Is related but we will call them separately so please item 1 please. Item 1 is a initiative oar from the mayor for the proposed Initiative Ordinance submitted are by the mayor for the voters for june 7, 2016 for election entitled ordinance mending the planning code to maximize inclusionary or Affordable Housing and Economic Feasibility studies. We have staff here. We will have this presentation and if you get the powerpoint on the screen thank you. I want to be very clear the clear of this Initiative Ordinance is establish a pathway to maximize the amount of Affordable Housing that the city can require of developers. The current requirements are too low. Not only are they too low but theyre a one size fits all rules and acts if a luxury tower downtown has the same economics as a project in another neighborhood. The economics are different and the rules need to be different the mayor directed staff to bring working groups to bring stakeholders together for these requirements and its underpinned by a Feasibility Study by a independent consultant as all have done and in recent memory every time the board introduced a new fee or the inclusionary requirements its done with a Feasibility Study and looking how much it could be increased and feasibility and killing the golden goose. This is the Third Initiative in a serious of policy measures relating to maximizing of affordability that the mayor has put in front of voters with some of the other supervisors responding to what he knows to be the voters number one concern which is affordability. Proposition k in 2014 made it the policy of the city to build or rehabilitate 30,000 units by 2020, have of which would be affordable to low, moderate and middle income san franciscan and proposition k clarified and the strengthened policies using public land for Affordable Housing. This 2016 directive would turn from public to private Development Projects understanding that we need both halves of the coin to get it right and turn to private Development Projects and seeking to maximize the contribution from the private developers to the Housing Stock and make sure the city has a factual basis to accomplish that. Before you move on i believe supervisor peskin has a question or comment . Thank you madam chair. I want put this in some legislative and Historical Context as well as some political context starting first of all i welcome mr. Bridges comments they think there is a widespread sentiment that the current inclusionary rate at 12 is too low for the current Market Conditions and i welcome that, and i think that is what precipitated the introduction of a Charter Amendment on december 15 of 2015 by supervisor kim and myself which i believe lead to the january 19 introduction of this measure as well as another measure that we will discuss as the next item on the agenda, but i actually wanted to harken back to a decade and a half ago when the city actually did not have an inclusionary law. It had an inclusionary policy that was used in some instances and not used in other instances, and my then colleague on the board of supervisors mark leno introduced the first inclusionary law i will at section 3 17 of the planning code if my memory serves and it was quite contentious. As a matter of fact there were people in the Development Industry who while they didnt oppose it indicated that if as a matter of fact senator leno and i were having this conversation a few days ago if it was 1 10 of 1 north of 5 it would kill new development starts. We actually without a Feasibility Study picked 10 which was the guideline that planning had been working with and life went on just fine. By the time i left office at the beginning of 2009 that number had grown to 15 . After i left office in a deal that im not interesting or important to revisit, but in exchange for creating a Housing Trust fund there was a Charter Amendment that put the inclusionary dropped it from 15 to 12 and stuck it in the charter. I dont want to second guess that but once it went into the charter the conversation in the legislative branch, in the Planning Department, in the community, in the Development Industry about changing that number became impossible without a vote. Now, let me go to the political context. I just ran a somewhat charged race for supervisor, and i can tell you at least in the northeast corny of San Francisco that Everybody Knows that 12 is much too low. Yes, the cost per square foot of building today is astronomically high and the sale prices are high and i do not begrudge Developers Making money. I am delighted they hire union labor in many instances and it provides a modicum of Affordable Housing but i believe, and i believe many of our colleagues share the sentiment that we can and should do better. This is not a new crisis. This crisis has been going on for a number of years. The fact that we have not as a city been acting more quickly is troublesome to me. The fact that a Feasibility Study could have, should have done last year, the year before, the year before that where we could have captured many more units. Now, we are in the process of moving forward with the Charter Amendment in june rather than in november in order to capture more projects moving forward so that we can actually have a higher level of affordability for working class san franciscan for the individuals who build these projects, for teachers, for firefighters, for everyday people in this town which is by anybodys estimation at a crisis. That i think is what supervisor kim and i have been attempting to do. I am delighted to have a conversation about fiscal feasibility but now let me deal with the last political reality and i want to be very clear, honest and transparent about this. It is my profound hope that because of the way the Charter Amendment is designed which takes it out of the charter and allows us collectively as a government to legislate Going Forward, which is our goal. Take those numbers up when building prices go down, and sale prices stay high to bring those numbers down when were in a recession it should be a dynamic law, but i would hope that on or before march 1 and i had this conversation personally with the mayor that the two items before us today will be removed from the ballot. The mayor will remove his. The four members of the board who signed on to the next item that is not been us but called in a few minutes will remove theirs and we will collectively find the sweet spot, figure out grandfathering, get this thing out of the charter and should have never went in 2012 and doing the work incumbent upon us and to build units that nobody can afford but units that are expensive that some folks that work in the town can afford. Thank you supervisor peskin for the lengthy conversations and if we can go on to the presentation. Supervisor it sounds like were on the same page but before moving back to the presentation it maybe the first time that the inclusionary was introduced. There wasnt a Feasibility Study and raised to 15 i am sure there has been and we will give you a list in the presentation about eight times since there there have been feasibility studies so i think i said in recent memory and depends on your definition of recent and we agree that 12 is too low but we have serious concerns about figuring out what the right number is. Its clearly above 12 and some projects its probably 25 but we dont think its 25 for most or all projects. We will be getting into that conversation. If i could have the next slide so as you recall [inaudible] there we are. I am just summarizing the proposed Initiative Ordinance and what it says is briefly its fairly simple. The controller and the Planning Department within six months of the passage of the ordinance should lead a study looking at the feasibility of changes to the inclusionary requirements. That study should be repeated every 24 months. Supervisor peskin thats the sort of response to your well taken point that the economy goes up and down and our requirements need to figure out a way to go up and down with the economy. Again in response to that sort of two rigid existing requirements they dont do that now. They just stay where they are no matter where the economy it is. The Initiative Ordinance would say theyre justed if theyre too low for afford for private developers and in effect leaving housing on the table or too high and killing projects and not getting the affordability and that way directs that the Planning Department would bring to the Planning Commission legislation for the inclusionary based on this analysis and the commission has the normal process would refer to the board of supervisors. It continues to say that adjustments should address all three ways of providing inclusionary housing, on site, off site and in lou fees and this is different from the current inclusionary rules. It should cover a range income levels. We nbl San Francisco we should be providing Affordable Housing for people making 55 of Median Income and defined as low Income Housing and up to 150 of income and two teachers salaries and one child. Those households need to be served by inclusionary at the 1201 50 ami level and lastly the feasible idstudy mand mandated on this sorry the changes for the inclusionary are based on the study and the nexus and not the same as a Feasibility Study and all other relevant data so what i will pass this on to my colleague leslie who will hopefully describe a little more about what we see as a feasible idstudy doing and how it can help set the policy correctly. Good afternoon supervisors. So we just like to take a few minutes to walk through some of the critical questions that the study should answer and the first one on peoples minds what are is the sweet spot for Affordable Housing and without making it not feasible and we dont know yet. We suspect its higher for todays rates for most sites and projects but we did preliminary analysis of the new proposed inclusionary rates and i will share them in the next item on the agenda and the analysis suggests the rates are not feasible for all types of development so the Economic Feasibility studies will dig deeper and getting an important policy change like this right. It would define the concept of feasibility and the Economic Conditions that a developer would or not choose to build housing and in numerical terms and test the different housing proposals and rule out the ones that numbers fell below the Feasibility Study threshold. Another important question is whether there is a better alternative to the one size fit approach that we currently take. We apply the same rate to all projects regarding of neighborhood or project and luxury high rises are subject to the same rates compared to other neighborhood and these buildings should shoulder the burden of more Affordable Housing and feasibility but the maximum rate are dealer killers for many of the smaller neighborhood projects with smaller margins so we should seriously move beyond the single rate system. Otherwise we will have luxury projects providing less than fair share of Affordable Housing or modest projects never built because the burden is too great and neither wi are we maximizing Affordable Housing creation so this study will enable us to take the nuisanced approach even further to figure out how to tailor a policy for housing needs. We could study how to best expand the program with different enemies such for teachers and firefighters and in a way not to privilege one over another. Many developers meet this by two options. They designate options on site that are affordable or pay in lieu fees. Each of the options has a different rate and currently under todays policylet two rates are cal braitded so one option is not essentially cheaper or more expensive for a developer to choose and we get a combination of units and in lieu fees which is ideal and this housing can meet the needs of different kinds of families. The proposed initiative requires that we do a Feasibility Study at least every 24 months and ensures that we and the successors can consider the housing requirements if conditions change over time so by contrast what happens if we dont have the flexibility . Well, this is exactly the situation that were in now. Our inclusionary rates were at low levels when the Housing Market was weak and the board hasnt been able to change them as conditions change. The other side of the coin is the new rate that we set right now hopefully with the Feasibility Study could work well to maximize Affordable Housing in todays market but less than optimal during a future downturn so thats why we want to mandate this study happens every two years and keep a constant eye on the market and maximize this. The study will allow us not to have the pitfall of setting the Affordable Housing requirements too high. We know when a developer considers to move forward with a project they look at the revenues with the proposed cost and the rate of return to buy the land and construct the project. If the rate of return is too low Funding Sources wont lend money and the builder cant build the project. This translates into lower rate of return and lower returns relative to the projects costs. Ideally developers could get the this back by and pay less for land and balancing out the reduced revenue and reduced cost. However, this is only a possibility if the developer has not already bought the land and even then they have to convince the owner to sell at a low price which is challenging because many of the remaining opportunities sites in San Francisco have Revenue Generating uses on them already. If im a landowner with a profitable parking lot or a refail store i will only consider selling to a developer if they offer enough money to forgo the revenue stream into the future and the less money the developer can offer to pay for the land the less likely theyre willing to find a seller so this is the back of envelope example to illustrate how a landowner may e the offer. Its say its a 10,000 square foot parcel and retail or commercial business. Based on the revenue stream that parcel could generate as retail commercial under todays rent we believe its worth about 8 million. In a neighborhood with 75foot height limit and fit 60 units on that land and if you do the division if the land cost is 8 million and 130,000 per unit and in the ball bark what developers believe they can pay today but if the land drops below 8 million its irrational for the landowner to sell. Now its possible that land prices could drop somewhat before running into this situation on some potential housing parcels, but again its about finding the sweet spot which is what we need the Feasibility Study in order to do. So how does it work from a technical perspective . We need to include a lot of research about the inputs that a developer considers when evaluating the feasibility things like costs and rental and condo prices and todays numbers and historical numbers and used how conditions might change into the future, understand land dynamics fully and look at prices just to ascertain how sticky they are and pin pointing the value of housing opportunity sites, parking lots, storage, retail sites under the current uses. As i described earlier it would operationalize the concept of Development Feasibility and test different proposals to see whether they meet this metric and for the promising proposals it would test them under varying conditions. Based on our experience working with Economic Consultants on other projects we believe it could take as short as two, three months to do it correctly once the consultant is hired and i will turn it back over to ken rich to conclude. So i wanted to quickly were almost done here talk about some precedents we believe are relevant. The planning code does in section 410 require the controller to report how much impact requirements affect affordability. Were not sure how much its been followed but were trying to connect the second part of it and once its done and essentially done more often than every five years it should translate into the Planning Department upon the advice of the controller and other experts proposing changes to the inclusionary ordinance. That part hasnt been done. We feel that is very important and secondly as i promised you let me see if i can read it from the notes quickly. I got it and precedents and on the screen and go