Skip to main content

tv   Government Access Programming  SFGTV  May 17, 2018 2:00pm-3:01pm PDT

2:00 pm
-- in january and faen february. . in january and february, 12 hours of deliberation on the operating and capital budget and also adopted ten-year capital plan and ten-year financial plan. the capital budget was also forwarded to the city-wide
2:01 pm
planning committee where it was vetted as well. so, as general manager kelly, i wanted to hit the highlights of the budget and what's really driving the changes year over year. the city-wide rollout is the single largest driver of the budget increases. it's additional $172 million. over the two-year period. all of our on budget position requests relate to cleanpowersf, 11 f.d.e.s. what i talk to you about in terms of the ten-year capital plan and the two-year capital plan, we issue bonds and have to pay debt service issue bonds and debt service on them and larger share of the main replacement and sewer replacement through revenue funded capital, and
2:02 pm
that's also driving the increase in the budget. recommended budget results in rate and charge increases in line with the ten-year financial plans that we have provided on an annual basis. the combined water and sewer bill increase will be 8.5% annually, over the next four years. rate increases will go into effect on july 1st. the commission and staff recognizes the rates and charges impact our customers and we've been on a multi-pronged effort over the last several years to try to address how our rates impact our most vulnerable and low income customers, and we've really taken four levels of work here. one to improve assistance to single-family residential customers, and we have worked collaboratively with the mayor's office and the controller's
2:03 pm
office to find legally compliant sort of funding. direct 15% on water and 35% on sewer credit. it's our community assistance program. and we'll be promoting and developing customized outreach to address, to try to reach our single-family residential low income customers. we have also worked significantly over the last year to reduce the impact of fees and charges on our low income customers. the commission last month adopted elimination of several fees and charges, including the water shutoff and water turn-on fees and so those disproportionately impact the low income customers who are already having trouble paying their bills. working collaboratively with the office of financial empowerment and the h.s.a. to develop early interventions for some customers experiencing bill payment problems and try to develop
2:04 pm
assistant program for the customers in multi-family housing with whom we don't have a direct relationship. so, i talked about sort of the planning context, highlights, work on affordability, and overview of the budget. what we have here is a table of the p.u.c. operating budget. broken down into our enterprises, wastewater enterprise, hetch hetchy water and power, and cleanpowersf, such a big driver over the next two years. what you can see is our existing budget is about a billion dollars, $53 million, going up for fiscal year, 1,000,000,299 million and for 2020, 1,000,000,499 million, increase of 348 million over the two-year
2:05 pm
period. lion's share by cleanpowersf and the other big drivers are debt service on water bonds, on wastewater bonds, and then revenue funded capital on water and wastewater infrastructure assets. >> bring to your attention the presentation was -- >> long? >> yes, long, but supposed to be ten minutes and you are already like seven minutes over. i need you to wrap it up to get to the questions. >> sorry about that. operating budgets highlights are here. i've highlighted them, cleanpowersf, capital funding, slide 19, this is a picture of the authorized position changes from fiscal year 18 to 19. >> and authorized position change, who authorized them? >> in the annual salary budget.
2:06 pm
and the -- >> the f.t.e., increase to help with the rollout of the program? >> yes, exactly. the large page summarizes the capital budget, two-year appropriation, $1.85 billion. you can see the lion's share relates to 60% of that relates to the wastewater enterprise and the sewer system improvement program the general manager addressed. water side, investments are, and completing the water improvement program, investing in the water transmission and distribution system, and the power side, about 70% of the investment in the up-country assets, and investment in distribution locally the general manager
2:07 pm
pointed out to expand the hetchy power operations. in conclusion, 24/7 services critical to public health and safety. a significant expansion of the power enterprise and cleanpowersf, long-term capital investment and financial planning strategies, we are investing in our assets. and the activities as general manager kelly pointed out, deliver tangible benefits to the community. >> all right. thank very much. supervisor yee. >> supervisor yee: could you help me understand this a little bit? increase of seven f.t.e. for the clean power and increase of 117 million in terms of revenues for cleanpowersf. not understanding the math.
2:08 pm
>> very good question. >> i think one of the premise of convincing people to participate in clean, cleanpowersf is that, you know, we want to use clean power, but at the same time, we knew that people to participate would get hit with a higher rate, especially super clean power, and then so is there any attempt to lower that rate? you continue to almost punish the people that want to have clean power. >> so, the commission adopted last month rates for cleanpowersf that will put it on july 1, 2% lower than comparable
2:09 pm
pg&e rates, and the dollars that you point out are related to the increase is really related to the cost of purchasing and procuring power, not staffing. >> supervisor fewer: thank you for the presentation and because the general manager meets with me every six months i'm pretty up to date on everything. congratulations on the timeline, on the cleanpowersf, i think it's very exciting and then i just have one question which i have asked all of our departments is that i understand that you have some contracts you contract out, and very few, mainly about security. and i know that those are in times of emergency as prop j has been, that's when it says and that, and i think 76 ordinance. do you have any plans to incorporate those jobs into your
2:10 pm
permanent workforce? >> we can talk with the head of h.r. and get back to you. >> supervisor fewer: i want to commend you, we have seen presentation after presentation today and the idea that you are looking, forward looking at your retirement and planning for creating a pipeline to your jobs i think is really commendable and putting resource to say that, and also the apprenticeship programs. i think it is proving to actually help to hire and train many san franciscans, and a problem of homelessness and the wealth divide. thank you very much. >> i think the general manager deserves a lot of credit. the general manager deserves a lot of credit for those programs. >> a little bit louder? >> thank you general manager. >> thank you.
2:11 pm
>> ok, eric. thank you. real quick, for clarification, i don't know if i have this wrong, but when we say that the combined water, power sewer bill increase 8% over four years, do most customers have all three, are they bundled? >> no, i meant to say it's the water and wastewater bill 8.5%. >> ok. just the wastewater, that's what i was briefed on. and ok, thank you, that's it. thank you. anyone else, any questions? all right. benefit of being last. critical thinking skills might be dissipating. going through this since 10:00. thank you, appreciate that. so, i think we are going to hear from the san francisco unified school district, ben rosenfeld. >> controller.
2:12 pm
this is the county office of education appropriation for this item, so, this is statutory required payment from the county to the county office of education, which of course for us is the same as our school district. the -- so, ministerial appropriation before you on this item. majority of these appropriations that flow to the school district, much larger and of interest, contained in the department of children youth and families budget which you'll see in june. >> yes, that's right. all right. well, thank you very much for that brief description. appreciate that. right now we are going to go to public comment. any member of the public, come on up, two minutes. public comment is open. please. someone. come to the mic. >> start off with that first speaker from the transportation. i object to his statements about school traffic monitors,
2:13 pm
monitoring the crosswalk for kids. there was hundreds that applied for a job opening about several months ago, and i was the person that was passing out the job announcements, advertise you pay $20 an hour for the work. you lead the people to believe they can make enough money to support themselves in the city. then after the process and selection process to get the job, you only work them an hour and a half a day. it's disgusting. and about this medallions, where you are charging the arabic and people from india descent, $250,000 in order to have a license and permit to drive taxis, that's extortion. that's a criminal offense. and you are in violation of the rico act. racially profile those brown skin color taxi drivers in order to pressure them, you know they
2:14 pm
want to survive and put them in potential financial bind. it's a criminal offense. violation of title 18 of the united states code service and deprive a person of a civil rights like that, pertaining to funds, you should not be fined more than $10,000 of cash money and serve a prison term fo longer than seven years. you should go to the school district and press charges against them and also the city attorney for civil penalties and about calling that hearing to verify what i'm talking about, i take it intelligence of cohen, seeing how all the arabic people were coming to me and asking me to help them and i was the one that pointed out all you have to do is explain to them like you explain to me. they didn't know they could speak at public comment. i'm the one that got them to come up and speak. don't stop there cohen, also the way we got treated in the fillmore area.
2:15 pm
>> your time is up. thank you. come on, next speaker. >> good afternoon, supervisors. peter warfield, executive director of library users association. i want to thank you very much for the many questions you have had generally and particularly to the library. they are not used to being in a forum where they don't control everything, and their responses were very interesting. let me make some general statements about radio frequency identification, $3.4 million project they want to install and then spend about $200,000 a year for the next ten years supporting. first of all, rfid kills patron privacy, enables a tag of the book to be read without the knowledge or consent of the person carrying the item and it
2:16 pm
can be read through clothing and a closed container like a purse or briefcase. rfid, second of all, a huge security hole and that is it leaves the library wide open to massive and undetected losses from people who may intentionally or unintentionally have a very inexpensive and readily available material that they can basically put the books or other materials into or have it adjacent to, and that blocks the signal so that the reader has no idea what's going out the door. rfid poses potential health risks from radio frequency radiation. we are not talking atomic radiation, but radio frequency radiation. some health studies have shown that. and repetitive stress coming from bar code swiping is something they have no longer claimed but that is pretty much bogus.
2:17 pm
let me just say the biggest whopper we heard, only one individual from acle and esf, electronic frontier foundation and american civil liberties submit the letter. groups, not individuals. >> thank you, next speaker, please. >> thank you, supervisors, mark krueger with san francisco taxi workers alliance, and some taxi drivers came to the board the other day, you heard from them. they shelled out $250,000 for taxi medallion. drivers have been coming to the mta for a couple of years now asking for help and the mta has been unresponsive to them. most drivers have given up on the mta and don't bother to go. there was a consultant's report
2:18 pm
put out in the last couple of weeks, completely dropped the ball, did not discuss it. and this is an issue not only here in san francisco, it's an issue in new york and other places. last week the "new york times" wrote an editorial which entitled what will new york do about its uber problem, and i would like to read you just two sentences from that editorial. says over time the city should consider whether it owes something to drivers who sunk their savings into taxi medallions. many drivers went into debt to buy these permits because the city promised them a monopoly on picking up passengers a promise it has not been able to keep. so, the situation here in san francisco is far worse because these drivers who bought the medallio medallions were on a waiting list, many for 10, 15 years or more, the city pulled away the right to a medallion at a nominal price and forced them to
2:19 pm
buy these things for $250,000. so, the city needs to do something about this. these drivers need help. i don't know if it's too late in the mta's budget process but i would call upon this board, the board of supervisors to find a funding source, whether through the mta or otherwise to start compensating these medallion holders for the situation which the city has created. thank you. >> thank you. any other members of the public that would like to comment? seeing none, public comment is closed. thank you very much, thank you to the staff that made the presentations and the ladies and gentlemen that participated in public comment. thank you. colleagues, we are just about done here. i would like to make a motion to continue the hearings to next week. >> motion to continue the matter to may 24. >> that's right. second? >> second by supervisor fewer, take that without objection. please note that supervisor yee is not here.
2:20 pm
>> thank you. >> that motion passes. with chair cohen, fewer, stefani and supervisor yee absent. >> any other business before this body? >> that completes the morning agenda. take a 15-minute recess and then we will begin the afternoon agenda. thank you.
2:21 pm
2:22 pm
2:23 pm
2:24 pm
>> hi. i'm shana longhorn with the san francisco league of women voters. i'm here to discuss prop e, a measure that will be before the
2:25 pm
voters on june 5th. in 2014, the supervisors adopted a resolution in san francisco that prohibited the sail of cigarette products. a rhenendumb was filed requiring that the ordinance be submitted to the voters. the ordinance will not go into effect unless a majority of voters approve. proposition e is a refer endumb to pass the ordinance passed by the board of supervisors prohibiting the sail of flafrd tobacco products in san francisco. a yes vote means you want to prohibit the sail of flafrd tobacco products in san francisco. a no vote means if you vote no, you want to allow the sale of flavored tobacco products in san francisco. i'm here with dr. lawrence chung, past president of the marin medical society. we're also joined by star child, outreach director of the
2:26 pm
libertiaryian party of san francisco. thank you both for being here. i'd like to start with you, star child. why do you feel it's so important. >> well, it's an expansion of the war on drug dos, and we shd know that the war on drugs has been a massive failure. it didn't work with alcohol, it didn't work with cannabis, and it won't work with tobacco. this will create a black market in san francisco for purchase of cigarettes on the streets where they won't be checking i.d. it's already illegal in california for people under 21 to buy tobacco products, so the opposition's claims about oh, it's about kids being able to buy tobacco, well kids can't buy tobacco now. this is about not fringing on adult choices. it's going to lead to more crime, it's going to lead to more retailers closing.
2:27 pm
controller's economic office estimated 50 million lost in sales. vaping stores and other retailers that are highly reliant on tobacco sales will close. raping actually helps people quit smoking. it's less harmful. vaping and e cigarettes are included under this proposed ban. >> thank you. dr. chung? >> thank you for asking me to be here? i'm here not only as a concerned physician but as a father. i have two wonderful nine-year-old twin boys and girls, and i am worried that this is allen assault on our k. canny flavored tobacco has only one use, and that's to hook kids into tobacco. this measure is all about protecting our kids, our community, and i feel very strongly that we should uphold this ban on tobacco that has already been passed by a unanimous decision at the board
2:28 pm
of supervisors level. so please join me and the san francisco marin medical association, the california medical association and the american medical association in upholding this ban on candy flavored tobacco, vote yes on prop e. >> thank you. i'd like to ask some questions, and i'm going to begin with you, dr. chung. do you believe that this proposition, a ban on flavored tobacco is the best way to fight youth tobacco use. >> yes, i believe this is a very effective way to fight youth tobacco, because we know that four out of five kids who start smoking start with a candy tobacco flavored product, four out of five. so if we ban the sale of these candy flavored tobacco in our stores, we will effectively keep them out of the reach of our kids. it's all about our health. >> and the same to you, star
2:29 pm
child. >> absolutely not. as i mentioned, the kids already can't buy tobacco in stores. what this will do is drive sales to the streets or on-line where i.d. check is less effective or in the case of on the streets, it won't take place at all. if you buy things on the street from unregulated sources, he don't know what's in them. we all know the case of eric garner in new york city who was killed by police there. he was selling illegal unlicensed cigarettes on the street, so that's an example of the kind of violence that can be produced by this, and it's not going to be effective at preventing kids from smoking. i mean, kids get tobacco know. i mean, it's a parental decision. keep your nine-year-olds from smoking, absolutely, but prop e won't help make that happen. >> thank you. our next question goes to star child first, is do you believe
2:30 pm
proposition e is too broad, there have been some arguments that in addition to it covering candy and flavored tobacco in that sense, that it also covers menthol cigarettes and hookah use in the middle eastern communities. >> we would be against it even if it were only covering a very narrow segment, because your question is does your body belong to you or the government. all of us consume various things that are unhealthy. if we all switched to a raw food, vegan diet, we would be much healthier. does that mean that anything that's not vegan should be criminalized? no, but that's the way that some people want to go. big government, unfortunately, they already make more off of the sale of a package of cigarettes than the tobacco companies do. they're trying to make money off of it on both ends, fining
2:31 pm
it from the sales, and criminalizing it on the other, and all the apparatus, there will be air cost with enforcing that, and we've seen with the war on drugs and putting people behind bars, especially with low-income communities and communities of color, and this is the wrong way to go. we know proceed hibitihibitionr on drugs is the wrong way to go. >> dr. chung? >> absolutely not. again, most kids start smoking through candy flavored tobacco products. these flavors are added for a reason: so make smoking easier and to make more pima ikt didded. we know the more you smoke, the more it'll call you to have harm, cancer and eventually death. i like to do whatever i can to keep my kids safe and to keep my community safe. i do believe this ban will be effective in reducing our kids from smoking, so i'm a
2:32 pm
proponent of this proposition. >> and we'd like to have our closing arguments. we'll start with you, star child. >> well, first of all, i wanted to point out, for one thing, there's medical health professionals and people who care about kids and reducing death on both sides of this argument, so please don't be misled by the fact that my opponent has the word dr. in front of his name. et he et -- he's a dermatologist, not a health care researcher. the fact that kids may start by smoking flavored tobacco, that has nothing to do with the reality that everybody likes flavors. they're acting like oh, just because it's flavored, it's going after kids. nonsense. i like different flavored when i eat products. i don't smoke cigarettes, but it's something that people should have, again, ultimately the right to choose what to put into their own bodies, and this
2:33 pm
is not going to reduce smoking. history shows it's not going to reduce smoking. the belief that it will somehow flies in the face of reality. >> thank you. dr. chung? >> thank you. again as a practicing physician in san francisco for over ten years and having represented san francisco marin medical society, the california medical association and also the american medical association on public health policy, i can tell you that all of our organizations feel that this proposition is the right thing to do. this proposition simply is to uphold the ban on candy flavored tobacco. big tobacco is waging a war, an assault on our kids' health. they try to get a new generation of children to be addicted to tobacco products that's going to increase our health care costs down the road. nod to diseas-- in addition to diseases and deaths, so please vote no on proposition e. >> thank you. thank you both for being here. >> thank you. >> thank you. >> no on prop e. >> we hope that this discussion
2:34 pm
has been informative. for more information on this and other ballot measures in the june election, please visit the department of elections website at, remember, early voting is available at city hall on may 7th, from 7:00 a.m. to 5:00 p.m., and if you don't vote early, remember to vote on june 5th.
2:35 pm
2:36 pm
2:37 pm
2:38 pm
2:39 pm
2:40 pm
2:41 pm
2:42 pm
2:43 pm
2:44 pm
>> good aefrnl, afternoon. >> good afternoon, ladies and gentlemen, sfgovtv. another wonderful agenda set out ahead of us. talking about our favorite subject on thursdays we like to talk about, budget and finance. mr. clerk, could you please call item 4, or attendance and all that stuff? >> quickly, this is, please silence all electronic devices,
2:45 pm
complete speaker cards and any documents should be submitted to the clerk. any items acted on will be on the june 5th agenda unless otherwise stated. resolution approving a lease approximately 41,000 -- >> item 4. motion ordering submitted to the voters and elections to be held on november 6, 2018, and ordinance amending the business and tax regulation code to add a new gross receipt tax category for transportation network companies, services and private transit vehicle services. >> all right. thank you, so this ordinance would impose a gross receipts tax on transportation network companies, services and private transit vehicle services. largely includes companies like uber, lyft and chariot. i just wanted to let you know that we are not debating the
2:46 pm
merits of the legislation today but instead, accepting some amendments for a cleaner hearing in july. all right. so, also want to acknowledge that supervisor peskin is the chair, excuse me, sponsor of the legislation. is staff here? i don't know if there's a member of peskin's staff that will present on the amendment. all right. well, the amendments that are going to be presented are going to expand the program to include any future autonomous vehicle passenger services. is there a presentation? she's walking -- who is making the presentation?
2:47 pm
we are going to move on, we'll come back to item 4. 1 and 2 together. come on, you are late. let's go. item 4. don't be sorry, just -- >> all right. thank you, chair cohen. supervisor peskin, thank you for scheduling the item. i know you have a ton at budget and finance. essentially, this is supervisor peskin has put forward legislation intended for the november ballot to essentially create a new tax category for one of the emerging businesses, business models, industries, in san francisco that it has certainly had a ton of impact on our city and deserves to have its own separate category as we have other emerging industries come into play in san francisco, i know the city is doing a thoughtful job of trying to plan for that, you know, whether it's
2:48 pm
recreational cannabis use or whether or not it's the new private transportation industry. so, what this does, essentially mimics the existing gross receipts tax structure that we have and is quite modest, i think, in terms of its top tier, which would increase the commercial gross receipts to .975%. and i want to thank the controllers office and the tax collector's office for working so closely with us since the very beginning on this. that has been, it's been an exercise as we have tried to figure out how to generate more revenue for the city and its growing needs. many of you heard supervisor peskin when he introduced the legislation talk about the process of the task force 2045, a six-month process, included all the city departments,
2:49 pm
included stakeholders from across the city as we tried to identify $100 million annually towards the local contribution, toward the overall $22 billion need over the next 27 years. this is a general tax, it is not something that is intended necessarily to be dedicated towards transportation, given the fact that there are so many competing needs in the city. so, that's ultimately revenue that this body would be tasked with figuring out how to prioritize in our city's general fund. what else can i tell you about the tax? today, unfortunately, because supervisor peskin is not here to ask himself, i would ask that your offices should have given you proposed amendments that we have worked with the city attorney's office on to add a category, or go ahead. >> do you have the language? >> yes. sorry, i apologize, you should have gotten a copy for staff. >> thank you.
2:50 pm
thank you. >> so in addition to the two definitions for those passenger services, vehicle services that would currently be included in this tax, which is transportation network companies, as well as private transportation vehicles on a fixed route, the city attorney's office has given us very good advice that we should plan for the future, you know, at that point in time when the state will allow autonomous vehicles to start charging for their passenger services, that is what is before you today to essentially make sure we capture them in this new category. it's not a regulatory measure, not something that's intended to regulate or create rules or for how t.n.c. or private transportation vehicles operate on our city streets. it's really intended to recapture that value of a booming industry that should be paying its fair share towards the city's growing needs. thank you. >> thank you very much. to the controller, are you
2:51 pm
prepared to discuss this or do you want to save it for july? all right. >> we can save it for july. >> as i said, we are going to keep the legislation as clean as possible so we are going to take public comment and then take action on the amendments and then we will hear the item and debate the item in july. all right. so, let's go ahead and open up for public comment. if anyone would like to comment on item 4, please come on up. and again, this is about a gross receipt tax on the transportation. >> randy shaw, director of tenderloin housing clinic. about a month ago i heard of the attempt to repeal the mid market tax credit, read in the newspaper and texted aaron peskin, you are into local control, how come you did not talk to mid market or tenderloin before introducing this. it seems very inconsistent. not even a meeting the
2:52 pm
supervisors convened with stakeholders. he would not appreciate if i went into north beach and came up to proposal without consulting. great, i'm at a coastal commission meeting and sit down with you and work on it. never heard a word, did not know this was going on until i heard from another source yesterday. why are we doing this? it doesn't make any sense. there's been no process. it's been pointed out the mid market tenderloin tax credit ends in a year anyway. so, why do this? and i know, i wish aaron were here so he could explain this. i've heard various theories, but none make any sense. i think he spends too much time at cafe tria he needs more time on mid market. any of the supervisors or anyone who work here take bart or see market, we have not achieved mission accomplished.
2:53 pm
work needs to be done in mid market. and if you think it's gentrified since twitter came, walk down there and get a reality check. and it's a bad idea. and do whatever you can to quellch it. >> thank you, we are not going to be doing too much today, just the amendment, i look forward to seeing you in july for more conversation. >> good afternoon, supervisors. emily loper. council represents over 300 employers across the nine county bay area and we are concerned about the potential impacts of this proposal. we know that the public overwhelmingly believed that t.n.c. and other private transportation are an integral part in the transportation system. 74% of residents region-wide believe that uber and lyft are an important part of the transportation system and also know that despite rising
2:54 pm
regional congestion, that these services are, the public believes these services are making it easier for them to get around, because it's improving their mobility options and you know, making it easier to connect to and from transit. so, we are concerned it's punitively targeting three company, there are a few more, and without achieving a public policy goal, because the revenue is not designated for transportation improvements, so, we believe that instead of targeting the business community, we should be talking about sound public policy solutions to really reduce road congestion and enhance public transit in the city. so, thanks very much. >> thank you very much. any other members of the public? >> good afternoon, supervisors. speaking on behalf of the san francisco chamber of commerce. conversion from the payroll tax to the gross receipts tax is far from complete. there is still a half percent payroll tax remaining next year.
2:55 pm
we shouldn't lose sight of the goal from 2012 to stop taxing jobs. t.n.c. tax on top of the commercial rent taxes on the june ballot and other measures result in burdensome tax policies that may make it harder to complete the tax reforms that everyone agreed to in 2012. the chamber is open to working together with supervisor peskin and our partners to achieve the goals this ballot measure would be seeking. thank you. >> thank you. >> seeing no other member in line for public comment, closed. thank you. colleagues, i would like to make a motion to accept the amendments and continue to the call of the chair. and we'll take that without objection. thank you. mr. clerk, items 1 and 2 together, please. >> clerk: item number one, a resolution approving a lease of approximately 41,000 square
2:56 pm
feet, entire three floors of 945 bryant street for the adult probation office with bridgeton 945 bryant fee llc, for 20 years, to be occupied in phases for a period of august 1, 2018, through july 31, 2038, base rate not -- item 2, resolution lease of approximately 27,000 square feet, consisting three floors of 777 brannan street for the police department with lcl global, 777 brannan street, for ten years, with 25-year options for a period of july 1, 2018, initial monthly rent not to exceed $83,724.83.
2:57 pm
>> thank you. mr. updike, good to see you. >> good afternoon, chair cohen, members of the committee. so, the first two items we'll discuss today about the leases that come forth from letters of intent that were previously approved by the board in november of 2017. these along with the already executed and fully approved lease of 350 rhode island facilitate the administrative exit of the hall of justice, resources and available space allow. item 1, 945 bryant street, 71,744 square foot building, less than a block from the hall of justice. the property's program for use by adult probation. the lease before you today is consistent with the previously approved letter of intent. take possession in phase, the first two floors in august of
2:58 pm
2018, the third floor in the spring of 2019. $64 per square foot per year, appraisal confirmed by a separate review appraisal as required under the code, fair market lease rate at $66 a square foot in october of 2017. remind the committee it's may 2018. we held the rate during the lease negotiation, a number of issues to work through and the legislative process as well. in this market that's pretty extraordinary. furthermore, note the rent commencement, the date we start paying rent, is 90 days after the lease commencement date. so, equivalent to three months of free rent, which drops the net effective rate in year 1 to $48 a square foot, or 27 less than the rate determined in october. fairly good deal i think is my
2:59 pm
point. 20-year lease with annual increases of 3%, but at the ten-year mark we have what's called a market to market moment. and so at that point, the rate will reset to a new appraised fair market rent and that rate could be higher or it could be lower than the rate paid at the time. you are used to seeing leases with a certain term, renewal option, and usually no less than the prior rate. given the term of 20 years, we wanted the opportunity to check in, there could be a market upset and we would want to be able to take advantage of that at year ten. at year ten recalibrates and moves forward another 3% a year to year 20. we expect the tenant improvements, $2.7 million, build-out, information technology, connectivity, and moving costs, fnne. the property does come with 33 parking spaces, simply part of
3:00 pm
the overall premises of the building and the lot come together as one, which we will lease in its entirety after phase two is delivered. those spaces come at additional cost of $225 a space per month. [please stand by for captioning change]