Transcripts For SFGTV BOS Budget And Finance Committee 20240713

Sfgovtv. Budget and finance. Committee. Good morning, everyone. The meeting will come to order. Happy new year. This is january 8, 2020, regular meeting of the budget and finance committee. I am supervisor fewer. I am joined by supervisors walton and mandelman. I would like to thank sfgovtv for broadcasting this meeting. Madam clerk, do you have any announcements . Pleplease silence your cell phones. Items today will appear on the january 14th agenda unless otherwise stated. Thank you very much. I want to welcome everyone to the first Budget Committee meeting of 2020. I did want to note the committee will be recessing today before 11 00 a. M. So you may attend inauguration of mayor breed. We will reconvene after the inauguration to finish the agenda. Can you please call item one. Resolution approving and authorizing 50 year lease with one option tone the Port Commission and tzk broadway llc at seawall lots 323 and 324 with a minimum base rent no less than 1 million to commence following board approval. We have with us today rebecca. Thank you. And your assistant Deputy Director of Waterfront Development for San Francisco port. Good morning. As chair fewer said i am with the port. I am proud to represent the project team today. The resolution before you authorized a 66 year lease for hotel and theater and public open space. It shows the site at the corner of embarcadero and broadway this Brown Building would be the future site if approved. A bit background. The existing site is a 60,000 square foot surface lot. Proposed is a four Story Building where we would have 192 hotel rooms, 14,000 square foot open space and 30,000 square foot theater space where we would have the new permanent home for zinzanni. A little about the project layout from left to right north end of the site shown with the 14,000 square foot park. That would be closely bordered by this Pedestrian Access way. It would be a new way from the street down to the embarcadero. The theater would be right in the center. The hotel at the corner of the site. It is important to stop for a moment. Siit is an important theater for more than a decade until 2011. They were moved under agreeable terms to terminate if lease to terminate the mer cuscup and we have been working to find a new permanent home for them. This project has been going on for nearly five years with numerous approvals to date. The rent filing stones are planning, Port Commission approval late in 2019 as well as consistency finding with the locally noted Historic District in the area by the Preservation Commission which found this new build to be consistent with the historic nature of that district. Just a quick overview of the financial structure of how this project will be financed and structured. The team would finance the entire development. They would be required to pay the port the greater of base rent. About 1 million per year with annual escalations or percentage rent. That is equal to gross revenues time percent beginning at 3. 5 . I want to sing. 3. 5 rising up to 6. 5 by year 20. We will participate in upside so to the extent the tenant is selling or refinancing we participate when the equity is returned and they get return on the equity. The partnership between the port and developer will be sfgovtv earned by two documents first is lbda a contract that will require us to enter the lease so long as certain conditions are fulfilled including the tenant paying our costs and transaction fees. They must secure the financing and then close escrow to assure they will build what is proposed to be built before entering the lease. The ground lease would govern up to 66 year relationship between port and tenant. Port would pay rent. Use site consistent with approval and Public Trust Doctrine and numris other numerr documents for approvals. Lease revenues projected. Minimum rent is light blue set to seek qualor greater from the circus parking lot. Percentage rents going up over time and we participate in per order dickey events like pier ope thedriver behind the projs bringing back this popular cultural asset helped produce consistency to attract people to the water front. There is also the public open space. The project team agreed to 17 local enterprise goal for contracting. A local hire of 30 . Using the first source hiring for jobs along the waterfront. Revenues 8 million in impact fees upwards of 4 million per year in annual general fund revenues. I want to conclude prepared remarks with the photo from the time in San Francisco. We would like to have them back. I would like to recognize my project manager and j wallace to answer questions from the development team. Thank you so much. Thank you. Colleagues comments or questions . Supervisor walton . Thank you for the presentation. You may not be able to answer this. In terms of permanent jobs do we have a breakdown how many hotel, hospitality . Are we there yet . I cant answer the sector break done we estimate 120 permanent jobs. Developer entered into agreement with local 2 for hots workers. Hotel workers. I dont know that they have a projection yet. Could we have a bla report, please. Good morning. Budget analyst office. The board of supervisors is asked to approve the ground lease between the port and tzk produce way for development of seawall lots. We summarize those in exhibit 2 on page 4 of the report. In addition. This is referenced the port approved the lease and disposition agreement to cover the construction of the project. That is not what the board is asked to approve today. The ground lease subordinate to that lease and disposition and Development Agreement until the completion of construction. We do outline the terms in exhibit 3 on page 5 of our report. Again, what was in the port presentation, the rent is based on minimum annual rent to the port that starts at 12 million 1 million and goes up to 1. 4 million plus percent 2. 5 up to 6. 5 and 3. 5 . There is also participation rent when the developer received the return on equity. The uncertainty if this would be based on the financial projections be received when this would go into effect. There would be some participation if the Hotel Developer were to sell the hotel and the city port would participate in future proceeds from the sales. We summarize on exhibit 4 on page 7 of our report the annual revenues to the report and other revenues that would come from inclusionary fees and tax revenues, which are summarized on page 8 of the report. We recommend approval. Thank you. Lets open this up for Public Comment. Any members of the public like to comment . Seeing none Public Comment is closed . I would like to move this with a positive recommendation to the full board. Without objection thank you very much. Madam clerk item two. Ordinance amending the environmental cod to require all electric energy sources. I believe we center cindy from the department of environment. Okay. Good morning, i am cindy c. U. Mmerford. Here to request your support to amend the environment code to require new construction and major renovations on Municipal Buildings to be all electric to help the city move toward Climate Action and create a healthier environment. I would like to acknowledge my staff. The Municipal Building coordinator and charles our chief policy officer. Lets look at San Franciscos emission sources today. We can see 44 of our overall emissions come from buildings. If we break that down, we can see in our Municipal Buildings 94 of the emissions from natural gas. In our commercial and residential sectors it is about 84 . So this illustrates it is crucial to move away from natural gas. Natural gas was once a bridge fuel. As we have moved away from coal, we now need to move away from natural gas. We have so much more research and information in the last five years about the impacts of natural gas. We see that the Natural Gas Industry is as potent as the coal industry. Let me talk about impacts. First natural gas impacts climate. The major criteria po pollutants methane. It traps more heat in a faster time than carbon dioxide. Methane traps 8 six times as much heat as carbon dioxides in a 20 year period. There are safety issues. Natural gas is combustible and hazardous. In the United States a gas or pipeline catches fire every four days resulting in injury every five days and explodes every 11 days, leading to paytalty every 26 days. We have seen these issues in frap. In february we had the hall of justice. Last year we cant forget about sanbruno where 8 people died from gas explosion and wiped out a neighborhood. In addition to climate and safety we see health impacts. We know that communities living next to extraction sites suffer from respiratory disease, Neurological Disorders and digestive disorders. A pollutant nitrogen dioxide increases respiratory disease and also trigger asthma. Now we learn that it can lead to asthma in otherwise healthy children. This is gas power appliances in homes such as stoves. The policy proposal for us today is to basically eliminate natural gas from new construction and Major Construction in Municipal Buildings. Every three years the state of california revises housing codes. Cities do this to make sure we meet the state mandates. In addition, cities have the opportunity be to do a reach code. A reach code is efforts beyond the state code and are done for environmental reasons. For 2009 the department of environment worked with supervisor stefani to develop this ordinance. The proposal is simple. It will require all New Buildings and major renovations to be all electric and not allow mixed fe fuel buildings. It is important to lead by example. We raise publish awareness and set the tone where the market is going tgoing to go. It is important to note we have a waiver process. If there was an instance where new construction or major renovation was not able to construct all electric, we have a process for emergencies if it is cost probative or alternative compliance pathway. The waiver is well defined in chapter 7. We would work the project sponsor to make this as easy as possible for success, if necessary. I know the bla report will cover cost and benefits. I will go through this because it is important. We had arab do a small costeffectiveness study to look at the types of buildings we would foresee the city constructing. What we saw as we looked at equipment costs, the cost of constructing the building would probably be cost neutral plus or minus 1 ther 1 per square foot. It was limited in scope and did not include savings from not including natural gas infrastructure. We extrapolated that from the 2019 cost effectiveness study. In a Large Office Building that would be less than 200,000 in savings or translated to 35 cents per square foot in saving. We would see annual Energy Savings from 9 to 48 . That is Lower Energy Bills each year for Municipal Buildings. It is important to note that this ordinance was done with a range of stakeholder engagement. The intent is to illustrate the ways we have connected with people. For example, we had six green desk force buildings, met with the code advisory, we have also just met individually with city departments to make sure that we listened to input, concerns and heard about the great work they have been doing. In july the municipal Green Building task force recommended to the department of environment we include this in chapter 9. I want to cuff touch on a i want to touch on a couple examples. We have a couple departments that are all electric. These are in construction or already developed. What really gives me encouragement is buildings are going all electric without regulation. This is the right time for this ordinance. In addition to city buildings, there is an array of Public Private sector buildings, too. This slide illustrates Affordable Housing sites. I looked at the agenda later there is a multifamily affordable rental site. It is on Treasure Island that they will talk about. That is a great example for this presentation. Lastly, i want to talk about our next step was around the elimination of natural gas. This ordinance marks an important step in creating buildings of the future. We are initiating several workshops and work groups to better understand what the opportunities and challenges and solutions are. We are hosting the first Public Private workshop this afternoon to look at elimination for natural gas citywide. We also know that we need to address hurdles around transitioning away from natural gas in existing buildings, too. We have had two buildings around de carbonization and equity that looked at Work Force Development and Affordable Housing and we will have those discussions this year. We think it is important to do out reach and education. I want to let you know on february 25, our department will host an electrification expo for homeowners, renters and builders to come to learn about how to transition their home to being fossil free. The implementation is crucial for the city to meet climate goals. It will rechoir a lot of require a lot of political courage. I want to briefly introduce two colleagues. Julie from the department of of public works to speak on behalf of their department and heather green from longterm capital planning. I will be available to answer questions afterwards. Good morning, committee members. I am julie lowy. I am the architect and manager for the bureau of architecture at San Francisco public works speaking in support of this ordinance. I have been working in the field of architecture for 34 years and have project delivery of many buildings. I joined this seven years ago. As an architect in the building industry i can tell you buildings are the Biggest Energy hogs on earth in materials, construction and operationally. This ordinance is just one small step towards addressing this critical issue of getting us toward net zero ca carbon for buildings. Some say we passed the point of no return. I am an optimist. This is critical for our environment. You know, one thing i learned when i joined the city is good enough for government work is not what some people take it as. It means good enough for government work. We need to lead the charge in the city and county of San Francisco and set an example of this Important Initiative like this one. Our buildings need to be built to last. At the Bureau Architecture we take great pride in building the buildings with highest quality and durability. Government buildings last 50 to 1000 year o 50 to one hundred years. Lead gold is the lowest common denominator. We need to do better and get to net positive, which we are trying to do. Some of the buildings on the screen. My staff have worked on like Southeast Community center is net zero, all electric. I think that i want to thank you for your time. Happy inauguration day. Thank you. Good morning. I apologize heather green. Thank you on this busy day. I want to thank the department of environment and cindy and debbie for their efforts. Environment Capital Committee presented this. Not surprisingly through the bla, the cost is a concern. Building in the city is extremely expensive. We appreciate the attention paid to making sure we are doing this where we should on the whole building major renovation. Not that every time we parent the law we need to electrify the building. It is an important distinction to make this fiscally feasible for the city. This helps advance our greater goals as the city. We drafted the hazard plan for San Francisco and a chiefing the Greenhouse Gas targets is essential for us all. This helps get us there. Thank you. Any questions . Could we hear from the bla, please. Yes, the board of supervisors is approving the amendment to the environment code to require the construction of city owned buildings or major rehabilitation to be all electric. They covered the fiscal impact in the report. Based on studies provided by the department of environment. There is a range on the Construction Costs depending on the infra structure and building from decrease in cost in increase of 1 per square foot and other cost reductions associated with not installing the natural gas infrastructure. We were provided a range depending on the type of infrastructure summarized in the report. With Energy Savings there could be some increase depending on the type of electric infrastructure installed to savings generated over time. This is a new policy for the board of supervisors. We consider this to be a policy matter for the board. Supervisor mandelman. Clarification on the department of environment presentation. The all electric examples i am assuming are illlus trative. I dont think this will apply to Affordable Housing developments, correct . Right. That is the range of the buildings built in the city. I appreciate the thoughtful way the department of environment approached this. I think it is worth saying as we move through the stages through Municipal Buildings and new private construction we are probably at some point going to have to circle back to retrofitting public and private buildings. Over time it will be unacceptable that we have buildings emitting Greenhouse Gases. It is an important first step in bite sized chungs. Thank you. I have just would questions. One is that in these buildings i have been asked by actually people my residents who want to switch to all electric in Single Family homes. I have a tank less water heater in my home. I am wondering are we using for this construction for these large buildings, how are we doing our water Heating Systems . Are they all electric and how does that work . I have been told that actually there is not a system for all electric water heaters. Explaining that in a minute,if you could. I will. The technology we would use is called heat pump water heater. It is like the inverse of refrigrator. That is my best laymans terms of explaining it. I will invite a colleague for a more technical answer. Heat pump water heater. It is working as inverse of refriggerrator to give out heat that circulates water to heat the house. The electrification fair on the 25th will have a lot of vendors with heat pump water heaters, spacing, cooling and electric stoves which is a big issue. That is great. Because we also have a pump in our home, an electric pump to circulate the water. The hook up is gas. This is what my residents are asking. Is this a new Technology Just on the market to you can do this for large buildings . Yes, we believe we can do it for large buildings. It is not new technology, but it has been improved vastly in the last couple years as the Electrification Movement has taken place. Costs have come down. They are comparable to natural gas appliances at this point. If you would send that information to my office about the fair we will get it out in the monthly newsletter. I wondered how we were doing it. I had not heard for the large buildings. The developers said there are no options to have it all electric. You are here telling me there are options in multi Story Buildings . This afternoon we will host a workshop with engineers and architects to talk about the technology and options. There will be 80 team coming to learn about the technology. Maybe the next question. I want to ask about are we tapping into any solar energy on the New Buildings . Are we putting on solar panels . It seems if we are doing the new construction on Municipal Buildings we should look at capturing solar energy. I would assume we are doing that because the department of environment would be the department that would insist we do that or bring forth an ordinance to require that all municipal facilities being vastly renovated or newly built that would be a requirement. Is it a requirement . I will have our breen building coordinate Green Building coordinator apply to that. We have the better roofs ordinance that requires some portion of solar on the roofs. As alternative there is an opportunity to apply twice that area in living roof but most projects opt for the solar option. That is in conjunction with. When we say that there must be some solar panels, what is the we have no measure or bar or minimum or is there that they must comply with . It is percentage of the roof area. It is not relative to the operations of the energy demand, it is based on what is available to the project outside of the mechanical footprint on the roof. Thank you very much. Lets open up for Public Comment. Any members of the comment like to comment on item two . Seeing none, comment is closed. I would like to move to positive recommendation and add my name as sponsor. Please call item 3. Resolution authorizing the general manager of the Public Utilities commission for a contract for cdm smith with planning andy sign and engineering support for the no Water Treatment plant ozonation for project for an amount not to exceed 15 million for six years mar2020 through march 2026. We have bryan de sore, project manager. Good afternoon. San francisco public project manager. This item s sfgovtv could we have the slides on the screen . This is a request to authorize the general manager to executes a professional Service Agreement with cdm smith for professional Engineering Services on the ozonation project. It is one of the Treatment Facilities along the sfpuc water transmission system. The plant treats water stored at the san antonio reservoys prior to the transmission system. In recent years it has experienced more frequent taste and o door event odor events from the byproducts of al gee in the two reservoirs. The photos of the reservoirs both in california as well. The purpose of the project is to improve the plant reliability and address the taste and odor events. It was recently constructed at the plant. The facility is located in the yellow outlined area on the photo on the bottom left. The photo of the powder activated carbon facility is in the right. The ozone facility will be constructed as longterm solution to the taste and odor issues. It is in the outlined area in orange. The ozone facility will consist of an ozone building, liquid oxygen tanks, generators, injectors, Contact Chamber and associated piping and control systems. It is part of the 10 year Capital Improvement program, and the budget is 165 million. The duration is approximately six years. This slide shows components that make up the system. Starting at the top left is the liquid oxygen tanks and vapor risesser. To the right is the ozone building. Bottom light is ozone injectors which inject ozone into the water prior to the Contact Chamber. To the bottom right is the ozone de construct system which treats the ozone not dissolved in the water. The Ozone Project requires Planning Services. In june 2019 request for proposal was issued for the services. After the interview process cdm smith was the highest ranked proposeser. In november of 2019 the San Francisco Public Utilities Commission Approved the selection of cdm smith and award of the professional Services Agreement. They are here today to approval the 15 million six year term of professional Service Agreement with cdm smith for the planning and Specialized Services on this project. Thank you. I will be happy to answer any questions you may have. Colleagues questions or comments . Could we hear from the bla, please. Yes, the board of supervisors is asked to approve the six Year Contract to provide engineering and Planning Services for the Water Treatment and ozonation project which was summarized by the representative from p. U. C. Briefly. The cdm was selected through competitive for 15 million which is summarized in table one on page 16 of the report. Of that 15 million, 2. 8 are optional costs for engineering support during construction of the plant. The total project cost is 165 million, which makes this contract 9 of the total project budget. We consider that to be reasonable and remember approval. Thank you. Supervisor mandelman. This contract raises a question for me as i was briefed by the bla. It is more of a question for the mayors Budget Office or controller. Which is 160 million project. We are asked to approve 15 million worth of the cost for the design personal Services Agreement. I was thinking about, you know, why is it that the larger 80 Million Construction contract doesnt come to us but the small relatively smaller personal Services Agreement does . I dont think this is particularly the p. U. C. Or the City Attorney question actually. I guess the City Attorney can address the legal reason why that is. I wonder if the controller and budget analyst can speculate if it is sensible. The City Attorney. Section 9. 11 a requires the board give approval to large contracts those that have a term over 10 years or 10 million. That provision of the charter exempts Construction Contracts. Those are not required to go to the board for approval, regardless of duration or amount. Over to controller or mayors Budget Office, what is the theory as best you understand of why we would look at a relatively small part of the project but not the big giant part of the project . As the deputy City Attorney said charter section 918p. Code section 6 has the outlining of the processes the departments must follow in order to go forth with Construction Projects. It only applies to about five or six of the citys main infrastructure departments with very detailed minimum bidding and fairness requirements for those departments to ensure it is a fair process. I think it might be helpful for the p. U. C. To explain the public process they will be going through for the larger construction project so we can understand what departments do in terms of public process for large Construction Projects like this. One of my questions, also, this is the next phase. The 80 million have to go through your commission . Yes. The process is going through the bid or design bid then build process. We complete the 100 design and openly advertise to contractors who then review the package, prepare proposals and submits their bid for construction work. We do outreach to various contractors and firms that may be interested. We will have a prebid conference with the contractors. This gives the contractors an opportunity to learn more about the project as well as engage with subcontractors who also attend the prebid conferences. Then contractors will prepare the bids, submit and open bids and identify the lowest responsible bidder. We will evaluate the bids. When the bidder is lowest ranked is selected we will go to the San Francisco Public Utilities commission requesting the authorization to award a contract. With that contractor. A contract like this design contract does not go through that process at the p. U. C. Or it does . This project will go through that process. For all of it, design and construction, all of the contracts . Maybe back over, and again if that process is good enough for Construction Contracts and we trust that it can work the way through the commission process and that there is transparency and that is enough for that. Why isnt that enough for the design piece . Any thoughts about why that gets elevated to the board of supervisors peboard ofsuperviso . The City Attorney said because of the charter you must. Deputy City Attorney ann pearson only the construction piece is exempted. The Services Related to contradiction arent considered construction contract. Those dont fall in that exception. I will stop. I am having a hard time conceptually understanding why one piece of the project, which is design, seems to be something where we dont rely on a Departmental Commission process. Setting aside legal requirement what is is the right way to deal with this, the design has to come here but the construction which is larger doesnt. I will stop. I am done. Thanks. Thank you very much. So lets open this up for Public Comment. Any members of the public like to comment . Seeing none, Public Comment is closed. I would like to move with a positive recommendation to take without objection thank you very much. I think we have time for one more item. Please call item 4. Resolution declaring intent of city to reimburse future bonds and authorizing the director of the Mayors Office of housing and Community Development to submission documents for Residential Mortgage revenue bond not to exceed 24 million for 1223 webster street. Thank you very much. Christina m un n is here today. I am here to present on the proposed bond issue resolution before you to fund the rehappy birthday of the marketplace which is an existing 120 unit Affordable Housing apartment complex at 1223 webster street in fillmore district. It would approve the submit of application to secure an allocation of bond the state and that bond issue would be conduit financing that would not require city funds to repay bonds. It consisting of substantial renovation of apartment complex built in 1996. There is many tenants there a long time. Average tent is there 14 years. Under the rehaband refinancing 10 units will remain affordable to households earning no more than 60 of the income and 108 must be no more than 50 of a. M. I. The scope including replacing windows, boilers, repair water system, upgrading fire alarm systems and building exterior work and no displacements or relocation of residents. They will remain in place. Timeline. They will return to the board for bond issuance approval in april. On behalf of the project sponsors in hfsdc thank you for consideration. I am joined by the representative lisa grady. We can answer your questions. There is no bla report. Lets open for Public Comment. Any members of the comment to comment item 4 . It is now closed. I would like to move to board with positive recommendation without objection. Thank you very much. Having said that, we are going to now recess this meeting and then we will reconvene after inauguration of mayor london breed. Thank you. Good morning, ladies and gentlemen. Please take your seats. Our ceremony is about to begin. Thank you