Transcripts For SFGTV BOS Replay Full Board Of Supervisors 12115 20151211

Equal or less than penguin that is the affordability weve leading with the affordability and cannot you know deliver the program equal or less than penguin we will have the policy come back to you so milestones that are upcoming i want to make sure youre aware of and barbara will talk about that one we talked about last time was that pg e recently put forward their pc i a their power charge and adjustment which is pretty sure the exit fee if you no longer choose to be receiving the power from pg e or go to the cca that actually charge a fee they went to the california puc and they have something that item before the california puc which they would like to increase by 94 percent increase that has we talked about last time the way were offering our product were making sure that our customers total bill is equal then it was if they were in pg e customer which means our jurisdictions has to be low enough to absorb it by increasing the pc i a were actually having to put a lower generation that means we have to feed into our margin that is why one of the items on here is a really resolution urging the california puc to reject pg es proposal to increase the fee it impacts the program that is the one thing out there and the other thing we want you to adopt the business practice policies so it really helps the guide the implementation and Ongoing Operations and approve the schedule raised and charges for phase one of the program and then also the stand by letter credit that supports our supplies with the program and so barb will spend time walk you through the changes in the program and then have discussion on what you want to see as we move forward. Thank you general manager Kelly Barbara hale assistant general manager for power another big milestones for cleanpowersf weve produced the final draft copies for the public youve received copies as well ill do as the general manager said walk you through the new information since weve presented on november 10th specifically associated with additional working capital refresh the supply pricing and the pg e revised exit fee the general manager mentioned well also look at what that means to our program projections our final projections how we you to adjust the policies in the Advisory Committee of the new information and give you a contract workshop with the milestones of the calendar for launch so first up the goals the program that is something that has not changed sticking with the Program Goals and the Overall Program design it is fundamental to launching the program so those things have not yielded changed had a has changed new information weve present to you on november 10th on november 13th the california puc administrator law judge overseeing it issued a proposed decision agreeing with pg e exit fee were expecting according to the california puc schedule a decision on this item on december 17th we have also worked with the board of supervisors to have a resolution for the record where the board about urge certain acts the pg e and the action before you today item 18 that would have you urging the c p to denouncement alternative proposals that help to mitigate the rate impacts on customers of pg e proposal and to express support that the california puc reexamine how to calculates and how it supplies to pg e customers thats a quick summary of action were looking for were also the other piece new information an inclusion of the 4 million in working Capital Loans and we have since november 10th received a supply refresh from the Supplier Companies were working with and negotiating with and that reduces our projected costs for supply for the program and thats at 70 percent of the Program Costs of supplies that is an important refresh for us. Can you i think there is a lot of information especially new information im wondering too pause for a minute i have a question. Sure. Ill be happy to to take youre questions. So this december 17th decision is pretty important i know that our love our state literatures are they engaged as echoing it this feels like a moment to be able to see what can happen on this important decision auto and alice may speak more but engaged with our sacramento legislators and lobbyists and working with them we are proposing various letters send work with the other cca associations trying to make sure that we have a very engaged voice at the california puc myself and some of the puc San Francisco puc staff a calendared to meet with the couple of the advisors for the commissioners there to make sure we have a facing face to face meeting what the impacts on our program and cca generally. Great. That is important and then on the second item whats the 4 million Additional Capital loan for. That of the working capital in order to support the launch the program we had the hetch hetchy loan was set at 4 million we requested an additional 4 million to give ourselves for the launch room it turns out quite important to us now that the program has taken this the hit on the financial projections from the pg e action took youll see that explained in the next slide. Okay. Great. Anything else. I have a question i want to understand more thoroughly about the exit fee. Uhhuh. Im assuming and maybe the correct me if i am wrong assumption the people cut to the chase im assuming it is the fact that very purchased the power now that power will not be used thats the fee they put on the personal loan is if sort of the power may pg e has made a commitment either because they own generation or theyve purchased generation assuming that a certain amount of customer if a customer leaves the california puc said you can charge their customers their share of the power youll have to pay forest they left. Holy ghost how long does it last. It is bureaucratic and archiveic there is in Expiration Date under the current puc date in calculating the exit fee that is part of the reason we want them to reexamine how they calculate it. Thats not right i mean a contract cant be that long. Correct and if you know prudent Utility Management required or requires that long and mid and short time candidates they should be forecasted to match and departure of youre Customer Base pg e is getting that wrong if we continue to pay exit fees theyre not forecasting the low departure appropriately so theyre not doing their jobs right or the reshths have set up a methodologies that didnt loot the costs one of the two things is happening we want the puc to investigate that is before you in item 18. Another question on previous question so in a sense it is like three hundred plates and chair mar the guests not showing up but pg e can turn around and sell. We should only have to pay in pg e is going suffering a loss. Right. Which is why this conversation engaged with the regulators and the legislators is very important because it didnt sync up. Right and depending on how things workout on the 17 we may find ourselves back talking about what sort of legislative activity we should be pursuing we need this to fix an improvement on this for the programs ongoing success. You know to that point and maybe come back to this after the presentation you sort of applied saying the Program Design is not changing but you know the faensz approach in the neighborhood weve selected not asset on affordability and so it might are implementations for Program Design. Like i said were leading with affordability so if i cant offer and setting price or cheaper ill pause unless youre direct me to offer more expensive programs to me you know if we cant meet or beat pg e we need to think about it right now we feel we can we are you know planning were go over some of the things well do to try to mitigate if something were to happen next year that will challenge that you know we do have some levers we can pull but the intent of the program is to leave with affordability to i dont want to say that were going to make it more comprehensive. Im suggesting that but suggesting something in the program skwien that is not about pausing but looking at you know a different place to launch or a phased approach or inclination or combination of activities maybe affordability. Well go over it you know i dont want to steal her thunders were looking at whatever you know areas of how were launch to minimize that effect. Great but all of those things are talking about the overall financial projections and the slide you see here shows the same slide we shouted on november 10th able to fund the reserves with the operating and the contingency stabilization reserve those are circled in red at the bottom the 3 new pieces of information that field into those 3 items 1, 2, 3 with the green arrows lets talk about each of those number one thats the exit fee impact it reduces our electricity Sales Revenues by 88. 4 million over the first 5 years and our Capital Improvement plan sorry youre working capital loan increases by 4 million that is number 2 and then the third item to our advantage is the lower supply costs associated with the supplier price refresh we got so the pc i reduces the projected revenues by 8. 4 million this is advocating the california puc to revisit how it is calculated item 18 that the number one is our largest impact and it is one of the sensitivities that we evaluated a price change and so we also modified our sensitivities analysis from november 10th ill talk about that just a minute the fact when you look at the bottom you only see one number circled thats our new financial observed to fund our reserves but no longer agriculture to have the stabilization reserve within the target this is an important change to note the kind of action that pg e took with the change in that rate element as i say the kind of action we performed a Sensitivity Analysis the reserve was to help us weather our way through changes like that without a reserve no longer have a cushion to weather on effect like that this is the importance have lost the rate stability reserve those are projections they assume that pg e request is grant by the california puc and whole so it sort of the 1 30 i dont want to sound like im running on the brake but part of the exercise to test our Program Design and method of deploying stuff like that so holed up to the goals the Financial Stability of the program. Oh, i see i didnt quite go through all the animations there but theres all the numbers now so i mentioned the Sensitivity Analysis it is Sensitivity Analysis that was presented on the 10 it was conducted on the key risks of the pg e regulatory Hidden Valley high school the left pg e changes and the revised sensitivities using the new information so basically, if the cu puc adapts it the program realize the risk and then prior to launch and as i mentioned without the ability to use you know were this to occur we wont have the cushion the rate go stabilization to weather through this is a thin margin business as weve talked about tonsillitis tenth we are that projecting an 8 percent margin and now what we are looking 6. 5 our small margin you know it has become smaller i want to emphasize that all the Business Plan and Risk Assessment materials are based on reasonable assumptions some Key Assumptions will become more clear and settled after january 1st importantly the pg e generations and exit fee will be gotten e known and the Electrical Supply costs known and meanwhile well have to continue to plan and prepare and to address this new information were making proposals to change proposed changes to our adopted best practices so on the tenth we had proposed the general manager having some rate go flexibility within the year were removing that wear i i think were aware that the process the rate making process can be accelerated, the instead of this form of flexibility youll see in the rate setting item 20 on todays agenda there is a Administrative Authority to adjust the rates based on the c pi were replying that and recommending a change on november 10th recommend a 0. 5 rate now a 0. 25 to demonstrate our rates are lower but to provide some small amount of additional revenue and then the larger what more impactful change is the change to the reserve policy to allow the contingency and Rate Stabilization reserve to be funded at a slower pace that will allow us to continue forward with the program but again without that cushion ill refer to as that cushion now, when we get to january and the general manager is faced with looking at what are our costs can we set our rates at are below pg e rates and recover ore operating reserve when were at that moment if it looks like we are going to need to pause we can we can look at pulling some of the levers we have we have talked about the ability to modify the customer mix of it have more commercial customers in the earliest part of program than planned that brings in addition revenue and be able to look at the enrollment area you know were looking at citywide; right . For our initial enrollment and looking at we had initially proposed automatic enrollment ignore part of city and moving on to the central part of city and have more of a mixed of central San Francisco than previously recommended we might want to look at not offering automatic enrollment to customers in the low income care program from the commissions is concerned about the affordability and if were lose that battle once we see what the commission across the street does at the california level you know we might want to make some of those changes to help to buffer the program some also. We pay hetch hetchy. Yes. And then always the possibility we could repay the hetch hetchy loan at a slower pace than modeled that Internal Revenue service us to go back to the board of supervisors to take action the board sets the schedule for repayment. So thats the quick overview on the plan changes im ready to move into the Contract Negotiation if youre ready. May i have find it not surprising but egregious to pull this stunt ill call that that go using the word pause makes everyone a little bit tense whatever we support this and to youre point earlier the cu puc how those charges are calculated and what are you going to do with that money this is the tricks to detail but by the pg e move is disconcerting ill say that through the chair. Commission. A couple off points within the Business Plan and practices ill tell you. Ill give a contract update and the milestones schedule but, yes. 3 things i want to talk about and if so it more appropriate to wait a few minutes let me know one is that in the rip between cca and hetch hetchy we have tried to maintain this as separate operations as soon as possible a couple of areas that line gets crossed one is the loan for the working capital and the presumption there from the fireman succeeds that loan will be repaid so it is a loan as opposed to a gift the larger area hetch hetchy is the credit for the letter of credit that basically back stops the power purchase contracts if we fail to enroll people were in a position to have costs but no revenue the letter of credit stands behind that and makes the Power Providers whole the cost of the letter of credit the annual cost is built into the cca program as i understand. To the full stent the letter of credit 40. 01 of the things i asked the few minutes ago folks to basically do a stress test given the 10 year plan what were the impact of that date and i think it would be important for finance staff to present the results of that and the other two things in terms of one is longterm and one short term the short term issue we have talked about making go solar an over and over are cca and i was a and other hetch hetchy customers the redevelopment areas that is not in here it is something that as we contemplate the marketing the program any grove we can have makes the program for interesting to folks that are not arent you can keep an eye on the dollars i felt strongly if i dont see the utility purpose of us funding a program for other peoples customers so that is the one and the second one is the criteria for scaling beyond the rollout the 50 millions and now going to the next increment what is the thought process in under the criteria for saying yes, were ready whats is definition of success that says we have met the criteria the letters are funded whatever else the Customer Base. I think that is the key is the operating reserves are funded. Okay. As you look at the phasing plan as it is laid out in the Business Plan thats the threshold that had to think be met before the next set of customers could be brought on. Part of the rebate that is important as you go to the next phase that which you have reserves and the demands for reserves gets bigger. Youre immediately out of guidance as soon as you bring on the new customers. You need to think that through having the level of reserve enough what is the way to think about that and the letter of credits how were dealing with the back letters of credit dpaing with an expanded letter of concreting credit or some other thinking that needs to go into that in your presentation the material provides to the commission and in the Business Plan a section that talks about scaling or the phasing policy and i think that is a good start i think that could be more explicit that is something ill ask we do as a we go forward the short time the products that included go solar and little letter of credit exercises. So maybe ill talk about the go solar we had an opportunity to talk about that the mayor feels that go solar is a program hes persuade proud of it creates a lot of jobs and is for everyone to have a conversation which we talked about of having go solar really tie into our customers i think with her talking about that we were talking about the power enterprise customers and so at this time we thought cca would be part of power customers that make sense but given the fact a separate enterprise you you know we talked about it like you know if you are making the go solar that is funded by hetch hetchy executive for cca youre loaning money for go solar the fact that cca should find its own Solar Program it gets complicated the other thing i want to put that out there if were going to do the phase one only a subset of folks that will be offered go solar because we have not yielded rolled it out to the city probable a longer conversation how we should think about it but something i totally agree we should offer something especially, if we are doing go solar to the pg e customers he totally get that and we need to think about you know how do we use the go solar from hetch hetchy and apply to cca because theyre not the same enterprise i dont know if you understand autopsy the different enterprise argument ill have more sympathy with hetch hetchy the fact that those things cross and hetch hetchy has skin in the game as well. I see. I do. And yeah. My main concern i want to make this a product that people want to buy and joking with one of you earlier that in mire household the ulcer asterisk argument will sell my wife shes there because its the right thing to do how did does it pencil out if there is a program in there that gives a financial benefit for participating in the program then youve got both part of my household that works i think that is important more than a consideration in the city it is important we have that kind of especially, when penguin by every action theyre making it harder to be a solar customer thats one way to differentiate ourselves from pg e theyre the people that want to make that harder and were the people that want to make that easier who do you want to belong to you recognize the problems youve expressed i would very much encourage and not sure love to put it in the resolution here somehow that the go Solar Program be focused on hetch hetchy customers inclusive if that mathematics the go solar the Clean Power Program great the more people the marketing the better and make that an economic interest to have the program succeed as well im looking for what the trigger to pull on that and obviously the rest of the commission. The go solar for hetch hetchy or cca customers. Well, ill say for hetch hetchy it is a hetch hetchy program if you are a customer of ours in Hunters Point or Treasure Island Treasure Island might be tricky but if youre a customer of ours have the program and pg e you might want to think about becoming a customer of ours. Which means the cca customer. Right. If you can comment on the fact were only doing a small part of the city for a couple of years. I dont know that work outs i recognize that is an issue if the solution no longer exclusive but have something exclusive. I want to put that out there if we were to incentivize if youre a cca customer that we make solar for affordable if you were a pg e customer would that will something you may wanted to look at . Isnt that the idea. I mean. Youre saying i think you careful crafted that language to the distinction im not sure what it is laughter . If it is clear as i contemplate putting solar panels will i be better as a cracking Customer Service customer then im interested. What im saying so were all clear our saying if you are a pg e customer go solar doesnt apply and cca it applies im saying if you go solar it prices but cca you get a bigger contribution to advise you that way so im saying to make it go away for the entire city. Im listen to anything but not in the position if i can stay with pg e and get a similar benefit then i think what it is salt in the wound no reason to provide that benefit to people that are our customers not consistent with our utility customers. So eric do you want to i think commissioner courtney you want to hold off. I think the tone the last 20 minutes is absent down we kind of anticipated most of that stuff we knew we were going to have turbulence and more. Yes. Okay. So no no more tush lens then we got out the door. Just to be clear. I appreciate that i think we have known it was going to be turbulence and keep our eyes open and not leaving opportunities for unturned in possible and so lets finish the presentation and then come up with to answer youre question about the letter of Credit Commission kwh when eric comes up to present well have the backstop anothers financial consequences. Looking at the Contract Negotiations we are continuing to negotiate with our pool were making Good Progress you see on the screen here the full pool is represented by the logos are good options for folks in active and the blue circles active negotiation with and have outstanding issues with those pools of suppliers credit and collateral requirements that the contractor supplies us with we provide them rather as one of the issues the bids option one folks were righting the details how to do scheduling and requirements and have city contract language that is troubling for example, the controllers certification of funds for the bid option two folks those are the specified solar and wind projects theyre the outstanding issues are you know performance assurance i know we have some construction still under law will they be able to deliver on the date we need them and the credit and collateral issues assuming we resolve the issues krabts will be ready for execution by december 18th that starts to get us into the milestone schedule let me flip to that. The boards action on the contract will be complete by tomorrow hopefully then the mayor has a 10 days to address the legislation or not so between the 18 and 28 the general manager will be able to execute the general contract and move to the first of the year where well learn what pg e 2016 will be both the pc i a and the rate itself and get our suppliers best and final offers will come 70 percent of cost really matters what those folks tells you theyll sell the power to us for assuming the Commission Adopts 18, 1 and 20 well move through the milestones and launch the program specifically staff will test the program against the new pg e rates into jen and p cia from the costs including the operating reserves within 3 years of launch can be recovered from Program Rates that are 0. 25 blow pg e rates the gm will go execute the confirmation and initiate the process for Program Launch well come back and report what happens on the 12 youre First Commission meeting in january so you know weve been talking about those unknowns that will suddenly become known i think i want to emphasize that is this furthermore offramp we have the offramps that is you know money tests and seeing if we can where i know the program in under pg e rates and recovery the funding operating reserves make that target under those items before you the general manager will have the authority to begin the launch with that, now have the Business Plan Risk Assessment update and overview ill be happy to answer any questions or morph ton moving on on to hearing the motion for 18 and 19 are ready for you 20 is not so do you want to hear 20 before vote on 18 and 19 fwls no. I think he wants to yeah. Yeah. 20 and do a presentation 20 on 20. Lets have the slides please i have two pregnancy for you financier relates to the public hearing regarding not to exceed for the Clean Power Program im holy this sheds lights on the p cia discussion weve been having so on the agenda for this presentation i want to give you a little bit of background to talk about the rated methodologies and youve approved in may talk about cleanpowersf rates and is requested actions of this particular item that are to approve the initial rates and second to offer an adjustment based on january pg e rates and the administrative adjustment by the general manager and to approve the methods for future annual rates that pg E Barbara Hale talked about but before we get into the nittygritty details i thought to step back and look at the methodologies that general manager kelly a methodology and basic structure you adopted in may, may 12th is basically says that you start with the pg e generation rate and make a couple of deductions one through the price excessiveness reduction of half percent which is an item i think that hal talked about it to lore to a quarter of a percent and the pass through charges the p cia the power charge and the surcharge to calculate the pg e power rates so essentially we need to offer a discount equal to have rate parities with the pg e so we have some kind of the next two slides provide a little bit of numbers behind the discussion were having those numbers relate to the pg e current rates not werent to projected january 2016 rates this first slide is a summary of the current pg e Residential Service rate and as you can see it is broke down into two components the generation rate and then a rate that represents a lot of things contribution and distribution a number of adjustments and credits and the generate rate for this classify of customer is 9 point 75 cents all the other rates are 0. 05 a total of 0. 15 just under 0. 15 kilowatt hours as a percentage 9 total rates as you can see the general rate is 2 3rds of the generate and all the other stuff but what were talking about is the jen rate the basis for the rate so, now less looking at the pass through charges. Wait so can you go back one slide to understand so that i know youre about to unpack the other rights the t n d stays the same. The same as we developing generations we start with the pg e generate. And the t n d. The same on everybodys bill. How much is the 5. 1. It is all. All of it okay. So your next slide youll go to you thought turn up going to do go to the other. This is not unpacking the other it is slightly confusing sorry about that now were talking about the nonrestricted bypassable charges the pass through that are only las vegas i didnt do on pg e the franchisee fee. In addition. Yeah. This is how we develop the discount to offer our customers for price disparity this is the existing numbers for p cia and the franchisee fees for you know Residential Service e1 and as you can see the p. I. P cia is point one. 6 and the other is under of. 78 percent pass through charges are 1, 2, 3, 4 chents that is equal to the generate so we have to offer a discount of. 2. 5 to be below pg e this is the existing p cia now the permanent ma on november 10th was based on projections of an increase in the p cia of 70 percent we were looking at instead of one. 6, one. 98 an increase of 70 percent and we thought that was the e vaunt now if were not successful the by cia theyre talking about for this class of services 2 point 32 cents an increase of just under 100 percent so, now the discount is looking more like 24 percent as you can see how this regulatory maneuvering has such an impact on our margin it is dramatic and see what pg e put together eroded the preservation recur with one regulatory mirror this is inside bans the p. I. P cia is by customer and vantage so people that opt out have a difference by cia they have different vantage so each customer has a different p cia potentially any questions about the methodologies . Do you understand that. Kind of understand that i just you know the notion that the p cia is variable is harder get our heads around. It is an impact to margin historically not changed this much over time a penny and penny and penny. Are there certain clarification like commercial for example, not this great of an impact. You can look at the exhibit to the item it has the p kay for every customer class and type i dont know the answer to that. Im going to plan b i dont know the pause notion i like the plan b option in indeed an exit you know if this went through you can an variable a certain class it make sense because of the customer type of. I think; right . I dont have an answer to that maybe hale has that or certainly we can come back. If thats an option we need to come back to that i dont know if we need an answer. Well verify i think theyre all impacted some more than other but i think that is large overall and just kind of varies per customer look at which one will be you know best suited for us to move forward as we really it out thats why we want to kind of see in the 17 is when the california puc would make their recommendations but it will be a while in john a. January you see the actual rates they will actually see the rates which we will see the rates from pg e based on the california puc decisions go in december. Im curious to know what justification pg e has for doubling the effect of this rate. What justification. Its call cca. Barbara hale manager for power the way the p cia methodology works as market wholly market for electrical go down pg e what theyve committed to purchase for their customers is more out of market could be higher than p than the market price the p cia will capture that price when we see the prices go down we expect the pg e to allow to go up. Now that assumes that penguin takes no mitigation action to keep the cost of competitive you know we know that contracts are struck that have out clauses that allow parties to walk away has pg e exercised theyre built to walk away at every opportunity were not allowed to see those contracts the puc puts those contracts under seal we cant check how the p cia is calculated we cant see the underlying contracts but the general idea market prices go down and pg e is out of market above the market cost if this difference in priced between portfolio the p cia will cover the cellist rates costs are sharing the costs among fewer and fewer folks leave as they join programs like ours. Quite and deal. A monopoly. So any other questions about the methodology. Lets turn now to cleanpowersf rate action so various entities can we have the slides please a bit of rate relayed activity over the past year on april 17th reviews the methodologies without the discount with the rate fairness board they deemed it fair and held a public hearing on live cleanpowersf rates with no additional discounts you authorized the gm to justify initial rates on the pg e and established the future adjustments motion assisting you requested to review the exterminates cost prior to the opt out process thats what we are doing right now. Of course setting clean power rates and charges abides by the policies and procedures we conform with in setting our other charges first and foremost with the rate policy weve discussed earlier today which establishes privileges of transparency and wed follow the standard procedures for rates setting contained in the charter and state law and also as with our existing retails rates a provision for an administrative adjustment annually to adjust the p cia if not sufficient then a more rate setting process. So here is the performer a theyve provided an update of the performer that we presented on november 10th so just to reiterate it contains the new projected january 16th generates and p cia it contains the additional 4 million hetch hetchy loan, and it contains an updated refresh of power supply costs from the providers what you see here you know sources and resources match the ability to fund the reserve ways we kicked in the 4 million from the handful power enterprise and on a delay basis an ability for contingency reserve as hale showed the movement from pg e on the p cia was a significant downward impact any questions on that performer a so look at the performer a here a slight improvement if 9 consumes of the requires or reserve before 600,000 over the total period from that from lowering that discount but i would point out that just about all of this this sources and uses that performa reflects the power enterprise to run the process a much better sense the cost of program than in may when you took action thats why were here with that information. As i mentioned earlier exhibit one to this item contains a complete schedule based on the generates and the methodologies using the existing p cia and franchisee surcharge and this is just a representation of some of the major of our products with the major the green product with the residential rates the small commercial rate, the super green 0. 02 more than the green product and summer, winter rates for the smaller customers and offpeak and other rates and charges so, now we always show when we present rates and charges what a customer might look like a comparison of all of the items that are electric utility bill and highlighted the ones that change between a penguin and clean power customer in green and so you see the generate and the jen bill amount on the top line the pg e charge for the clean power and the sfgh on the left the pg e customer but a p cia in the middle you see the pg e customer that has the higher jen rate with no franchisee fee and the different way see is that for that is a modest difference a low use 0. 11 diffuse on a 1 generate bill that is kwaulth actuate to half a billion were not talking about a lot of money but you can see e is it cheaper than pg e. Any questions on this similar to what was presented i think. I have a reaction to that the numbers are there overwhelming go so a half of a cent everyone understand a quarter of a cent but if you the focus group and i would think is a marketing decision. So youre saying that is marketable but not a money you know that the. Yeah. It depends on how ive you know how people react to a quarter of a percent cheaper i mean cheaper is cheaper that part it understand but pg e comes back and says yeah, but you know theyre playing with you if that is a negative prospective we should look at this percent. What youre saying we have to be good on the value how we went into this in the first place people in this for because they want to help the climate and people in here they want more choice you know dont believe in 0 monopoly and people in here that are not happy that pg e is doing their tricks and people that care both affordability a game even though so it is important no matter what especially with the margin is so thin to make that Value Proposition strong; right . And i just what ink can is trying to present the Sensitivity Analysis if we were to reduce the discount youre not seeing a lot of return for four and a half percent is that worth it and so i think that that is what he was trying to illustrate. We have a revised resolution a revision to the resolution to the resolution that is in our pact for recess instructing ceqa changes and an alternative a. 20 and zero discount if you want to adopt those the slides please. So in addition to rates and charges this item proposed a terminate fee so people that opt out of clean power the opt period is 44 most there is no termination fee opt out for free and after the noticing a charge of 5 conflict of interests for residential customers and 25 more nonresidential that is compatibility to what the cca is charging in terms of termination fees. Can i ask a question why not us have a exit fee laughter . We certainly could that would make that more attractive to lenders. What do you mean an exit fee. Im saying the same principle people leave and. Isnt that kind of this sfm isnt an exit fee but an opt out fee how do you collect a opt out fee. I was being facetious. The opt out fee youre talking about. So just a recap the presentation the action described action to approve initial rates on pg e rates and charges and a half percent methodology authorize an adjustment based on january pg e raised and then approve a method for the Rate Adjustments so what would be the sneks next step well take action to submit that information for the board of supervisors for their per charter they can reject it the gm based on january pg e rates would adjust the schedule and then present to you and the rate fairness board the customer notices the rates to be included for opt out should i move on to the matter of credit item. Just to on the guidance youre seeking the rates are not finally set until we know what the power costs are and the pg e rates so the guidance is a nonbinding guidance. Pardon me. This not the final feel what im thinking the choice within a half and quarter of a Cent Discount i dont know im qualified to make that choice but i would be comfortable i said hate it have you locked into something a half of cent should have the flexibility to make the market Value Program as good as it can be. Norway reign im not sure that is a level of discretion. Sorry i was writing a note to the Commission President i didnt hear the question repeat yourself. Probable not. The idea being that we are not setting actual rates and charges is it not to exceed. No. Your actually youre adopting rates that have conditions associated with them before the program could launch so youre adopting rates that are in the resolution and youre then 30 years the general manager to adjust those rates to reflect the pg e new rates in january and provided that that rate as adjusted falls within that range related to the. 2 or dolphin or differentiate authorizing him to move forward with the program. Youre setting the initial rate and setting our acting to embed in that rate an initial adjustment in january and youre also frankly 30 years subsequent c pi. Whatever number a half of a scent thats the goal the general manager has to meet; is that right. Yes. Thats definitely a fixed so ceiling so if the cost come in and the other factors that go into the rate setting add up blow that ceiling then thats the rate that the Program Launches if theyre not blow the ceiling theyll have to come back. Okay. I think perhaps that confusion not to exceed terminology that was meaningful in may when the costs were not known now i guess i would go whatever way staff is most comfortable in the flexibility to deal with january when many happens. I would feel comfortable with a quarter of a percent because it is so thin now and then you know if we know more you know next year when we set rates well make the adjustment then. Okay. I did you could give a greater discount in january if that number supports that. For this january the criteria is that you had at least a quarter of a cent so if if january you wanted to do a half a cent you could do that a. It is basic math take the january pg e rate and subtract the the franchisee fee you discount it by. 25 if that is youre resolution or dont. Yeah. The resolution. Yeah. No discretion we understand from the City Attorney to limit the mulch the discretionary to the city charter. Thank you it would have been nice but okay. Next item. Are we are going to talk about the loan or the line of credit is something different. The letter of credit. The letter of the credits. The loan was on the november 10th agenda. Yeah. That you authorized the extension of an additional. 4 million. 4 million as well as the extension of the terms of the existing 4 and next 4 to 5 years as well as authorize us to work with the Controllers Office to do any adjustments to sort of accounts and funds that were necessary in order to sort of establish the financial infrastructure for cleanpowersf moving forward so that item went with the business and finance committee and going to be signs by the mayor soon. I guess so many moving part to generate that loans for local build outs would we be able to bring on a significant customer like a lawyers or something as a cca customer would that will eligible to pay back that a lot about if need be. If we had additional revenue for the program. We repay the hetch hetchy loan and deposit it to a reserve and determine the next set of priorities as we generate revenue. Im sorry the revenue first and the hetch hetchy next. The way we show it were you know paying back and identified the model but i think what youre saying if we look at where we are in a year and could live with repagan hetch hetchy longer how would that help us phase in the next phase sooner. Correct. So that is something we can look at you know once we get more information because right away right now is a guessing game of so many unknowns in the next few weeks. Tied in with that question when the phase a triggered. Once we get more information. Yeah. The you know the current legislation it has to be paid within 5 years of launch extending that requires the board action and certainly impacts of not doing that and paying back the power enterprise of 8 million thank you. Next item. Right item 20. Related to the proposed stand by letter of credit supporting the cleanpowersf Power Contracting effort so why did why is a i was needed ill spined time talking about the power contract and the key terms related to them so the standard long term power contract has a term associated with that related to early termination so if you contract for power within 3 or 5 or 10 years to buy in and lets see we buy it at 50 a megawatt hour if for some reason the contract are terms 1 or two years into it because you know the cleanpowersf program is not for some reason pg e explicit move like theyve done now the program is not visible and need to terminate the contract you look at what marketrate prices theyre the same as when i entered the contract none losses termination money so it is 50 when we sign at the yearend the prices are 50 no lost value; right . So if we sign a contract for 50 and the price goes up to 55 that contract is valuable to us and see if they were a power supplier were to terminate it we have a right to buy power at 50 and the marketrate is 55 theyll have to pay us the difference in price and the remaining megawatt hours the longer the contract the large the termination amount and the difference in the energy price the time you terminate a contract no, that goes both was as i mentioned the contracts were negotiating right now, were looking to cap the termination value the termination amount that the dollars equivalent of a go maximum thirty percent change in the marketplace a not termination amount were not implementing caps so does make sense so in august when we started putting together an rfp for a letter of credit luke for a maximize of 40 million that was i mean primarily a bit action one 5 Year Contract for 50 megawatts currently looking at the a 3 year bid contract and smaller bidding options and the termination amount at the thirty percent cap is looking at just under 25 modules that is really what we are talking about now in terms of the terms obligations can choose to post a letter of credit from a bank that will pay a secondrate party in the event that the contract were terminated and a guarantee and the bank will recollect from the other party now, one of this maybe a little bit inside of baseball were advocating that it is on this to the defaulting party that pays the termination for some reason they default the provider couldnt deliver the power that but our contract was out of the money like a negative termination thats not something we will pay if they were the defaulting party so thats under our position and negotiations so with a Counter Party like cleanpowersf a letter of credit is a fiscal way to meet the security and secure the facial cover and it didnt will have a Credit Rating were looking for the power enterprise ignore the letter of credit for cleanpowersffignore the letter of credit for cleanpoweroignore the letter of credit for cleanpowerrignore the letter of credit for cleanpowersfgnore the letter of credit for cleanpowernore the letter of credit for cleanpowerore the letter of credit for cleanpowerre the letter of credit for cleanpowersfe the letter of credit for cleanpower the letter of credit for cleanpowersf what are the terminations as i understand angle agreement between the power enterprise and in this case j. P. Morgan chase not to exceed 40 million and ran a competitive rfp issued one to 12 National Banks two responses so it shows you what one of the provisions for this letter of credit because we didnt want to impact the power christmas deck capacities on the lowest senior lien the repayment is blow omi and commercial paper and r and r payments and thats why we got very few bids and those were very attractive bids for the looming weve offered for security so the response to our rfp was term for letter of credit between 3 and 5 years the cost for a short time letter of credit is lower than a longer one 1. 20 and 1. 6 percent for 5 years and modeled 6 hundred 40 thousand in the performa it assumes 40 million at one 60 the cost is or lower this letter of credit for the benefit of our power purchase counter parties and asking for letters of lower credit only drone an termination not for anything else other than termination and wed be looking to close on execution of the power contract in early january lets see the repayment terms the next slide is while we dont you know expect to have you know a termination we have to look at the worst case would be and actually, im going to deviate from this outline for a second and provide context so power prices showed earlier near historical levels that provides assurance that were more likely to see power prices rise than of all the termination payment is to our benefit rather than our ranch adverse to us but if there were a termination and cleanpowersf couldnt fund it the provider widraw on the l and a term of the power enterprise to be paid over a 7 year period thats at term out the power enterprise repays that from revenues there would be obviously if we were in this kind of situation and number of mitigations well pursue but you know the measures to pay this off could result in increased po u rates we have i think commissioner Vice President moran the information youve talked about well, the forms of the documents of the before you for consideration the Reimbursement Agreement is really the meat and potatoes of the agreement so, now are you able to see that no throw away and magnify this can we magnify this . Eye to hand coordination. Okay should i stand up there. You can point. So you know as i mentioned prices are near a historical although, the termination payment if were into our benefit, however, important to understand if things go wrong if were were an early termination because cleanpowersf couldnt pay for the power we first determine if interest there is a termination payment no draw on the letter if there is one percent the price is one percent to thirty percent difference verse the Contract Price if it lets assume this analysis assumes a thirty percent price difference in the second year the program 20 initial termination cap of 25 million a year into is that termination amount will be 18 million and convert the bank pace it converts to a 7 year that costs 3 point plus Million Dollars a year so it will be repaid on the lowest priority what you have brand new i can send this out yeah, the 10 year we have the 10 year Financial Plan you adopted in january for the pour price assuming this model assumes no mitigation so there might be a range in mitigation from the let of the contract. So the mountain tunnel is still in there. Mountain tunnel is still there and funded by the power enterprise debt and water enterprise debt. You didnt make any adjustments to the rates. No, this is a no mitigation scenario and doesnt assume that the power enterprise is repaid the 8 million if it assumes what you see there is a basically assumes you make those payments on a fund balance a reduction in the fund battalion of the power enterprise to a low of 1800 Million Dollars from 42 million today lets see and it didnt take into consideration if we defer any Capital Project deferral. No Capital Program we compete our debt coverage of one 25 we have not yielded that much debt and the fund balance declines from 24 percent today to 9 percent which is blow the 15 percent policy targeted if you look at raising the general fund rate as the only mitigation action to address that and make the 10 year plan whole verse before the termination youll be looking at depending on when general fund rates to increase an increase of. 85 to a 85 an increase of half a percentage per year and adjusts the general fund is 674 projected to be 750 in 2017 ideally use a mix of strategies; right . Have some you know you might look at you know if the power contracts with in excess of the term out and looking at the power enterprise and paying the amount over time verse seven years you could look at refinancing that with taxable debt or defer or defund the nonessential projects or raise rates you may be wondering thank you, eric quam what do you mean i think that from the contracts were termed because of the clean management of the cleanpowersf an unquantifyable if it were pg e maneuvering an explanation financially we need to put together a plan for razors the plan it didnt have the financial projects we have a negative outcome on our rating and probably a down rate of the s p but those are the kind of worst Case Scenario. The bottom line first of all, eric has done exactly what i asked for the nativity stress test you dont do anything of the things you should or could do how straightforward could it be if nothing else happened if not pretty thats kind of my idea for the conclusion on that but the hetch hetchy enterprise in my view can afford to take on this obligation knowing the worst we can live with that and knowing we have a lot of things to do to make a smaller impact i wanted to go through the nationality questions when we return to the more positive version of this discussion we do that with the confidence we have looked at t looked at the worstcase stuff thank you for that information my conclusion the proposal in front of us do it more responsible. Thank you. Any questions about this item . Commissioners . I understand it better i want is it make sure it is required that you specify the criteria that governs the adjustment but that you specified that was in a range of. 25 or point you know one 57 or. 15 whatever the criteria being that there showcase is much drount prudent of the other cost factors that you would have taken the action and provided the criteria that would be a lawful designation to him you can specify a range if you think that flexibility in that time period is necessary but you cant do just is go forth and accelerate okay so i think i maybe misunderstood what was question was thats helpful ill defer to the general manager what the staff thinks. I have an amendment to offer a measure in front now. You have not yielded moved them yet im not sure when youll do Public Comment move them and move an amendment and then ask for Public Comment if thats youre pleasure. Yeah. Why not get the motions on the tackle and take Public Comment and then a motion we have 3 4 items, 19, 18, 20 and 21 a motion to move forward. I want to make sure for item 19 the summary of changes were promoted ii went throw in the presentation i made have been provided to the Commission Secretary so lets make sure we circulate those as you can see in those as you can see a rated setting policy excuse me. A phasing policy changes where you see red lines for recuse the rate discount is from. 5 to. 25 if there is interest in a different version that will be where that appears and you see the letters policy change to relax the Rate Stabilization within the first 3 years of the Program Launch make sure those are appropriately before you before you vote. Did you move the amendments to the rate resolution as well i did not move it but presented on the record you referred those okay. Thank you. Well first put id like to hear a motion on the four resolutions and with these amendments we have on number 19 18 and 19 are those 18 and 19 . On 19 before you. On 19 let get those on the table a motion to put those four on the table. Second. Okay open up for Public Comment and because we took several items together were going to give you a little bit longer for Public Comment if you need it. Ill suggest as one way of expediting if i could put my amendment the Public Comment can refer to that as well. Lets do that. Which item. For item 19 and it would be to add a resolve after the first resolve therefore, be it resolved that hetch hetchy support the go Solar Program the limited to power customers of hetch hetchy and between cleanpowersf. I was wondering if that was it so with respect to go solar because go solar is not on the agenda you can move to direct the general manager to look at that and bring that back to you for subsequent action but because automotive adopted a go Solar Program which is separate from cca youll have to agendize those go solar and action on changing the conditions under which people will be entitled to apply for and receive go solar we didnt advertise go solar. That amendment will be out of order. If you want to say resolve the general manager shall go and look at it go solar and bring back to the commission a proposal that will make go solar inclusive to hetch hetchy and cca customers. Well give that direction with or without a resolution. In this case ill withdraw the amendment and offer my direction for the general manager as you stated to come back with something that will accomplish and encourage that happen on the first meeting in january our marketing will begin and it had been a strong as Marketing Program as much as possible. We have a motion on the tackle for the four items and were going to open up for Public Comment at this time david please. Less clarify to the when you made the motion you moved the amendments to item 20 the rate what rate item that had the red lynn before you eric sandler read into the record as part of his proposal there were red line edits that have been handled out to you want to make sure the record is clear you mentioned items 19 and staff initiated amendments to items 20 before you moved the items okay. 25 so amendments to 20 as well 19 and 20 are red lined as. 25 in item 20. As well as additional language. You should have before you in addition to the amendments that many hale presented on item 19 just to be clear can you have an alleged motion on those four items as amend. Ill second. Open up for Public Comment thank you david i go in el cerrito i am cochair the sierra bay area chapter of committee ill speak on all the items you need to go ahead with the cleanpowersf now putting it off the approval will only delay the program and confuse the residents we have momentum lets keep the momentum going and if the c puc allows the increase by penguin we can adapt weve got good minds working on that and can be creative and Design Energy and the Energy Efficiency service more convenient and financially lucrative than pg es especially with go solar involved as appropriate thank you very much. Next dawn. Thank you. Im dawn im with 350 San Francisco and usf faculty want to say so many people care about that and cant be here in the middle the afternoon the im in college have an education and resetting what is a corporate welfare through the p cia is interesting described but im here like david to go on the tone that is super important to move forward and i feel that were on that cusp and neutral site youre posed to do this well be moving and every time he hear the report from the binding agreements thats the best to contribute to the draw down in a significant way so, yeah i would urge you know, i see really credit cards caution and i see the difficulties that are being thrown but feel like the way it is distributed and the way im understanding it i hope im not two optimistic but many the worst Case Scenario it is still can work and really to say people believe in this will be working with 36050 to get it enacted so thank you. Thank you very much. Jed i support you moved on all those items and ann mentioning paris today, i got an email from the Program Director and air quality district we work on g h g regulation and refinery issues she pointed out to me that was a presentation yesterday on Community Choice energy by all bay area people to designates in paris that was well received the mayor of richmond had folks there this is definitely spreading far and wide and people have not heard of merry ran county a good illustration how once we start doing something that information can spread quickly peaking to the items from 350 im the cocornered and on the board from 350 bay areas prospective we work in sacramento as well as in the 9 county area the p cia charged the corporate welfare the questions that came up in our discussion are spot on in terms of why is this not sunset why do we have to pay for power theyre able to sell to other folks and really encourage you folks keep on that i know that youre staff is on that ultimately my experience as a advocate at the puc are grim so here the kind of badgers is night and day in the california puc where things are really happening behind closed doors and require a law license to be practicing in front of the the commission to have a substance in that process i encourage you ultimately you guys are going to have more effect on this hearing on the 17 than we will as the Public Utilities commission of the california that is not the way it should be but it is what it is i want you to nail that down and ultimately a moral hazard for i o u they can miss calculated and not bother to do prudent business mr. Haney and have that cost picked up by the people of california this is real money we saw it on the 4 million youre going to be losing if we pay this charge that money goes to growing the program and providing discounts for customers and Rate Stabilization but that is you know it is terrible we need to that will be funded in 2016 as much as originally funded not until 2019 we are funding and two years earlier 0 that is a great move and given the kind of crap sandwich weve been given pardon my language a great move to get us on solid ground ultimately pg e is trying to instill fear by doing this theyre also trying to effect Public Policy by doing this and by reasonable dictionary definition would be chaired and economic terry recidivism and definitely economic hostage talking to capitulate would be to allow the economic hostage takers to win i urge to move forward with the letter of credit should coffer not only phase one but multiple contract we know with the Customer Base will provide that letter of credit so thank you very much for everybody. Thank you mr. Brooks. Good afternoon, commissioners another really good day for cleanpowersf im hearing from the commissioner that was the most careful to make sure those staff got the numbers down pat as hes ready to move forward thats really good to speak specifically to some of the things youve raised first, i want to get this out of what go solar we have to register were improperly customers in cleanpowersf in trenches and not all at once of we get people to say they want to enroll ahead of being automatic enrolled cant enroll them all at once only our customers and cleanpowersf customers are allowed to use cleanpowersf were not clustering people that cant get them so i asked the general manager to factor that into the equation especially low Income Customers and nonprofit customers that are already lefrnldz that program it helps them specifically and for some reason one of the customers cant be part of the program until two years from not not go to include them from solar panes but agree with the commissioner Vice President moran that that once weve enrolled everybody go solar sf should be for our customers not pg es customers that gives a great way to market to our customers and get more pentagon customers to come to us with regards to the issues around the financial viability of starting now it sounds like youre are you insured i want to add for reassurance when merry ran county started in 2010 pg e played games with the structures and on the p cia and other charges that made the rate fluctuations that marin had to deal with more crazy and marin was able to weather that storm with no problem and so and also the california San Francisco Public Utilities commission recently rapidly changed the rate structure for californians and unfortunately in not good was the people will get to use more energy for less energy and people will have to pay more we activists in california raised a major fit and managed to get the california Public Utilities commission to reduce the impact of that on low income rate payers by 25 pierce and on this issue the exit fee for the Community Choice customers and fit being pinched statewide the commissioners are getting emails they canned follow them all on the issues angry about the p cia doubling angry about that increase theyll compromise with the public and that of we get a 25 percent decrease in the exit fee that will be around what the staff was projecting green before so but what that said youre staff made clear in and the commenters made clear even in the worst Case Scenario if we accomplish nothing this program pencils out and time to start it today this is it the public may not realize this were flipping the switch that is excellent so wards a little bit more on the exits fee charge i want to amplify the negative itself this is not just pg e take advantage of us by finding every this charge might not be charged to their customer and charging use it is worse than that this current policy in stale for this exit fee charge encourages pg e and the other utilizes to make bad deals buying energy ahead of time for 10 or 20 years for the as good a price deal because when Community Choice customers leave they will ding those customers for more to be sloppy and purposely manipulative encourages them not to do contractors that are beneficial to design their contracts that specifically is an attack on communities choice programs we need to get the legislators to change that policy and not just fight the increase but change the policy finally we had a great meeting with staff yesterday they reassured us the Community Choice advocates im here on behalf of the green party and a coordinator with the cleanpowersf advocate we had a great presentation with the staff they presented here what they presented then we want to make sure we make one quibble that is one thing in the Business Modeled model i think the summaries the Business Model assumes nothing major will occur with 2020 with Global Warming that is too late to state so we ask staffer yesterday to please set up a workshop to meet with them but figuring out our experts and interacting to make sure we do bonding properly and the most cleaver way the way we fought ways to use the power capability to build things to feed into cleanpowersf without having to have a cleanpowersf go bond rating right away Creative Things to make sure we Start Building substantial projects before 2020 but staff like i said reassured us to work out that and even i want to flag that as a concern but not a reason not to move forward because staff is being very receptive and working with us youve given me more times only one more comment sorry i just remembered it is for the issue of the back in 2012, we the advocates for cleanpowersf and on the Clean Power Programs did work with our staff and went to the board of supervisors and pushed for the record the half of cent for the previous customers youre talked about previously commissioner Vice President moran and i would say regardless of waiting for staff to report on had you written and how much to raise the cost of the general fund customers it is important that we at least get something small like a half percent increase for continuance past 2017 im recommending personally i havent talked to my colleagues personally recommend Going Forward and moving that so financiers and risk analysts know youll continue the half a cent increase past 2017 more of a cushion for pg e issues and more pg e customers that the power enterprise is behaving to afford its own operations and cleanpowersf with no cost thank you for allowing me time. Jason fried please. Hi jason fried executive director for lafco thank you very much for this staff presentation he wanted to go over a few items so vote yes on all the things thats the quick itself why the details first of all, the discussion around p cia pg e is totally trying to rebuff the customers builds with a b bus of over collection of pg e charges not good at the calculation figuring out how to do the contracts correctly we suffer the resolution on the p side is important once through december 17th pushing hard for the will p a complete joke it was created in a by done era and not updated with the generations back had there was a lot of things that occur within the generation line items we should be doing a lot to push those changes made i would hope the San Francisco Public Utilities commission will take a lead but there are loaf people not only impacts us but impacting the pg e program theyre charged the p cia what the sfpuc we care about chair mar our people good examples why we need changes i hope utilizing youll vote yes own is resolution today, i heard about the comments things that are forward thinking im appreciative of those make sure were not getting too far ahead but voting. Yes. And brought up good ideas make sure were not excluding people anyone if gets the go solar funds this be part of p cia to provide energy theyll be agreed to first on the wait list for the next customers that come in and once pg e agrees theyll not opt out probable legislation or something that needs to be worked out with the City Attorneys office and commissioner Vice President moran im more than happy to sit down good ideas how we can do that if you go back to 2008 Land Use Commission that is how long ago people were thinking about this tied together it is appropriate to have go solar customer hetch hetchy full power or Treasure Island or like me at Hunters Point and that maybe legislation needed ill encourage you to pressure pursue that there here or the board of supervisors to agree to get those people as quickly as possible to be part of phase one that is the best way to go ill encourage you to do that as far as i know i believe that commissioner president vietor was talking about the worries that is great forward thinking think about them full fledge of power but for some reason their cca customers you know youre staff is extremely intelligent theyll make the financing work theyll figure out how to come back with a proposal it might mean making a proposal but youre staff a will talented and will come back with a changes a very Good Opportunity and might be there is a really good, opportunity with construction that fell into their laptops we cant pass this it is cheaper and there is some new incentive that will dry up and theyll come back make sure youre moving the package forward today to have a program to have those discusses in the future and one over 6 years working on this the frustration at times not gordons anytime youve had a question the only time this commission go said put the brakes on this and youre staff stopped work an cca thats the original time had they they talked with the staff and pretty sure this report was things youre staff knew and first and foremost give our staff the authority and move forward and so with that, ill end with that, please vote yes on the resolutions and everything so we can get moving forward it is extremely important. Thank you, jason. Any other Public Comment . Yeah straurlg comments introduce yourselves and im karen babe it the outgoing chair the sierra club so i want to say this is not the kind of meeting to drop in on our fourth item so ill not speak with any level of detail but sounds like things are looking good were forwarding to, yes votes and as someone that is a environment i was and the world will ends and ice melting all that stuff weve been scaring you what im glad. Thank you for all you do and hope that goes forward and hope we environmentalists are making it work thank you. Thank you. Fufrlts Public Comment . Commissioners. Im going to say i this was meeting was getting dry i have a comment on Public Comment that was valuable to hear organized and you guys it is very important let the record reflect under the commissioner Vice President moran it was under 3 minutes in all seriousness thank you. It is appropriate that this is coming for a vote before us the week that the paris climate talks are underway and our state governs and your president was there to really advocate and evaluate the importance of Climate Change and come up with solutions it makes me proud as the city of San Francisco from. Far we can be viably participating in creating helping to create some of the solution for our generations with that, id like to call the vote all in charge of the four items all in favor, say i. I. Opposed . That motion carries thank you very much. clapping . Indemnities i believe were going into closed session will you please read the item. Item 24 a litigated claim listened vs. The city and county of San Francisco 25 existing litigation restore hetch hetchy vs. City and county of San Francisco 26 is existing litigation city and county of San Francisco verse Pacific Gas Electric 27 existing litigation Pacific Gas Electric 28 existing litigation Pacific Gas Electric and 29 existing litigation Pacific Gas Electric thirty existing litigation Pacific Gas Electric and 31 existing litigation Pacific Gas Electric and 32 will not be heard. Thank you. Any Public Comment on closed session items if so im going to ask you to indulge me a tiny bits. Back to our right back to the 3 minute rule. Right. Excuse me. Are you commenting on something. A future closed session item thats the best to justify this i was down in our coffee shop in the wonderful puc building and noticed the coffee is closing at 4 oclock but for you have a lot of employees that work until 7 oclock ill encourage you i think that is a closed session to work with your contractor to not short youre staff and the public and leave that coffee shop open longer and not keep reigning in to 5 oclock thats silly. May i have a motion to insert this privilege. Second. A session. So were back in open session took action on item 24 and no further action beyond that can i have a motion whether or not to disclose. All in favor, say i. I. Opposed . One clarification that id like to put forward some confusion of multiple copies of item one the four items we voted on its version number 2 which you should all have before you the red line version we voted on. For the one. 25 compatible to the pg e not a range but specific if 25. So if no objections entered into a record as the one that was adopted to mar that is perfectly clear. Thank you. Any further Something Else on further comments commissioners hearing none this meeting is adjourned. [ gavel ] can i call us to order. Good, call this meeting of the Transbay Joint Powers Authority to order for thursday, december 10th, would you call the roll, please, medal secretary. And ill go ahead and note director sartipi has a conference and welcome director gee. Present. Director kim. Here. Kim present. Reiskin. Present. Mohammed nuru. President harper present as well and mr. President you have a quorum and per the concurrence of the board well call the closed session, followed by the regular calendar and return back to items 37. Excellent. So at this time you are scheduled to go into closed session pursuant to Government Code Section 54956. 8. Well go ahead and clear the room. The tjpa board of directors meeting of december 10th, 2015 is now back in open session and Council Counsel will report on closed session. Item 16 conference with Real Property negotiators related to assessors parcel number Listing Properties all known as parcel f, the tjpa will be executing terminating the execution of the purchase and Sale Agreement with crescent height and related agreements. Are you ready to move into your regular calendar. We are. Regular calendar item 8 is presentation of the master lessee request for proposal. Directors this next item is going to be presented by our Consultant Team hr advisors. While you are familiar with pelly clark pelly, i wanted to introduce the additional firms that that we have engaged to assist us with the master lessee, because this is the first you will hear from them. So we retained hr advisors talking to the Port Authority of new yorks real estate director. There was a recommendation from them and after our vetting with we agreed to retain them to lead the master lessee process. They are going to be supporting us in evaluating the responses. They are a real estate and Economic Development Advisory Firm with over 30 years of experience supporting public and private clients with complex Publicprivate Partnership projects across the entire u. S. Recently, they advised the mta in new york city on the facilitation for the newly built Fulton Center in lower mt. Rainier and assisted them with the Lease Agreement with major retail develop westfield who is now operating the Center Including retail and public spaces. You will also going to hear from sensory interactive and they bring expertise in creating technologydriven experiences that generate revenue and correct brands with customers and professional platforms and Digital Media projects in times square and manhattan, washington, d. C. And other parts of the country. They are supporting evaluation of our current promotional elements including advertising, sponsorship, namingright opportunitis and youller from the director of sensory interactive. I did want to let the board know over the last almost six months now we have been working with this team of consultants to identify the appropriate structure for a Publicprivate Partnership. Market the opportunity to potential partners and draft a compelling rfp document. Today they are going to present on the recommended partnership structure, and rfp for the boards comments. The presentation is also going to include a brief overview of the commercial spaces included the Transit Center for the benefit of director yee, who is joining us new today and the discussion at master lessee scope. Its complete and has nine sections and 13 appendices and its intended to provide potential respondents with four key elements one a compelling overview of the opportunity to take part in the growth of trance bay district through management of the Transit Center. 2 a description of facility itself and the responsibilities associated with the master lessee and the key deal terms we seek. 3, adequate information to understand how the deal may be economically attractive to respondent firms . And 4, Key Information to guide the formation of multidisciplinary teams who can fill the roles of the master lessee. I do want to also mention that we presented this to our cac last night. We have scheduled meetings on january 11th to present this to the greater rincon hill benefit district board, south beach rincon Neighborhood Association on january 11th. January 12th well be presenting to the San Francisco chamber of commerce. January 13th, to San Francisco beautiful, and the millennium hoa and to the citizens Advisory Committee oci. We heard loud and clear when we presented before on this, the importance of presenting to all of the community on this item. So id like to ask hr and a team to please come up and please begin the presentation. Could i ask one context question . In terms of the overall operation of the entire facility. Are there other procurements that are envisioned that would handle operations and maintenance or security . Is the intent to do a single one and its all bundled in this . The intent is to do a single one on the operations and maintenance, the promotional platform. Digital signage, advertising reality leasouts and this rfp and youll hear in a moment that the recommendation is to put out the security rfp in early 2017 because were not going to be able to hold those prices from now until when the station opens. We need to get the security onboard a little closer to the opening ever of the stations. This one for every that i just mentioned and the recommendation to have a security rfp early 2017 to give time to bring onboard a chief security officer. And this would include the o m for the entire building . Yes, and you will hear about that from a moment from the team. Where is the sponsorship . That will be part of this as well. Part of this . Yes. Okay. So its really the entire operations of the facility will be in those two procurements . Yes. The proposal . Yes. Thank you. I hope we can extend this afterward because i want to know why it is that the master leaseholder wouldnt want to have a whole lot of influence over the security . And that just doesnt make sense to me from the getgo here. So lets work on that one. Yes. They will be responding to that, too, director. Thank you, maria. Good morning board members. Thank you for this opportunity to present the overview of the master lessee procurement process for the Transbay Center. As maria said, im a partner at hr advisors and hr a is an Economic Development and Real Estate Consulting firm. We work in the intersection of public and private spheres both for public clients, as well as private clients. We have been in business for more than 35 years. Im based from the new York City Office and im here with a couple of people from my office, who have been working on the project the last six months, a principal in our office and olivia is a director in our office. Wanted to briefly talk about a couple of relevant projects for the Transbay Center. Maria fencinged the Fulton Center a projects 1. 4 billion new subway station built in Lower Manhattan brings together 11 subway lines with the connection to new jersey. Here we assisted the mta, the new york city mta essentially privatized the entire facility apart from the tracks and the platform. And bring in westfield to run the entire facility awesome take care of that entire facility on behalf of the mta. We have had a number of sort of station planning and station redevelopment projects including Union Station in washington, d. C. , is a current project and our clients its a client group. Union depot is a project we did a couple of years back. A procurement process where we helped both the retail privatized the retail, as well as o m of this facility in st. Paul, minnesota and closer to the bay area we have been advicing the Concord Local Reuse Authority on the redevelopment of the naval base. As you may know its right now in hiatus, two finalists and they are going through the process. The agenda for this morning is an overview of the master lease process. Which will include a discussion about the operation the goals and deal structure and scope that the master lessee would have to do and then well talk get into and talk deeper about key rfp content. We see the opportunity as the Transbay Center for the sector as three guiding fundamental principles here. First, the private sector over here will have the opportunity to create a thriving sort of opportunity to create and manage a thriving sort of Retail Center in the midst of a mixeduse, vibrant new district that is coming up. No. 2, operations of the center, operations and maintenance of the center could be a significant Revenue Source for the private sector master lessee and a third point that a private sector would be interested in this is the fact that they could control and they could sort of Program Major open spaces and public spaces in the facility, including the 5. 4acre rooftop park, and the urban public spaces in the fulfillment itself such as at grand hall and other pedestrian cutthroughs. We see the Transbay Center and the master lessee essentially serving four different customer segments. As you well know, this is right now very vibrant office district. There is about 18 million square feet, 18,000 workers are currently there. Most of them at least half of them are in professional services, it or financial services. Significantly high sort of wages and salaries. This is only going to grow. The next five or six years, the projections are for another 7 million square feet of class a space including 1. 4 million force. 37,000 commuters would use this facility on a week day basic, a significant major would be ac transit travelers. They, too, have very, very high sort of demographics. Household income in excess of 80,000, which makes them very attractive for a master lessee to canter some of their disposal income. 10,000 residents now and expected to grow by 7,000 inment the next few years and that is say market that the master lessee could leverage and finally visitors. With the Moscone Center that drives about a million visitors, the renovation of the sfmoma that you have up on the screen and a number of institutional locations and we feel visitors are a very important segment that the master lessee could leverage at the Transit Center. Questions . What does the board think . On the market, i guess two questions. With regard to commuters, the volume of commuter traffic will significantly change once phase 2 is done and you have caltrain and highspeed rail having huge flows of people running through the facility that wont be there in the first phase of the facilitys operation. First question is how do you accommodate for that pretty dramatic change in the way that the facility is going to operate in terms of people walking through it . How do you plan for that . I think that is a significant new operation for the master lessee. We think its only going to add to the vitality and the kind of sort of tenants that master lessee would plan in the first phase. As you are aware in the second phase, there is an opportunity to do another 60,000 square feet of retail in the train concourses. And as part of this master lessee ceo procurement, well give the selected master lessee the first right to negotiate for that phase 2 retail space as well. So 100,000 new sort of potentially 60,000 new additional sort of commuters that would come from the trains we think would be a tremendous sort of improvement and a tremendous new demographic for the master lessee retail and promotional opportunities. We also think they would have high disposable income. That quantum idea of stepup in terms of traffic is accommodated by opening up the train concourselevel and does it mean that area is shuttered until the trains come . And secondly, does that also suggest there are no impacts to the balance of the Transit Center once all of that train traffic is there . I think im probably more sort of qualified to answer the first question. For the master lessee opportunity right now, essentially envisions that the phase 2 is going to be sort of in a there is a lot of Building Systems on the train box in phase 2 right now, which the master lessee will have control over and operate. But there will not be any sort of revenueproducing opportunitis from the train box, the phase 2 train box right now as part of this rfp. At least the train concourse, above the box at least whatever there is a floor above the box that is not going to be developed at all maybe. And one of the questions that i have is that this stage, before we go out or even during working with the architects and saying if that concourse is going to be vacant for say, ten years, then is it possible to do anything with it other than storage during that ten years that can make some money . And that is kind i dont know that is maybe can be dismissed with quickly, but i would kind of like somebody to look at the question and come back definitively and say okay ten years empty floor, that is all you can do. Architect says nothing else, and buildout time is too mall for the tenants, Something Like that. I just want it addressed at some point. I believe the answer that right now you cannot achieve any revenues from that, but i will let randy answer that question. Good morning, directors, we have looked at that director harper, that train box. Train box is actually two levels. Train platform is down on the bottom, 50 down, 25 down nominally is the lower concourse. To be able to occupy it, we have were we would have to introduce all of the lifesafety egress access, ventilation things that we deferred to phase 2 at this point for costsavings reasons. Its not that it couldnt be done, but there would be a cost to do it that we havent currently in the budget. If we actually penciled out and said here are what the costs should be . No, we i think what would be the right thing to do, we would need to know what we would want to use it for . And we havent even if its a storage, that is kind of one thing. If it becomes an active space where people are down there and there are restaurants and grocery stores, anything, that would be a different kind of an equation. And depending on the usage, it would then determine and drive what wed have to do for the egress and access and lifesafety components that wed need to provide. At what point do you think that thinking will start happening . Im sorry . The usage of that level, when would you think that type of thinking should start happening . It could happen now, or the intent obviously the longterm goal, that is the trainlevel ticketing passenger waiting retail at that level. People would come down and have their tickets, and much like an airport, waiting areas. As the trains come in, they would go down and get on the train and again, there would be retail, 60,000 square feet we see and there would be toilet facilities, amenities as people are waiting. Its always been conceived of and planned for as part of phase 2. It sounds like its worth the exercise now to determine what the costs of putting the lifesafety systems in to make the space usable and then what type of uses scenarios of types of uses, some of which might generate net positive return you that could support the operations. It seems like an exercise were doing. I agree and say we have done this calculation for you as a ballpark notion and that may be something that you want to look at, or Something Like that . Because we dont know how long its going to be the case, but it could be a while. It could be a while. A floor, we hope not, but it could be a good while. Yes. It would be a study, i think, that would take some time to do, you know . Its not something that question turn around in a couple of weeks i believe, but we can certainly look at it. I think mark wanted to add to the discussion. We did do a brief study in 2010 and the cost for making that space dwarfed for that amount of Square Footage was not worth the effort. And the costs would be higher now . Against a potential return. Okay. Against some sort of potential return that you had to imagine. Correct, correct. Okay. I think it might be worth looking at. So my other question related to the market. Just on the first, it sounds like even without the train traffic, you believe that the other potential elements of the market are enough to support the level of retail above the train box that is contemplated . Yes. We have done a maria mentioned in her opening remarks as part of this sort of writing this procurement rfp, we have had significant outreach and talked to potential entities who might be interested in this opportunity and what we have heard back is very, very positive. So the commuters as things stand now for phase 1 along with the employees and the residents and visitors and not just right now, but looking by the time the next 35 years is a very is something which i think a lot of people feel very bullish about. Okay. That was my first question. My second question, when you were speaking of employees and commuters and perhaps visitors and talking about kind of like relatively highincome people, the district which this sits in if not the immediate neighborhood has lowincome people that the redevelopment calls for 35 affordable housing. So i guess i would hope that were not contemplating only retail that is catering to higherincome people because that would not be reflectivityneighborhood. Right, when we go through the presentation, you will see sort of we have spent some discussion on the retail. And what we believe the master lessee should bring to the table in terms of a realize vision. As well as execution abilities. We can certainly talk about that in terms of what that means and how that how we hope to incorporate sort of the Retail Vision as part of a Selection Process for the master lessee. Thank you. If i may followup on director reiskins comments. I think in the procurement, it might be interesting to allow alternate or an option for someone who might have a great idea for that extra area. And let the market dictate it rather than us here or if someone is out there who has a great idea, we would want to hear about it now you and factor into the Selection Process potentially. And just let those smart people out there, the innovators, the market people out there, hey, if there is 60,000 square feet of x and i can do it and i can pay for the improvements, and generate revenue on it, wouldnt we want to hear about it . Oh, yes. I think lets not con strain this too tightly and let the responders propose an alternate. I looked ahead in your presentation and saw the element and it might be interested to allow a voluntary alternate for a great idea to come forward, if there is one out there . That is a point wellnoted. As part of the rfp, we sort of have the master lessee respondents proposing alternative ideas as well to the structure and the opportunity would be weighed out. So im assuming if someone has a fabulous idea, which is financially accretive to them as well to the tjpa, well be able to hear that from them. Thank you. Thank you. Should i proceed . . We have outlined four goals for the procurement process and for the master lessee who is going to be maintaining and operating the Transit Center. Speak into the mic. Thanks. The first one is master lessee needs to operate a clean, safe and wellmaintained Transit Center, befitting of worldclass transit facility. This facility has been talked off as the grand terminal of the west and that is certainly a paradigm that we hope master lessees coming on would aspire to as far as running and maintaining this facility. The second goal is that the master lessee would need to deliver a Visionary Program that reflects local character and local context. They need to to have a vision for the retail obviously, but also for the deutschingal digital and the events that might happen at this facility and they must have the experience to execute on that vision. The third goal is to ensure a high quality User Experience and must engage with ac transit and the other transportation tenants and stakeholders as part of this facility. And ensure a quality experience for the commuters and other users of the facility. And last, but not least, the master lessee must maximize the economic value of the Transit Center which means that they must propose an economic offer and again have the Financial Capability and wherewithal to followup and substantiate that economic offer. When we commenced this project, we looked at a number of different sort of deal structures to achieve these goals for the facility, for the o m of the facility. From purely sort of public sort of models such as 30th street in philadelphia, which is owned and operated by amtrak and has a small amount of retail to kings cross in london, which is a fantastic for those who have visited that sort of facility, fantastic location. That is ownedandoperated by network rail. All the way to the right, where its purely private model, like the World Trade Center hub in new york city where westfield essentially has acquired the rights for the retail over a very, very long period of time. And when we looked alt all of these different structures, what we recommended to the tjpa was the master lease structure where we felt that was the appropriate balance between risk and responsibility and reward similar to what the deal structure that we executed for Fulton Center. Very similar to a deal structure that now exists for Union Station in washington, d. C. We see three main benefits from the master lessee deal structure the first benefit is that the master lessee deal structure helps attract private sector capital. We will have the master lessee, the private sector master lessee come in and need to make tenant improvements as retail tenants controin and need to provide o m and capital maintenance and repairs to the facility and this allows the prior master lessee to come in and pay upfront capital and ongoing capital over the term of master lease. The second benefit that we see from master lease is ensuring highquality performance. And as you can imagine, and well talk about this a little bit later, were asking the master lessee to put under their umbrella a number of different expertise areas, including retail leasing, management of public spaces and development. Promotional platform. So we think sort of putting those expertise areas and having experience with them is something that is key from the master lessee deal structure perspective. And finally, what the master lessee deal structure does it rediscusses tjpas burden. It minimizes tjpa daytoday management of facility, while still maintaining control of the Public Sector. The deal structure that i will describe incentivizes the master lessee to optimize structure costs and significantly reduces the risk from the Public Sector over to the private side. Tell me why now the ones to each side of that, asset manager or joint venture model wouldnt fit our situation . Director harper, it is not a question of it would not fit our situation; what we recommended was there are risks and there are rewards and we were trying to balance the risks versus rewards. So the asset manager situation is something which Grand Central terminal has where the mta essentially procures an enity on shortterm base to run their facility for them. The mta has all of the risks on the facilities side, including costs, and at the end of the year, whatever the costs are, they write a check to their asset manager to pay for all of these costs. They also retain the revenues from the facility. They have someone on their behalf managing the facility, but not really sharing the risk or pushing the risk to the private sector. We felt in obviously in the direct model its the transportation entity or the Public Entity doing all of that work inhouse and taking care of that. Again, with all of the risks and all of rewards of running a facility, and having it within themselves and having the resources to pay for all of that. So we felt the master lease structure was an appropriate way to balance some of these things, where we could transfer over some of the risks of running this facility to a master lessee and still get a portion of the revenues that the facility would generate through retail and through advertising back to the tjpa. I dont believe there is sort of one sort of Silver Bullet or right answer to the different structures we have seen, but we felt the master lessee structure was the most appropriate for the tjpa. And the one the joint venture see i have to i have to come to an understanding as to why should the tjpa exist after everything is done . Right . Right. I mean im sort of the best thing any bureaucracy can do is dissolve itself and what about the joint venture disposition . The joint venture disposition structure is very specific and in the World Trade Center westfield essentially bought the rights to 360,000 square feet of retail, and the public circulation space immediately surrounding that. They are not responsible for running any of the public spaces that is outside, including the park station facility or any other public space. Its a very, very controlled set of area that they are responsible for, and almost all of it is retail from which they can achieve significant revenues. What were trying to do over here is were trying to attract a master lessee, and say this is a previous discussion you will now have the ability to run this entire facility, and pay for running this entire facility. Youll also be able to collect rents, part of which you will share with us, but it transfers over that risk of running the entire facility, not just the retail, which is the first and second story, but also the bus ramps and public circulation spaces over to the Public Sector. When you say running you mean maintaining . Yes, o m, yes. Thank you. So in the rfp, we include a scope for phase 1 right now, which is 103 square feet of 103,000 square feet of retail and right to negotiate involvement in the phase 2 operations 62,000 square feet of commercial retail. And were asking the master lessee to do sort of 4 broad things for us. First is the fitout leasing and management of facilitywide retail space in phase 1, development and operation of a highquality promotional platform and i will describe what a promotional platform is and greg from sensory is going to go and discuss that aly bit more deeply. Promotional platform includes all of the digital assets, the naming and the sponsorship rights, and some of the events that are synergistic with the naming aspects and rights. Third, were going to ask the master lessee for the management and production of private and public events. Whether its an event on the rooftop park, or in grand hall, were going to ask the master lessee to sort of recommend a program of such events to the tjpa board and the cbd. And finally, facility operations and maintenance and Capital Improvements, this is absolutely very, very closely linked to the master lessee providing a very, very positive experience to the commuters, as well as to the other visitors who are going to use the facility on a daily basis. One of the things as part of operations and maintenance, the master lessee would have to coordinate very closely with the tjpas chief security officer, as well as the security vendor that is being procured separately to make sure that they are wellcoordinated and the facility is safe and secure on a daily basis. And the other agreements that you have looked at, has the security been certificate from has been separate from the master lessee . Most of the facilities director reiskin, the master lessee essentially provides security, much like a Shopping Mall operator provides security within their own lease lines. So there is pilfering or shoplifting or other issues such as that, the master lessee would provide those kind of securities and the master lessee will still do those tasks in this case as well. Most of the other large centers, whether its grand center or terminal station, security is provided through a [kpwaoeufpbs ] state, federal and local entities. Lot skill security from securing the facility prospective is not usually privatized. We can talk more about this. Im certainly not the expert on this, but we do have someone who can speak more about this. You want to talk more about that now . Chair harper, id like to followup on your comments about operations and maintenance and one of the things to ensure as this rfp Going Forward is that the master lessee is going to inherit some of the things that are built and the vision of a worldclass facility is very lofty and great. But if what is being built in that highquality environment is different, there will be an opportunity for disagreement downstream or Additional Capital investment by the master lessee. You think making sure whatever is being built now is in alignment with that vision, that the master lessee is going to inherit and there is not a gap or a gap identified earlier that didnt become a liability or contentious point of disagreement. I think that is wellnoted. Sort of all of the Building Systems of vertical transportation and elements will come with a set of their own warranties and detailed specification. As part of the master lease execution, all of these documents will obviously have the master lessee understand what they are going to inhertz and what they are going to run . And they must make sure they are comfortable with what they are inheriting and running. So we think sort of from the master lessee perspective this will require multidisciplinary expertise. Clearly, we think you that sort of the Retail Development piece of this is primary and most of the people who will be interested in this opportunity is Retail Developers and managers, but there is an open space sort of management expertise that is required whether its the rooftop park or other public facilities, the a facilities manager to take care of the entire facility and the naming and sponsorship rights, as well as other private events to make sure that between the retail and the promotional platform its run synergistically and the master lessee is optimizing Revenue Streams from those opportunities. So they can sort of in turn share more with the tjpa on an ongoing basis. So well now segway into key rfp content and weve highlighted five elements to discuss with you this morning. Revenue opportunities. Financial terms. The retail approach. The evaluation and Selection Process and finally, rfp process and timing. So there are three separate buckets of Revenue Opportunities for the master lessee by runing this facility. First is the phase 1 retail 103,000 square feet. Second is the promotional platform. Again, that is a digital asset, naming and sponsorship and events. And finally there are other events which also could be sort of public events; that we can sort ill show you some examples. Phase 1 is 103,000 square feet of retail. Our aspiration is here some of the great transit sort of facilities across the country. You have an image of Grand Central terminal on your left, which is the food market. Local sort of purveyors of produce and groceries. Grand central has close to 130,000, 140,000 square feet of retail and what is really interesting in Grand Central its had a combination of sort of food and dining, as well as hard and soft goods, a combination of local, national, regional tenants. So we think sort of Grand Central in terms of Retail Vision and execution is an aspirational sort of idea for the tjpa in terms of securing a vision from the master lessee. The image on the right is denver terminal Union Station, which again on a much smaller scale, but a great combination of sort of local foodoriented tenants. Im going to have randy from p c. P. A. Come up here and speak to you about how the retail is organized in the facility. Thank you. Im sure you have all seen the plan before. What we have here is essentially broken into areas, the orange is the retail that is available. That is the 103,000 square feet and again, this is in phase 1. This is from the groundlevel up. It doesnt take into consideration the potential 60,000 square feet in phase 2, which is in the lower concourse area. Kind of hard to tell the colors, but lightblue tends to be the transit users. The green is the park. And the gray is backup house spaces. Ill go through these a little more in detail for each of them. At the west end, first two quadrants on the lower part of the screen, groundleveled. And orange is retail and its divided into three kind of categories. We have this has to do with ventilation. You have a kitchen, you have to have a grease duct and you have to be able to ventilate the kitchen exhaust out and because of the nature of our building we have to thread it up through the entire length of the building and out through the park roof. So some of these areas are set up in the infrastructure for grease ventilation. Some of the areas are set up for warming kitchens, you know . The starbucks kind of thing. Where you can have some sandwiches and that kind of thing and other areas its just been very difficult to impossible to get this ducting done is what we consider more geared towards retail dry goods, clothing, card shops and that sort of thing. Again, as you can see on the groundlevel plan we have a loading deck, that large lightcolored area. On the natoma side before we get to the pedestrian way we have a second loading dock that Services Retail on the secondlevel above it. On the secondlevel, we have again, all of these areas in orange is retail. We have circulation starting at the pedestrian cutthrough on the far west end, left side. There is escalators and stairs up to the secondlevel. There are elevators from the loading dock that go throughout the building and im working from left to right. There are additional escalators and stairs off of shaw alley that bring people to the secondlevel. To the east of shaw alley is esq. Esq. Esq. Escalator as well. 1st street we have additional opportunity not opportunity, but we have el elevators on first 1st street as well. The secondlevel retail sometimes is a bit problematic, because of the access, but we think we have a lot of access and very good access to the levels. As we envision the secondlevel retail there are kind of big, large, open areas and the First Quadrant on the west end was thought to be more of a food court im sorry, food hall kind of operation. Where youd have much like the Ferry Building has, a grocery kind of thing, prepared food, people could on their way out pick up dinner and take it home with them. They could also pick up things at the grocery store, deli, that sort of thing. On the quadrant to the east, that was a food court where would envisioned a series of kiosks that would be a you good thing for breakfast lunch and chairs would be arranged throughout the open space. These are our thoughts and if the master lessee, if somebody wants some something different, we believe we have built in a lot of accommodation for flexibility, so they are not tied to prior thinking, but we didnt want to preclude the abilities that i just mentioned here. The two quadrants to the east of that on the ground floor is the grand hall and a couple of small orange areas that you see, which we see as a wine bar, coffee bar kind of operation in the grand hall. And then on the secondlevel, the furthest west or east quadrant, im sorry, is an open space that might be office, might be additional retail. There are elevators that access that space directly from beall street. And up in the park we have the two retail components, which are the restaurant on the far west end. That is about 5,000 square feet with a terracelevel above that is an additional 4500 square feet. The restaurant would be built as a corn shell as would all of these retail spaces where the master lessee works with the tenants to zient design the interior of the spaces. The little circle on the eastern end of the picture is the cafe, 1500 square feet operation. In this particular case we put the foundation and i think we talked about this last time, put the foundation and the infrastructure below the foundation. But the cafe itself would be provided by the master lessee and the tenant. Could you go back to the previous slide for a second . Sure. Just in terms of translating the design into an into this rfp, for example, on the bottom left side of the ground level bottom left of the slide. Yes. Are we precribing to the bidders that those orange boxs are what they have to work with . Or could they use other aspects of the grand hall or similarly of the circulation above on the second floor, if they so choose . Were pretty much prescribing these areas. Were putting the infrastructure in for plumbing and for electrical, and data at these locations. One of the things about the grand hall, its the main circulation area for the facility. We envision most of the people are going to enter and exit the building through the grand hall. So that round circle you see as the light column there towards the right . The doors to the north and to the south and to the east are all where people would be entering the building. Between that circle, the light column, and that orange rectangle in the model is the main escalators. This we felt needed to be left as mainly public circulation. Our pedestrian models show most of the people being here, we kind of fit that little retail rectangle there, because again, there are doors that lead out to 1st street at the west side of the grand hall. So its trying to strike a balance between all of the Public Movement of people, and again in phase 2, whether they are going to the train boxlevel to here, trying to leave that as open and flexible as possible and yet, try to have an opportunity for some retail there. I guess i would just to director gees earlier point in terms of letting the market tell us what works, if you look at washington, d. C. s Union Station or denvers Union Station their retail spills out into their equivalence to their main halls and again, the secondlevel just looks like circulation space. I would think in this procurement, we would not want to be very prescriptive and maybe at the end of you could talk about whether an rfp is even the right structure . I think we want to let especially since these folks if they are responsible for operations and maintenance, then pedestrian circulation, that is all their problem. Right. So they need to make it all work and if they can make it work with not having to fit in the Little Orange box, i think we would want to give them that opportunity. Yes. I didnt mention the secondlevel above the grand hall is that twostory open space. There is not a floor there, which is the upper lefthand rectangle. Okay. And we are pretty much allowing that flexibility that director yee and reiskin spoke of was my understanding. Yes, for example, director reiskin on the buslevels plans were not showing any retail, but we certainly expect passengers that wait there to take their bus and master lessee might come back to propose a