank you. it's been a long night. thank you, thank you.

>> item ten, new business -- 14, new business. >> is there any new business? is there any public comment on new business? >> no worries. >> yes, yes, they're up. commissioners, any new business? no? the only thing i think i asked for an update to our crane cove park. >> yes, that's correct. >> funding. what are we doing with our $36 million and our funding sources? okay. can i have a motion to adjourn? >> motion to adjourn. >> all in favor? [voting] >> meeting adjourned at 6:20.

>> self-planning works to preserve and enhance the city what kind hispanic the environment in a variety of ways overhead plans to fwied other departments to open space and land use an urban design and a variety of other matters related to the physical urban

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mr. the upcoming visit the plans and programs package of our we are talking about with our feedback and participation that is important to us not everyone takes this so be proud of taking ann >> june 7, 2018. i will remind members that the commission does not tolerate any outburst of any kind. please silence your mobile devices that may sound off during the meetings. when speaking before the commission, if you care to, do state your name for the record. i would like to take roll at this time. [roll call] commissioners, first on your agenda is consideration for items for continuance. it