Good morning.

The meeting will come to order.

Welcome to the September 3rd, 2025 meeting of the budget and finance committee.

I'm Supervisor Connie Chan, Chair of the Committee.

I'm joined by Vice Chair, Supervisor Matt Dorsey, and Member Supervisor Joan Guardio.

Our clerk, it's Brent Halipa, and I would like to thank uh Colina Mendoza from SFGov TV for broadcasting this meeting.

Mr.

Clark, do you have any announcement?

Thank you, Madam Chair.

Just a friendly reminder to those in attendance to please make sure to silence all cell phones and electronic devices to prevent interruptions to our proceedings.

Should you have any documents to be included as part of the file, this should be submitted to myself, the clerk.

Public comment will be taken on each item on this agenda.

When your item of interest comes up in public comment is called, please line up to speak on the west side of the chamber to your right, my left along those curtains.

And while not required to provide public comment, we do invite you to fill out a comment card and leave them on the trade by the television to your left by the doors.

If you wish to be accurately recorded for the minutes, alternatively, you may submit public comment in writing in either of the following ways.

Email them to myself, the budget and finance committee clerk at B R E N T.

P-A, HET SFGO V.org.

If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file.

You may also send your written comments via U.S.

Postal Service to our office in City Hall at one.

Dr.

Carlton B.

Good place.

Room 244, San Francisco, California 94102.

And finally, Madam Chair, items acted upon today are expected to appear on the Board of Supervisors agenda of September 9th, unless otherwise stated.

Madam Chair.

Thank you, Mr.

Clerk.

And before we call items on the agenda today, I'd like to remind everyone that we have the budget and legislative analyst reports for items on the today's agenda.

So for those items, we will have the department presentation first, followed by the budget and legislative analyst.

Then we will take questions and public comment.

Mr.

Clark, please call item number one.

Yes, item number one is a resolution retroactively authorizing the Office of the District Attorney to accept and expend a grant in the amount of approximately 167,000 from the Superior Court of California for the grant period of September 1st, 2024 through August 31st, 2026, to support the Bern State Crisis Intervention Program activities and services.

Madam Chair.

Thank you.

And today I believe we have the San Francisco District Attorney here.

Hi, good morning, everyone.

I appreciate being scheduled for this item.

And thank you all for your service.

Today is a resolution to accept and expend the grant amount of 167,021 for the Superior Court of California, County of San Francisco to support the Bern State Crisis Intervention Program.

Uh just a little brief on the grant goals and why this is so important.

It really is a multi-agency initiative led by the superior courts that looks to reduce individuals having access to guns.

So there's a gun relinquishment program to it to prevent gun violence, in addition to improve access to treatment uh by reducing gaps and barriers for participants in mental health diversion.

So how the district attorney's office will be using these funds would be over a two-year period uh paying for a master's level mental health clinician to uh one participate in the already existing mental health diversity clinical team uh to ensure that proposed treatment plans um have the lens of public safety um on them, in addition to providing consultation to our legal team and understanding what would be the appropriate level of care for an individual as the facts are being presented.

Um so uh hopefully this will one improve um how people are able to access care and that everyone will be on the same accord earlier on, which will ideally decrease delays, get people to the right level of care, and shepherd people to where they actually need to be to support their outcomes.

And with that, I'll stop for any questions.

I just want to thank you for your service and really appreciate you bringing these items for.

Um, and so with that, I don't see any name on roster.

I don't have further questions.

Let's go to public comment on this item.

Yes, we're now opening public comment for this item number one.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

Seeing no public commons, Papa Common is now close.

Colleagues, I would like to send this item to full board with recommendation and a roll call, please.

And on that motion to forward this resolution to the full board with a positive recommendation, Vice Chair Dorsey.

Dorsey, I, Member Ingario and Guardio, I, Chair Chan.

I.

Chan, I.

We have three eyes.

The motion passes.

Mr.

Clark, please call item number two.

Yes, item number two is a resolution approving an agreement with Solaris Bus U.S.

Inc.

to procure three 40-foot and three sixty-foot battery electric transit buses from Solaris Bus US Inc., along with associated spare parts, spare tools, manuals, hand training through uh assigned options established under a procurement conducted by King County Metro, which requires anticipated expenditures of approximately 10.8 million, which includes a contract uh for an amount not to exceed how approximately 9.9 million at a term until December 19, 2027.

Effective upon approval of this resolution with options to extend it to December 19th, 2029, and responsibility for the payment of an estimated 855,000 in taxes, and to authorize the acting director of transportation to enter into amendments or modifications to the contract that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the contract or this resolution.

Madam Chair.

Thank you.

And today we have um our SFMTA here.

Hi.

Yes, uh Marley Miller here from SFMTA, the transit program delivery team, joined by Bob and Katry as well.

Um, and yeah, we are here today to um seek approval to execute this contract with Solaris bus for three 40-foot and 360 foot buses along with spare parts, tools, manuals, and training.

Um, so a bit about the background of why we need to do this procurement.

Uh, we have 112 hybrid buses right now that are reaching the end of their 12-year lifespan.

In order to keep our fleet in a state of good repair, we need to replace these vehicles before they get too old for service.

Um, we'd like to do this by uh replacing them with as many battery electric buses as possible per our zero emission vehicle policy.

Um, and right now we have the electrical infrastructure for 18 additional battery electric buses on top of the 12 pilot buses that we're currently running.

Um, so these 18 battery electric buses will join 94 hybrid buses that were previously approved, um, and and replace that 112 bus fleet.

So we're gonna buy these 18 battery buses from a mix of different manufacturers.

Because uh when we did our 40-foot bus pilot program, um, one of the key things we learned from this experience was that we need to be able to buy buses from multiple companies.

Um, it helps us insulate ourselves from the uh uncertainty and the volatility in the transit market, which has been pretty extreme lately, um, and it helps us uh drive competition, reduce prices, and get the best possible value for our dollar.

So right now, um, there's only two major players in the transit bus market in North America, and that's New Flyer, who we do a lot of business with, and Gillig, our neighbors over in Livermore.

Um, and this is where Solaris comes in.

They're the largest zero emission bus manufacturer in Europe, and right now they're seeking to establish a presence in the US market, so that gives us a good opportunity to get in on the ground floor with a uh emerging US manufacturer when they open a facility here in the United States.

So the 18 buses um right now we're seeking approval for the 340 foot and 360 foot battery electric buses from Solaris.

Um, these buses will be made in Poland, but they'll be built to U.S.

specifications, um, and we'll be using local funds to pay for these buses.

Uh they'll join uh four 40 foot and 360 foot buses from New Flyer that were previously approved earlier this year.

Um, and by the end of this year, we hope to uh seek approval for five 40-foot gillag buses as well, rounding out the 18.

So the contract.

Um, aside from the three 340-foot and 360 foot buses, we have an allowance for spare parts, tools, manuals, and training from Solaris bus.

The amount is about 9.96 million, but with tax, we anticipate that our expenditures will be slightly over 10 million dollars.

And the term should expire December 19th, 2027, unless we extend it with options.

Here's a breakdown of our uh budget and funding sources.

The bus contract is about 9.96 million, but we also have some associated costs.

So this is everything from the technical spec development, the contracting, all the early stages of the work, testing and auditing the buses, and then supporting the vehicles once they've been delivered and get them through their warranty period.

The total project cost is estimated to be not to exceed 13.94 million.

And like I said, these buses are built in Poland, so we can't use federal funds to pay for them, not until Solaris opens a manufacturing center in the U.S.

So we will be using primarily Prop L and RM3 funding.

It's about 97% of the total project cost.

And then there's a small amount of LCFS and general funds also available to pay for this project.

We've had a lot of questions about tariffs.

Since these buses are produced overseas, it's an important consideration.

We've been working with our city attorney's office to add options to the contract to adjust the value or the amount of buses that we buy, or give us the option to cancel contract outright if the tariff situation proves to be untenable and the value we get from paying tariffs on buses is just not worth it.

Of course, any amount if we increase any value or any uh amount of the contract, we will have to go through contract modification.

Lastly, uh kind of a why on Solaris.

So, like I said, Solaris is planning to be an up and coming US bus manufacturer.

Um they produce trolley buses, which is important for us.

Right now only New Flyer makes trolley buses and they could stop producing them at any time.

Um Solaris uh is the largest U.S.

or sorry, the largest European zero emission bus manufacturer, and uh their expertise is gonna do well for us here in the United States.

Um, they also make 60-foot buses, which currently only New Flyer produces in North America, and New Flyer knows they're the only game in town, and their buses are accordingly expensive.

Um so again, per our zero emission vehicle policy.

Going forward, we intend to produce uh to procure buses from as many or from multiple manufacturers, and this will help us uh increase competition, reduce costs, and overall deliver better value for the S of MTA.

Thank you.

Thank you.

Good morning, Supervisors Nick Bernard from the budget legislative analyst office.

Item two is a resolution that would authorize a contract between MTA and Solaris, a bus manufacturer, uh, to allow MTA to buy six battery electric buses.

This is a two-year contract with an optional extension for uh of additional two years and a total cost of ten point eight million dollars.

Um this is the procurement of the this contract uh piggybacked off the procurement results of um King County and uh Washington State.

That agreement uh was a sole source agreement, and then the director of transportation determined that that sole source agreement uh uh was a viable option for the city.

We know in our report that these buses are four to eighteen percent less expensive than the buses in the new flyer contract that was recently approved by the board that is also providing MTA electric buses.

Um, and so we think those costs are reasonable.

We summarize the cost of the contract on page four of our report and the funding sources on page five.

Uh the contract costs are primarily funded by sales tax revenue dedicated to transportation and bridge toll revenues.

We recommend approval of item two.

Thank you.

I mean, I I concur with the sentiment absolutely that let's make sure that we can remain competitive in the way that we procure our vehicles and uh and really uh especially if we have to do all 112, like let's be thoughtful about it.

Uh, what I do have questions though, and you know, and I'm definitely open to the fact that we have a we're trying to get ahead uh to think about a potential um uh local manufacturers or uh a U.S.

manual, well, a European partners or European companies that could be uh having a US manufacturer and uh production here in the United States.

Totally think that that is a right approach.

However, the question then now comes to this sort of this long-term also vision about both on maintenance and also parts.

Uh you now have three different companies.

That's totally fine.

Again, you know, I I I encourage and continue to support that approach of how do we remain competitive uh in the way that we procure vehicles.

Then then comes to the warrantees and comes to the maintenance part and parts.

Now you have three different manufacturers.

How are you what is your approach uh to make sure also then the back end of it uh is uh remain also competitive and that is affordable for long-term maintenance.

Thank you for the question.

We really appreciate the opportunity.

Um it's a great questions.

That that is one of the challenge of procuring buses for multiple manufacturers is that you have to store parts for three different manufacturers.

But what we've learned and the lessons learned from like 10 years ago when we first went out with a procurement of 900 buses, we got one bid and it was new flyer, and we're learning that what we're doing a midlife overhaul, the cost are outrageous because the manufacturer know that we are only procuring from the vehicles.

So if you look at the pros and cons, uh this definitely outweighs uh that uh one of the reasons I think uh the staff mentioned is that we're paying almost three hundred and fifty thousand dollars less for the sixty-foot buses from Solares as compared to New Flyer.

Um and the other thing is the support that they can provide uh is because we have 900 buses uh from uh new flyer, we want to make sure we diversify that as well and not put all our eggs in one basket.

It is a challenge to uh store parts, but our our mechanics are used to working on different propulsion.

We have uh buses from five different manufacturers currently uh and the buses are very similar to work on.

Uh one advantage we have is that our mechanics are already trained to work on battery electric buses since we've been working on hybrid buses, so that transition is quite easy as well.

Vice Chair Dorsey.

Thank you.

I don't have any questions, but I did just want to express I do appreciate that um the importance of trying to make competitive bidding more competitive and looking for others.

So um I just hope I guess I'm still worried about the the tariffs.

I know that this is this adds a level of uncertainty as so uh the as I feel like the federal government comes up in every uh budget meeting of some level of uncertainty, and this is another one, but um I just appreciate the um pursuing the uh efforts to make our competitive bidding more competitive.

I think it's better for our taxpayers.

Thank you.

Uh are there is it's a a is there a uniform sort of a manufacturing around just the general parts like you know, tires or just overall that really also allow you to have easy access um to parts that uh better for better maintenance in the long term.

Yeah, so uh other man, for example, we currently buy new flower parts from Gilly.

So because they stock the same parts and it's a really small industry, so they both carry each other parts, so we're able to do that as well.

And we don't expect expect this to be different for Solaris as well.

Wonderful.

I mean, I mean from a very lay-person perspective.

It's like there's Android and there's a there's an iPhone and you should be able to use SBC charger the same.

So um I I that's a very lay person perspective, and I I certainly hope that's the case uh as you continue to approach it.

Thank you so much for the effort.

I really do appreciate that um that it's it's a bit more di you know uh uh innovative and it's different approach than what you traditionally been doing, and I know that it takes work, it takes um thoughtfulness and to take work to do this, and we really appreciate that.

Thank you so much for coming before us.

And uh so with that, let's go to public comment on this item.

Yes, we're now opening public comment for this item number two.

If we have any members of the public who should address uh address this committee, Madam Chair, we have no speakers.

See no public comments.

Public comment is now closed.

Colleagues, I would like to uh move this item forward with uh to full board with recommendation and a roll call, please.

And on that motion to forward to the full board to the positive recommendation, Vice Chair Dorsey, and Dorsey I, Member Ingario and Guardio, I, Chair Chan.

Aye.

Chan, I.

We have three eyes.

The motion passes.

Yes, item number three is an ordinance execute authorizing the execution and delivery from time to time of tax-exempt or taxable certificates of participation in one or more series, uh, evidencing and representing an aggregate principal amount of not to exceed 65 million to finance and refinance certain capital improvement projects within the city and county contained in the capital plan, and generally consisting of street resurfacing and curb ramp improvements.

Approving the form of a supplement to trust agreement between the city and U.S.

bank trust company.

Has successor and interest to the U.S.

Bank National Association as trustee, approving respective forms of a supplement to property and project lease each between the city and the trustee for the lease to the trustee and lease back to the city of all or a portion of certain real property and improvements owned by the city, together with any property determined by the city's director of public finance to be made subject to the lease and lease back arrangements, approving the form of an official notice of sale and notice of intention to sell certificates, approving the form of an official statement in preliminary and final form, and approving the form of a purchase contract between the city and one or more initial purchasers of the certificates, approving the form of a continuing disclosure certificate, granting general authority to city officials to take necessary actions in connection with the authorization sale, execution, and delivery of the certificates, approving modifications to documents and ratifying previous actions taken in connection therewith.

Madam Chair.

Thank you, Mr.

Clerk.

And with that, we have our uh Office of Public Finance here.

Thank you.

Good morning, supervisors.

My name is Grant Carson.

I'm a debt capital market specialist in the controller's office of public finance.

Pleasure to be speaking here with you this morning.

The item before you today is an ordinance which which, if approved, would authorize the issuance of not to exceed 65 million in certificates of participation or COPs to finance 50 million in project costs for street resurfacing and curb ramp improvements in fiscal fiscal 26 and 27.

I'll cover the first part of the presentation, focusing on structure and financing terms for the COPs, and then I'll pass it off to my colleague Paul Baradas at the Department of Public Works to go a little more in detail on the street resurfacing and curb ramp programs.

First, I'd like to note the financing proceeds for the proposed COPs were appropriated in the adopted budget.

So no supplementary appropriation ordinance is required here, just the COP authorizing ordinance.

The table here has the breakdown for the proposed project funds, uh 25 million in fiscal 26 and additional 25 million in fiscal 27.

In both years, the split is 23 million for street resurfacing and 2 million for curb ramps.

This page is a general summary of the financing terms for the transaction.

I'll start on the right, which has the aggregate sources and uses, as it's included in the AAO.

Uh top right, we have the not to exceed power amount of 65 million, which is sufficient to cover 50 million in project funds, 100,000 in the CSA audit fee, about 2.1 million in capitalized interest, basically a proxy for the cost of using our commercial paper program as an interim financing tool, 5.7 million approximately for debt service reserve fund, and then about two million for delivery date expenses, split 1.6 million for cost of issuance, primary items there are rating agency fees, municipal advisor, bond and disclosure council fees, etc.

And about 420,000 for underwriters discounts.

And then as we typically do on new money COPs, we include a reserve for market uncertainty to ensure that we can finance the transaction even if there's an unforeseen increase in rates.

Um that reserved for market uncertainty about 5.1 million brings us to our not to not to exceed paramount of 65 million.

Moving to the top left, we have our good faith estimate as provided by our municipal advisor, KN public finance, assume a 20-year final term ending on April 1, 2047, a true interest cost or TIC for the transaction of 6.84%, results in total debt service of about 111 million or about 5.5 million in annual debt service.

And lastly, moving to the bottom left, the like the rest of the COPs issued by the city, this would be a lease-lease back agreement wherein the city leases certain city-owned property to a trustee and then pays to lease back that same property.

We were a number of previously issued and authorized COPs secured by a group of assets.

Current pool of city assets on the master lease is the Laguna Honda Hospital Campus, San Bruno Jail Complex, and one South Van Ness.

Uh, however, we can add and substitute assets as needed.

And then for the financing timeline here before you on September 3rd, assuming positive recommendation, uh, two readings before the board on September 9th and 16th.

If the ordinance is approved, we could then issue the COP's next calendar year.

With that, I'll pass it off to Paul.

Good morning, supervisors.

Paul Baradis with San Francisco Public Works, project manager with the street resurfacing program.

The street resurfacing program on the left side here.

Um, to maintain current street conditions, the program requires $88 million annually.

However, only approximately $70 million per year has been identified.

Certificates of participation account for 36% of identified funding, making them a major contributor to the program.

On the right side here, the curb grant program and ADA compliance by 2035.

Achieving ADA compliance by 2035 requires $29 million annually.

However, only $5 million per year in funding has been identified so far through fiscal year 26-27.

COPs again make up a significant portion, approximately 25% of the curb rent funding.

The program's current goal is to maintain or increase the citywide payment condition index or PCI score of 75.

PCI is measured on a scale from zero to 100, with 100 representing a brand new street.

Several factors are considered when planning and implementing street resurfacing projects, including the PCI score, multimodal routes, project readiness and coordination with city agencies and utility companies, equitable distribution of projects across the city and all districts and neighborhoods, inquiries and funding.

Street resurfacing program funding.

On this chart, the vertical bars show the different types of funding the program has received each year.

The dots above the bars indicate the citywide payment condition index or PCI score.

On the first bar, in fiscal year 21-22, the total funding received was $79.9 million, and the citywide PCI was $74.

If you move one bar to the right in fiscal year 22-23, funding slightly decreased to $77.2 million, with $30 million coming from certificates of participation and the PCI improved to $75.

In fiscal year 24, 25, and 26, COPs are anticipated to be approximately 23 million of the program's annual funding.

So COPs are a significant portion of the program's funding.

Moving to the CurbRamp program.

The COPREMP program goal is to have 100% coverage by 2035.

If the CurbRAM program were fully funded at 20 million dollars per year, it could deliver around 400 curb ramps annually.

This estimate includes the high-cost ramps built over basements.

With the current funding level of approximately $5 million a year, of which $2 million is COPs, the program can only deliver approximately $175 curb ramps per year.

This funding gap increases the backlog and poses risks, such as trip and fall liabilities, accessibility challenges, and the public safety.

This chart shows two key pieces of information.

The vertical bars represent the annual funding received by the program broken down by fund source, and the dots represent the number of curve ramps delivered each year.

So for example, on the first bar in fiscal year 2122, the program had a budget of 12.2 million, including 4 million of COPs, and 142 curb ramps were delivered that year.

If you move one bar to the right in fiscal year 2223, the budget decreased to nine million with three million coming from COPs, and the program was able to deliver 182 curb ramps.

Similar to the street resurfacing program, the number of curb ramps delivered in any given year often reflects funding from previous years due to the typical two-year time frame for design and construction.

Refer to this delay, slight delay as a rollover.

Program outcomes supported by the COPs.

COPs are a critical and substantial funding source for both the street resurfacing and curb ramp programs.

Timely street resurfacing helps prevent cracking and deterioration, reducing long-term maintenance needs.

And installing curbs is essential to staying on track for the ADA compliance by 2035.

Both programs also emphasize geographic equity, aiming to ensure that projects are fairly distributed across all neighborhoods in San Francisco.

As the city continues to grow, so does the infrastructure network.

Over the past few years, nearly 100 blocks in areas such as Mission Bay, Hearns Point Shipyard, and Treasure Island have been accepted and transferred to San Francisco Public Works for maintenance, with many more expected as development in these neighborhoods progresses.

Thank you.

And today I'm joined by colleagues who are uh available to help answer questions you may have.

Thank you.

Item three is an ordinance that approves up to $65 million in certificate or participation debt and approves documents associated with that transaction.

The proceeds uh for this debt is already um included in the budget that you approved uh for this year and next year.

According to the Office of Public Finance, uh the average annual debt service over the next 20 years is about 5.5 million dollars, which amounts to 110.7 million dollars over the life of the debt.

Uh the the funding will be used to fund um the street resurfacing program at public works and also provide funding for uh the curb ramp replacement program.

On pages 12 and 13 of our report, we discuss um the funding sources and funding levels of those programs and note that they are below the amount recommended by the capital plan to help the city maintain a PCI score of 75 and to address uh sidewalk ramps.

Um, you know, in a manner that it makes them accessible citywide.

Uh we also note that um the city, due to its financial condition has turned from using the general fund pay-go funding for this program to certificates of participation uh to reduce kind of short-term pressure on the general fund.

This um helps reduce general fund funding to these programs, uh, but it is over the long term more expensive due to issuance and financing costs.

Uh, we recommend approval of item three.

Thank you.

I mean, I think this is let's start uh let's start the questions for the Department of Public Works first.

Um, or maybe this is also for the Office of Public Finance.

I mean, you know, in last year we have approved for the bond dollars, which is $390 million, out of which about $60 million.

Now I'm looking at proofs here, but um, and out of which around $60 million is really for street, you know, safety improvements.

Uh, it does mention sidewalk, it's only because also based on your presentation, too.

So, where are we lending with that 60 million dollars?

I know it's vision zero and quick bill and other stuff, but I mean, as you have indicated, sidewalk and hardscape, it's really also part of that uh as well.

So how do you uh is it on top of what we're gonna do with that sixty million dollars, and therefore now we're going to the COPs.

Uh what's happening here?

Uh good morning uh members of the board, Bruce Robertson, chief financial officer for San Francisco Public Works.

Uh it's a very good question.

So I'll answer it in a couple different parts.

On the healthy and vibrant bond that was passed by the voters, there was money identified for streetscape projects, and working collaboratively with Capital Planning Committee, the MTA, as well as public works.

We identified some specific projects that would be more than just paving, there would be a full rehabilitation of an entire street.

So some of those projects, a lot of those are in the Silma District.

Uh some of those are the 11th Street Project, the Fifth Street Project, and then the Central Embarcadero project.

So those are more than just paving, those will have you know overall elements of vision zero that we're working collaboratively with the MTA.

There is money also identified for redoing mission street, and so that's a big chunk of that money as well.

So it is more than just paving for those projects.

It's you know, all of the enhancements for pedestrian safety and bicyclist safety as well.

This money, the additional money for the street resurfacing program and the curb rent program, is really on top of that money.

And this is truly just for street resurfacing.

But I would add that a lot of this money gets combined with joint projects with the PUC.

Would there be doing underground sewer work for water mains or sewer lines, and then above ground incorporating some MTA elements as well.

So this is very much on top of that money, and as the BOA identified, it is a shift from general fund using COPs, and you do pay roughly that five million dollars in annual debt service.

But I would just add that there are other benefits in using this money and using COPs without this funding that was included in the budget and approved by the mayor and the members of the board, we would see a significant deterioration in the maintenance.

So one of the things that I'll highlight, because this is a uh really important stat that we track a street resurfacing, a simple grind and paper, slurry seal can go from thirty to fifty thousand dollars.

And that's doing the block is as Mr.

Barada said at the right time.

If it deteriorates, it could cost potentially up to a million dollars a block.

So really making sure we have this money really saves money not just in the deterioration of the street, but as well as potential escalation costs for any of the materials we need, asphalt, which you know will be impacted by any potential tariffs or other cost increases.

So it really is a big benefit of having the certificates of participation for these critical projects.

Thank you.

And then I am my next question is really for the Office of Public Finance.

Thank you so much for answering that question.

That that helps at least understand what the projects uh what the monies are covering for for which area and project.

This is a question that I have is that you know, uh, during May, the um controller's office issues sort of the update of the certificate of participation projection and uh indicated that roughly about 54 million dollars additional uh that is can be made available.

So I think my question is so today uh with this uh COPs, are we actually tapping into that additional availability?

Yes, this was sized as yeah, so 54 million, and so the CPC elected to use 50 million of that capacity for this COP.

So we're now uh we're we're got it.

So we're reaching that capacity by issuing based on that analysis at that time, yeah.

Yes, thank you.

Um good.

I mean, I I think I think I not you know, I I mean not the most ideal circumstance to use the COPs for it, but I think that's a good use.

Like if we have to use the COPs, this is this would be something that I say.

Let's let's it's it's not this fancy, you know, or like this nice to have projects, but it's I in my opinion is necessary, you know, for safety and liability.

So uh thank you so much for your work on this.

I just wanted to get clarification on that.

I don't see any name on the roster.

I don't have additional questions.

Thank you so much for all your work.

Uh let's go to public comment on this item.

Yes, right now opening public comment for this item number three.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

I see uh seeing no public commons, uh, public comments now closed.

Colleagues, I would like to send this item to full board with recommendation.

Um roll call, please.

And on that motion to forward to the full board to the positive recommendation, Vice Chair Dorsey.

And Dorsey, I, Member and Guardio and Guardio.

Uh Chair Chan.

Aye.

Chan I.

We have three ayes.

The motion passes.

Um, Clark, please call item number four.

Yes, item number four is a resolution approving and authorizing the director of property on behalf of the city and county to lease approximately 4,000 square feet of real property for the public defender's office located at eight boardman place for a five-year term with two five-year options to extend, had 95% of fair market value, had an annual base rent of 144,000, 84,000 in the first year of the lease term from Steel Arc LLC.

Effective upon approval of this resolution and the lease term to commence upon completion of tenant improvements.

Rent payments will begin three months after lease commencement, and to authorize the director of property to enter into any additions, amendments, or other modifications to the lease that do not otherwise materially increase the obligations nor liabilities of the city to effectuate the purposes of the lease or this resolution.

Madam Chair.

Thank you.

And uh we have Rio Este here.

Good morning, supervisors.

Low Supervisor Chan, Supervisor Dorsey, Supervisor Ingario.

My name is Jeff Case.

I'm the transaction team's manager for the real estate division.

I want to mention that I have uh Liz Lynn Lacost here, Chief of Staff from the Pem Public Defender's Office.

If you have any questions regarding the programming or the use that's in here, the this is we're seeking approval of a lease of five years for eight boardman place.

Um as background, the um the public defender's office moved into 5557 street when the staff count was 150.

Over the last 11 years, an additional 95 employees were hired with growing caseloads and new programs.

Uh we've reached a point where overcrowding conditions are now compromising the delivery of the public defender's office essential services.

Uh, we have some examples.

We have uh four attorneys sharing a single private office.

We have three employees that are working out of a converted janitorial closet.

So we've reached a point where it's starting to impact operations and the city's ability to function.

We are excuse me, I jumped ahead here.

The field terms that we're looking at here are we have hold on up, going back.

My apologies.

The premises are 4,009 square feet.

It will accommodate 30 employees.

It's uh essentially a block away from the current location at 5557th Street.

This will be supplemental, it'll house 30 employees.

The FTE to square footage is 137, which is still fairly tight.

We actually explored approximately nine different locations, and uh narrowed it down, toured it with the public defender's office, narrowed it down to three locations, then requested uh our um requested proposals from these landlords and selected this one due to its uh superior layout and economic conditions that are uh here.

So we would be annual base rent would be $35.92 cents per square foot or $144,000 per year, increasing six thousand dollars per year thereafter.

The term we're looking for a five-year lease with two additional terms of five years, each of the extension options would be at 95% of fair market value.

In addition to this, that the landlord has agreed at uh their cost to build out private offices in the uh and deliver tenant improvements, the existing furniture um can be adapted to the public defenders uh use, so there's no need for additional expenses related to that.

As you can see, it's uh its location is pretty premier for directly across the street from the hall of justice around the corner from the offices that are there.

And with that, if you have any questions, um, yeah, I mean I do.

I I think that um for the long term for the public defender's office, you know, noted that uh be it the district attorney's office, even the police department, they have like now they they have a different location a little bit further away from the hall of justice, um, just in the eventual that we know that the hall justice is going to it's a problem.

It's a problem, you know, you know, problematic building.

We should either we should do something with it.

I'm not gonna say what I think that what we should do, but I know that we need to do something with it, and it's potentially like even relocation of the court and and all that.

What is the plan for the public defender's office for the long term to support to provide the support that they need and both like I I am supportive of the uh expansion and clearly it's been 11 years and it it makes sense, but still they're like divided, like meaning that the location wise, they're not together, you know, in the same space, even though it's proximity is very close.

Um, you know, of course, like that's that's that's still uh it's good, but ideally is to really have a uh a good uh a good working environments for the for the public for our attorneys, you know, uh working on on this job.

Um but ideally I think that you know it's still in the proximity of the courts, uh, you know, be at the future, especially for a future location that is no longer there.

So is there a conversation and plan in providing that support and and what could that what could that look like?

Yeah, no, absolutely, and and you know that's a conversation that's being had with the with this, you know, with the state because we have the conversation about where the court is going to be located, and that sort of drives a lot of where our future um you know decisions are going to be made.

And because we don't have control over that conversation completely, but we're participating in those, we're in regular meetings with them every three weeks to try to figure out where we're going to reach a uh a decision on how we can move forward both with an antiquated court system and also with the hall of justice and and how it needs to be rebuilt.

So, for the external leases that are impacted by this, we're seeking flexibility to be able to, you know, um to limit the terms that we're going into.

We know that any future project is going to take years to develop.

Um that's not gonna happen overnight.

So we think that a five-year term for this sort of situation makes sense.

Um we can then time those with what's gonna happen in the future once a decision has been made with the city, county, and the state.

Yeah, and maybe this is a questions for the public defender's office, and but I'm absolutely also for the real estate.

It's whatever how you want to answer it.

You know, I think that we all know that be it purchasing your own building or be it um when you move to a new place, and you do need to have uh improvements uh and and just the moving costs uh so to speak, which thank you.

I think you you always help to calculate that.

But as far as I'm concerned, and I understand it for the public defender's budget, uh, at least for the last two fiscal years, I I don't I don't see that there is a conversation about what what would be in apart from just the existing operation to be a capital investments and improvements.

Um, so what what has those conversations looked like?

And okay?

Hi, hi supervisors.

Um, listen to cost chief of staff of the public defender's office.

Um we we have had some preliminary conversations, I think, with the board with um you with the mayor's office.

Um we are we were very pleased that the mayor's office was at least able to give us some funding to get this eight boardman place.

I think to the mayor's office for that, um, and working with the real estate division.

There were other properties that we looked at um that are um across the street from where we are that bigger and larger that might be able to staff the entirety of the downtown office, which is a five five five seventh street office, however, um working within the city capacity to support um this ask, um, and where our current needs are um and what we were able to bring um into that um extended budget um boardman is what we were you know what we could all do at this time.

Um ideally, yes, we would love to move into different you know, bigger space.

Um we have identified several buildings, um, and we're hoping to work with um, you know, the board and the mayor's office in order to do so, um, and hoping that those um properties are still under market when we when we're everybody's ready to help us with that expansion.

And I think that you made a very important point is that like I believe the market uh can be uh to our advantage right now, especially for purchasing the building.

And I well, I assume well, unless the market see all crumbles tomorrow, which is could be happening, but you know, under Trump.

But uh I am going to wanted to say, you know, it's an investment for the public defender's office to actually own the space and have that space, and I'm in support of that long-term conversation to make sure that you know public defender uh no matter what the court moves, and and I I again like we want to be strategic and be thoughtful about that, that you actually have uh easier access to the courts and and directly, and so so is your clients, right?

And then the people that you need of the defense really also be able to have those access uh and safety and all that.

Um so uh I look forward to hearing back uh more and an update about what that collaboration looks like and uh what timing of that would look like.

Um, but thank you so much for your work on that.

Thank you, appreciate the conversation.

Thanks.

Thank you.

Uh I don't see any other name on the roster.

Uh we I don't have any further question.

Uh let's go to public comment on this item.

Yes, if we have any members of the public have joined us today who wish to address this committee regarding this item number four.

This is your opportunity.

Madam Chair, we have no speakers.

Seeing no public comments, public comments now closed.

Colleagues, I would like to move this item to full board with recommendation and a roll call piece.

And on that motion to forward this resolution to the full board to the positive recommendation.

Vice Chair Dorsey.

Dorsey, I member on Guardio, and Guardio, I chair Chan.

Aye, Chan I.

We have three ayes.

The motion passes.

Okay, Mr.

Clerk, please call item number five.

Yes, item number five is a resolution authorizing and approving the director of property to execute a lease agreement for a term of five years with three five-year pardon options to extend to commence upon approval of this resolution through July 31st, 2029, with NPU Inc.

for the continued use of the old mint located at 88 Fifth Street, paying as participation rent, 10% of the gross monthly revenue generated from their use of the old mint, and authorizing the director property to execute any amendments or modifications to the lease, including exercising options to extend the agreement term, make certain modifications and take certain actions that did not materially increase the obligations nor liabilities to the city, and do not materially decrease the benefits to the city and are necessary to effectuate the purposes of the lease or this resolution.

Madam Chair.

Thank you, Mr.

Clerk.

And again, we have Rio Este here.

Hi, once again.

Hi, good morning, Chair King, Supervisor Dorsey, Supervisor and Guardio, uh Jeff C's transaction team manager with the real estate division, um, bringing you the old mint lease.

Um before I start my presentation, I want to um say that I have some amendments I'd like to read into the records on the resolution, uh, at the conclusion of this presentation.

So the old mint was uh uh constructed in 1874, operated as an old mint until 1932.

The city acquired it um in the early 2000s, and uh the real estate division working with the Office of Economic and Workforce Development issued a request for proposals to uh for an interim use.

And we entered it into an agreement with NPU that lease was executed in March of 2020 for their use of the space as a public venue.

As you can imagine, the shelter in place order was issued a month later, and the use of the interim, the interim use was interrupted during this time.

Before I go into the deal points of that, though, I'd like to give you an update or have uh we have John Lau here with the Office of Economic and Workforce Development to update you in the long-term project, not what this interim use is for, but for where this building is intended to go in the future.

Good morning, Madam Chair and members of the committee.

John Lau, OEWD staff.

Just here to this is not before you today, obviously, the lease is, but provide a little context.

An important puzzle piece to the larger efforts around the mint.

Excuse me.

So in about 2015, then Mayor Edley directed our group within OEWD to sort of project manage the larger restoration efforts around the mint, pulling in other departments as need be.

So we led a very fruitful due diligence process from about 2015 to 2020 with our then partner of the California Historical Society, an effort that produced a great number of technical studies and reports, very useful still, including a full seismic evaluation of the building.

So we learned a great deal from that again, very fruitful effort.

What we're doing now is polishing off that uh concept plan and looking at how to phase what is a very significant capital project, obviously, perhaps uh nearing 300 million dollars in total.

So uh it's uh proven obviously challenging to figure out how to uh build that capital stack.

Um what we're we're now looking at with DPW is how we might be able to phase that uh capital project uh with potentially investing in city dollars first, and that's a key distinction from the model that we had been uh exploring uh to this point.

So we're we're just engaging in that work now, and it'll take place over the next uh few months, but this interim lease again has been said uh is an important piece to helping to keep the facility uh active and maintain as best we can until we have a better idea of how to approach that significant capital project.

Thank you, John.

And I keep doing this.

All right, so we are seeking approval of a four-year lease with three five-year options to extend.

And just as I I spoke about with the public defender's office, the key here is flexibility.

The there are three five-year options, but each of those options are subject to the approval by the city.

We can we can disapprove any one of them when they exercise them.

We also have and we inserted a termination clause that is uh we can issue at any time should we be able to move forward with the larger project that uh OEWD just spoke about.

So the economics though are that we have 10% of the monthly gross receipts we will receive.

We are um we are looking to forgive 163,000 in past due rent that's owed from the current tenant.

And in exchange for that, we're looking to for the tenant to perform capital improvements valued at 477,000 dollars.

These improvements are all ones that are part of the bigger package that needs to go forward.

Um the tenant pays all expenses, utilities, taxes, assessments, maintenance, and security, that's it.

Okay.

Thank you.

Item five.

This is a res.

So you I'm sorry, I was supposed to read some uh amendments into the we'll come back to you.

Let's let's go with that.

I have questions for you.

Item five is a resolution that approves a new lease between the city and uh non plus ultra incorporated to continue to use the old mint space um to host events.

The lease has an initial term through July 2029, and then three five-year option, three five year options to extend.

Um there is no base rent, but the the tenant would pay the city 10% of um their gross revenues, and the city could uh terminate the lease with one year notice.

Uh this is a interim use uh for a project that began in the early 2000s, and this is another 19-year lease.

Um the original rehabilitation of this site is delayed because the partner is no longer in business.

Uh we describe the uh fiscal impact on pages 19 18 and 19 of our report.

You'll see over the initial term, this will generate about $700,000 in rent to the city.

That's a general fund revenue.

Uh, and that's based on bookings through 2026 and then a projection of of those revenues uh for the remaining initial term uh through July 2029.

The lease also forgives back rent that was um not paid during COVID of about 163,000, but does require the tenant to put in 477,000 dollars of tenant improvements on the site.

The lease also transfers responsibility of maintaining the site from the city uh to the tenant, and so those future costs will also be NPUs.

Uh we know as a policy consideration, the administrative code requires the real estate division to competitively award leases.

Uh they didn't do that in this case uh because the tenants in good standing, because of the kind of particulars of the relationship with NPU and their history with the building, um, and they didn't think, and because the last RFP process that occurred for the prior lease only resulted in one respondent.

Um nevertheless, that is the policy that's been established by the Board of Supervisors.

Um, and they didn't follow that local law, and they don't have a policy um in place uh to kind of operationalize that requirement in chapter 23.

Um, so we're recommending that the real estate division establish a policy to competitively award leases consistent with administrative code chapter 23.

Uh we're also recommending that you accept real estate's uh amendment of this resolution to correctly state the initial term of the lease, which is not correct in the version one of the legislation.

Thank you.

Uh you want to go ahead and read the amendments out uh out loud and uh before I start some of my questions.

Certainly.

Thank you.

So the um in the title after the uh it says old mint state uh old United States mint.

Please add participation rent of 10% of gross monthly revenue on line four.

Uh, the please strike the word five and insert the word four.

Then on page three, line one, strike the word five, insert the word four, and on line seven, the past due rent owed to the city should be the amount should be one hundred and sixty-three thousand, not one hundred and sixty thousand.

We've provided the clerk with a red line of these change amendments.

Thank you.

Um could we go back a little bit to kind of explain why this company non plus outra owes back rank?

Are they what?

That they owe the rent, the back rent.

Oh, um, certainly.

Um the the activation was as a public venue.

That's the primary revenue stream that you get when you execute a lease in March of 2020, and then you immediately go into a pandemic.

We are required to enforce the lease.

We don't it's would be a gift of public funds to do anything otherwise.

Um they were not able to hold any events or generate any revenue, so they went they fell into arrears.

Do they have a contract with uh with other city departments?

They do.

Um my understanding is they have a contract at the Palace of Fine Arts with the Recreation and Parks Department.

I checked in with Dana Ketchum, director of property there.

She says that they're in good standing with them.

In terms of they don't owe any back rent at Palace of Fine Art.

I I didn't, uh all I got was that they were in good standing.

So are you aware that they were uh there was a claim filed against them in 2021?

Against non-plus outra by uh employees claiming that non-plus outra, you know, file unemployment claim on behalf of their staff and issue them as checks, and then later uh found uh that was the case by their own employees and the employees then file lawsuits against them.

Is that does that ring about to you?

No, no, that that doesn't.

It does for me.

Okay, it does I think for the company and uh but but it seems like there's no record of what happened to that lawsuit.

That yeah, it doesn't pertain to it's not anything that would come up in the real estate transaction itself.

Um I believe we have some.

So but we I we have um somebody here from NPU, so Jordan can uh answer that question specifically.

Please state your first name, last name, and your title with the organization.

Of course, Jordan Langer, uh I'm the president and CEO of non-plus Ultra and PU Inc.

So in answer to your question specific to that employee lawsuit, um, in typical press and media that it does not give the full story.

Um the the claimant Ryan Melchiano was actually my best friend, and it was far more personal than it was an attack on my company.

So if you look at and you do it is completely dismissed.

We were checked in by the government, by the all sorts of different entities, and and nothing was found to be done wrong whatsoever.

It was strictly a way for us to be able to maintain as many employees as we possibly could during a period of time whereas uh an events company, a mass gathering company, we were not able to generate a penny.

So over that period of time, I'm really really actually quite proud to say that we were able to maintain every single employee at NPU that wanted to be with the company.

Um Mr.

Melchiano, my mom taught me something as a at a very young age that if you don't have anything nice to say, you ought not say anything at all.

And I can I can leave it at that.

Unfortunately, um decisions were made on his part that that really affected me, my family, and my company, and I'm glad that he's not part of it anymore.

Thank you.

And uh actually, I think then back to the city.

Thank you for the explanation.

Of course.

Uh, right before we move on, Doug.

Uh, will you then?

I mean, I think that we're entering a contract.

It was a no-bit contract, you know.

Um, but we appreciate the work uh that allowed you allow having you there to continue before the city can do a long-term uh uh planning around that area uh or for the for the structure.

Uh will it will you be uh able to provide an affidavit just to be attached to this agreement explaining what you just explain on a record, absolutely and just allow us to have that as a document.

Uh again, you know, and we can also share the dismissed court records.

We can share the the canceled he had to sign a all of the stuff.

We appreciate that, like you know, as a just a liability to the city, we appreciate you providing that document.

And I'm really really quite grateful to be stewards of such incredibly unique San Francisco properties from the Palace of Fine Arts, as was mentioned, and the old San Francisco Mint.

A quick thing, last year, non-plus ultra was responsible for bringing in 156 million dollars of economic impact to the city and county of San Francisco.

So while we were it was a absolute brutal struggle for 2020, 2021.

Um again, as proud as I am about keeping staff, I'm that much more proud that we are at the forefront of bringing San Francisco back and at the entertainment side of it really with Portola coming up here in a couple weeks, some big stuff out in Golden Gate Park.

Um, very, very, very grateful that the mint hopefully will be part of it to continue to support art entertainment culture here in San Francisco.

And Supervisor Dorsey, thank you for sponsoring this as well.

Thank you.

Thank you.

Jeff, when can we have that affidavit ready?

We can have it by next week, or sooner if you like.

I think let's have it before because it will appear at the full board on September 9.

Um, and I would really appreciate it that we have to absolutely prior to that uh to go with this.

Uh Vice Chair Dorsey.

Thank you, Chair Chan.

I just wanted to ask, just because I have some residents in the neighborhood who are gonna have questions about um the security and those questions that go go for the city as much as for um the the operation.

But if we would could I ask you to elaborate on what the security arrangements are going to be as part of the action, absolutely.

I'll actually bring the operator back up here to talk about it since that's one of the expenses that he needs to cover that's in there.

Thank you again, Jordan Langer, uh president and CEO of NPU.

The security at that location is is intense.

Uh we have the the number one thing that we do is activation.

So activation is a very, very clear crime prevention.

So the more stuff, the more activation, the more people that we have coming into the space, the better it is.

Um on top of that, we also have two full-time maintenance utility folks that fix the broken windows, abate the graffiti.

Um, and as I'm sure you can imagine with the bus stop right there being at mission and fifth, that is a every single day, oftentimes twice a day sort of endeavor.

On top of that, we're also pressure washing at least three times a week.

So while that's not necessarily security guard security, that makes the space feel far more welcoming.

It allows for people to be able to sit on the blocks on the uh patio there in Mint Plaza to be able to embrace the neighborhood.

As far as specific security, every single event that we do, we have at least two security guards.

Generally, we're up in the world of 10 to 15 per per show that we have.

And that's not just inside of the building.

That's wandering around, that's in the the general area.

As we see more and more coming at Musconi and more events happening throughout the city, we actually expand our security protocols when we're having shows that are in conjunction with Musconi to make sure that the walking area for the guests coming to San Francisco is really quite strong.

But on a day-to-day basis, um, it is also our offices, so iOffice out of there, Jen Andrea, and 20 other people on a daily basis office out of the old San Francisco Mint.

Again, the more activation, the more people, the more thought it becomes a a little bit less forgotten of a building and a really prominent one.

Okay, thanks.

Thank you.

Thank you.

Uh, let me add there that uh one of the upgrades that he's doing is uh security systems, right?

And and what he's speaking about is what we find is critical to interim activations.

It's a lesson I learned at the recreation and parks department.

If you have something that's not being activated, it will get activated negatively.

If you positively activate it, then that alone is a deterrent.

So just we find that uh important.

Thank you.

And I don't see any other name on the roster, and I don't have further questions.

Let's go to public comment on this item.

Yes, if we have any member of the public who wish to address this committee regarding this item number five, that was your opportunity.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Um I would like to first make the motion to amend uh responding to the BIA report and corrected the lease terms as provided by the Rio Estate Division and a roll call, please.

And on that motion to amend this resolution to accept the BLA's recommendations and that's so read into the record by the real estate division.

Vice Chair Dorsey.

Dorsey, I member on Guardio and Guardio.

Aye, Chair Chan.

Aye.

Chan, I.

We have three ayes.

The motion passes.

And Vice Chair Dorsey.

What are your thoughts?

Thank you, Chair Chan.

Um, I would like to make the motion to move this to the full board with positive recommendation.

Thank you.

And roll call, please.

And on that motion to forward this resolution to the full board with the positive recommendation as amended as offered by Vice Chair Dorsey.

Vice Chair Dorsey.

Aye.

And Dorsey, I member on Guardio.

And Guardio I.

Chair Chan.

Aye.

Chan I.

We have three ayes.

The motion passes.

Thank you.

Mr.

Clerk, please call item number six.

Yes, item number six is a resolution retroactively authorizing the Department of Public Health to enter into an agreement with the California Department of State Hospitals to provide funding for the felony incompetent to stand trial mental health diversion program for individuals found incompetent to stand trial for a term of five years from July 1st, 2025 through June 30th, 2023.

Oh, sorry, 2030.

Having anticipated revenue of approximately 15 million and authorizing DPH to enter into amendments or modifications to the agreement that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the agreement or this resolution.

Madam Chair.

Thank you, Mr.

Clerk.

And with that, we have Department of Public Health here.

Good morning, Chair Chan, Vice Chair Dorsey and Supervisor Engardio.

Thank you for having us here this morning.

I'm here to present on a contract between the California Department of State Hospitals and the Department of Public Health for a felony incompetent to stand trial mental health diversion program.

As stated, the contract is for approximately $15 million over five years, beginning July 1st, 2025 through June 30, 2030.

This project is one of many efforts by the Department of State Hospitals to reduce the felony incompetent to stand trial population being sent to the state hospital.

This particular program works to divert people from going to the state hospital for competency restoration to mental health diversion under Penal Code 1001.36 PC.

So it's primarily funding post-release services to meet the needs of this patient population.

It also supports providing uh reports and communication with the criminal courts on clients' appropriateness for and ongoing participation in mental health diversion.

We anticipate or are planning to work with UCSF citywide on the uh provision of the intensive wraparound services in the community.

Um we are seeking to retroactively authorize this because the project period for the grant or excuse me for the contract began July 1st, so the beginning of the fiscal year.

Um contract delays uh delays in the um finalizing the agreement uh resulted in us not really coming to a final agreement till July 9th.

And that is the summary of what we're here for today.

Thank you.

Thank you so much for your work.

Uh very important.

Uh I'm interested to learn more just about the program itself uh and the results uh that it delivers.

Uh but I don't have any other question today, and uh and I don't see any other name on the roster.

Let's go to public comment on this item.

Thank you.

Thank you.

Martin, we are now opening public comment.

For this item number six, if we have any members of the public who wish to address this committee.

Madam Chair, we have no speakers.

Seeing no public comments, public comments now closed.

Colleagues, I would like to move this item to full board with positive recommendation and a roll call, please.

And on that motion to forward to the full board with a positive recommendation, Vice Chair Dorsey.

Dorsey, aye, member and guardio and guardio, I chair Chan.

Aye.

Chan I.

We have three ayes.

The motion passes.

Item number seven is a resolution approving amendment number four to the agreement between the city acting by and through the Department of Public Health and Project Open Hand to provide HIV AIDS, food and nutrition services to increase the contract amount by approximately 1.5.7 million for a new total not to exceed amount of approximately 20.5 million, with no changes to the term of April 1st, 2017 through March 31st, 2027, and to authorize DPH to enter into amendments or modifications to the agreement that do not materially increase the applications nor liabilities to the city and are necessary to effectuate the purposes of the agreement or this resolution.

Madam Chair.

Thank you.

I was somewhat anticipating this one.

So we have Department of Public Health here.

Good morning.

Nice to see you again, Madam Chair Chan, as well as Vice Chair Dorsey.

Good to see you, as well as Supervisor Engardio.

I'm here to seek your support for a contract amendment between Project Open Hand, which provides HIV food services and nutrition with the San Francisco Department of Public Health.

I'm here with the assistant director Beth Neary.

Next slide.

So the Project Open Hand HIV AIDS Foods and Nutrition Services.

The contract amount is one million seven hundred and twenty-seven thousand and nine hundred and twenty eight, the not to exceed amount of twenty million five hundred and eighty-two thousand two hundred and seventy-two.

The timeline for the contract is April 7 April 1st, 2017 through March 31st, 2027.

This is the fourth amendment to the agreement between DPH and Project Open Hand.

And this will be for providing um serve uh food and nutrition services for low-income people living with HIV in San Francisco.

Thank you.

Item seven is a resolution that approves an amendment to DPH's contract with Project Open Hand.

Uh the amendment adds 1.7 million dollars to the agreement but doesn't change the term, which ends March 2027.

Project Open Hand provides nutrition assistance to people, low-income people living with HIV.

We summarize their performance on page 25.

You can see that Project Open Hand is meeting or exceeding the service goals of this agreement.

This is money primarily being added to the contract from unspent Ryan White funds.

And then about 300,000 in general fund money to allow a cost of doing a business increase for this provider.

We recommend approval of item seven.

Thank you and just want to express my gratitude publicly for the work that Department of Public Health is doing.

Thank you, Bill.

And but also for uh Project Open Hand as a great partner, and we really we know it's hard work.

Uh and uh and we're grateful that they're willing to commit this to this partnership and and to keep this as an ongoing service uh for our community.

So thank you.

Um, and with that, let's go to public comment on this item.

Yes, we're opening public comment for this item number seven.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues, I would like to move this item to full board with recommendation and a roll call, please.

And on that motion to forward to the full board with a positive recommendation, Vice Chair Dorsey.

Dorsey, I member and guardio.

Engarteo, I, Chair Chan.

Aye.

Chan, I.

We have three eyes.

The motion passes.

Thank you very much.

Thank you.

Uh and Mr.

Clerk, please call items eight through ten together.

Yes, item numbers eight through ten.

Our resolutions approving the following as it relates to projects located at 11 free to Calaway, commonly known as Balboa Reservoir, Building E or the Balbora Reservoir Project, and granting general authority to city officials to take actions necessary to implement these resolutions and related matters or enter into amendments or modifications to respective agreements that do not materially increase the obligations nor liabilities to the city.

Item number eight approves for the purposes of the internal revenue code of 1986 as amended, authorizing the execution and delivery of a multifamily housing revenue note in one or more series and an aggregate principal amount not to exceed the approximately 84.1 million for the purpose of providing financing for the construction of a multifamily rental housing project, expected to be located at 505 Mayor Edwin M.

Lee Avenue, formerly known as Eleven Frida Calaway, known as the Balboa Balboa Reservoir Building E, approving the form of and authorizing the execution of a funding loan agreement, providing the terms and conditions of the loan from the funding lender to the city and execution and delivery of the note, approving the form of and authorizing the execution of a project loan agreement, providing the terms and conditions of the loan from the city to Balboa Lee Avenue LP as the borrower, approving the form of and authorizing the execution of a regulatory agreement and declaration of restrictive covenants, authorizing the collection of certain fees, approving modifications, changes or and additions to the documents, ratifying and approving any action heretofore taken in connection with the back to back loans, the note and the project.

Item number nine approves and authorizes the director of the mayor's office of housing and community development to execute an amended and restated loan agreement with BHC Balboa Builders LLC for a total loan amount not to exceed approximately 56.4 million to finance the first phase of infrastructure improvements related to the revitalization and master development of the project, adopting findings that the loan agreement is consistent with the adopted mitigation monitoring and reporting program under the California Environmental Quality Act, the general plan and the priority policies of the planning code and item number 10 approves and authorizes the director of property and MOCD to enter into a ground lease for the real property uh with Balboa Lee Avenue LP as the developer for a lease term of 75 years and one 24-year option to extend and an annual base rent of $15,000 in order to construct the project, approving and authorizing an amended and restated loan agreement in an amount not to exceed 36 million for a minimum loan term of 57 years to finance the development and construction of the project, adopting findings that the project is and proposed transactions are consistent with the general plan and the eight priority policies of the planning code.

Madam Chair.

Thank you, and we do have mayor's office of housing and community development here.

Thank you so much, Chair Chan.

Very delighted to be here this morning with you, all of you committee members.

I'm Dan Adams.

I'm the director of the Mayor's Office of Housing and Community Development, and this is an exciting day for us.

Uh we're here to introduce uh several items related primarily to the first phase of affordable housing, uh which is has is fully funded, including your actions today.

Uh but also we have another affordable housing phase in in close proximity, which will be coming for your consideration for our gap commitment in the coming months.

Block E is today, and block A is moving forward very shortly.

It has also secured state funding to move forward.

Together, the two developments represent two hundred and eighty-seven units of a hundred percent affordable housing at this site.

Um, part of an overall master plan uh that has successfully leveraged hundreds of millions of dollars in state subsidy.

Uh and I I just I can't say how exciting it is to be able to move this long planned project into implementation.

Um, uh the subsidy that we've received from the tax credit program, the SIDLAC program, the private activity bonds that we've leveraged, the affordable housing to sustainable communities program, as well as the infrastructure in the infill infrastructure grant program collectively represent well over 300 million dollars of subsidy coming to the city for investment for this project.

Again, so your action today is very well timed.

We were coming up with some very uh tight funding deadlines.

Uh so we're all cued up and ready to go.

I did want to take a minute to thank our development partners, Bridge Housing, who are represented here today, as well as our colleagues at OEWD who've really been point on the overall master plan work on behalf of the city, as well as Supervisor Melgar, who's been a champion of this project for many years, and want to thank her participation and advocacy.

With that, I'll turn it over to my colleague Ryan Van Sylvan, who will go through some of the details, and we are happy to answer any questions you may have.

Thank you.

Great.

Thank you, Director Adams.

I have a slide deck.

Perfect.

All right.

Good still morning.

Um, Chair Chan, committee members Dorsey and Guardio.

My name's Ryan Van Zeilen, as Director Adams mentioned.

I'm senior project manager at the Balboa Reservoir Project.

The purpose of the resolutions before you today are to authorize bonds and the gap loan for building E and the gap loan for the infrastructure work.

But item number eight authorizes the execution of 84 million dollars of tax exempt and taxable revenue bonds for building E.

Item number nine approves the resolution and loan agreement for $56 million for the infrastructure loan.

And item number 10 approves the MOCD loan agreement for up to $28 million and a ground lease for Baboa Reservoir Building E.

The Balboa Reservoir site is a development agreement project that was approved by the Board of Supervisors in August 2020.

It's located across from City College and is approximately 17.6 acres that will include multiple buildings of new housing with hundreds of those units affordable to the those earning low incomes.

The first phase of the infrastructure work is developed by bridge housing and will provide utilities, public right-of-ways, including streets and sidewalks, sewer systems, and other transportation improvements.

The roughly 5.7 acres of infrastructure work will also include grading and site preparations for the two affordable projects mentioned, buildings E and A, totaling 287 units.

The infrastructure work is projected to cost around 56.5 million dollars with funds from Mo CD, the state's infill infrastructure grant program, and the state's affordable housing sustainable communities or ASIC program.

Infrastructure is planned to start in early October and finish in spring 2027.

Building E will be the first 100% affordable development at Bella Boa Reservoir with the developer also bridge housing.

There will be 128 new units with 56 one-bedrooms, 42 bedrooms, and 32 three bedrooms, making this a family affordable housing project.

The area median incomes will range from 40% to 80% area median income.

Financing for this project will include funds from MOCD, the IIG and ASIC programs previously mentioned, housing tax credit equity, and construction and permanent loans.

The $20 million IIG award will be used for infrastructure related to this project and the future project A, which will be coming before the board in a few months.

Financing for this project is planned to close in early October of this year with construction to start in early 2026 and finish roughly two years later.

I am joined here with representatives from Bridge Housing.

We're happy to answer any questions committee members may have.

We are also happy to accept the amendments to the resolution, which include changing the not to exceed amount in item number 10 to 28 million, and uh having the MOCD director report back to the board on the status of the project following the completion of building E and any action to forgive all or a part of the proposed infrastructure loan.

Thank you.

Items nine and 10 are two resolutions pertaining to MOHCD providing loans to the developer about the Balboa reservoir project.

So file 250829 is a resolution that approves an amended and restated loan agreement with BHC Balboa Builders LLC for about 56.4 million dollars.

This will fund the infrastructure work and a portion of the project area, and then file 250830 is an amended and restated loan agreement to Balboa Lee Avenue LP for up to 36 million dollars to provide gap financing for the development of the affordable housing project in that parcel.

We showed the budgets for these projects on pages 35 and 36 of our report.

Um the city funding for these loans is also discussed on page 38.

Besides 20 million dollars of a state infill infrastructure grant, uh the balance of the loan funds will be funded by the city.

Uh we also discussed in the report that the the infrastructure in this area is subject to a development agreement in which the developer is actually responsible for the infrastructure.

MOFCD is moving forward with this infrastructure to not lose the over 200 million dollars in state financing for these projects.

Um the infrastructure loan includes provisions that name certain sources uh of revenue uh within the project area as sources of repayment for the infrastructure loan.

Those include the sale of townhome parcels, other infrastructure financing that the developer is able to obtain, and then the sale of uh the market rate parcels that are slated for development uh that will be rental of um multifamily housing.

The the development agreement caps those proceeds which go to the developer uh for up to 10 point uh at 10.4 million dollars, and then the developer has to use that uh to pay for project costs.

Um, so as we discussed in our report, there are other project revenues that are not named in this loan agreement, uh, which could include additional transfer payments from the market rate parcels or operating income from those market rate developments, or for or frankly, rethinking the land use in this area and maybe doing more townhomes so it's more financially feasible uh for the developer.

Um, but we're just noting this because yes, this is public infrastructure, however, the DA that's not being amended does require the developer to actually pay for this infrastructure.

Um, so that is the basis of recommendation five is to for MOHCD to continue to evaluate the feasibility of other project revenues to repay this infrastructure loan.

Again, MOHCD can forgive this loan if the developer can't come up with um sufficient revenues by the end of the term.

We're also recommending um MOHD under update its underwriting guidelines.

These are policies that govern its lending to affordable housing developers.

The policies speak to gap financing for vertical development, but not infrastructure development.

And so we believe that they should include they should update that policy.

I believe that's already underway, and according to the director, they agree with that recommendation as well.

When I spoke to him on Friday.

Um, we're also recommending file two five oh eight three oh be reduced from thirty-six to twenty-eight million dollars.

That reflects the project budget.

Um, and so that is that's the amount that they need based on the numbers they provided us.

Um, and then finally, we are recommending two report backs, one with the completion of building E to provide an update to the board on the status of the project.

Uh, and then if the MOHCD does forgive the infrastructure loan to report back to the board and that have those reports be included in the legislative file for these items so we can all reference them in the years to come.

Thank you.

I I think um, you know, Director Adams, you and I have brief conversation, and in fact, um Supervisor Malgart and I did too.

Um not so much about Babola Reservoir itself as a project, which I am in supportive of not just for uh the affordable housing portion of it, just really the entire project.

Um this preceded uh predated us, you know, like it was really uh board president, former board president Norman Yee was really closely involved with this and uh wanted to see its completion.

Um and I I think that we're we're getting there.

What I do think though is that the budget and legislative analyst report has flagged a point for us that we've been seeing this in the last uh year or two.

Um and first and foremost, we we want to recognize is because the market and the and in terms of development and particularly about housing all across the board in general.

Um, and then not to mention that there's this like pressure that is cooking right now about uh you know density uh upzoning and increasing um just more like building more.

And I'm not um against building more.

I am what I am though concerned about is this particular is flagging point like flash point here that flagging for us is the infrastructure needs uh to actually have infrastructure that meets the capacity.

Um few things are needed to be in discussion, uh be it for affordable housing or market rate housing, just really development in general, but particularly when it comes to a uh development at of this size and larger, uh that really encompass both affordable housing as a uh as part of the agreement as well as market rate housing uh then uh infrastructure conversation be it at on Treasure Island, uh be it a Babo reservoir, that it will s and or candlestick sooner rather than later, then it's just gonna be or portrayal power station, that infrastructure is gonna come into a space where we could no longer afford this, but we all need this because we're all in this together.

It's not just the development sites, but also the neighboring, you know, um areas too or immediate adjacent to it, they too need those capacity for infrastructure.

And so I think that what is going to bring us to the next step is that I hope yourself, uh, who is an expert and and really seeing a lot of these uh affordable housing development uh in partnership with OEWD who's overseeing a lot of these development agreements to come back to this body, uh really help us understand uh perhaps a next study is required by the planning department um to help us understand the infrastructure need um and uh the impact uh on the city and particularly um areas that are going to be developed that has never been developed before, uh, and and what does that actually look like and and does that actually meet the city's financial reality?

Uh I'm gonna articulate this point, and I think my colleagues know this too.

On the West side, we do want to make sure that we have the emergency firefighter, firefighting water system.

And we are investing 100 million dollars of uh bond, uh uh general obligation bond and another 300 million dollars of water bond from SFPUC simply just to design the system for the West Side.

That's not an account for the actual construction of it, which I pretty sure is gonna go into billions.

And and that those are worthy investment.

However, I think part of this design process, the conversation is, and and they came before land use, and I was there for the hearing, uh, is that at some point we have to dis have a discussion that what is the capacity that we are building for that meets the financial reality of the city and and we need to tell our partners, which we're grateful for for them to come in here to develop housing.

Are we gonna offset those costs onto them?

And is that realistic, or that if the city should and and will bear those uh infrastructure costs, then will then the city also be able to tell our partners in building these and and developing these sites that here's your real like capacity and what actually that looks like, and it's a limitation by data, not by operat I don't want to say it's arbitration, but it's not it it's a it's a limit by data and limit by infrastructure, but not limit not in negotiated term by simply driven by the market and what is available to us and what is feasible.

I'm making that statement.

I look forward to your feedback, and I really welcome your feedback either on the spot, but I don't mean to put you on the spot, but but I welcome it.

No, I really appreciate those comments, uh, supervisor, and would be more than happy to engage in this conversation moving forward.

You know, we're the mayor's office of housing, uh, but increasingly we're drawn into questions of infrastructure, uh, the financing, the funding of infrastructure that comes often because we need, as in the case of uh Balboa, we need the infrastructure for the affordable housing, and indeed um much of the infrastructure costs that are being contemplated today are allocated to the affordable housing parcels to boost the tax credit equity that we get and the infrastructure as a whole is needed to build these two parcels of affordable housing.

So we become a de facto infrastructure age funding agency and I really appreciate the comments from our colleagues at BLA that we have started to develop a kind of an underwriting framework, so we're not uh these aren't increasingly aren't a series of one-offs if there's a kind of structure for us to engage uh consistently in this work because we do imagine it will continue.

Um I've been somewhat obsessed with infrastructure as an impediment and the cost of infrastructure as an impediment to reaching our overall housing goals.

This is very early money, it's very expensive money.

The returns come much later, and frankly, this is public infrastructure in the case of Balboa, these will be public streets, they'll be public sidewalks, and so it makes sense uh from from my perspective and I think from our perspective, that the city would step into this gap in this case and advance the infrastructure because it brings so many uh returns, both in terms of affordability, in terms of amenities for the residents, uh, and to create the the mixed income uh development that was originally proposed and designed.

So uh all of which long way of saying is I agree and let's keep talking uh because I think this is gonna be continue to be a really important topic for us to wrestle with as a city and get clarity on.

Absolutely, and and I think that I do look forward to the future and supporting a regional housing bond so that we can build more housing in San Francisco.

And but I think it's when we talk about those bond dollars, and again, right, like it's that if we take those bond dollars just focusing on housing, then we build more units of it.

But what we don't really think about or or uh we haven't had a conversation like uh in a concrete way with our planning uh capital planning committee is then then what about the infrastructure?

And are we actually uh syncing and recognizing that as we build more housing, we do need more infrastructure.

And how would it where does that money gonna come from, and that then we need to build for that capacity both in both in our general general obligation bond, um, because the way that I see it though, and and I think that I concur with the budget and legislative analysts sort of approach and flagging this is that then that 10.4 million dollars could gone to an more pots for affordable housing to build more units, and then instead, or planning for it, or you know, instead of now it's it's taking away to go to infrastructure um loan, where maybe at some point you even have to forgive it, and and so maybe that it should actually come from somewhere else.

Um so that just I I just want to articulate that thought um today.

Um, and as we continue this these conversations and be able to publicly state sort of my concerns not so much of the project itself, but just how we're approaching it.

And um, and Supervisor Malgar and I had this conversation, and I think that my my uh inclination is let's take a step back and have a holistic approach instead of sort of the space like project by project.

And that's which uh we're seeing right now at the budget committee, and and everyone come in.

I need a fee waiver for this, I need I need a I need a loan for this, or I need a COPs for this, uh, all actually seems to be really uh saying the upfront infrastructure cost is too much to bear um and and that's what what I'm seeing and and I am saying let's then let's collectively problem solve this uh and have that approach so thank you so much for in advance for your time and uh for for that conversation and um I I don't have any other questions and uh I will be in support of this but I I just wanted to say let's have those conversations thank you uh I don't see any other name on the roster I don't have any other question let's go to public comments on all these three items yes we're now opening public comment for these items eight nine and ten uh if we have any members of the public who wish to address this committee.

Madam Chair we have no speakers.

Seeing no public comment uh public comment is now closed colleagues I would like to make the motion to amend and accept uh the budget and legislative analyst recommendation um and the amendments are specifically to read for items I believe is for items number 10 specifically is to reduce the dollar amount from 36 million to 28 million and um and that is indicated on page one and four and would like to send the amended item uh along with the rest to full board with recommendation and a roll call please uh point of clarification madam chair uh the so you did make a motion to uh to amend um as per the BLA's recommendations but there is a BLA recommendation to amend item number nine as well as far as like our reporting uh requirements but separately uh deputy city attorney Brad Russian we don't have a proposed amendments to item number nine before us I mean if you'd like to make those amendments I think I would prefer if you did that on Tuesday with the board once we have the language proposed.

Yeah I only have that item number 10.

Okay.

So okay uh yeah okay so let's flag it for let's make sure we flag at the full board then also for president that we need to make the amendment.

I'm sorry I didn't hear you supervisor no I I uh just that we should flag for President Mandelman uh a full board that we need to make the amendment to item number this item sorry the file here is the different file file number there's the two files is the 25-0829 that we cannot amend today.

Item number nine I think it was yeah item number nine sorry okay very clear thank you much madam chair so on that motion to amend the resolution item 10 to reduce the not to exceed amount from 36 million to 28 million um and to forward all three resolutions to the full board with a positive recommendation item 10 as amended yes roll call and on that motion vice chair dorsey aye dorsey I member in Guardio and Guardio I Chair Chan.

I chan I we have three eyes the motion passes thank you and uh Mr.

Clerk do we have any other uh items before us today madam chair that concludes your business the meetings adjourned