Transcripts For SFGTV BOS Budget And Finance Committee 20240

Transcripts For SFGTV BOS Budget And Finance Committee 20240711

This agenda, and we are streaming the number across the stream. Each speaker will be allowed two minutes to speak. Comments or opportunities to speak during the Public Comments are available by phone. Meeting i. D. 146291707. Then press pound twice. When connected, you will hear the meeting discussions, but you will be muted. When youre item of interest comes up, dial star 3 to be added to the speaker line. Best practices are to call from a quiet location, and turn down your television or radio. Alternatively, you may submit Public Comment in the following way, email to myself or the budget committee. Icommittee. It will be forwarded to the supervisors and will included as part of the official items. Items acted on today are expected to appear on the board of supervisors agenda on november 10th, unless otherwise stated. Chairwoman can you call number one . Authorizin [inaudible] members of the public who wish to provide Public Comment on this item shall call 415455, 0091. And then press pound twice. If you have not already done so, dial star 3. And please wait until the system indicates you have been unmuted and you may begin your comments. Chairwoman today we have karea zee, and also available, rebecca benisini. The floor is yours. Thank you so much, chair fewer. Im elaine forbes, and thank you supervisor mandelman and supervisor walton. I just wanted to share a couple of words in perspective of how important it is for the porto consider our tenants during this period. And our team has done a lot of work with our variety of diverse tenants during this time. We have been in front of our commission four times on the tenant situation, and it started with rent deferral, and now rent forgiveness, which is in front of you today. Our program is really designed to keep a commitment to our tenants, to provide a real maximum opportunity for our tenants to weather the storm. While we were encouraging a safe reopening, but the opportunities for our Retail Stores and restaurants are not there during the pandemic. And well be stronger if we can recover today. The port has also supported rent relief for our maritime tenants and for our Small Business tenants. Several of whom reside in district 10, for policy reasons, to keep us stronger and more resilient and equitable as a Port Organization and for mission purposes. I wanted to thank you again for looking at this ordinance, and understanding some of these old leases, this is the practical solution to provide rent forgiveness. I want to thank you for all of your work. She has been on the ground with all of the details. And rebecca and boris are also here to also answer questions, and they have provided a considerable support on this effort. I wanted to say how important this item is for the port. With that, ill turn it over to kazia. Thank you, director forbes. Good morning chair fewer and supervisors walton and chairwoman cues me onexcuse meone second. It seems as though were having a problem displaying the power point. Madam clerk, would you mind assisting. And supervisor walton is in the cue, and so if you dont mind, i would like to hear from him first. Supervisor . Im actually waiting to speak when they were done with their presentation. I have a question when theyre finished. Chairwoman all right. Are we able to assist with the power point. Point . Yes, good morning, madam chair. I do not have a problem viewing the power points. Chairwoman im sorry. I see on my screen the content there was a problem displaying the content. Am i the only one that cannot access the power point . I can see it. Chairwoman you can . I can. Chairwoman all right. I guess i might be the only one that cant see it, and i dont know why. Is that going to be an issue, or do you think you can just walk me through this . Director forbes, we had previous conversations before about your rent relief, and im familiar a little bit about the program that through your rent release program before. Im okay not seeing the power point if youre okay with me not seeing the power point . Im okay with that. I think well be sure to get it to kelsey and your team, and if kazia can walk through the details for the public and other members, i think that would be very beneficial. Chairwoman kazia, my apologies. I dont know what is wrong with my screen. Were living in a new technical age. We can send a p. D. F. Version of the power point after the presentation, so if you have any followup questions, we can answer that. Okay. I will begin. My name is kazia tonalium, and im the manager of Business Strategy at the port of San Francisco. As director forbes shared, im joined by my colleague rebecca benisini. And weve been working very tirelessly on the proposed ordinance that is in front of you today. And i apologize, i dont know why it says november 11th, but today is obviously not that date. So i will move on with the presentation. The proposed ordinance in front of you today authorizes the Port Division to amend certain leases that are subject to charter section 9118. In addition to that, the ordinance also waives Administration Codes and environmental codes that are typical requirements that have been enacted after most of our most recent modifications of each of the leases. Many of the leases that are subject to this are retail leases that have that are primarily up in our fishmans wharf area. 10 of which date back as far as may 1st, 1970, so you can imagine there have been many code changes since then if we had to in corporate them would pose certain buena burdens on many of the businesses that are severely impacted by the covid19 pandemic. We have been working on the ground with many of our tenants to understand their financial circumstances, and so we believe we are presenting a very thoughtful rent forgiveness package to you all today. So as an overview to our rent Forgiveness Program, we propose a sectorbased approach to rent forgiveness at this time. We are focusing on our percentage rent tenants, those that are retail tenants, most of them restaurants, and other commercial operators throughout our portfolio. The second bucket of our tenants are maritime tenants, that as can imagine are fishers, our crabbers, our fish processors, and our other Maritime Operations along the waterfront. And the third bucket are local Business Enterprise tenants, and we have about 27 of those in our portfolio, which typically are very, very small operators, and need our assistance at this time. As an overview, we propose, for the percentage rent tenants, to forgive all base rents and require the payment of percentage rent as defined in their current lease agreement. The relief area would be from march 1st, 2020, through april 30th of 2021, next year. Our maritime tenants in this particular case we will be forgiving all of their base rents for a period of march 1st to august 13st, and for our l. B. E. Tenants, forgive their rents from march 1st to may 31st. For percentage rent tenants, it would give forgiveness for up to 14 months, and affects approximately 48 tenants, but for this particular ordinance, we are focusing in on about 32 leases. The estimated rent to be forgiven in this bucket is about 11. 8 million, but this will be offset by percentage rents that are collected throughout this period of time. For maritime tenants, the rent Forgiveness Program is going to impact roughly 121 maritime tenants, and provide forgiveness of up to 1. 5 million, and for our l. B. E. Tenants, for the period, it will affect up to 27 tenants, and forgive about 150,000 dollars of rent. In total, this will approximately forgive 13. 5 million and is a pretty significant package in light of all of the economic Recovery Efforts the port is deploying at this time. So for a rent forgiveness, or proposed conditions, generally, all of our tenants will have to supply all of their other responsibilities under the lease. They will have to maintain agreed upon hours of operation during this period of time. They will have to submit an online application with key data points to help us execute their lease amendments. And anyone who has outstanding balances will have to rectify that balance prior to march any balances prior to march 1st will have to be rectified to take advantage of the program. And they will have to pay their percentage rent due according to their lease agreement. For local Business Enterprise tenants, they will have had to maintain l. B. E. Status during the forgiveness period. In addition to rent forgiveness, we are also proposing rent credits to apply. The two rent credits we are proposing are rent credits for anyone who has paid rent during the forgiveness period, and a startup rent credit for tenants who may have made physical investments in order to open up operations. When shelter in place orders have allowed them to reopen. In terms of our Program Administration on the rent paid, any tenant who had paid rent during that period of time shall be able to take a rent credit in fiscal year 2021 through 2022. That rent will be equally divided over that period of the year, and can be taken against their rent, but not against any other fees or charges under their lease. If a tenant has a lease that has expired prior to that, we would allow for a lease extension to occur to cover that period of time. If a tenant were to terminate in advance of that extension, any forgive me rent credits would be extinguished at that time. For the startup rent credit, many of our tenants in this particular sector have had to make investments in signage, other physical structures to separate and safely socially distance. And so our tenants we are requiring that our tenants provide proof of such expenditures. That rent credit can be taken immediately against any balance that they have. They will be required to rectify any outstanding balances that had occurred prior to march 1st. And the rent credit will expire if it is not exhausted prior to june 30th, 2021. Again, any early termination in advance of the lease term, those rent credits would be extinguished. So i know the budget analyst will touch on this a little bit more, but our total base rent that were going to be forgiving is about 13. 5 million. Our percentage rent at this time is very uncertain. We dont know how the market will react as reopening continues to improve, but our projections show either a range of 6. 6 million up to 13 million of percentage rent that could be collected in the coming months. At this time, i just want to reiterate that our rent forgiveness package, and the ordinance in front of you, will really allow for port staff to streamline the rent forgiveness to our tenants. I know many of them are very much hurting in this time, and we want to do our best to get that relief to them as soon as possible. Rebecca and i are here to answer any questions that you may have. Thank you so much. Chairwoman thank you very much. Supervisor walton, i am going on the recommendation of the clerks office, to reboot my laptop because we have another presentation further along in our agenda. Would you mind chairing this meeting while i am doing that . And i see youre in the cue also to speak. Thank you very much. Thank you so much, chair fewer. Thank you so much for the presentation, director forbes. I do have one question, and my question is i know that this is necessary, but as i look at some of our port tenants, i have concern and would like to know will we be forgiving rents for tenants like indescernable . No. A subtenant like jewel will not be forgiven. Many of those Office Tenants are subleases to our master tenants. So our master tenants at this time arent covered by this particular ordinance that is in front of you today. Thank you so much. And supervisor mandelman, i dont see that you have any questions. I think this will be time for us to take Public Comments on item number one. Can you check to see if there are any callers in the cue. Operations, please let us know if there are callers that are ready. If you have not already done so, please press star 3 to be added into the cue. If therare there any callers who wish to comment on item number one . Mr. Chair, there are no callers in the cue. Chairman thank you so much. And i do not see any comments from supervisor mandelman. I am to a point where i do kind of want to at least see what is going on with chair fewer. So im going to ask that we recess for two minutes, just so that we can give chair fewer a chance to get back because i dont know if she has anything she wants to ask. Lets recess for, lets say five minutes, and come back chairwoman thank you, supervisor walton, for assisting me during this technical clich, and my apologies that i wasnt able to access it, but i did receive the emails, and i did see your power point, and thank you very much. I understand that Public Comment has been taken on this item. Is that correct, madam clerk . Thats correct, ma madam chair. Chairwoman so the Public Comment is now closed. This is nick bernard from the budget analyst committee. This would waive the lease modifications related to the ports rent Forgiveness Program, and also raise the administrative code and environmental code requirements enacted after the most recent requirement. This lease approval applies to 38 leases. At shown on page five of the report, the cost of the rent Forgiveness Program is approximately 13. 5 million, which may be processed by ongoing payment for certain tenants. Because this proposed ordinance needs the board of supervisors approval, we consider approval to be a policy matter for the board. Chairwoman thank you very much, mr. Bernard. Colleagues, any comments or questions . Supervisor walton, did you want to comment on this . Thank you so much. [inaudible] chairwoman thank you very much. Actually, i just want to say that i wish that all landlords were as generous and thoughtful as our San Francisco port. Im assuming the San Francisco port is actually in this rent forgiveness this rent Forgiveness Program has enough funds to actually do this. It is pretty costly. I mean, it is 13 million, but you can absorb the cost into the loss in your budget, is that correct, director . Yes, it is. Thank you for that question. We did put it in the budget that we are operating under now assumed reduction, and were balanced and managing, yes. Chairwoman so we hope that well be up and running soon, and that all of our tenants can once again, you know, be profitable. And so i think that this is timely, and i think this is completely generous. And i think it is the right thing to do as a city and county of San Francisco. With that, i would like to make a motion to move this to the board with a positive recommendation. May i have a roll call vote, please. Yes. On the motion, supervisor walton . Yea. Supervisor mandelman . Yea. Chair fewer . Yea. There are three yeas. Chairwoman my apologies for the technical clich. Madam clerk, cu clerk can you pe call item number two. Call to suspend imposition of th the cannabis indescernable to increase the exemption of gross from cannabis activities from the fires 500,000 to the first one million, and beginning january 1st, 2022, to increase the upper range of gross receipts attributable to the cities from cannabis business activities, subject to the 2. 5 tax rates on gross receipts from retail service, and the 1 tax rate on gross receipt from other venues. It goes from 1 million to 1. 5 million. Member of the public who wish to provide Public Comment, call 4156550051. And then press pound twice. If you have not already done so, please dial star 3to speak. A system prompt will indicate you have raised your hand. Please wait until it indicates you have been admitted and you may begin your comments. Chairwoman thank you very much. Supervisor mandelman . Thank you, chair fewer and supervisor walton for considering this ordinance. A little bit of background, on the number 2618, the San Francisco voters approved the cannabis business tax, proposition d, which imposes a tax for cannabis business activities. It is currently to go into effect on january 2021, for the retail sale of cannabis products, 2. 5 including 1 million, and 5 of gross receipts for over a 5 million. 1 up to and including a million, and 1. 5 of gross receipts over a million. The first 500,000 dollars of gross receipts are exempt from the tax under the 2018 ballot measure. Please stay with us. [please stand by] while approvals happening more clear over the last year than previously, many of the businesses have been paying rent under empty locations for years. Proposition 6 2, legalizing cannabis in california, established a 15 excise tax on Retail Cannabis sales at the state level. The California State Legislative Analysts Office completed that reducing the tax rates would expand the legal market and reduce the size of the illicit market. In addition, i. R. S. Code section 280 e disallows the business incomes for cannabis businesses. Businesses cannot write off payroll, marketing rent, utilities, et cetera, which results in a higher federal tax burden than for other industries. Now god willing, over the next year, changes may come at the state and federal level that would reduce the tax burden on cannabis businesses, allowing for a local tax to be less impactful on the businesses. This relief may allow local tax to be assessed without the need to increase retail priceses and continue to drive the illicit market. As i mentioned, in addition to spending the cannabis business tax, through december 31st, 2021, the ordinance helping reliever the ongoing tax burden on smaller cannabis businesses, by increasing the exemptions for gross receipts from the first 500,000 to the first 1 million. And the the upper range of the gross receipts that are subject to the tax of 2. 5 sales for nonretail sales from 1 million to 1. 5 million as i said. The shifting of the tax burden upward is similar to what were doing for all Small Businesses, as part of our larger

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