For the budget and finance committee meeting. My name is Supervisor Malia Cohen . Supervisor tang is excused for todays meeting. I would like to thank sf govtv for todays broadcast. Madam clerk, any announcements . Clerk yes, please shut off any cell phones or any devices. Speaker cards should be submitted to the clerk. Items will be appearing on april 4, 2017. Would you like to take a vote on excusing supervisor tang for todays meeting. Yes. Do we have an approval to excuse supervisor tang. That is approved. Madam clerk, please read item 8 and 10. 170214 [purchase and Sale Agreement lendlease development, inc. 30 van ness avenue 70,000,000] sponsors mayor; kim reading code . Supervisor malia cohen all right. Thank you very much, supervisor kim has joined us today who is the sponsor for these two items. I will give her the floor now. Supervisor jane kim im only the sponsor to no. 8. Thank you, chair cohen and members of the budget and finance committee. We know this issue very well. This has been before the board of supervisors for some time. This is regarding the sale and acquisition of 30 van ness owned by the city county of san franciscans. In september when 2016 when we first saw the purchase of the acquisition of the site at 15 Affordable Housing at 80 million Purchase Price. The proposal we have before us today, while a reduction of 70 million. Proposition which passed june 2016 which requires developers to now buildup to 25 inclusionary housing which would include 15 at low income with Affordable Housing and in addition to 15 at 100 ami. In 2015, i did pass a proposition, a ballot measure proposition k when we said or build on public land that we should be building maximum affordable minimum households on site. What im proud of today is that not only has the developer committed to build and also committed that if the city would decide to increase to provide any up zoning that they will be able to commit to 33 of Affordable Housing with on site in lieu of fees through the market octavia and van ness special use district plan. It has been important to me that we are able to use every resources that are available to us to keep building for San Francisco residents here whether they be teachers and nurses or Hotel Workers and restaurant workers. And even in case where we are also prioritizing the need for revenue to build much needed office space which is equally important, what i am supportive about this feel is this a good balance of making sure that we are maximizing affordability and important need in the housing crisis that we are experiencing here in San Francisco today without compromising the revenue that is much needed to build the Office Buildings for several of our City Departments and to provide more efficiency in the delivery of City Services. What is also important about this deal is that we are able to achieve the 25 affordability without any city buyback or discounts. The original deal that came before us december 2015, had offered the city to buyback units from the 15 up to 2025 or 30 , but at a dollar amount that we thought was incredibly high. Im looking for the number right now. Well, i will find the number later in the points as we talk further about it. But anyway, colleagues, i do ask for your support on this item. I know that we have a presentation from department of real estate before us and then our presentation from the budget and legislative Analyst Report. All right. Thank you, before we take real estate, we are going to hear from bla, item 7 and 8. Sponsored by the mayor and supervisor kim. 170213 [purchase and Sale Agreement sf prosperity 2, llc 1660 street and 1680 Mission Street 52,000,000] sponsor mayo good morning, supervisor kim, you would like me to go over item 8 . Yes. If you would like we can hear from real estate. Im prepared. Madam chair, supervisors, on page 23 of our report, we know that San Francisco prosperity as the highest bidder agreed to pay the city 52 million to purchase 1660 and 1680 Mission Street and pay tax of 55,000. In addition they will pay property taxes in 1634 in first year and transfer taxes and property taxes are deposited into the citys general fund. Therefore the city will receive the sales price and transfer taxes of 53,560. And will receive the annual property taxes in the first year of that estimated approximately 600,000. On page 24 of our report while we know the appraised value of 54,800 achieve the purchase prize, the estimated taxes of 1 million should be added to get a total value of approximately 53 million if you consider the transfer tax which is normally paid by the seller which is the city in this case, the buyer is paying for it. We also note that the proceeds of the 52 million from the sale of 1660 mission and 1680 Mission Street will be allocated to the pending development of the new city owned building at 1500 Mission Street which has an estimated project cost of 439,265. And the sources of use for that cost is shown in table 2 page 25 of our report. On the bottom of page 25, we note table 3 and table 3 is on page 26 of our report which shows the total annual rent and operating cost to be paid by the city of the first year of the lease back is 47,000. As you know this deal has the lease back provision where departments in the city will remain and 1660 and 1680 over an initial 3year period and 21year options. They could be there for 5 years. On that action on page 26, under the proposed lease back. Dbis rent and operating cost for 1660 Mission Street will increase by 1,281,210. And public works cost for 1680 Mission Street will increase by 1,102,590 for the first year for the total additional rent and operating cost in the first year of 28,383. As a result, its going up 107 . We also note on page 27 that chapter 23a of the administrative code prioritizes the use of property for Affordable Housing because the funds of the sale of 1660 and 1680 mission are not used for Affordable Housing and this is a matter for the board of supervisors. We state on page 27 to make an amendment to add a finding that the Public Interest or necessity will not be inconvenienced by the conveyance from 1660 and 1680 Mission Street as prosperity and include that as amended to be a policy for the board of supervisors. We stand for questions. Thank you very much. Did you want me to also go over item 8 . I would like you to go over item 8. We called them both together. In item 7 you have amendments . Yes. Thats just a technical amendment. Okay. The board has to make that. We will take that amendment at the end. We would love to hear your presentation on item 8. On item 8. Supervisors, i refer you initially to page 34 of our report where we note that in addition to the 70 million Purchase Price received by the city, the city negotiated for a lease to pay the citys one time transfer tax just as in 1660 and 1680 Mission Street which i stated is typically paid by the seller in San Francisco. That is across 2,100,000. And transfer taxes go to the citys general fund. Therefore as shown in table 1 page 34 of our report, the city will actually receive 7,210,000,000 of the proposed value. And will pay property taxes in the first year and again property taxes would accrue to the citys general fund. We know the city maintained and approval from 69 million to 74 million. That is explained on page 35. Land lease for van ness for residential and retail uses while paying the city transfer tax and while they pursue primarily Residential Development on this site. Because this is a purchase and Sale Agreement and not a development agreement. The actual use specifics of the property is not known. We emphasize that, supervisors. What is before you is strictly the purchase of a Sale Agreement. If you approve you are authorizing the city to sell this property. What happens in the future to this property is not known. Has not been finalized, is not known and your action today cannot determine what that will be. That will be sometime in the future. On the bottom of page 35, its shown in table 2, if the city sells 30 van ness at the proposed 70 million price, it will result in a 44 million net proceed. That is because there are an existing debt of participation which has to be paid. While you will be authorizing the sale of 70 million. The city would get net proceeds of 42,545,000. We note from the report that 42 million from van ness will be allocated from the potential developer from the building like in 1660 and 1680 Mission Street and i mentioned the estimated project cost of that new building is 439 million and that is shown in table 3 on page 36 of our report. On the bottom of page 36, shown on pages 34 and 37. The city will pay 139,990. 50 of lendlease to remain in van ness. This deal is the same as 1660 and 1680 mission where there is a 3year lease back and 21year options to permit departments to stay in the buildings while the new City Office Building is being constructed. On page 38 of our report, we note that the proposed resolution would approve the sale of 30 van ness for 70 million with at least 25 affordability which is 17 million or 19. 5 less than the originally authorized 87 million amount. As you recall, the city had this property up for sale at 87 million and rejected that offer by the board of supervisors as you know. However, the 80 million and 70 million sale offer were negotiated before each of acquisition in 1993 for its current use. 75,000 square feet. And acquired. To hsa in 1965 for about 5 million. And was transferred jurisdictionally to public works in 1988 for approximately 105,000. So pretty good deal in terms of our acquisition versus our sale of that property. The timeline on this effort just a quick recap. For 30 van ness, i think its important to just get a little history on that. It was appraised for 1. 5 1. 5 million to determine whether the property made sense for the city as a part of restacking our portfolio in the civic center and as the budget analyst has gone over, the board took their action back in 2015 and really the key points here are what we her from the board of supervisors and put back on the market in after effort to secure a minimum from the buyer. We need a better total value for the city and we needed to record that affordability to go with the title so it runs with the land forever. We have no contingencies regarding affordability and we needed to have a process to resemble the process for clarity to prospective buyers of the property. So looking at whats before you now as noted at the 1660 and 1680 Mission Savings of this figure. For 30 van ness that is to contemplate for Development Opportunity combined with the 102 million in Gross Revenue for the city. That was our yield target when we first put together what we call project chess and put before this budget and finance committee 3 years ago the idea of pursuing a replacement property for these offices that are more resilient and most importantly provided a one stop permitting center opportunity. As mr. Rose noted, the transfer tax here which is typically paid for by the seller we have reversed that dynamic paid by the buyer of both and you see the total amount of revenue there in addition to the 102. We have a very favorable commission on this represented by the sale of mission and represented for the sale of van ness. Each at. 5 or less of the Purchase Price which is unheard of in the commercial property market. The lease backs are for a 3year initial term. We anticipate after 36 months our destination site wherever that maybe will be available for move in. In case there is a delay we have negotiated 21year options to remain on site at nominal increases at your 3 increase per year, a 30square foot cost at both of these locations. We believe that is an extremely favorable rate at the center and the budget Analyst Report puts that out at the low 50square foot. We are at 70 a foot just a few blocks away. To give you an idea, we have a very favorable lease back. Its more of a currently paid and all of the pro forma chess. You can take another look at when we bring forward the ratification for the process. That will be coming later this spring. Lastly we have deposits for 1660 and 1680 mission for 32 million and a total of 60 million. Due diligence has been completed with respect to van ness. I think that is really an important point here with previous agreements and potential agreements did not have complete due diligence. That means they have made it through looking at the seismic performance of the asset as well as the seismic condition of the land later issues and in addition to the bart tunnel which provides challenges with respect to redevelopment. I will talk about Affordable Housing. So, as supervisor kim noted we have the prop c requirements of 25 affordability. This restriction is in the psa and also in the deed. It maintains this as a minimum required affordability level and there is no comfort given to the buyer of van ness if the board of supervisors should choose to lower those limits to say whatever 19. 2 in the future. This buyer is by deed restriction required to be at 25 affordability. If the board should choose to raise the levels of prop c to 32 at some point in the future before permits are pulled and obligations are made by the buyer, it raises to that level. So it is a floor, a firm floor. This is also consistent. The development thats being proposed by a land lease is consistent with the hub effort thats on going with the Planning Department. We are joined here by colleagues from planning who can speak to that if you have questions about that conformity. Future zoning could also increase that Affordable Housing as supervisor kim articulated in her presentation. We are pleased that we have a path to 33 here that is on the act of the developer. That is an important dynamic change that has been negotiated between what the board saw in late 2015. Lastly there are additional impact fees as a result that this is in two special use districts on top of the fee obligation that the developer is making on the agreement. Lastly, a comparison in what you saw in 2015 and today in 2017. So as noted by the budget analyst, we have a difference in the pricing from the 80 to 70 million but most importantly we have a difference in the affordability level from 1525 . Whats that value . We estimate that value to an incremental increase of 104 affordability to 1238 million. That magic number that you were searching for is 641,227 per unit price in california originally put forward as a cost to buy a middle income unit taking it down from market to affordability. We are looking at a much more modest number to drive those numbers. Thank you, supervisor kim has a question for you. Supervisor jane kim i was trying to job my memory on those numbers, do you remember what a. M. I we were considering . Thats correct, we were looking at 120 minimum. What we are looking at today is 100 ami. Thats right. At a 10 million reduction if you want to put that in 250,000 out the door at a lower bmi than the original deal . Thats correct. I think there is office of housing and Community Development staff would support that as being a fantastic opportunity for the city to yield more Affordable Housing. And again, as noted transfer tax stays as a buyer obligation. That concludes our presentation for you. Happy to answer any questions that you might have. Thank you for your time. Thank you, supervisor yee has some questions and i have some questions as well. Supervisor norman yee thank you. Let me ask about the the terms of the deed, i guess. If the terms include the affordability piece in the deed, then, lets say that the original buyer decides not to just build anything for a while and then 15 years from now the property is worth 200 million. Its easy to just sell it. So the new buyer would be obligated to build the affordable units also . Thats correct. That is why it is important to have this as a deed restriction and not just a contractual agreement between buyer and seller so it is on the deed, runs with the land forever for whenever this property maybe developed. As the budget analyst noted, we are not talking about a development, we are talking about a contract for real estate. There are certain things we could not do, but this is as far as we believe we can push that envelope to ensure when and if development happens we can guide that development and its affordability levels. Is there i know this is sort of a crystal ball question, did you get the sense that the buyers would be motivated to actually build in the few years because, the deal sounds great, but if it is not built, for the no deal. The deal is that weve got nothing. It is a great question. Its the factor that we look at those potential buyers, not only the capacity to close the transaction that is important as the city as the seller, but also the likelihood not only the development but a Compatible Development that this city would be proud to have on this corner. We are pleased that land lease has shown tremendous interest in this property. They have put their best resources on this property who are joining us here today in the chamber, and so we do believe they want to put their best foot forward on this landmark location. I mean, this is an iconic opportunity for land lease to really make a claim here and if they wanted to do business in San Francisco, this is their opportunity to do right by the city. We feel comfortable with the developer and the opportunity. The other question i have is in regards to up zoning, is that what its called, up zoning, making the height taller. So you move from 25 to 33 possibly. So, for the difference, that 8 difference, what affordability level are we talking about . Would it be all of it being middle income, all of it being affordable to the low income. Im just curious because right now we have a break down of 1510. What is the 8 going to do . In pure numbers, lets just assume there is 400 units of residential, thats just a number, but it helps if we actually think of how many units are involved. That adds another 8 . So thats another 30 units of Affordable Housing at 100 of ami. And thats a tremendous opportunity for this city. So thats the raw count of units that this would entail. Yes, i understand that account. Thats not my question. Okay. The question is of the 30 something units. What affordability level are we talking about . Is it for low income, middle income . That maybe more of an appropriate question, we were talking about the offsite in lieu fees should we provide the off zoning and shift the 33 , is that the question, like where would those dollars, what type of housing would those dollars be dedicated to building . I assumed that it was going to be built onsite. The commitment here by the developer is to comply with proposition c which requires developers to build 25 Affordable Housing on site. 50 at an average of 5 of average Median Income and the remaining 10 at 100 of ami should they build rentals. The ami is slightly higher if they build Home Ownership condos. The remaining 8 which would allow to achieve 33 is paid through fees. They are already paying market octavia fees and which will be an equivalent of 8 and those dollars will be deposited to the citys Affordable Housing fund and making sure those fees are deposited closely in the neighborhood into building Affordable Housing. In that case it could go towards housing for the affordable homeless or Affordable Housing. That actually hasnt been determined yet. If director lee wants to add anything to that, hes welcome to. Mayor edwin so there is no possibility that the developer would build 33 on site . I mean, we can ask our project sponsor. In our discussions what we had agreed to was 25 onsite Affordable Housing, and in the final 8 coming to the city via an offsite inclusionary fee. That would be based on the citywide return. It would be purchased by the Mayors Office of housing which grants towards a wide variety of projects anywhere from housing for people at 0 percent of average Median Income and really up to 100 which is more variable. Its typically between 055 ami. My question is if we were to push it to be onsite, if they chose it to go onsite, then the question is the same question, if they build 8 onsite, would you be for those that are at 55, for the low or the moderates, what are we looking at . That option is not only table to build that onsite. We havent discussed those ami levels of those units. If they cant build it onsite even though they want it, is that what you are saying . No, if they want to build onsite we would be thrilled. But what is included today in the 70 recent sale and acquisition agreement is that the developer is committing to building no less than 25 onsite fully complying with proposition c which was passed by the voters on june 2017. So they are committing to 25 onsite which is more than what the commitment that was made in 2015 by related which only committed to 15 onsite. The additional 8 was something we had negotiated, acknowledging that 30 van ness is publicly owned land. Under proposition k we had agreed that 33 for Public Housing on city owned land. The developer agreed that if we were able to up zone the site which i am committed to, that they would be able to provide additional fees to allow the project to contribute 33 of Affordable Housing and a mix of onsite and offsite units. Dont get me wrong. I appreciate the 25 . Im being pushing a little bit. I dont have the numbers in front of me. Thats why im not an expert of onsite and offsite and whether or not they choose to do onsite of 30 is it cheaper for them to do it if they can actually either sell it for 150 of ami for the fees . Right. Thats all im asking if they are going to build onsite. Let me respond a little bit differently to the question, if we were able to push 30 of Affordable Housing onsite, we would have to likely reduce the value of the building to the city, and normally actually i think in a very different transaction i would have pushed for 33 Affordable Housing onsite. However, we have a lot of competing interest and priorities that are tied to the sale of 30 van ness. And in this case, you know, 30 van ness Purchase Price is also being utilized to help us build 1600 mission which is the goodwill site to build the large Office Building and also help stream line many of the City Services to one building. I think given our Office Market that we have been seeing and the incredible ups and downs and the grimaces that i often make with the board that come up with the high commercial rents that many of the City Departments are paying, we had to make kind of a value call at the end of the day in both the Purchase Price that we are willing to accept and our commitment to building as much Affordable Housing as possible. Because the 30 van ness sale was linked to the construction of our Office Building, at the end of the day, i felt it was important to bring back a balanced deal where we bring no less than 70 million to the board of supervisors in order to bring towards the construction of mission, but we still achieve proposition c getting 25 onsite Affordable Housing. If we had pushed for 33 on Affordable Housing which there are Community Members that really wanted to do that, it would have reduced the Purchase Price thereby decreasing our ability to the office. This deal is a delicate balance of two competing city needs which are both very important, one for us to build our own office space that we have control over and that we are not, you know, in many ways victim to the wins of the commercial Office Market, and second make being sure that we are building as much housing four our residents as possible if that makes sense. So a 33 deal would have likely come with a lower Purchase Price. Im just raising these issues from a Budget Committee point of view. I really appreciate the negotiation that went on. I guess what im trying to do is whether we take that this into consideration or not. Im not arguing this point. Im wondering wait a minute, if im sitting this putting the numbers together and i think maybe i will just build it onsite if its cheaper for me paying the fees. We still gain, but are we gaining at units being at the upper end of the affordability or the lower end. That was just something that im curious about and of course i would push for the lower end. Thank you. Thank you, supervisor yee and supervisor kim for making yourself available to answer the questions. Supervisor malia cohen questions about the agreement. It doesnt legally bind the developer to build Affordable Housing units. The housing will be assured that thats exactly what they will do. Chair, you are exactly correct. It does not and cannot bind the developer to something that doesnt have ceqa approval. So therefore its a purchase and Sale Agreement with the restrictions that we felt comfortable, that we could deploy against the title in the event of future development. The alignment of the hub project for this opportunity for the mixed use vertically integrated mixed use project and the timing of that in that the hub effort and its eirs is about to engage in its wrapping up. You answered the question. We cant guarantee it. Thats correct. Thats an acceptable answer although it still makes me very uncomfortable. Supervisor, would you like to speak to that . I would like to bring the project sponsor up to speak. But i also want to note that the developer, that this is not going to be the last project in San Francisco. If the developer were to go back on their word although not binding, i think Development Projects would be very difficult for them in the future of the city and county in San Francisco. Also wanted to note that landly has stolen very talented [ laughter ] leadership. We have good taste. And im confident in knowing that you know the consequences of Double Crossing the city and county of San Francisco. [ laughter ] all right. I will leave that there. The floor is yours. Welcome back. In all fairness. Would you read your name for the record . Alexa arena from lendlease. We are really excited about this as our first project in San Francisco. We are primarily a residential developer in the u. S. Today and that is our intent for the site to look at rehabbing the office space and building residential on top. We are certainly not in the business of rehabbing Office Buildings. I think as mentioned there is quite a substantive amount of work that would need to happen to the building anyway. Your motivation is really to produce a redevelopment out of the project in the long run, but of course it is a psa versus having ceqa clearance. We are just in that art where we had some limitations on the ability to say this is absolutely what we are doing. We have to go through a process and things like study wind but it is absolutely our intent to keep an office space on top of that office space and residential. What im looking to hear is i guess you are reaffirming your commitment to building affordable units . Absolutely. And working with the Planning Department around the hub and get more Affordable Housing units out of this site overall. Okay. Thank you very much, ms. Arena. Good to see you. One more question for you mr. Up dike. There is a plan comparison to the 2015 and 2017 deals. Im curious why we used the 641,000 number to value an affordable unit in 2015 and then use 300,000 value for an Affordable Housing pricing at an Affordable Housing unit for today. Can you just reconcile that discrepancy . The agreement was different than this agreement, in that the agreement in 2015 had a buy out clause. If the city had additional Funds Available to the combined yields of sale with mission and van ness beyond that 122 million target. If we had secured more than that, the agreement which related would allow us to buy additional affordability to reinvest those additional proceeds into direct onsite affordability. But negotiated with the developer was the price point of that affordability at this rather extreme number of 641,000 per unit. Thats why this number was in 2015. It was a negotiated number. They did open their books and showed us how and related california does know how to build housing thats for sure. They were very transparent with us and thats the number they came to with the cost of building affordability. Today we are using nce numbers, that is a very conservative number because it is based on more traditional in the way of City Projects that they are not in high rise annates you nature where this is a high rise project. That rises to 38 million of whats the value of the extra 10 . I hope that answers your question. Yes. Any other questions . One of the biggest criticisms i had of the bigger deal was the buyback of the 141,000 per united and one of those deals was that director negotiated on behalf of the city and folsom of the buyback of the 240,000 range allowing us to reach 40 of middle income ownership onsite in that building. Im really excited that the deal coming before us today is very close to that deal where we are going to obtain an additional 40 units add basically 250,000 a unit which is far below what it cost to build a unit of housing here in San Francisco. So, when i think at the 10 million discount achieving 40 additional middle class units that we did not have in the previous deal but still achieving the minimum price that we need in order to build a new Office Building for the City Department that we will be at the control level and not at the whim of the market before us today. Supervisor malia cohen okay, lets go to Public Comment. Ladies and gentlemen, if you would like to come to talk about item 7 and 8, please come up. You will have 2 minutes. When you hear a soft chime, you have 30 seconds remaining. Public speaker good morning, im jim has and i have been involved for 30 years and im here to endorse this. You talk about affordable and the city finances. Im here to talk about a different issue. The intersection of van ness should be the most prominent of the city. It is not. It is a tawdry place. The streets and sidewalks are narrow. The access to transportation is poor, there is very little services. It is very uncomfortable. We have 10,000 employees in that area and thousands of people that attend performances and many residents and many of those people find it very unpleasant if not unsafe. This developer has a major opportunity to help solve that by creating a fantastic ground floor experience that is retail and entertainment pourous to the street and would like to see additional transit on that corner. That is required by the city and the developer. Asking the Development Fees required for that building regarding the transportation and other things, be recycled in an in kind way which is a city term, i believe, to help pay for the additional improvements to the public realm. So, this should be a consideration in approving this project now and in the future and it will be a burden on everyone to get what we should have at this intersection which we dont. Supervisor malia cohen thank you. Anyone else who would like to speak to this item, seeing none, Public Comment is closed. Last remarks . I would like to thank chair cohen for putting these items first on the budget finance subcommittee and thank you for the benefits this will provide the neighborhood. The van ness market corridor is in great need of additional housing and additional development. We look forward to the on going work of the Planning Department on the market hub to ensure we are able to do that. But we are expecting a lot of up zoning and development in this neighborhood and its important for the city to keep an eye on making sure we are keeping up with amenities and reference for Office Workers that we are Building Office space and workers for it. I do want to acknowledge mr. John up dike and mr. Gavt. This is really important for the department and we were trying to balance a number of competing needs. We thank you for this work today. It really maximizes the citys priorities in achieving revenue for Office Buildings and our goals for the maximum and Affordable Housing in San Francisco. Colleagues, i ask for your support on this item. Thank you very much, supervisor kim. I think we are going to take some amendments first before we vote on item 8. Supervisor yee, do you have, can you make a motion . Supervisor norman yee i would like to make a motion on an amendment on item 7 by the proposed resolution to add a finding that the Public Interest or necessity will not be inconvenienced by the conveyance of 1660 Mission Street and 1680 Mission Street from sf San Francisco prosperity to llc. Supervisor malia cohen thank you, well take that as amended. I would like to amend item 8 as a committee report. Supervisor malia cohen thank you. Well take that without objection. Got that, madam clerk, lets call item no. 1. Clerk 170150 [lease agreement sp yde parking joint venture northern waterfront surface parking lots 2,955,607 estimated total rent in first year] reading code . Supervisor malia cohen all right, we have mr. J edwards presenting this item. Presenter good morning, chair cohen, board members. I would like to share this item before you in regard to the extensive outreach and process we went through to determine this joint venture of this parking lot opportunity. This was initially we received authorization from the Port Commission in 2015 to issue a request for proposal for the surface lots and shed lots that you have in your report. Currently all the sites are operating on interim lease on a month to month basis. The Court Commission believe this is in the best interest to a Settlement Agreement to provide stability and investment to upgrading the parking lots in order to improve the Financial Performance and visitor experience. Due to the location, these lots serve a number of well membered destinations, including the exploratorium and embarkation and restaurants. I have a site map. Can you put it on the overhead. Sf govtv will pick it up. There it is. As you can see these lots are very prominently located close to embarcadero and this is serving all of our tennants and the visitors that come to the water front. In an effort to diversity and lot operations, the request for proposal with sound in part operator in partnership with joint with community and local enterprise partner. Lbe. In november 2015, the port issued and rfp to 50 prospective Parking Management companies after an Extensive Community outreach. The board received four very professional proposals from a combined 8 firms. The port formed a panel that consisted of both port staff and mta. Staff who evaluated scores and ranked each proposal and also in a presentation. The joint venture comprised of sb plus and Park Management received a highest score and they are here today in the chamber. The sb plus is a National Parking operator and hyde park an lbe with the city and county of San Francisco. As required in the joint venture is structured for both companies that share in the risk and reward under the terms of the lease. The port received authorization from the Port Commission march 2016. Authorizing to negotiate the lease with the joint Venture Partnership and the jb partnership has executed a lease. The port will actually queue upon approval of the board of supervisors. Beyond the partnership which i will describe in a minute, the sb plus will provide membership opportunities for hyde park in key operational aspects in running and managing large parking operations. We hope this will lead to future opportunities between both individually and possibly jointly. So in terms of the Financial Performance of the lease, the lots, the combined lots that are currentlily generating about 2. 25 million to the port in net revenue. This is an important contributor to our on going Capital Infrastructure needs at the port and these lots provide a steady reliable source of income. Out of the lots that you have in front of you, the seawall lot, 321, located right here will be a 5year lease and 323, 324 is a 3year lease located right there. And that is in order to the other four sites will be on interim leases because these are future expansion sites for other port activities. The seawall lot 3221 shown right here, the reason thats only interim lot is we have entered into a memorandum of understanding with the Mayors Office and Housing Community development for potential Affordable Housing site. 324 here under exclusive negotiating agreement with ken wood investments. The overall, the two seawall lots do have a minimum base rent outlined in the budget Analyst Report and increase to 3. 5 annually. The rent will be the minimum percentage rent paid at 66 based on the gross receipts. So, according to our reports and projections, these lots combined should generate roughly 2. 9 million in annual revenue to the port in the first full year of operations. Thats a substantial increase over the existing amount. In addition, the partnership will invest significant capital to the signage, install new revenue control equipment and Energy Efficient lighting and the lots. The goal is to operate the overall appearance of the parking lot and improve the visitor experience. This concludes my presentation. Thank you, we appreciate your presentation. We are going to pivot and go to bla and hear their report. Yes, madam chair, supervisor yee, on page 6 of our report we have table 4 that shows that 66 of the Gross Revenue brings to the projected for the five parking lots in the first year with slight revenue and extended for 5 years for all five parking lots based on that 66 of got from revenues. The port is projected to receive 50,691,723 in total revenues. On page 7 of our report. The proposed lease expected to generate 748,037 of additional rental revenues in the first year to the port and approximately 280,277 in additional parking revenue. We recommend you approve this resolution. Supervisor malia cohen thank you very much for the recommendation. We are good with the presentation. We are going to go ahead with Public Comment. Is there any additional Public Comment . Seeing none, Public Comment is closed. Thank you, supervisor yee, is there a motion to accept the recommendation from the bla and approve the positive recommendation to the board. Supervisor norman yee i ladies and gentlemen, as we get back online, i would like to call items 2, 3, 4 together. Clerk yes. Madam chair. Item no. 2. 170174 [2011 lease and use agreement redding aero enterprises, in reading code . Item no. 3. 170173 [2011 lease and use agreement turk hava yollari anonim ortakligi] reading code . Item no. 4. 170172 [2011 lease and use agreement aer lingus, limited] reading code . Supervisor malia cohen thank you very much, madam clerk. We have with us ms. Kathy white from the airport. Thank you very much. You are going to be presenting these items . Presenter thank you very much. Kathy white ner from the airport in San Francisco. The airport is requesting your approval to add three airlines, to the airports lease and use agreement for approximately 4 years and 4 months remaining on the term. The agreement expires in 2021. The lease and use agreement is the mechanism that allows airlines to allow Flight Operations and determine space in sfo. The agreement provides a common set of lease provisions such as rent, fees and permitted use of space and also provides the airport framework to add an annual payment to the city. Each time a new carrier begins at the airport, they are added to the agreement which includes a modification and requires board approval. Over the course of the last probably 7 years weve had about 49 Airlines Sign onto the agreement and these three are the latest three. The Budget Analyst Office recommends approval and i would be happy to answer any questions. Supervisor malia cohen thank you, lets go ahead and pivot to the bla. Yes, mad chair, we have a table 3 and that shows the actual landing fee revenue from the airport from july through 2017. Totally and showing table 2 which shows the rent to the paid by the three airlines to the airport would be 2,962,513. We recommend you approve these resolutions. Thank you. Anymore comments or questions . Great. Is there any additional Public Comment . Seeing none, Public Comment is closed. Supervisor yee . Supervisor norman yee i will make a motion to move this with a positive recommendation. Thank you very much. Without objection that motion passes. Madam clerk, item 5. Clerk 170242 [apply for grant state of california, department of housing and Community Development various parks and Community Centers 7,500,000] sponsor mayor codes code Supervisor Malia Cohen thank you, we have tony morean. Presenter good morning. Today im here on behalf of the director of Parks Department and the Mayors Office and the Planning Commission and here to you to the board of supervisors to apply for the grants Program Grant for an amount of 7500 million. The parks and recreation ask the officers to administer the grants. The grants is based on a number of low income Housing Units developed in the city for the years 2015 and 2016, pardon me, its actually Housing Units that are permitted, and during that time we permitted quite a few. So, we are eligible for about 2. 2 million just based on the number of permits issued. In addition, the projects that we are proposing to fund with the grant are all located in areas of the city that are financially disadvantaged, park deficient and in field areas that allow us to secure additional up to 4. 4 million. So the total amount we are eligible for is about 7. 5 million. We are, these parks that were selected were selected with the different staff from the Mayors Office of housing, planning and the Parks Department. We considered that the projects that would be funded would be completed by june 30, 2019. This is a very short grant performance period. Once we get the award which will be announced july 1st of this year, we will prepare and expand legislation to appropriate the money. This concludes my presentation. I appreciate that presentation. Thank you very much. There is no bla report for this item. We are going to Public Comment. Is there any additional Public Comment . Seeing none, Public Comment is closed. Thank you. Supervisor yee, what shall we do . Supervisor norman yee what shall be do, asking the state for 7. 5 million. I will recommend this is approved. Without objection. Thank you very much. Madam clerk, would you call item no. 6. Clerk 170193 [supplemental authorizations for interdepartmental property transfer mou amendment no. 1 central shops relocation increasing transfer price by 8,578,429 to an amount not to exceed 82,278,429; authorizing notice to proceed Oryx Development i, llc] reading code . Supervisor malia cohen before us is Shelly Campbell of the Public Office commission and you will be followed by samuel chiu. From public works. The floor is yours . Good morning, im the project manager for the facilities improvement program. The major component of the program is a substantial replacement of the citys southeast plant. We have been working closely with gsa and public works to relocate central shops which are currently located adjacent to the plant to a new location. We urge your full support of the relocation. Samuel is here to give you a progress on completing that effort. Presenter good morning, madam chair, cohen, supervisor yee. Im jerry chew from public works. The premise of this project is to replace the central shops to the acquired sites of selby street and 1975 galvez avenue and the lease site at 450. By being close proximity to the Current Operations rather than the alternatives which were explored 2 years ago including sites for the way in hunters point. In february of last year, the board of supervisors approved legislation to execute a project delivery agreement which memorialized in an mou between sf puc the office of Contract Administration to be construct by the developer at these sites. The total mou was for 73. 7 million. With the approved ordinance also stated that when the architect completes the construction drawings, the developer will provide the city with a guaranteed maximum price. If that guarantee maximum price exceeds 5 million. The city will seek the board of supervisors approval before proceeding with Construction Works or phase two of this project work delivery agreement. To date, the developer has met all project schedule milestones. The Community Meetings outreach in december were well received. All applications have been permitted and construction if approved will begin may 1, 2017 to target a completion in june of next year. Thank you. To give you a little bit of context, last month sf puc included a total project of 7. 7 million to 8. 2 million. This variance of 8. 6 million includes an increase to the cost of acquisition sites and tenant relocation a higher Construction Cost for the new central shop facilities. A contingency held by city for future city request and for unforeseen conditions and cost relocates is for facilities infrastructure as necessitated by construction. We are onsite for april 15th of this year for onsite may 1. On tuesday this week, the full board approved the pg e utilitys easement legislation and yesterday the government and Audit Committee moved with approval to the full board instead of an agreement with 1955 galvez. The tenant at 555 selby has agreed to vacate by april 13th, we need to finalize the terms of the relocation. More specifically in regards to the increase Construction Cost. The city staff has worked through the last year with the developer and the team to reduce the increased cost by 1. 9 million from 62. 1 million estimated at the start of the Schematic Design phase to 60. 2 million upon completion of the 100 documentation phase. This net variance of 5. 2 million from 55 million to 50. 2 million can be attributed on the following to the poor conditions onsite, 1. 4 million is needed for foundation than originally anticipated and 1. 2 million is needed for the precap system. There are also high cost from preliminary estimates most notably 900,000 for Industrial Equipment and 100,000 for electrical needs for the central shop now and moving forward. In addition, there were about 450,000 in that increase for additional hard cost and architectural and engineering cost due to the revised scope. This concludes my presentation. Supervisor malia cohen okay, good. I have a couple of questions. Out of the many things that you mr. Chiu in particular from public works is presenting what i am most concerned about is the increase from the construction budget from 55 million to 62 million. Public works has claimed that the 55 million which is 10 is due to the details of cost variance which you detailed a little bit in your presentation. The unforeseen site conditions resulted in a need for a more robust system increased cost and industrial scope in electrical and the bidding market which we have very little control, i understand that. But, the reason we allow for this contracting, if im not mistaken when they came to the board we authorized central to install the shops quickly, while they are staying with the project, the cost is really difficult to swallow as you can imagine. The public works claimed this happens often with Construction Cost and we have a contingency in the budget anticipating this. Well, this is still very uncomfortable to get around. So i do have a couple questions for you. When we approved the sole source contract last year, the board assured it was a decision we had to makeup to keep the project online on time and within budget. Now, i understand that oryx didnt anticipate this increase. Could you speak to that . Sure. Last year, the original ordinance was approved at 55 million. That cost was based on the preliminary estimate using conceptual designs, using per Square Footage allowance for example and understanding of nearby sites to understanding what the conditions were. Oryx and its team of contractors were not authorized at that time to perform work. For example, we werent able to go ahead and do detail to technical investigation to find out what the actual site was like. It turns out at this site, 555 selby, that was located at Old River Bed with the steepest and north moving shallow towards the south. So that wasnt anticipated. For example, the Industrial Equipment, what they do was to take or model it after a comparable facility in modesto. So afterwards they came and the architects and engineers, the equipment that was determined needed and appropriate for the current central shops has changed. So, the current estimate of 62. 2 million incorporates the final Design Development through this year of design. Okay, well, how often do Construction Projects cost for comparable projects see this level of increase . From experience, we typically maintain a 1015 contingency for projects for items like this, unforeseen conditions or due to necessarily due to Market Conditions that are always a crystal ball item or even changes to the program that are necessitated once we start the project and design the projects and working with clients. Okay. So, this cost is something that its within the realm of possibility . Correct. This increase is within the range of construction development. Okay, my final question. I have in front of me a list of the details describing why you need the 5. 2 million Construction Cost increase. I see that 1. 7 million is dedicated to Foundation Cost because the until cost estimate was based on soil and Foundation Conditions 2 blocks away from the project site. So, for what reason did the contractor test the soil 2 blocks away from the site instead of the actual site itself . If i can clarify that. It was actually based on their experience with another project nearby. It wasnt testing done for this project. And there wasnt a testing done for this project. Okay. Typically when we have testing of a project for a nearby site is an indication of what your site will be like. Could we have anticipated the cost of the increase if we tested the actual site . That would help to reduce the risk. The more you test on the site, you more information you have, yes. Thank you, mr. Chiu. Supervisor yee, do you have questions for the presenters . Supervisor norman yee its pretty similar. As the chair cohen mentioned when it was presented to us before as a sole source contract. We asked a lot of questions about why and the answer was they would do this on time and on budget. And so, at some point we have to trust the professional judgments, but this increase gives me less reasons, fewer reasons to trust the professional judgment because this is way off. We are not talking you know a decade ago estimates. Even the moving cost, the relocation cost, its like what . You are going what is it . 1,000 of whatever it is to 2 million 200,000. When you make an estimate that far off, i have to question what were people thinking coming to chambers saying we are professionals and you should accept it. Tell me why i should accept it now and is there a reason why you wouldnt come back next year and tell us, by the way, we are off another 10 million. I will start clarifying that by the original ordinance. The developers task first and foremost was to complete the construction drawings. At that point they would provide a guaranteed price. We are back here because the guaranteed price has exceeded the 5 million. Secondly, in terms of what are we doing now to reduce the possibility or even mitigate the possibility of coming back again later on is that we have put the in place a city held contingency for unforeseen conditions or request as part of the mou between puc real estate and oca. We believe this contingency will help to mitigate and in line within the range of what we typically maintain as contingency for Construction Projects. With respect to the relocation cost, if i may ask director up dike to speak to that. Thank you, samuel. Director of real estate. With respect to relocation cost. Frankly, the flywheel desoto tenancy was assumed originally to not be eligible for benefits, but upon legal view of their status that ended up being an eligible cost. Its simply not on the radar, on the radar. An opinion noneligibility of cost to an opinion eligibility cost. The final settlement of that amount of cost we can solve administratively. As samuel mentioned for the contingency and amount for continue relocation expenses, that is the amount. We do not plan to return to the board on this matter. Im hopeful that will be. Mayor i also want to say weve mitigated these cost between the sublease and which ran longer than we anticipated because we had additional time for the relocation of these two tenancies, that generates over 900,000 in anticipated revenue. That is the bottom line and we were able to replace these occupancies of a season of filming of chance. I know he was delighted with that opportunity to keep that filming. They are filming outside of San Francisco. So there was a nice twist to fate where they were able to grant some revenue for the expenses. I would reveal this rather specific unrelated to me. This is where you come in and you say this is what we estimate and the cost to be and here you are talking about something that was as simple, not simple, nothing is every that simple, but when you have a legal determination that made it 2 million more. That to me should have been done when you came the first time, not, oh, we just found out. These are to me not very excusable rational. And by the way, when you come in with any contract, i would assume, and im talking about the first one, that you already have these contingency plans in there. I think almost every contact i have seen especially if it has anything to do with construction, the contingency point is built in. So whats the difference between this contingency and what we should have had. Did we have one in the first contract . If we didnt, thats not being very using good judgment. If you didnt include it, this is in poor judgment. There was a very small contingency in the first agreement. So it didnt work in other words. It wasnt adequate to cover the cost of the increase we are looking at currently. Did you see any possibility that this looks like about 23 contingency plan is good enough . So, if i may, the city contingency works out to about 3 , you are correct. But within the project development there are contingencies that are within the contract. So the city held contingency of 2 million, thats outside of the contract. Within the contract, there is some contingency for both the general contractor for construction use and for the developer for things like project control cost and entering fees should the scope changes. In total we are looking at 9. 7 of the total development agreement. So within the 80 million there is actually some contingency funds in there . Correct. With sf puc and real estate we felt it was important for the city to maintain part of that contingency outside of the contract. So thats why there was a split between the contingency within the contract and contingency outside of the contract. Okay. I know this is an important item for the city. I know its an important item for district 10, supervisor, but this smells, to me, we shouldnt have come back with an increases this size on the sole source contract. So, but i know its important. Supervisor malia cohen thank you. I would agree with you. I like you voted last year and we voted to move forward. We were very uncomfortable and kelly was the one that did the presentation initially and john up dike closed a little bit, but, i feel like my back is against the wall. We need this to go forward so that we can continue to move forward with the entire project. I will say this since our conversation last year for sole source contracting, i think he came back once as we made our desires to see better, stronger rfp process and know particularly to puc and public works. They seem to be the worst offenders in this case in particular. Supervisor yee, im going to have to ask you to hold your breath. Hold your breath, hold your nose and support this so we can move this forward. I dont know if there is anything else from mr. Chiu, if not, i would like to pivot to the bla. Thank you, madam chair and supervisor yee, on page 17 of our report we have a table 3 which compares the total estimated cost to the central shop relocation project of 73. 2 million to 82 million in the original amendment to the mou as included in the resolution this shown an increase of 8,578. 49. On page 18 of our report to date, 90 million of wastewater enterprise sole source approved by the board of supervisors for this project. The difference between the 90 million already appropriated by the sf puc and the total 82,027,849. There is an additional 7. 7 million of city cost. And i would just like to emphasize on the bottom of page 18 what both madam chair and supervisor yee that you have been stating and questioning. We point out that ordinance no. 816 authorize the existing agreement with Oryx Development developer and general contractor to design the facilities. The cost to be determined to be the one team capable of designing this project and capable of the budget. At the time the Construction Agreement was for 75 million and the total project was not to exceed 73 million. We note that while approving and sole selected officer the general contractor likely expedited the process and design phase. The citys requirement for Competitive Bidding compose a larger policy with an open process to contain the most Competitive Price for the city. Having said that, we agree this resolution should be approved and we are recommending approval. Supervisor malia cohen thank you very much for that statement of clarity. Supervisor yee . All right. All right. We are just wanting to see if you have any questions from the bla. All right. We are going to Public Comment at this time. Is there any additional Public Comment . Seeing none, Public Comment is closed. All right. Supervisor yee . Lets take a motion to move this with a positive recommendation to the full board. Would you like to make the motion . I would like to make a positive recommendation to the full board. Without objection. This item passes. Do we have any further business for this body . We have no more business. Thank you. We are adjourned. [ meeting is adjourned ]