for interesting and unusual subleases such as juul to first of all pass it to the port, you know, through whatever structure is the right structure so that the port staff can get a feeling for what this particular or those particular subleases are going to be. and if, in fact, it's going to be something like a bazooka manufacturing company or something that we all would prefer not to have in san francisco, that then, at that point, perhaps it's time to let the community know that this is going to happen -- or that this is not going to happen, but that this is being considered, and then, the community has a chance to respond. as it came in thhappened in tht

just came and it suddenly exploded. so what you could possibly do is when organizations like orton are subleasing, which they have to do, you can have some provisions for a time period, especially when it is going to be something as dramatic as this, maybe a 30-day waiting period. maybe we should be doing it for other things. >> i'm giving you leeway because you're chair of the central waterfront committee, but your time expired quite sometime ago, so conclude. >> thank you. i will. so i think what you need to be thinking about is ways that this does not happen again, because this has not been a pleasant experience. however, by the same token, the fact that the city attorney is

involved, i think that does help. at least people can say well, the city attorney's looked at it, and he thinks whatever he thinks. >> or she. >> or she. >> thank you. thank you. >> any way, please think about what you can do to try to -- [inaudible] >> okay. thank you so much. is there any other public comment on this item? come on up. >> hi, commissioners. my name is basil haish. i'm a parent raising children here in frisan francisco, and care about our ports and shoreline. what we are not willing to pay for it enabling juul's success by ignoring public and

prestigious public facilities for that company to base its operations. juul has become a tremendously valuable company because its clever way to deliver tobacco products and create new markets for addiction. key among those new markets are youth, and when it comes to capitalizing on tobacco addiction, the younger your customers are, the longer your revenue stream. whether juul was granted port property because someone closed their eyes while holding out their hand or someone pinched their knows while holding out their hand, there should be no gray zone in this case. i want to know what the port is doing to end juul's use of port property and what will be done to ensure the public's trust is done to protect us in the

future in managing port properties. >> good afternoon, commissioners, again. i'm alice rogers, and i was at the november november c-wag meeting when this issue came to the floor. there was a secondary level of concern not addressing the subleasing issue. that's very complicated and very difficult, but the public access and public vitality and inclusion issues in the public realm aspects of these buildings don't seem to be delivering on their promise. i can't speak highly enough of the quality of the reconstruction and the engagement of the developer company during the process, so it comes as quite a surprise

that the lobby area, the ground floors, the piazza area, the wonderful picture of the party notwithstanding, are not really being activated in the way that we all anticipated. and i'm truly hoping that the second great listening tour will help rectify that. i think this is really important not only for this historic core project, but also for what we're hoping to achieve as a result of the waterfront land use plan update, and the kind of vitality and the kind of diversity and the kind of authenticity that we're looking for across the entire waterfront. this project has so much hope, and it really is a poster child

for fabulous development, and i just hope we can pull it off to help integrate it better 234509 community. i can't speak first hard, but at the c-wag meeting, there were testimonies of people actually being turned away from the lobbies and some other very unfortunate things, so i don't want the public access issue to get lost with this other very large and important issue, so just to bring it to your attention. thank you. >> thank you. is there any other public comment on this item? seeing none, public comment is closed. commissioner woo ho? >> thank you. well, first of all, i do want to thank eddie and everardo for the update, and phil

williamson. i think that was one of the first projects that we addressed when i first became a commissioner, and that was six years ago. i want to commend everybody's efforts to get us to where we are today. i've been at the site several times, saw it in its original state. i think we were extremely fortunate at the port to have a developer step up just to maintain the buildings. and obviously, we've gone much further than just maintaining the buildings and building them back. they are -- in strategic plan terms, they are very productive for the port. i don't want to lose site of the fact that that's a major contribution, and i want to thank or developer for get -- our developer for getting us to that point. i'd like to suggest we hear a little bit from staff. number one, i had ac'd like to

little bit about the discrepancies in public access. we'd have either phil or eddie orton address that. and i do have another question as it results to the other issue. >> thank you, commissioner. the lease is quite specific about public access requirements. there's an exhibit to the master lease that spells out where -- what views will be preserved inside the buildings, what access will be provided into the buildings, what exterior views will be preserved, and to my knowledge, as project manager, o.d.i. is meeting those requirements. as you heard, i think there are two building still under construction, but when those are done, building 2 and building 101, they will meet the requirements for public access. to the specifics of site

activation, that is the major part of this project. bringing the public to these buildings is one of the reasons why we did it, and it was really the gateway to pier 70, and will be the gateway to pier 70 once it's built. if you go there today, even with six buildings done, it's still a construction project. i mentioned the brookfield project, they're just getting underway and building this project. it's going to be a construction zone for the next 12 months at least. so not super inviting to the public today, but we are worki working closely with orton. we expect orton to polish stuff up over the next week or so, and bring an update to the next c-wag meeting with a proposal, getting feedback, so once the

project does finance issue the next two buildings, once 20th street is rablthed and reopened, i think we'll be ready to go with a meaningful site activation plan. did you want to say anything in. >> yes. as phil mentioned, the conception project is still underway. i'm there every day, and it's a -- it's greatly improved. one of the best moments was taking the fences down and putting sidewalks down so people can walk on flat ground. our neighboring construction projects are going to be a challenge. we're going to have to come up with creative ways to negotiate that in the interim, but our goal is to provide a series of programming that we're currently working onto activate the space while construction is still going around our project, the city laws and also the projects around 20th street, we

are very committed to that goal. we heard the community loud and clear at the c-wag meeting, and in addition to other meetings that we've been having with individuals and community stakeholders. and we look forward to activating the space in a meaningful way, and it's really just a matter of time before we start rolling that out and start feeling that level of warmth in the space that people wanted to feel in the beginning. >> i just wanted to reiterate, this is an interim report. this is not the final report, and building 101, you all, i'm sure know, is the keystone to the project. it is the statement building, and that is the building that is not going to be completed until first quarter 2020. so i think the 20th street has

tremendous work planned for it this year, and i think the activation will be in very good shape when building 101 is done and 20th street is passable. >> okay. well, that sounds great, and i hope there's more communication and discussion with the community on that. addressing the subtenant issue, i guess i'd like to hear a little bit from director forbes in terms of where the port stands in terms of what we can do at this point, and i think more importantly, as toby has pointed out, is what we can do going forward in future leases. i will have some thoughts to offer on that, but i'd like you to at least comment on the current status. >> certainly. thank you, commissioner woo ho, and i think toby's statement about what we can do so this doesn't happen again is a really good structure and question to ask in a go-forward

manner. the master lease does require that every tenant comply with local laws and policies, whether -- you know, and we have a broad range of social policies that are required of our lessees. that was all negotiated and included in the lease packet that orton signed, and we are enforcing. we are not aware of -- and i say we are not aware of because you heard that the city attorney, dennis herrera, is asking for documents. we are not aware that juul's tenancy violates any city policy law, regulation, and we're fairly certain it doesn't violate any rule or regulation in our lease. the city is very progressive in terms of tobacco. we had a city tobacco policy. in that you can't advertise tobacco in the city, but

there's nothing that prohibits vaping or tobacco firms from being located on city property. so from our perspective, it's very important that we think through how to avoid things going forward. we're always open to looking if our requirements are broad enough. i think it is an important principle for us that what we agree to with our investors and our developers is forward looking and that there's certainty for them. we want to provide the public benefits up front and have them meet the requirements. it is hard to deal with a shifting sand of regulation, so if we are to explore how to avoid this happening in the future, we would look toward a policy that is clear and concise and that everyone who signs up with us can under and we can enforce. so with that, i have more specifics around -- we don't actually -- i don't make an

affirmative decision as it relates to the subtenants. we do allow for a nondisclosure for subtenants, but i have to exercise reasonable discretion for those, so i don't actually sign up or down with the subtenants. our agreement is with orton, and that is how the agreement with them was structured, to provide for flexiblity in leasing, and this is true of other master development agreements we have on port property, as well. so i think that will conclude my remarks. >> all right. i think you've pointed out something important in terms of the city's policies, examine there's nothing -- and there's nothing at the current time that would preclude that we or orton could not lease this property, so that is the legality of the situation. we do understand the social and concerns of the community here, so i think the suggestion that i think i have, since we have some other policies -- and you know, we can go into a lot of

marijuana -- all sorts of things. you can have all sorts of issues. i think that, you know, being on the corporate governance side in public companies where ethical social governance is becoming more important, it is important to have policies. and i think these have to be adopted, not just at the port level, it has to be adopted at the city level. so my suggestion is we have to adopt at the city level if we think these types of enterprises are not beyond city property, we cannot do one-off transactions because everybody has there are own opinion on being on one side or the other side of a particular company and their purpose in life. i think we have to have broad social policies, and i'm sure maybe the retirement funds or pension funds have these policies to describe what

companies they will sanction or not sanction. i think that's what we have to have going forward. you're always going to find, as you've said, we've discussed in the past, a company like anchorsteen that deals in alcohol. we have to have a broader policy that guides our leases. i think we need to tackle this on a much more strategic level and at a city level to address this. >> thank you. thank you. commissioner makris? >> i do agree with you, commissioner, but i do think it's a broader issue when it comes to compliance. for instance, lots of agreements have in it no

smoking of cigarettes 25 years ago. they didn't really contemplate smoking marijuana or marijuana becoming legal, so when you have a no smoking provision in your lease, and your tenants say i want to smoke marijuana because marijuana is legal, i think it's a fair interpretation of the provision that was struck of no smoking cigarettes to deal with the no smoking of marijuana issue. it's not an issue of where we stand socially on all of this, it's a lease provision we should look at in honor. let's take a step back and say what happens if our tenant came and just asked us to make an interpretation on this. let's take it from a very positive perspective, not where we're at today. let's just say what happens if they just wrote a letter and say we want this tenant to come in, and how do you interpret

this with your no tobacco policy, which it is in their lease on page 102. if you read it, it is a rather broad paragraph. so i think it's fair for us to address it because we have a tenant, and the tenant is going to address it even in their reputation with the tenants. we owe it to the community to say this is how we look at it, rather than hiding behind the lease. for me, if you look at the face value of the no tobacco, it's concerning to me. if you look at the f.d.a., and turn to what they've done, they've issued 500 notices to major retailers and manufacturers, that's a fact associated with page 102 of our

lease of no tobacco at least in principle. i believe we have a large operation here. we're the policy makers. we have to deal with these actions whether we like it or not. they're finding us. we're not seeking problems. we have an issue of a moving target similar to the no cigarette smoking in the marijuana smoking with the vapor component to it, and i think it's fair for us to address that concern. >> commissioner gilman? >> first off, i really want the public who came out to understand the commission hears you, and all of the e-mails and letters that we got. and while i, too, want to say as someone who's new to this project, orton has done a great job in the rehabilitation of the buildings and the plaza from what i saw, but i really hope you hear this commission

and you hear on your second listening tour the outrage from the community, to have almost 65,000 square feet in two locations to an entity that has recently been fined by the f.d.a. for not doing their community benefits from a nationwide perspective that is charging tobacco to children. while i agree with commissioner window with hoe that we need a citywide policy that deals with office and p.d.r. of any kind of poe tatobacco, and i urge y move as quickly as possible on that. i do feel being a new commissioner, bringing on such a risky tenant, it's sort of an

act of bad faith. because we have this gem of a project that we're reactivating for the community that has so much public trust, has access issues, has land, and i feel like this is almost like a smudge on what confer we're tr achieve on this incredible opportunity. i agree with commissioner woo ho and with what i've heard from the director is our hands are tied. there's very little we can do in this instance. i hope moving forward, we have greater freedom to look at who our tenants are. >> thank you. commissioner abbott?

>> this is an issue that gives me a heavy heart. the public came out today, and their concern -- they have a legitimate concern about their children and this tenant. eddie, i'll just say this to you, that i think you've done some great work, but on this lease to j you huul, i think y missed the mark. i have to tell you that, with all the love that i have for you, because i know in your heart and soul you always try to do the right thing. i understand with this commission, we have to follow the law. don't like what i've heard, but we have to follow the law. i would like to know how long is that lease, and if there's any kind of way -- because i think that -- i think commissioner gilman said, we've got to change the law. if we don't like it, we've got to change the law, and i want

to know how long is that lease with them? is there something that we can do? i think we -- something has to be done. >> excuse me, commissioners. we believe the sublease is for ten years, and if i am incorrect, somebody will standup behind me. but the sublease for 102 and 104 are for ten years. >> and they've been in there how long already? >> it's ten years beginning from late last year. >> okay. i guess director forbes -- maybe i should address this to the city attorney? if there was -- what would you have to do to change the sublease? >> an existing sublease? >> yeah. >> you would negotiate with the existing tenant. >> so if -- so could orton do that? >> yes. >> okay. i just wanted to know that

because i -- we had another commission where parents came, and they were really upset about this issue. and then, the letters and fines and things like this, and it just seems like to me juul doesn't portray themselves as a good citizen. orton does, juul doesn't. and i think, eddie, that there's some community work that needs to be done with the parents and those that are really concerned. i know as commissioners, we can't do anything, but i think some work needs to be done to assure them that -- that you could try to work with them to resolve this issue. might not be everything that everybody wants, but i think it needs to be dealt with. and this is just me as one commissioner talking. i feel the pain of the community. it's kind of like this country

that we got right now, all these people that are going to work and not getting paid. they're feeling the pain right now. well, the parents that come out and the people of this community, these are the people, eddie, that's going to be bringing you money, going to be coming to your property, going to be coming to orton development. and i think whatever we do, we can't lose that human touch. so i just ask that you think about that, and whatever can be done, and to work with the concerned families and parents to try to come to a resolve. the city attorney said that you can negotiate out of this lease. clearly, juul is not a good citizen and doesn't fit what a good tenant should be, and i just don't think enough oversight was done to really look at them and their practices. because if that was done, a lot of this would have came out. this is just me. one commissioner speaking. i'm not speaking on behalf of all the other commissioners, but the public deserves to be

heard and have their concerns taken, you know, strongly. thank you. >> thank you. phil, eddie, everardo, thank you so much for the presentation. i do want to say that when we started this project in -- when we started the planning for pier 70 in 2007, it has been a very long process, and i think we have come a long way because at that point, we didn't know if we would find anybody to restore these buildings, and we thought we would have to pay them, and so this -- this project has been extremely successful, and you have done a work of art out there at pier 70, and so we really appreciate that. i think that we really do need to stay on top of the public access benefit of this project

and make sure that that is happening because the public has been behind this project since day one, and they've spent a lot of time monitoring and looking at every detail, so i hope that we can really do the public benefit piece. i understand, my fellow commissioners, that orton is not obligated to do anything with the juul lease at this time. i would listen to commissioner adams and see if there's any way you can shorten that lease or if there's anything you can do to maybe get them out because the public -- as you can hear, the public does not like them, you know? and this -- i think this is a big deal, and so i would just -- you know, i know our hands are tide. we have to honor our lease.

it's like any of our large master tenants, we have no control over the subleases. we know that, but just, from your own conscience, hear what the public is saying, hear how people feel about this particular company, and maybe something can be done. but i would like to direct the staff to advocate through the board of supervisors, through the mayor's office to try to come up with a city policy to prohibit or some type of ordinance to prohibit companies like this from leasing our city property, all right? commissioner makris? >> just to it's clear on the record. i withheld saying this, but it's more than a discussion item, but there's a lot of discussion saying that our hands are tied, and we cannot

do something. i do believe that there may be one or more lease violations based on this. on the face of it, i believe that the lease violates under the tobacco component of the lease, and i will share offline with the director and with the city attorney's office my views of where i believe we have jurisdictions under the lease. i may agree that they could have sublet, but i believe that the violation is under the lease with the tenant, and i will elaborate further on all of the provisions because i have reviewed the lease carefully. i have made notes on all of the areas where i think that smoking components are primary, and one other that i believe may be in violation at this time. >> commissioners, is there any

other comments on this item? okay. if there's any new information that needs to be brought back to the commission's attention, we'll definitely look forward to it. >> i will say in response to commissioner makras' statements, we are looking at this carefully from our own city attorney. we do not believe that we have a violation, but that doesn't mean that a second set of eyes -- another person at the county attorney's office is pouring over this. >> commissioner adams? >> phil, eddie, thank you for the presentation. and to the community, thank you for coming out. this is the place we need to talk out about these issues, and i'm glad to hear for and against your true feelings. as i said eddie, you're doing a great job. but to the public, please keep coming out, hammering. we want to know what you have

to say. we want you to know that we're listening, and we want you to know that we hope there's some way this can be resolved. >> okay. again, commissioners, any other comments? is everybody -- thank you, phil. >> thank you. >> clerk: okay. item 13-a, informational presentation on the port's five-year financial plan for fiscal years 2019-2020 through 2023 and 2024. >> good evening, commissioners, director forbes. i'm megan wallace, finance director for the port. the city and county of san francisco is required to prepare a five-year financial forecast every other fiscal year, and this forecast needs

to look at expenditures, revenues, and for any year that reflects a shortfall, the city needs to develop solutions and proposals to improve that shortfall. i'm here today to present on the port's five-year financial forecast for fiscal years 20 2019-20 to 2023-24 and to receive your criticism and feedback. i'll actually be back on february 12 to approve this item. today, i'm going to go over the city's outlook briefly, go over our financial overload, including our base, low, and high levels, and some of our strategic considerations to take into mind.

first looking at the city's outlook, the five-year financial plan was actually released this past friday, on january 4. while the city continues to forecast strong economic growth, because we're in the ninth year of expansion in this -- in this economic period, there is a concern that that growth is actually starting to slow, so the forecast for revenue generation is starting to ease on the citywide outlook. additionally, by looking at expenditures, there's some major hindrances by the citywide cost. first, as you can see, outlined here for employee benefits are extremely high, with 19% average growth for pension contributions, 6% average for retirement, retired and current employee health care. and then, like the city, the port is actually following assumptions or c.p.i. growth

for personnel and nonpersonnel costs. but at the citywide level, unfortunately, the expenditure growth is significantly higher than -- than revenue generation, so for the general funds, there is forecasted shortfalls for each fiscal year. keeping this in mind, the mayor's really wanted to keep a focus on equity and accountability for current focus. the effort to try to address these structural issues is being addressed through a variety of things, from generating for revenues, looking at citywide costs and departmental costs and a very fund amountal element of this piece is looking at employee costs, so trying to figure out how to address the growth in pension and health care. so for the port's financial outlook, i ended up taking the citywide assumptions for personnel and nonpersonnel costs. you can see -- so these

inflation rates of 19% for pensions, 6% for health care costs, and c.p.i. for nonpersonnel costs, these were all taken into accounts in the port's pace case, so this is what we think will most likely happen. and we assumed moderate revenue growth at 2.5% and really looked closely at projected revenue generation from new leases, development projects, efforts on the maritime front, particularly with cargo and crews. and then, i looked at a low case and assumed we might hit another economic downturn and considered 2% revenue jebration, impacts to our rents, assuming if the economy were to take a hit, fewer people would be coming out to the waterfront and our tenants wouldn't do as well, therefore, we would not do as well, and more limited growth on revenue

initiatives related to crews and cargo. the high case, on the other hand, assumes that we would continue to yield higher rates of revenue growth, so assuming an average of 3% annually, that our lease and development initiatives, which come across in the best cases, that we would do as well as we think we feasibly could in this five-year period, and that crews and cargo particularly would also show some -- would really bear some good fruit. so this chart, i hope helps give a good outlook. as you can see, we are showing surpluses in each scenario for each fiscal year. so i'm happy to be here today to say that i don't need to propose solutions for problems that we're facing. and then, even on top of that good news, the green line here indicates our prior five-year financial forecast, and you can see that even the low case

scenario in red is turning out better than our prior base case scenario in our prior forecast. and so when it comes to capital, this is also a very good story. what this start represents is our projected capital spending in all three scenarios, base, low, and high, and compares that projected capital investment with two key metrics. first, our deappreciation rates, so on average, we're projecting $20 million of deappreciation of port assets. we're meeting that in every fiscal year. the less good new is our ten-year capital plan, which you'll hear about next, projects very high renewal needs for the infrastructure. if we were to keep up with our

current forecast, that would average 61.5 million in spending for capital. we're not quite there, but we're doing much better, and we'll just keep working at it. so i just want to go in a little bit to the key elements of renew projection and operating expenditure projection in the base case. the really great news is that in the base case, we're projecting that we'll hit the $125 million target in operating revenues by the third year of the financial plan, really developing new sources of revenue that are diverse has been -- is a critical piece to meeting this target. development projects, new leasing opportunities, we are going to be coming forward with a proposal for a cruise fee increase, our passenger facility charge. it's a great partnership with carnival cruise lines will

certainly help, and cargo expansion in the southern waterfront. as you can see, this is an extremely diverse pie. this represents the different areas that are contribute bein our revenue growth, and it's a wonderful array of all of the things that the port commission has helped guide the port on over several -- as long as i've been at the port, seven years, while we're all counting. so on the operating expenditure growth, you can see that personnel really is driving port costs, as well -- you know, we're aligned with the city message. the cost of personnel is significant. really, together, while salaries are definitely contributors to this group, and work orders, those are actually projected to grow at -- at

c.p.i., so we're assuming 3% inflation. also significant, but it's really -- the port relies on other city departments to provide services. they're just a large component of our budget, and therefore, we naturally reflect growth in that cost line. this chart is intended to help explain a bit more about why -- why we're forecasting strong capital investments. so this is showing trends year over year in the different types of operating expenses. as you can see, the capital budget is represented through yellow portions of this bar, and the reason why we have that -- have money to make those investments is because of the areas in green, which represent our annual surpluses. so it -- this is a pairing of

expenses compared to revenues. the green represents that net income that we're generating year over year, so in the 2019 base, that surplus is then invested in capital in 2020, and the 2020 surplus is invested in 2021, and so forth. so we're hitting -- hitting these high targets of 125 million and ever growing through the end of the forecast is really generating a significantly positive outcome in terms of capital. on the not-so-positive news, if we were to hit an economic downturn and face this low case scenario, we still aren't projecting deficits, but we would expect to see impacts to our percentage rents as we did during the last economic slowdown. our leases would be delayed, we would expect more vacancies,

and for cruise and cargo, we would expect to have fewer agreements fall in place, particularly for cargo, and cruise, we would foresee lower passenger demand. and then, this results in 24 million average capital spending, which is still quite good, compared to prior years. for the high case, if we're really maximizing our potential, the real story here is more around continuing enhancements of revenues, where we would expect to get higher revenues from the new leasing and development initiatives under way, and if we would expect car go could generate additional deals at pier 94 and really, the story around cruise comes down to not only the increase to our passenger facility charge, but also how the port is able to adapt to

new castle air quality regulations that will require us to plug in ships at shoreside power. so the high case actually assumes that the new regulations coming from the state would allow us to have five additional nonshoreside power equipped cruise calls. and then for ongoing expenditure controls, we would assume that we would not be hiring additional personnel during those more difficult times and we would continue to just invest any surpluses in capital. so in the high case, we would have 30 million in average capital investments. so in talking, i really just want to talk about our strategic considerations. i think when you look at this list, it feels a lot like reviewing our strategic plan. it's all about stability. how do we continue to be a strong, stable port, you know, in the highs or the lows as we move forward?

and i think continuing to deepen our revenue base is stop number one, just knowing as we continue to diversefy and create new revenue streams, those are things that not only will protect us during an economic downturn. if you have that diversity, then maybe some areas of our portfolio will weaken while others will stay stronger, therefore protecting us in an economic downturn. and then, in the meantime, having that diversity and that deep bench of revenues will allow us to have more capital and further improve our credit rating, which we all like. focusing on product delivery, i think all of this comes into the port's ability to actually deliver on our projects. as elaine mentioned earlier -- i'm sorry. as director forbes stated earlier, as we have these higher level of capital budgets, we need to be able to

actually deliver these projects, and so the port's streld -- we'-- developed -- we looking at different ways of structuring our contracts that can enable more effective delivery. and then, more leveraging special use districts, i think that we are becoming more and more comfortable with our infrastructure financing districts and planning districts, so we'll continue to look for opportunities to utilize those additional revenue streams, and staff will look at our fiscal policies. that's the final point, that we have really good policies in place between our operating reserve and our capital policy, but there's probably more we can do. and over this next year in particular, we're going to take

another look. it's been a while since we've brushed them off, so we just want to make sure we're doing everything we can to position ourselves -- position ourselves for the highs and the lows. so thank you, and i'm happy to answer any questions. >> thank you. is there any public comment on this item? seeing none, public comment is closed. commissioner woo ho. >> okay. thank you. thank you. thank you. thank you. i think every year, this presentation becomes clear and good, and i think the trend lines are great, and i really appreciate. th but i do have some questions. on the pensions, the 19%, and you said the mayor's office wants to figure out ways how to cut down -- and pensions have been on the mayor's agenda for many years, even before this current mayor, and i don't know

if there's anything being done to figure out changes in the pensions so the costs can come down. i don't know if it's just you put 19% across the board or you look at your specific population -- actually, we have the requirement board expert over here who probably knows this in detail, whether you apply it to your demographics so that's just a 19% across the board so you look at your demographic in age and you understand your actual pension allocation or whatever is going to be more flexible than the standard 19%. so that's one question, whether you do that. and then, i guess, my sense is in looking at your presentation, that your revenue line moves more variably between the three scenarios, and your costs move less so because they're more fixed. so in all three scenarios, the only thing, maybe you don't add staff. that's about it. that's the only variable that i can find. >> in the low case, that is the

primary variable. >> yes, and so there's no other areas. in the corporate world, one is more aggressive to figure out how to make your costs more variable. and then, the interim -- what i didn't quite understand, in the interim dip, and we saw this before, and you improved upon it this time, where we showed the green line going down, i guess -- let's see what that slide was. no, not this one. it's the one i should have -- oh, it's on the first page. it actually -- you know, you do have the -- and now, you projected it's not going down as much -- yeah, this one. and it's now -- you've -- it looks like if you look at the new columns, it's smoothed out, but now, you've moved it to

20-gs 20 -- well, on the low scenario, it's fiscal year '21. but maybe you can explain how that dip goes down so much more, and it's pushed down from your previous forecast. >> yeah. so can i answer your questions last to first? >> yeah. i have more questions -- no, no. go ahead because i know you won't remember all of them. >> okay. great. so for this chart, i did average out fiscal year 21-22. i averaged it out over the last two years because the prior plan ended in fiscal year 21 and 22, but i wanted to still give a reference of what that would look like through the end of this financial plan. so those aren't -- 22-23 and 23-24 are averages. they're not actually from the prior plan. i don't want to say made up

numbers. it's a place holder. so the reason why you see that dip from 19-20 to 20-21 and then back up is really a result of how we had to adapt to the capital plan in the prior plan. so one thing we don't actually have to do here, but we have done historically is we designated operating revenue to capital, and so when you have to meet that 20 or 25% requirement as you're absorbing some of those resources, that would have otherwise supported operating. so -- and this is net operating revenue, as well, so i think what you're seeing is that we are expensed coming in to support that designation to capital that creates that deficit in that fiscal year, so we ended up having a much more of a -- kind of an up and down

forecast in the prior five-year financial plan because we were adjusting for different requirements of the capital policy. >> megan, isn't the -- also a factor, the one-time sources we know about in 2019-20, and not having certainty going forward, so we're counting in that -- i think in that first year, we have all the one-time sources that are known. this is something that we always struggle with, these one-time sources that we know of and how to project them going forward in the unknown. >> right. well, and it turns out we always have some one-time sources, which help with revenue. generally, these sources -- what i'm trying to get at, with your sources, even in the low scenario, it's conservative, so it's more conservative than -- i guess -- >> yeah. >> when you set a low case, you set a percentage rents, but

what was your vacancy assumption. >> what i did was just adjusted down the revenue growth. >> so you just said all your tenants would not do as well so we would not do as well. >> that's right. and then in terms of commercial rents, our rate of growth would be reduced to 2% instead of 2.5%. >> okay. >> so that was just one way of going about what could very well be a higher vacancy rate. i just chose one variable to bring down and ease that rate of increase. so it's not an outright drop in the same way that the percentage rents was in this forecast where i reduced it by 10% -- >> okay. >> -- by the second year. >> i'll just ask two more questions and yield the floor to others. one in the orton, we heard that the yield doubled, but the rent forecast doubled. how does that impact you in

this forecast. >> okay. so the beauty is i don't see the cost in this forecast, i only see the revenue? so in this chart, it's the operating revenue growth pie chart. you can see that 20th street historic core contributes 15%, so in the right -- middle right piece, 20th street historic core is 15% of that growth. by the fifth year, i'm assuming the $2.1 million income from -- from that area -- from those leases. >> i did see that, and that suggests to me the sooner we get these projects on stream, you can see the significance of what they do in terms of revenue growth. >> yeah. it significantly helped this forecast? these revenues were not assumed in the prior forecast. some of these revenues did exist, and we did have back

lands, for example. pier 48, and the impacts of mission rock, all of these, we had some assumptions built in, but the true one is the orton project. >> okay. last question is you mentioned in the base case, your revenue reaches 125 million. if i look at the charts on the high case, what does the revenue reach? >> so let's see...so in between 2021 and 2022 is when we hit the 125 million. by 2022, we're forecasting 128 million, so exceeding the goal, so it's about a $3 million increase compared to the base case. >> and the final year is

134,733, so 135 million. >> well, i'm expecting you're going to beat that. >> now, it's on record. >> so let's just go on record. >> okay. >> and actually -- >> that's the expectation. >> and i don't want to skip your question about pension. just to clarify, 19% is an average. i just say that for the simplicity of the presentation, but for the financial forecast, we actually use the city's only increases which range anywhere from 20% growth and actually reduces down to 15% growth by the fifth year, so it's not -- it's not an average across. the advantage of using the city's assumption is the controller's office is really in the weeds on understanding what the pension requirements are going to be, so that's actually an area where we're wholly reliant on the city to come up with these larger solutions, either through labor negotiations, additional

charter amendments to address pension needs, otherwise, our only control is around hiring. >> okay. and in terms of your own population base, which we don't really customize this forecast to what our population would be, when you do your analysis, do you see the forecast is less than will average age of the city or higher? >> we actually do that. we get a report from the department of human resources that shows the average age in the workforce, years to eligible retirement, and we are older and closer to retirement than the average city department. >> okay. so the average cost is quite real. >> people like to work here and stay. >> okay. i field the floor. >> thank you. >> commissioner makras. >> just a couple things on the pension stuff that may be

helpful. if the pension is 19, i'd just like to call out the employment benefit in the program is a much larger number, so that's how you should look at pension and benefits. it's wages plus the package, and the package is really set by the city, and i don't believe age has anything to do with it. you don't pay more into the pension fund because of your age. it's all blended out, and it's averaged out by your pay. and my estimate is it's going to stay at the 40% or the thereabouts for a long time. that's just my observation, but there's no real actual number out there, the 40% number. >> yeah -- no, i understand. >> so i have two questions. on your base case assumptions, on your key assumptions, i'm going to call out two things. item f is your rsi sites, walk

me through where you think we're going to bring that much money on the table for something that hasn't been brought to us yet in such a short period of time. >> so the key sites that i looked at and categorized as r.f.i. included pier 23, 19, and 38. a -- 19, 29, and 38. pier 29, i projected out it would be used for event space. for piers 23 and 19, the assumption in the base case was that both of those would be used for interim rents just for storage, so one of our lower parameter rates at 80% leasing.

and by the fifth year, one of those sites, and i happen to just plug in pier 19, we assumed, would actually be vacated from that storage leasing and be prepared for a development site. and pier 38, throughout, we actually assumed light storage, which just generates about $50,000 a year. so it's really piers 19 and 23 where we generate good money in that interim period. and the irony is we actually make more off of those sites in the base case than in the high case, because in the high case we assume we would be able to vacate pier 19 by the fourth year, and we would vacate pier 23 by the fifth year. so all-in-all, we probably lose up wards of $5 million from those two sites in the window, but the