Call the roll. Clerk all right. I heard a first and a second. [ roll call. ] clerk thats five ayes, and items 8 and 9 are approved. Go ahead and call the next item . Item 10 this item will be presented by sarah dibord chief financial officer. Good afternoon, officers. Sarah dibord. For the benefit of our new director, this is a new director for us. Our usual policy calls for us to come to you with the fiscal year budget, a narrow in april, a final in may, and budget adoption in june. As were putting in agreements of leases, they call for the formation of a primary Tenants Committee and obligate us to provide us to the primary Tenants Committee in the fall and for the board to approve those projections by january of this year. So thats why this item is before you. Again its not a final fiscal year budget. But at this time, based on what we know, and again, very preliminary because lincoln is still in the process of bringing on Service Contractors for the Transit Center, so these are estimates of expenses, estimates of revenues. The total is just over 54 million for fiscal year 19. We show three scenarios. The there are as has been presented to you before, there are some base building and tenant requirements that are needed to get the center ready for retail operations, and there are some different funding scenarios for funding those improvements. At this time, we have approval from the Cost Review Committee that was formed through the interim city financing to spend at least up to 25 million on those improvements. The scenarios that are shown before you, scenario one shows what would what the situation would be if the city financing funded all of the improvements. Scenario two shows the number if we used half of the early naming right payment for the towards the improvement. And then, scenario three if all of the early naming rights came in as used. So well continue those discussions with the trc. Our next meeting with them is in february. I will keep you posted on that, and the final agreement would be reflected in the budget that comes to you in may and june of this year. With that, im happy to answer any questions about the numbers and the development of the numbers. Yes, mr. Harper . Yes. I have one very big difference with this, and ive talked to mark about this already. The first level, the first round of tenant improvements should not even be an operating expense. That is part of finishing the building and doing the building, and we should make that distinction because thats the way its made in the private sector. When you get four or five people together as an llp doing a commercial building, theyre expected to give all of the money necessary to get the building up and running, and that includes tenant improvement allowance. Successive tenant improvements are then considered operating expenses. Its considered if youve been operating, you have built up a reserve and youve done all those things so when tenants change, then, operations take over. Thats the way it works most of the time, and thats, you know, what investors want to see is an end to their duties, their contractual duties to contribute money until the building is finished. So i think this is just this doesnt comport with that. It doesnt make sense. I mean, the building has to be finished, and then we start operations. I mean, weve been talking about that, and finish means getting the build out in terms of retail. And the more we can devote to getting, you know, tenant good tenants in there, the more tenant improvement allowances we can do, the Better Tenants were going to get. Thats one of the rules of the whole thing, and then, we can Start Building up through better rents the reserves we need for successive tenants if theyre necessary. And of course, theres going to be turnover as it comes in. So i think applying tenant improvements to an operating expense budget at the first round is inappropriate. And then, the second thing that ive got a problem with here is that i think, at least speaking for ac transit, that the operators have an expectation that as that all the revenues operating revenues will be devoted to cover operating expenses, and only the shortfall will be actual. And so theres no reason why the naming rights shouldnt be applied to revenues as much as necessary so that theres no shortfall that the operators have to cover. There will come a time, probably where the operators are going to have to come in and do that, but i think the expectation we have is reasonable. You cant all of a sudden take your naming rights is what youre doing here and essentially creating a great operating reserve right off the bat. That can be built up over time, but in the meantime when we operators are trying to get as much operations off the ground as possible right away, wed appreciate having the and require having as many of the revenues as possible devoted to covering the actual expenses so that we dont have to contribute. So i would say those were the two corrections i would make or two changes i would make to that, is talking about tenant improvements. And San Franciscos already said 25 million, which was more than this, any way, theyre going to cover as part of their building completion, that we go along with them on that. Its the way it should be done, and not even have that as an operating expense for this year. And then have and apply the naming rights over to covering at revenue as much as necessary so that the operators dont, in the first year at least have to come up with a shortfall when a shortfall doesnt exist. Ill take your second point first. Actually, a shortfall would exist in the first year. The scenario one assumes, again, using city financing to cover all of the tenant improvements, and ill get to that in a moment. But it also assumes using the full balance of the operating and maintenance reserve, and as is pointed out in the staff report, thats not necessarily the best or most prudent financial practice, so thats not necessarily a recommendation we would make in the drost budget that comes before you in may, but you can see in scenario one, use of operating and maintenance reserve is nearly 17 million. That assuming you putting the naming rights payment into the operating reserve and using the full operating reserve to offset expenses in the first year and that minimizes transit operator contributions if all of those expense numbers came to fruition. On the first point, were not the private sector, nor do we have investors. We have discussed with the city. It can be done both ways. I have no preference. We can if its the boards preference, we can put the tenant improvements we can put the initial tenant improvements in the capital budgets, but the full budget which may include the naming rights, those Funding Sources would also move to the capital budget, so it would be a zero sum gain in terms of operating expenses and operator contributions. Well, ic concede from the citys standpoint, but the naming rights have always been presented for the last three, four years in all weve been talking about when were talking about operations. Naming rights have always been fully allocated to fully allocated to cover operating expenses, no questions asked. So if in fact the citys coming in and as it is and covering tenant improvements for at least the first round, then i think all the naming right should be devoted. Now you say they are in the first scenario. Ill remind you of the item that i presented i dont recall if it was in november or december of last year. Last fall, we presented on the tenant improvements, base building improvemented. The total is estimated to be about 36 million. At this point, we only have commitment from the city to fund up to 25 million. Right. So theres another 11 million as was presented in the item, the naming source payment is the best source for that gap if the city declines to allow the use of city financing. Tjpa would have to come up with the money for that gap. Or as you stated, if we didnt offer competitive tenant improvement allowances, the rents would not be would not rise to the level that weve estimated in few tour years. But the first year is being completely covered and then some with the 25 that theyve agreed to, so successive years, theyll have to decide apparently in the next whether theyll go the full 35 or not, thats going to be in february . Well be discussing that with them in february. So im just saying that its its going to be rough on us, and its okay. But last meeting, we talked about having a zero for the first year, 1819, and now were up to half a million for ac transit and that sort of thing, for essentially that half a year of operations. Actually, it should be a full year here, but it starts at june. But thats going to be our expectation, that naming rights fully applied, and so im going to be looking for that to make sure that they dont go to tenant improvements in the first round because it doesnt make sense. Thats part of the build out. And San Franciscos been recognizing it. I greatly appreciate it for doing that, and thats what we should be following in these things. So as this comes, id like to see that addressed. Yes, director. Just if i could clarify. I dont disagree on principle, but when this board approved the deal for the city financing when we went to the city, we did not have these costs included. So whether the private sector does it or not or whether it was the right thing to do or not, the deal that we made with the mtc was to complete the building. So now subsequently, i think mark has been successful in convincing the city through this Cost Committee that the base Building Improvements that are needed to in order for a tenant to come in are legitimately part of the construction, theyve greed to come in now and allowed tjpa to use city financing for that. But theres still a delta. Thats only 25 of the additional 36. The additional 11 which is really the tenants part of the tenant improvements. I think it were all agreeing it would be ideal if the tjpa would do, mark still has to convince them through the city, its based on the fees that the city would receive from buildings, some of which havent started construction yet. So its extending the city, so i understand their caution there. If they dont agree i think one question is, would any kind of support from maybe the transit operators, in terms of letters to this committee be helpful, because ultimately, if they dont provide it, then, the naming rights is the only other source of funds. So we can all say wed rather those go to operating budget, but thats the only other source of funds. And then, the transit agencies are going to be left making up the gap, and thats what the scenarios reflect, so i dont support options two or three, but its not our unilateral decision at this board. Were kind of asking the city to give us more than we originally told them we needed in terms of scope for them to cover what theyre financing. So i fully support and im hopeful that you all can be successful in working with the city so that were in the option one scenario, and if theres a way that we can be helpful in terms of just making it really clear in terms of there will be an adverse impact, in terms of ac transit, thats just a reality. We can direct staff to do this or that, but in reality, were kind of relying on the folks that were asking for money from. What im saying is it would be great if staff had these numbers out. All of these numbers should have been presented to everybody much earlier. I think theyve been presented all along throughout 2017 at least. Within, tenant improvements have only been talked about for the last six or seven months, without any real number as to what it is. But everybody should have been able to understand that a number was going to be required to finish out the first floor and the second floor. I mean, were not going to leave it so that, you know and the a numbers going to be required to put in retail, and these things should be put in ahead of time so that we can come to adjust it. Because what it does, it get expectations otherwise when those numbers are missing. Dr. Harper, if i could clarify a couple of things. First, were going to be advocating to use all of the tenant improvements, money from the city financing. The Cost Review Committee was very flexible last time we met, and they told us we can take 25 million for both Building Improvements and tenant, so she showed quite a bit of flexiblity. They did not rule out giving us the additional 10 or 11 million. They have to think about it. In february , were going to be making the pitch for more money, and im optimistic about that, but when we presented the Asset Managements agreement to the board and the board approved it in march, in it, we had identified 27 or 28 million as needed. We had indicated we would seek reserves as funded by city financing to fund that. After we talked to crc, Cost Review Committee, they wanted to think about it. So we did present a number. Initially before that, our thought process was that we were going to [ inaudible ] thats why were at where were at. As we received information, we provided it to the board. Granted, its continues to be refined. And you know, youve got my commitment that were going to continue to look for operational funding for our operations, and youll see in the in our year in review that we were able to get approximately 11 million this year just for operations. 5 million from mtc and another million from a human rights agreement. So we are going to be getting a significant amount, but i know it does not solve the operators issues for the first three years. I recognize that. There will come a time when all the retail and operators are going to benefit greatly from ac transit. Theres no question, but that wont be for a few years. For the first two, the great part of the tenants that are in there are going to go to the community, and i know that, but its difficult to sell ac transit on the notion that for these first couple of years when essentially as a practical matter you can look at it and say were not getting any benefit from that. Its just a little harder sale. And im trying to get ac transit to realize youre going to benefit and youre going to get the money, but id like to get a running start at that. I would look at it director harper, this is a running investment thats going to save money in the future. If we have a robust retail and market opportunities, we should not be asking the operators for money based on the numbers based on the numbers, the projections that we have right now and thesubsidies and numbers that weve projected, we should not be asking you for subsidies. Would it be helpful to have a letter, or us to appear at the Committee Meeting to help you make your case, im sure both agencies would be happy to do so. Its a public meeting, and ac was at the meeting last time, so well keep you informed. I do think it would be helpful to have letters of support from the operators if you cant find time in your schedule to come to the meeting. I want to thank you, director reiskin for your comments. I want to highlight a point mark made. These numbers do not assume regional measure three. Do we know what the timing would be if it gets on the ballot and is approved in june, what the balance looks like for us . I dont know that information. Im told if it does pass in june, theres a chance of funds being able in fiscal year 19 but certainly 20. Could be as early as january 19 that we would receive any other questions from any directors . Okay. Call the rolls. No memobers of the public wanting to comment on the item. There is a first and a second. With that. [ roll call. ] clerk thats five ayes. Item 10 is approved. Your next item is item 11, approving the minutes of the december 19, 2017 meeting. No members of the public have indicated they want to comment on the item. November. Second. Clerk no objections, all in favor . The minutes are approved. Were going to go ahead and go back to item were going to move back on our calendar to the executive directors part and well do a restart on that. Happy new years, directors, again. My report, as i mentioned, will include two presentations that will cover three items. The first presentation will be the annual Program Status report that we present to you the accomplishments in 2017 and goals in 2018. Itll also include the project labor quarterly agreement that you have a copy of. Second presentation will be a brief report by Collier International on the retail leasing update efforts so far, so well start with the first presentation. This will be a team presentation. Ill ill share with you the highlights and accomplishments, and then well follow that with programwide accomplishments in 2017. Well have the construction update, and well have two updates as well as Operations Update and then well move to 2018. Can you. So starting with our accomplishments. Under the leadership of mayor ed lee in 2017, we were able to fully fund our construction in phase one. In january we closed the agreement with the city and mtc. In november in partnership with the city, we were able to sell 146 million of Community Facility district bonds that completed the funding picture for us. That was a Great Success for us. Also in also in 2017, we were able to secure significant amount of operations funding as i mentioned earlier. We secured 3 million from proposal 2, and 325 million for dtx. Also, it will provide a significant amount of funding for operations in total. As i mentioned, we secured 11 million annually for operations in 2017. We also awarded the Asset Management agreement with lincoln that helps us to be in a position to manage the property when constructions completed, and we increased or staff. We hired a facility manager and a chief Security Officer to help us manage the facility. Next slide, please. We partnered with ac transit and the golden gate Transit District and received a favorable lease with caltrans for the bus Storage Facility. That lease saves approximately 1. 6 million a year for ac transit for the bus Storage Facility. We also partnered with ocii and negotiated a very favorable lease with caltrans also for the underground park. We received that from caltrans for 1 a year. That results in