sub-committee. today is july 26th. we're waiting for sfgov-tv to catch up. all right. we're back. budget and finance sub-committee, today is july 26th, i want to welcome you to our meeting. and i thank sfgov-tv, and jesse and samuel who are assisting with the broadcast and miss

linda wong is our clerk. and i want to recognize my committee women, we've got to my right supervisor sandra fewer and to my left is catherine stefani. >> clerk: silence all cellphones and electronic devices and have any documents to be included as part of the file should be submitted to the clerk and items on today will appear on the supervisor's agenda unless otherwise stated. >> thank you. let's start with the first item. >> clerk: resolution authorizing the general manager of the san francisco public utilities commission to execute amendment number 5 to an agreement with u.r.s. corporation, increasing the length of the agreement by up to 13 month for a total term of september 11, 2003, through july 10, 2020, and increasing the agreement by their 2,415,000, adjusting the estimated cumulative contract amount from their 28,500,000 to their 30,915,000 for engineering support services for the water enterprise water system improvement program-funded agreement number c.s.-716 >> we have the discussion of this resolution, and it was authorized a fifth amendment to the larger water system improvement company in the

calaveras dam. but i think that increasing the contract by $2.3 million and i think that construction will be completed in 2019, is that right? >> yes, coming up soon. >> thank you, the floor is yours. >> so good morning, chair cohen, and supervisor fewer and supervisor stefani. i'm the project manager for calaveras dam. before we start, yes, that's good. as you said earlier and probably you have heard over the years that calaveras replacement project is the largest project in the water system improvement program. and it is also the most important project because this reservoir is the largest local riz voir for the water system. and so it's a very critical asset to provide 2.7 million customers in the bay area. as of today great news as the construction is 93% complete and

we had a celebration yesterday. we reached the highest point of the dam. so the amendment of number 4 was executed in 2014, and the project has increased -- has experienced increases to the costs and also duringation due to the different site conditions. one of the major ones is the instability issues in area b which is one of the mining sites to build the face of the dam. and we have severe and unusual rainy events in 2017 which triggered a landslide on the major access to the site. if you recall in march 2017, that p.u.c. has declared an emergency because of this and also request the board of supervisors to approve the emergency work. now these issues have extended the previously approved construction duration by six months. so now the construction end date is may 28, 2019. and also as we start planning for the construction monitoring

of the new dam we would like to retain who is the engineer of record to continue with the dam for a minimum of one year after the construction completion date. so we're here to request approval from the board to extend the contract for u.r.s. as the design engineer of record for an additional 13 months and with a cost increase of $2 $2.415 million. and so this is that i want to show you we have a celebration of the dam yesterday with the team. and you have probably seen it, the slide from 2017. and so this shows you a history of all of the previous amendments. we have a total of four amendments so far which increased the budget to $28.5 and up to 5 years and 9 months. and as i mentioned earlier construction duration has been

extended officially to may 28, 2019, for six months. so we would need to extend this contract to allow u.r.s. to provide services as the engineer of record. and in addition we also want u.r.s. to continue with the monitoring for one year past the project completion date during the start-up, commissioning and the close down phases. this is very important because the dam needs to be monitored during the initial filling which would go beyond the construction end date, depending on the weather. and it's also important to have u.r.s. as the engineers of record to perform this work. so there will be sufficient funds to cover amendment 5 as part of the project. so this shows you the breakdown of how the work has been spread out. and so we're currently in -- working on stage 4, engineering service. so previously approved budget is $28.5 million and with this $2.4 million it brings us to

$30.9 million. >> commissioner koppel: where do the resource comes from? >> from the original project budget. so that was already planned for. and with this i hope -- yeah, supervisor cohen and the supervisor fewer and supervisor stefani will increase it by $2.4 million and complete the duration by 13 months. >> super cohen: thank you very much. and we're hear -- >> supervisor cohen: we will hear more on this. >> the proposed solution would authorize the public utilities commission to execute amendment 5 to the agreement with u.r.s. corporation and increasing the length of the agreement up to 13 months for a term of september 11, 2003 through july 10, 2020. and increasing the agreement by about $2.4 million from

$28.5 million to $30.9 million for engineering support services for the calaveras dam replacement project. and as you can see on table -- on page 3 of our report, table 1, outlines the history of the original contract and the agreement and the contract amendments you can see in table 3 the budget for the fifth amendment. and you can see that there's $2 million that is budgeted to complete the engineering support services during construction and start-up and commissioning and close out tasks. however, the scope of the work for this fifth amendment prepared by u.r.s. corporation submitted they would need $1.6 million in staff time and an additional 15% or about $247,000 for a total of

$1,893,028 to complete these tasks. and our understanding is that u.r.s. added the 15% to the number of estimated staff hours to make the estimate more accurate. however, the total estimated amount of $1,893,028, including the 15% cop tin gent needed to complete the task is $107,000 less than the budget requested of $2 million and so, therefore, we recommend to reduce the contract amount by their 106,209, to $2,308,028 to reflect that estimate. and we recommend approving the proposed resolution as amended. >> supervisor cohen: colleagues, any questions? all right, thank you for your presentation and we'll take public comment. any member of the public that would like to speak on item 1? seeing none, public comment is

closed. thank you very much, and i'll make a motion to accept the budget legislative analyst amendments if we could take that without objection. and also to make a motion to approve and send to the full board with a positive recommendation to send the committee report, item one. all right, without objection. item two, there's. >> clerk: resolution approving the first amendment to lease l-13550 between boudin properties, inc, located at 160 jefferson street and the city and county of san francisco, acting by and through the port commission, to provide the two extension options of 10 years each, for an aggregate ter july june 30, 2065. >> supervisor cohen: we have jay edwards from the port that will make a short presentation today and in short this is a lease amendment to give two 10-year lease extension options for the boudin bak bakery which is on jefferson street. and the current lease expires in 2045 and the extension potentially moves the lease date

back out to 2065. and are you ready? all right, fantastic. so we'll hear from mr. jay edwards. thank you. >> good morning, supervisors. jay edwards issue senior property manager, port of san francisco. i'm here today to give you a brief presentation on the ports findings here for the lease -- for the boudin properties at 160 jefferson street for two 10-year extension options. boudin has been an anchor tenant of the fisherman's wharf community here since 2003 when they built a flagship bakery, café, restaurant and market hall. and they've been a very productive tenant for the port and we through a lot of discussions here wanted to enter into an extension to keep that relationship going for the foreseeable future until 2065. and so as you can see they have

averaged in 2016, they generate $27 million in sales and pay the port $1.6 million in rent. so in going through this potential lease extension, we determined that it does meet the port's two policies in regards to extensions. one is a tenant in good standing and it meets the retail leasing policy. that policy really allows the port to enter into these extensions provided that the tenant makes capital improvements into their premises that will generate additional revenue, that we would not have otherwise received. so we believe that this extension will provide for future growth and the sales and, therefore, we want to proceed ahead

in addition on top of the minimum rent, the tenant pays percentage rent of their food and beverage and off-premises bakery sales. so they remain the same but in the extension option it would be between the -- no lower than 6%

and capped at 7% and they're currently paying 6.5%. in return for these extension options boudin would invest $2 million and an additional $1 million during the extension term. and that $2 million in capital investment is to help to generate additional sales for the premises and it has to be -- it's not maintenance, it's actually business improvements. and for option 2 they'd have the same, $2 million by 2035 and an additional $1 million during the second extension term. in addition the port receives participation rent if they were to sell their asset here and we increase that amount from 10% to 12% of the net proceeds. so in determining whether or not to move forward the port has been tremendous with the

financial analysis which we were assisted by c.h. elliott who helped us with our financial reviews. so we analyzed three scenarios and one is to keep the existing lease in place and would just renew at the end of its term and we receive no additional capital improvements during the term and then the lease would continue on as it was. and the other scenario was the tenant would vacate and the port would be facing a significant vacancy and also in terms of downtime it probably would require an additional investment from another tenant and traditionally those result in rank credits that the port provides. so it would further deteriorate our financial position. scenario two is the proposed lease extension in front of and you we looked at that terms of what this meant for the port in terms of projected revenue. and so we've got this graph in

front of you as you can see, scenario 2, that is the lease extension option scenario is much more favorable for the port in terms of financial stability as well as revenue growth. and the second graph shows what would happen if the tenant were to leave and that'sy an scenaria and it shows a significant drop in revenue in 2045. we'd like to avoid offering these extension options and provide security and stability. and in summary our value analysis of it does show that with the scenario 2, it's substantial financial benefits to the port as compared to the other two alternatives. and with that thank you for listening to my presentation. thank you very much. >> supervisor cohen: seeing that there's no questions from colleagues at this time i'll go to the budget analyst and hear

their thoughts. >> pro posed resolution approved the first amendment to the lease between port of san francisco as lanlandlord and boudin as tenan, and providing two 10-year options to extend the lease through june 30, 2065 and the tenant to provide $6 million in capital improvements to exercise both options. on page 9 of our report if table one you can see the key terms of the lease amendment, including the requirement that the tenant invest $2 million in capital improvements by june 2025 to exercise the first option and another $2 million to exercise the second option. the tenant must also invest one million in the first five years of the extension term and in table two on page 9 also, you can see the rent projections of the lease including the existing

lease and the two extensions. and we recommend approval. >> supervisor cohen: thank you for that recommendation. let's take public comment. any member of the public that would like to comment on item 2, please come up. seeing none, public comment is closed. supervisor fewer? >> supervisor fewer: thank you, chair cohen and i'm happy to move this into a full board with a positive recommendation. i do believe that boudin is a san francisco-based company and really defines our fisherman's wharf area. and i have an outlet in my neighborhood that actually helps define also my neighborhood. so i think that they gave us approval of this recommendation. and i would like to send it to the full board with a positive recommendation. >> chair cohen: we'll take it -- >> (indiscernible). >> chair cohen: yes as a committee report, items 3 and four together.

>> clerk: resolution thursdaying the department of public health to retroactively enter into an amendmented agreement with the kam department of health care services to change the end date from april 30, 2018 to june 30, 2017. resolution number four, resolution retroactively approving the agreement between the department of public health and the california department of health care services to the san francisco mental health plan for a five-year term of july 1, 2017 through june 30, 2022. >> chair cohen: regarding the regulation of mental health care in our city. marlo simmons is here to present from the department of public health. good morning. >> good morning, i am marl low simmons with behavioral health services within the department of public health and we function as a managed health care plan for mental health services to medical beneficiaries in san

francisco and under that work we are required to have a mental health plan contract with the state department of health care services. and they in turn answer to the feds. in 2016, the federal government released new regulations that oversee the requirements related to the work that we do and the state is required to develop new contracts with the mental health plans at the county level that reflect the new changes and so we -- the fourth item really is the new contract that outlines all of the new requirements and the third item is taking the existing contracts and backing it up. so we don't have two contracts at the same time. >> chair cohe.it is a retroactio

july 1, 2017, which is a requirement from the feds down and on to us. >> chair cohen: does that conclude your presentation? >> it does. >> chair cohen: there's no legislative report for this item and i have a question for item 4. what are the new mental health regulations mandated by the california department of public health that are triggering this change? >> so the federal regulations and it's the set of regulations that came actually as in relation to managed care for the affordable care act. and it has a very, very broad range. a lot is focused on trying to be sure that medical or medicaid beneficiaries across the country have equal access to providers that have language capacity on geographic proximity to beneficiaries and looking at the amount of psychiatry capacity

that we have and the types of services that we provide. there's also a lot of the regulations focused on the policies that we have. you know, if we can't meet someone's need we need to do an out-of-network benefit, and so it is -- there are a few things that it does not impact, all the way to how the size of the font is for clients. >> chair cohen: why is this retroactive? >> the regulations from the feds were april of 2016. and many of them coming into effect july 1 of 2017. and it was in june 18th the state came to us and they said because the federal regulations were in effect in july 1, 2017, we're requiring the contract to match that date. and even though they hadn't give be us guidance we're on the hook to have complied with those rules. >> chair cohen: i see. all right, thank you.

we'll take public comment on item 3 and 4 at this time? any member of the public coming up. seeing none, public comment is closed. all right. make a motion to send this to the full board with a positive recommendation. i believe that we're sending this as a committee report. without objection. thank you. >> thank you very much. >> chair cohen: item 5, please. >> clerk: approving a contract agreement between the department of public health and the regents of the university of california for behavioral health services for adults or older adults for a contract term of five years in an amount not to exceed approximately $22.8 million. >> chair cohen: good morning, we have miss domigo ehas. >> ann acuoba with the department of mental health. good morning. >> chair cohen: it's for

provisions, is that right? >> yes for adults and colder adults this is from a new r.f.p., however, the provider is a long-term provider and the contract is retroactive to july 1, 2018. and this -- we're requesting retroactive approval because the process for negotiating and awarding this contract was delayed, the r.f.p. process was more cumbersome than we expected. they did have a previous contract that expired december 31, 2017. but we had a short interim six-month contract so that the contractor -- supplier or uscf has not been paid during this period. i want to note that there's a minor change in the resolution and the resolution says that it's a five-year contract but it's actually a four-year contract. so you may want to amend that

resolution. and then if you have any questions on the problematic aspects of the contract we have someone here that can answer questions about that. >> chair cohen: okay, where are they? it's always funny when people sit in the back of the chamber and it's like completely minute. come on down here. how are you? good morning to you. >> good morning, ma'am. i'm the program manager with the department of public health and i coordinate with the programs. >> chair cohen: thank you. i have a quick question about the r.f.p. process and you mentioned that it was delayed. can you explain to me -- did this r.f.p. follow the traditional pathway or was it a sole source contract? >> this was -- it was r.f.p. that followed the conventional pathway and it was a pretty large r.f.p. and we have large providers of mental health

services and we have all kinds of services like the adult mode is different than the children. and so the r.f.p.s are pretty complicated and so the reason why this contract was delayed is the award of the contract, you know, the actual r.f.p. process. and then there's the lengthy contract negotiation with the provider. >> chair cohen: thank you. we are going to hear from the spots on item 5. thank you. >> so the proposed resolution as stated would approve a contract between the department of public health and university of california san francisco to provide behavioral health services for adults and older adults for a term of four years from july 1, 2018 to june 30, 2022. and in the amount not to exceed $22,811,510. and as the department stated

they had issued requests for proposals for new behavioral health service providers in 2016 and 2017 and awarded the contract to -- this contract to ucsf to provide various services. on page 14 of our report, you can see in table 2, we outline the sources and the uses of the contract and you can see that over the term of the contract that about $8.4 million of general fund dollars will be used for the contract in addition to federal and state support as well as interdepartmental work orders. we do recommend that the proposed resolution be amended to specify the approval is retroactive to july 1, 2018. and as the department stated we concur that the proposed

resolution also should be amended to state that the contract is for four years. >> chair cohen: any questions or clarification needed? public comment. anyone to comment on item 5? public comment is closed. i make a motion to amend the contract to ensure that it's retroactive to july 1, 2018 and a motion to also amend the language to move from five years to four year. and we can take the amendments without objection. and also i'd like to approve and send this to the full board with a positive recommendation as amended. okay. all right, items 6 and 7, please call them together. >> clerk: authorizing the execution and the delivery of a multifamily housing revenue note in one or more series in an aggregate amount not to exceed $35.7 million for the purpose of

providing financing for the construction of an 81-multiunit project, and item 7, to approve and authorizing the long-term ground lease with 490 south van ness housing associates and for a term of 75 years to construct a 100% affordable 80-unit multifamily rental housing development plus one manager unit for low-income purposes. >> chair cohen: thank you very much for reading all of that. hello. and we have our guests who will be available to answer on this. so this is a 75-year-old ground lease. why don't you take it away. >> good morning, chair cohen and supervisors fewer and stefani. and so item number 6 is a bond issuance resolution for 490

south van ness, this is an 100% affordable housing contract that serves up to 60% of the median income and one manager's unit. and the board approved our acquisition of the property back in 2015 and we selected mission housing development corporation and bridge housing as the developers of the project. this resolution authorizes to execute up to $35,715,000 in multifamily to finance the project. and the proposed issuance will be conduit financing and not require the city to pledge any of its funds for the retainment of the bond. and item number 7 is a ground lease approval for the same project and the term of the ground lease is 75 years with an option to extend for 24 years. and the annual base rent of the ground lease is $15,000. and we did not seek a recent appraisal of -- to assess the

fair market value of the lease because this is for the purpose of affordable housing. as such we're requesting the following amendment to item number 7 to include this finding in the resolution: whereas the purpose of this lease is to solely to implement the mission of the mayor's office of housing and community development and the approval of this resolution furthers the purpose of providing affordable housing for low-income households in need, thus, to have the lease in the code section 101.3. and we are joined by bridge housing and the city attorney if you have any questions and we ask the committee to recommend the resolutions to the full board. >> chair cohen: thank you very much. we are going to hear from the budget legislative analyst on item 7, is that right? >> correct. >> chair cohen: thank you. >> the proposed resolution as stated would amend the -- sorry,

would approve a 75-year ground lease with, one 24-year option to extend. and at 490 south van ness avenue, to construct 80 units of multifamily rental housing for low-income units. and to have environmental findings and authorize the acting director of real estate and the director of the mayor's office of housing to execute the documents and make certain modifications and take certain actions. and on page 18 of our report, in table 1, we include the key provisions much th of the groun, including that the city could receive up to $1,835,000 per year in residual rent. it was equal to annual rent minus base rent or $1,835,000,

that's $1,850,000 minus the $15,000 in base rent. and it could be paid from surplus cash, should surplus cash be available from the tenant after payment of our operating expenses the city may receive that residual rent. but the department do not expect to receive that residual rent as a result of serving house holding at 60% below the median income and the debt repayment obligations associated with the housing. and we do note that under policy considerations on page 19 of our report that administrative code 23.3 requires a third-party appraisal for transactions over $10,000 and exceeding $220,000. and -- $200,000.

and the review must occur no more than min nine months priord the appraisal was in june 2015 and as the department has acknowledged or three years prior to the date of the legislation. so we do actually recommend that the board approve the resolution but contingent on the director of real estate submitting an appraisal review and an updated appraisal to the board of supervisors. >> chair cohen: let's hear more. and what are your thoughts on that? >> good morning, chair cohen and supervisors. thank you for allowing me to speak to you this morning. we are well aware of the section 23 of the code that would require under section 23.3 an appraisal and possibly a review appraisal, however, in my opinion we should be relying

upon section 233 2330 which alls the director of real estate to forego an appraisal if an authorized lease below market -- if it is for a proper public purpose. in this particular case the lease is for 100% affordable housing. so by definition we know that it's below market. an appraisal in this circumstance would only give us information on how much subsidy we're giving to this tenant in order to provide affordable housing. we know by definition that this is a below market lease. so getting an appraisal would not tell us anything more than we already know. i urge the board to allow me to exercise the authority granted me under section 2330 and that you approve the resolution without the need for further appraisal. >> chair cohen: thank you. b.l.a., what reason are you

suggesting that an appraisal be given on this property? >> it was based on the residual rent that could be due to the city from the appraisal. >> chair cohen: you heard the response from the director, so what are your thoughts? >> correct. so given that information, it does sound like there's a limited impact of an additional appraisal and that property is probably worth more than three years ago and the impact sounds minimal. so i would say that at this point it's a policy matter for the board. >> chair cohen: all right, thank you and thank you for your answer. colleagues, i don't know if you have any questions for the staff. seeing none we'll go to public comment. any member of the public that would like to speak on items 6 and 7 come up? seeing none, public comment is closed. thank you.

so just real quick, the b.l.a., your recommendations are -- do they still including the recommendation for appraisal or do you want to amend that? >> well, we do want to amend that to make it a policy matter. when we were drafting the report i was understanding that the real estate division was working on getting an updated appraisal. so this is new information for us. >> chair cohen: all right. so are there no more recommendations. >> correct. >> chair cohen: so we don't need to amend the legislation. great. thank you. so i'll make a motion to approve and send to full board with a positive recommendation. >> clerk: madam chair, i believe that miss chan indicated that she would like to amend item 7 to include the findings. >> chair cohen: she did say that, all right, thank you very much. and so i make a motion to amend item 7 to accept the findings

and this is again for item 7 and we'll take that without objection. thank you. and then we are going to move item 6 forward with a positive recommendation and item 7 as amended with a positive recommendation to the full board. thank you. items -- call item 8 next. >> clerk: declaring the intent of the city to reimburse the proceeds of future bond indebtnesses and the mayor of the director of housing to submit an application to the committee to have the issuance of the mortgage revenue bond in an amount to not exceed $80 million for 691 china basin street. >> chair cohen: thank you. we have adam cray to speak on this item. welcome, adam. >> good morning, chair cohen and committee members. i'm wit here to support the

development of mission base south block 6 west. the bonds of the city will eventually issue for this project will be conduit meaning that the city will not be required to pledge any funds or property or assets towards their repayment. and with the project description, mission bay south block west is all-affordable property at 691 china basin street east of third street in miss bay. all of the projects and the residential units serve households with no more than 60% of the median income and the buildings will be one and two and three-bedroom configurations with a handful of studio units. the community amenities include a child care center with -- 45 children approximately, and a large community rooms and commercial space. podium parking garage and off-site car share spaces and on-site laundry and bike

parking. no residents will be displaced as a result of this development as the site is currently vacant. the sponsor mercy housing california, submits an application by year end. and if awarded they'll return to the board for issuance short three there after. and here in support of the project are annie wong with the department of infrastructure and william ho from mercy, and on behalf of them we'd like to thank you for your consideration here today and we look forward to having your support for this project. our colleagues and i will answer any questions that you may have. >> chair cohen: this is pretty straightforward and an easy item. and any member of the public to comment on item 8, come on down. seeing none, this item is closed. i off approve this and send it a committee report. without objection. call items 9 through 12

together. >> clerk: item 9, approving the amendment number 1 to the domestic terminal food and beverage program lease between the bay restaurant group and the city to extend the term for five years with an option for early termination and no change to the city minimum annual guarantee of approximately $169,000. and item 10, resolution to approve item 1 for the terminal food and beverage program lease between the city to extend for five years with an option for early termination and no change to the minimum annual guarantee of approximately $146,000. and item 11, resolution to approve item number 2 to the electronic and technology stores in terminal 2 and 3 between inmotion and to extend the term for two years with an option for early termination and no change to the minimum annual guarantee of approximately $402,000. and item 12, resolution to approve item 2 to the specialty

coffee facility lease between gotham enterprises and the city to extend the term for three years with an option for early termination and no change to the minimum annual guarantee of approximately $154,000. >> chair cohen: thank you. our speaker is back for a cameo appearance here at the budget and finance committee. thank you. >> thank you, chair cohen, kathy widener with the san francisco airport. the airport is seeking your approval on a series of lease amendments and in this case four leases in our terminal 3 boarding area f. but the proposed lease amendments between the airport and the bay area restaurant group operating as gordon birsh and the yankee pier, in motion entertainment and gotham enterprises as pete's coffee and tea will allow for the continuation of retail and food and beverage options for airport

passengers in terminal 3, boarding area f, while the construction takes place to renovate the pier. with the proposed extensions the airport would receive $1.6 million in combined minimum annual guarantee rent from the four tenants. all four tenants have currently been paying on the higher percentage rent formula and that is anticipated to continue through the proposed lease terms. the budget analyst has reviewed the lease amendments and makes recommendations to approve after amending the legislation for retroactivity and to make some clerical changes to the mag amounts in each of the resolutions. the airport is supportive of these amendments and if approved i will provide copies of the amended legislation to the clerk. >> chair cohen: thank you. so this is just a group of concession leases for terminal leases at s.f.o.,. >> correct. >> chair cohen: and the area of the terminal is to be shutdown

and remodeled soon so these leases are very short term. so b.l.a., have any thoughts? >> yes, chair. the proposed resolution would approve amendments to concession lease agreements between the airport as a landlord and their restaurant group j.v. and the l.l.c. inmotion entertainment group l.l.c. and gotham enterprises l.l.c. through december 31, 2020 for the planned construction in terminal 3 west. in table one on page 23 of our report you can see the breakdown of the key terms of the lease extensions. and the minimum annual guaranteed rent would not change for any of the leases but adjust annually based on the consumer price index. and they pay the greater of the guaranteed rent or the percentage rent based on gross

revenues. and over the approximately two year and seven month term of the extensions the airport would receive at least $1,601,088 and minimum guaranteed rent as shown in table 2 on page 24 of our report. and as the airport noted we do have some technical amendments to recommend. the first of that being to amend resolution for file 18-0210 to correctly state that the minimum annual guarantee is $412,485. and second to amend the resolution for 18-0211, to correctly state that the minimum annual guarantee is $152,104. and third to amend files 18-2028, file 18-2029, 18-2010, 18-2011 to provide for

retroactive approval and to approve all of the files as amended. >> chair cohen: thank you. miss wides diner are you in agreement? >> we are. >> chair cohen: public comment on items 12 through 9, seeing none, public comment is closed. supervisor fewer you have something? >> supervisor fewer: no, i would like to make a motion to move these to the board with a positive recommendation. >> chair cohen: let's accept the b.l.a. amendments without objection. and then we're going to move -- to move this to the committee report and we'll take that without objection. okay, fantastic. and please call 13 and 14 together. >> clerk: and 13 retroactively approving item 2 to the domestic terminal food and beverage program lease between the bay area restaurant group joint venture and the city extending by two years and since months and no change to the minimum

annual guarantee of approximately $85,000. and item 14, resolution retroactively approving amendment 1 to the terminal food and beverage program lease between lady lucky and the city extending the term by one year and eight months and no change to the minimum annual guarantee of $66,000. >> chair cohen: thank you. these are lease amendments for businesses at the san francisco international airport and both are short-term leases and they are to replace -- to be replaced by a full set of new rrfps. and once terminal one renovations are complete. when do you expect those to be complete? >> the first phase of the terminal renovation project opens next summer so hopefully june 2019. >> chair cohen: would you like to present on these items. >> chair cohen and i'm kathy widener with the san francisco international airport. these are similar to the previous items that you just approved and these are for two

terminal one concession lease amendments that would extend the terms through september 30, 2019, it accommodate the t1 redevelopment stage construction and the proposed lease amendments between the airport and the bay area restaurant group doing business as max's eats and lady luck, operating as go bistro, will allow for the continuation of food and beverage needs for passengers in terminal one boarding area b through the end of construction. over the proposed lease, the term of the lease extensions, the airport will receive at least $229,404 in combined annual rent guarantee from the four tenants. again, these two locations have always paid on the higher percentage rent formula and we expect that to continue through the term of the extensions. the budget analyst has reviewed the lease amendments and recommends approval after amending the legislation for retroactivity and again for clerical adjustments and the

airport is in support of those suggested amendments. >> chair cohen: all right, thank you. b.l.a., you have any thoughts on item 13? >> yes, chair. the proposed resolutions approve the concession lease amendments between the airport as landlord and the bay area group joint venture as tenant, extending through september 30, 2019 and adjusting the minimum annual guaranteed rent to $86,875. and as well as retroactively approving the concession lease agreement for lady luck l.l.c. as tenant and extending the term by one year and eight months through september 30, 2019 and jawchting the annual guaranteed rent to $96,648. and table one on page 28 of our report outlines the key terms of the proposed lease amendments.

and table 2 on page 29 of our report shows the minimum annual guaranteed rent to be paid by the tenants under the lease amendments. totaling $229,40404 over -- for both leases for the entirety of the amendments. and the proposed resolutions would approve the amendments to the leases with bay area restaurant group joint venture and lady luck retroactively extending the term of each lease through september 2019. and the airport is renovating terminal one and construction is expected to be completed about that time. and the airport we've been told is currently undergoing a request for proposal process to select new tenants to occupy the new concessions in the renovated terminal one. as the department noted we do have recommendations for technical amendments and the first of which is to amend resolution for file 18-2042,

$86,875. and the second to amend the resolution for 18-2021 to have the guaranteed rent of $96,648 and we recommend approving the proposed resolutions as amended. >> chair cohen tim: thank you vy much. and to the b.l.a., you had amendments, is that right? >> correct. to -- yes, technical to revise -- to correctly state the guaranteed rent for both of the files. >> chair cohen: okay, thank you very much. and public comment is open. seeing no public comment, it's closed. colleagues any questions? all right, this is also another matter that is pretty straightforward and i make a motion to accept the b.l.a. amendments without objection. and let's approve and send forward with a positive

recommendation as a committee report. thank you, without objection it passes unanimously. all right. and moving on, please call 15 and 16 together. >> clerk: item 15, to the voter for an election to be held on november 6, and to amend the business and tax code to propose the gross receipt tax january 1, 2021, on gross receipts from cannibas business activities but exempting the first $500,000 of gross receipt and the retail sales of cannibas. and 16, to have an election to be held on november 6, 2018, and to amend the code to impose an additional growth receipt tax starting january 1, 2021 on gross receipt from cannibas business activities but exempting the first $500 how to of gross receipt and exempting the sales of medicinal cannibas. >> chair cohen: this is the third time that this committee

has heard this particular proposal. and i appreciate your willingness to engage on this issue and i think -- and to think about the policy implications of this legislation. the cannibas industry is a new one in san francisco and we're still finding our footing. there's still a lot of fear and misinformation out there about cannibas and not just across the country but also in this city. we as a board try to educate ourselves about the supply chain and the land-use restrictions and about the workforce of the cannibas industry and about the compassion programs, i think that we need to bring the city along with us, again, as we educate ourselves. and the industry has shown that they are not able to do this alone and they're going to need our assistance. and if you don't mind i would like to briefly go over how we got to this point to where we are today. this tax discussion started in 2016 with the passage of prop 64. and last summer mayor ed lee

convened a cannibas tax working group comprised of several members of his staff, including the office of cannibas, and the budget office, and the senior health advisor, my office, and the office of supervisor jeff sheehy and the office of the controller. we examined the rates and structures of our neighbors, neighboring counties, cities and counties, and we determined a few things. first, that we an adjustable rate are -- that adjust annualae rates are essential to have the data-driven approach given to have a data driven approach, give how little reliable information there is out there at this time. and, second, that a dedicated tax would be premature. given the ambiguity around revenues, around the number of businesses and around prices and around the spending needs of the industry. it's just not enough solid

information. we've decided that medicine should not be taxed and that we would go to the extent of our legal ability to keep medical cannibas taxes at a zero percent level. finally, based on the advice of our city attorney and in keeping with most of other jurisdictions in or around the city, we would move forward with a gross receipts tax. now in may my office presented a group -- my office presented to a group of industry stakeholders with a plan that had a rate adjustable up to 10% starting with retail at 5%. and upstream businesses at 3%. and small business extension. and a super majority required to change the rates. this would go into effect this coming january. the feedback that we received

from those meetings was not so much on the actual rates but more on the concern about the black market and the unlicensed operators. and i want to just underscore that because that is a real concern that this body now as well as future bodies will probably have to still grapple with and we don't have a concise answer again to address the black market and the unlicensed operators. the industry has expressed a desire to want more time and space to settle into and to gain their footing. the less that we introduced in june reflected this request. it delayed the start date to 2020 as opposed to january 2019. and it had a phase-in with a lower rate for the first year. again, a lower rate, a lower tax rate within the first year. this phased in approach would give the industry more time to

get into compliance. it would give the city some time to coordinate and implement an enforcement strategy. and after introduction we heard more from cultivators and manufacturers. cultivators had a unique perspective, they pointed out that they were -- that they are price takers in the market and like most other agricultural products and together with -- together with the manufacturers, most of these small businesses represent a union and represent a p.d.r. labor force. unlike retail these businesses are more likely to move outside of the city and i think that it's a goal of ours to want to keep p.d.r. and union jobs inside san francisco. as such, in committee on july 12th we lowered the introductory rate for all

businesses and lowered the tax rate for upstream businesses. and then the next round of industry feedback is that the industry craved normalcy and they pointed to the tax overhaul which will be conducted in partnership with the san francisco chamber of commerce and this overhaul is doing to take place some time during 2020, and the industry has asked that we not put a tax if place until after that point. last week we amended to delay any tax implementation, tax rate impelection, to after that -- implementation until after that process was completed. i believe that we have been very responsive, we've been open and thoughtful about our approach as we continue to move forward. we have worked with the controller's office to understand the impacts of this on the tax industry and i want to thank again the controller for their thoughtful report, and we have worked with the industry to understand more about the black market, to understand what is necessary to help normalize this industry.

and wanted to publicly affirm that we're not going to stop that conversation and we'll continue to move forward. and i want to also indicate that we're committed to working together on a compassion program and a compassion program, some of you may not be familiar with exactly what that is because it's very much of a colloquial term but it's a program that is set aside within the industry where people understand that not everyone has the resources to pay for cannibas. and so a compassionate program discounts the cost of cannibas for those that are in need of this medicine but do not have the resources to pay market price. and the other portion that we are working -- committed to working together on is the workforce development. supervisor safai had consideration that we continue as we normalize this industry to begin to educate and create programs such as partnering with san francisco city college to

educate a workforce that is then going to be poised to jump into the workforce and allow us to have a meaningful equity program. but we need revenue. bottom line is that we're going to need revenue to do all of this work. so what i am doing is asking the industry to come to the table and to help us to figure this all out. and i want us to be good allies but that doesn't mean no taxes. so, colleagues, this week i have received a counter proposal on rates from the industry. i have sir circulated them and u have them before you and i was uncomfortable to make this decision myself so i'm bringing them to the committee so there's a discussion around what the new proposed rates are. the industry has suggested a new three-year phase-in starting in 2021. and ramping up to 2023. and eventually arriving to 3% for retail and 1.5% for

everything outside of retail which is also identified as upstream. as you know our limits to ballot initiatives require a continuance. and i appreciate the industry engaging on this issue but given the two-month public process that we have been working through i believe that it's a little bit too late. as a reminder these are just interim rates that will appear on the ballot and the board can revise the intro rates down at any time after passage before this goes into effect. i want to make sure that we consider the options. however, if any of my colleagues believe that this is inappropriate to do so, please, let me know. the amendments today would require that we have a special meeting on tuesday morning, july 31st. and with that i open up the discussion to colleagues. supervisor fewer. >> supervisor fewer: yes, so after review of what we have received today and actually i am of the bl