Good morning, everyone. The meeting will come to order. Happy new year. This is january 8, 2020, regular meeting of the budget and finance committee. I am supervisor fewer. I am joined by supervisors walton and mandelman. I would like to thank sfgovtv for broadcasting this meeting. Madam clerk, do you have any announcements . Pleplease silence your cell phones. Items today will appear on the january 14th agenda unless otherwise stated. Thank you very much. I want to welcome everyone to the first Budget Committee meeting of 2020. I did want to note the committee will be recessing today before 11 00 a. M. So you may attend inauguration of mayor breed. We will reconvene after the inauguration to finish the agenda. Can you please call item one. Resolution approving and authorizing 50 year lease with one option tone the Port Commission and tzk broadway llc at seawall lots 323 and 324 with a minimum base rent no less than 1 million to commence following board approval. We have with us today rebecca. Thank you. And your assistant Deputy Director of Waterfront Development for San Francisco port. Good morning. As chair fewer said i am with the port. I am proud to represent the project team today. The resolution before you authorized a 66 year lease for hotel and theater and public open space. It shows the site at the corner of embarcadero and broadway this Brown Building would be the future site if approved. A bit background. The existing site is a 60,000 square foot surface lot. Proposed is a four Story Building where we would have 192 hotel rooms, 14,000 square foot open space and 30,000 square foot theater space where we would have the new permanent home for zinzanni. A little about the project layout from left to right north end of the site shown with the 14,000 square foot park. That would be closely bordered by this Pedestrian Access way. It would be a new way from the street down to the embarcadero. The theater would be right in the center. The hotel at the corner of the site. It is important to stop for a moment. Siit is an important theater for more than a decade until 2011. They were moved under agreeable terms to terminate if lease to terminate the mer cuscup and we have been working to find a new permanent home for them. This project has been going on for nearly five years with numerous approvals to date. The rent filing stones are planning, Port Commission approval late in 2019 as well as consistency finding with the locally noted Historic District in the area by the Preservation Commission which found this new build to be consistent with the historic nature of that district. Just a quick overview of the financial structure of how this project will be financed and structured. The team would finance the entire development. They would be required to pay the port the greater of base rent. About 1 million per year with annual escalations or percentage rent. That is equal to gross revenues time percent beginning at 3. 5 . I want to sing. 3. 5 rising up to 6. 5 by year 20. We will participate in upside so to the extent the tenant is selling or refinancing we participate when the equity is returned and they get return on the equity. The partnership between the port and developer will be sfgovtv earned by two documents first is lbda a contract that will require us to enter the lease so long as certain conditions are fulfilled including the tenant paying our costs and transaction fees. They must secure the financing and then close escrow to assure they will build what is proposed to be built before entering the lease. The ground lease would govern up to 66 year relationship between port and tenant. Port would pay rent. Use site consistent with approval and Public Trust Doctrine and numris other numerr documents for approvals. Lease revenues projected. Minimum rent is light blue set to seek qualor greater from the circus parking lot. Percentage rents going up over time and we participate in per order dickey events like pier ope thedriver behind the projs bringing back this popular cultural asset helped produce consistency to attract people to the water front. There is also the public open space. The project team agreed to 17 local enterprise goal for contracting. A local hire of 30 . Using the first source hiring for jobs along the waterfront. Revenues 8 million in impact fees upwards of 4 million per year in annual general fund revenues. I want to conclude prepared remarks with the photo from the time in San Francisco. We would like to have them back. I would like to recognize my project manager and j wallace to answer questions from the development team. Thank you so much. Thank you. Colleagues comments or questions . Supervisor walton . Thank you for the presentation. You may not be able to answer this. In terms of permanent jobs do we have a breakdown how many hotel, hospitality . Are we there yet . I cant answer the sector break done we estimate 120 permanent jobs. Developer entered into agreement with local 2 for hots workers. Hotel workers. I dont know that they have a projection yet. Could we have a bla report, please. Good morning. Budget analyst office. The board of supervisors is asked to approve the ground lease between the port and tzk produce way for development of seawall lots. We summarize those in exhibit 2 on page 4 of the report. In addition. This is referenced the port approved the lease and disposition agreement to cover the construction of the project. That is not what the board is asked to approve today. The ground lease subordinate to that lease and disposition and Development Agreement until the completion of construction. We do outline the terms in exhibit 3 on page 5 of our report. Again, what was in the port presentation, the rent is based on minimum annual rent to the port that starts at 12 million 1 million and goes up to 1. 4 million plus percent 2. 5 up to 6. 5 and 3. 5 . There is also participation rent when the developer received the return on equity. The uncertainty if this would be based on the financial projections be received when this would go into effect. There would be some participation if the Hotel Developer were to sell the hotel and the city port would participate in future proceeds from the sales. We summarize on exhibit 4 on page 7 of our report the annual revenues to the report and other revenues that would come from inclusionary fees and tax revenues, which are summarized on page 8 of the report. We recommend approval. Thank you. Lets open this up for Public Comment. Any members of the public like to comment . Seeing none Public Comment is closed . I would like to move this with a positive recommendation to the full board. Without objection thank you very much. Madam clerk item two. Ordinance amending the environmental cod to require all electric energy sources. I believe we center cindy from the department of environment. Okay. Good morning, i am cindy c. U. Mmerford. Here to request your support to amend the environment code to require new construction and major renovations on Municipal Buildings to be all electric to help the city move toward Climate Action and create a healthier environment. I would like to acknowledge my staff. The Municipal Building coordinator and charles our chief policy officer. Lets look at San Franciscos emission sources today. We can see 44 of our overall emissions come from buildings. If we break that down, we can see in our Municipal Buildings 94 of the emissions from natural gas. In our commercial and residential sectors it is about 84 . So this illustrates it is crucial to move away from natural gas. Natural gas was once a bridge fuel. As we have moved away from coal, we now need to move away from natural gas. We have so much more research and information in the last five years about the impacts of natural gas. We see that the Natural Gas Industry is as potent as the coal industry. Let me talk about impacts. First natural gas impacts climate. The major criteria po pollutants methane. It traps more heat in a faster time than carbon dioxide. Methane traps 8 six times as much heat as carbon dioxides in a 20 year period. There are safety issues. Natural gas is combustible and hazardous. In the United States a gas or pipeline catches fire every four days resulting in injury every five days and explodes every 11 days, leading to paytalty every 26 days. We have seen these issues in frap. In february we had the hall of justice. Last year we cant forget about sanbruno where 8 people died from gas explosion and wiped out a neighborhood. In addition to climate and safety we see health impacts. We know that communities living next to extraction sites suffer from respiratory disease, Neurological Disorders and digestive disorders. A pollutant nitrogen dioxide increases respiratory disease and also trigger asthma. Now we learn that it can lead to asthma in otherwise healthy children. This is gas power appliances in homes such as stoves. The policy proposal for us today is to basically eliminate natural gas from new construction and Major Construction in Municipal Buildings. Every three years the state of california revises housing codes. Cities do this to make sure we meet the state mandates. In addition, cities have the opportunity be to do a reach code. A reach code is efforts beyond the state code and are done for environmental reasons. For 2009 the department of environment worked with supervisor stefani to develop this ordinance. The proposal is simple. It will require all New Buildings and major renovations to be all electric and not allow mixed fe fuel buildings. It is important to lead by example. We raise publish awareness and set the tone where the market is going tgoing to go. It is important to note we have a waiver process. If there was an instance where new construction or major renovation was not able to construct all electric, we have a process for emergencies if it is cost probative or alternative compliance pathway. The waiver is well defined in chapter 7. We would work the project sponsor to make this as easy as possible for success, if necessary. I know the bla report will cover cost and benefits. I will go through this because it is important. We had arab do a small costeffectiveness study to look at the types of buildings we would foresee the city constructing. What we saw as we looked at equipment costs, the cost of constructing the building would probably be cost neutral plus or minus 1 ther 1 per square foot. It was limited in scope and did not include savings from not including natural gas infrastructure. We extrapolated that from the 2019 cost effectiveness study. In a Large Office Building that would be less than 200,000 in savings or translated to 35 cents per square foot in saving. We would see annual Energy Savings from 9 to 48 . That is Lower Energy Bills each year for Municipal Buildings. It is important to note that this ordinance was done with a range of stakeholder engagement. The intent is to illustrate the ways we have connected with people. For example, we had six green desk force buildings, met with the code advisory, we have also just met individually with city departments to make sure that we listened to input, concerns and heard about the great work they have been doing. In july the municipal Green Building task force recommended to the department of environment we include this in chapter 9. I want to cuff touch on a i want to touch on a couple examples. We have a couple departments that are all electric. These are in construction or already developed. What really gives me encouragement is buildings are going all electric without regulation. This is the right time for this ordinance. In addition to city buildings, there is an array of Public Private sector buildings, too. This slide illustrates Affordable Housing sites. I looked at the agenda later there is a multifamily affordable rental site. It is on Treasure Island that they will talk about. That is a great example for this presentation. Lastly, i want to talk about our next step was around the elimination of natural gas. This ordinance marks an important step in creating buildings of the future. We are initiating several workshops and work groups to better understand what the opportunities and challenges and solutions are. We are hosting the first Public Private workshop this afternoon to look at elimination for natural gas citywide. We also know that we need to address hurdles around transitioning away from natural gas in existing buildings, too. We have had two buildings around de carbonization and equity that looked at Work Force Development and Affordable Housing and we will have those discussions this year. We think it is important to do out reach and education. I want to let you know on february 25, our department will host an electrification expo for homeowners, renters and builders to come to learn about how to transition their home to being fossil free. The implementation is crucial for the city to meet climate goals. It will rechoir a lot of require a lot of political courage. I want to briefly introduce two colleagues. Julie from the department of of public works to speak on behalf of their department and heather green from longterm capital planning. I will be available to answer questions afterwards. Good morning, committee members. I am julie lowy. I am the architect and manager for the bureau of architecture at San Francisco public works speaking in support of this ordinance. I have been working in the field of architecture for 34 years and have project delivery of many buildings. I joined this seven years ago. As an architect in the building industry i can tell you buildings are the Biggest Energy hogs on earth in materials, construction and operationally. This ordinance is just one small step towards addressing this critical issue of getting us toward net zero ca carbon for buildings. Some say we passed the point of no return. I am an optimist. This is critical for our environment. You know, one thing i learned when i joined the city is good enough for government work is not what some people take it as. It means good enough for government work. We need to lead the charge in the city and county of San Francisco and set an example of this Important Initiative like this one. Our buildings need to be built to last. At the Bureau Architecture we take great pride in building the buildings with highest quality and durability. Government buildings last 50 to 1000 year o 50 to one hundred years. Lead gold is the lowest common denominator. We need to do better and get to net positive, which we are trying to do. Some of the buildings on the screen. My staff have worked on like Southeast Community center is net zero, all electric. I think that i want to thank you for your time. Happy inauguration day. Thank you. Good morning. I apologize heather green. Thank you on this busy day. I want to thank the department of environment and cindy and debbie for their efforts. Environment Capital Committee presented this. Not surprisingly through the bla, the cost is a concern. Building in the city is extremely expensive. We appreciate the attention paid to making sure we are doing this where we should on the whole building major renovation. Not that every time we parent the law we need to electrify the building. It is an important distinction to make this fiscally feasible for the city. This helps advance our greater goals as the city. We drafted the hazard plan for San Francisco and a chiefing the Greenhouse Gas targets is essential for us all. This helps get us there. Thank you. Any questions . Could we hear from the bla, please. Yes, the board of supervisors is approving the amendment to the environment code to require the construction of city owned buildings or major rehabilitation to be all electric. They covered the fiscal impact in the report. Based on studies provided by the department of environment. There is a range on the Construction Costs depending on the infra structure and building from decrease in cost in increase of 1 per square foot and other cost reductions associated with not installing the natural gas infrastructure. We were provided a range depending on the type of infrastructure summarized in the report. With Energy Savings there could be some increase depending on the type of electric infrastructure installed to savings generated over time. This is a new policy for the board of supervisors. We consider this to be a policy matter for the board. Supervisor mandelman. Clarification on the department of environment presentation. The all electric examples i am assuming are illlus trative. I dont think this will apply to Affordable Housing developments, correct . Right. That is the range of the buildings built in the city. I appreciate the thoughtful way the department of environment approached this. I think it is worth