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tv   [untitled]    January 26, 2011 11:30am-12:00pm PST

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please stand by unfortunately, they did not have sufficient qualifications to operate the concession and were not awarded. rather than putting this out to bid for a fifth occasion and expecting different results from the same process, the department felt that what we were prioritizing at the sites was capital improvement, that that should be what we ask for, and with the approval of the
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recreation and park commission, we published an rfq, which solicited capital improvement plans, suppose it financing for those capital improvement plans, the qualifications of the entity bidding as well as -- and the qualifications were broken down into their qualifications operating in a concession and also their qualifications performing renovation on historic buildings. as well we considered their proposed operating plans. again, these are some of the things we were looking for -- experience managing capital projects on historic buildings, rental boat managing, as well as concessions. as well as someone to renovate the boathouse, created in or cafe, purchase a new fleet of
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boats, and offer a healthy menu -- create an indoor cafe. supervisor mar: could you please slow it down a little bit again? >> sorry. upon selection of the panel, the panel unanimously selected ortega. just a few weeks ago, they took over the death valley national monument. they are well respected and had a history of performing capital improvements on historic buildings, including the renovation of the oldest house in the united states, a 1610 adobe mud building that ortega restored.
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as you can see from this slide, they and their partners have significant experience in all key areas that the department elicited qualifications for. with their partners, they have 22 years of voting experience. they have experience operating numerous food and beverage concessions, including with their local partner, the tenderloin-based fish and farm restaurants, and american box restaurants, and most importantly to the department, they have sufficient experience undertaking capital improvement programs on historic buildings. they have worked -- they have performed renovations on nine buildings over seven years old ranging from 70 to over 400 years old, and it is this skill sets that the department is
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especially excited about. these are just a few of the acclamations that ortega has received. they won the green business award in 2010. they were referred to as the greatest restaurant in marin, and the national park service said they have the healthiest, most sustainable food in the nps system. the lease before you has a proposed capital improvement plan that would require the ortegas to put $233,000 into the boat house up on raese execution -- into the boathouse upon lease execution. we intend to work closely with them to ensure the improvements
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are historically appropriate. we want to make sure that the building exterior remains unchanged. the red and white shutters, doors, and windows will all be restored to the look they had in 1946 but will not be otherwise changed. as you can see from these two photographs, we are not talking about a drastic change. more of a facelift to give it an updated look. as the general manager noted, we will for the first time be inviting the public into the stow lake boathouse. the existing boat repair facility that is off-limits to the public will be moved to the bottom floor of the concessions, and the space will be repurchased as an informal, indoor seating area. the space will be available for community groups to use for community meetings but perhaps will be available for visitors to the park to take a little bit of respite from the elements
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that are there. we will additionally be including -- they will additionally be including an 88 bathroom and a small an -- an ada bathroom and a small cafe/reading nook where patrons can read about the nature of the park's -- parks. the interior of the building would go from the look we have here of a working space that is certainly well worn and well loved to an open public space where we are inviting the public in to enjoy the stow lake boathouse while we preserve its character. just a little bit about their voting operations, which will be managed by their legal partner in this joint venture. they will be purchasing and only
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a fleet of boats, funding all applicable boating regulations -- purchasing and all new fleet of boats. staff will be trained in cpr, and the boats will be regularly maintained and serviced. the food and beverage component of the property will be managed by american box restaurants through district 6 restaurants. it will be modeled after their concession at near where 97% of produce and 80% of the meats are sourced from within 40 miles. additionally, the pink popcorn will be maintained that we have heard the public enjoys so much. we have heard that on top of that snack menu, we will be offering meals out there for the first time like sandwiches and suits that feature locally
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sourced, organic materials. the ortegas have proposed a number of environmental protections that will be a first for park concessions. they include certifying the concession as an audubon cooperative sanctuary. all of the work will be performed to lead standards, and as well, the concessions will be certified as a green restaurant. additionally, the ortegas have proposed a number of community partnerships that the department is very interested in developing, including about the wildlife, which has its only nesting area in san francisco on strawberry hill, as well as offering educational trips for children and reduced-price field
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trips for sf usc students. additionally, though their headquarters may be located in new mexico, there are numerous benefits to the local economy. we will be -- ortega will approximately doubling the number of staff out there. in addition to raising the number of staff, we will be having more training staff, as it is no longer serving prepared packaged food, but actually preparing the food on site. the local partners say all of the food will be from local suppliers, including farmers markets, and they will be working with a local architect, contractor, and furniture manufacturer. the proposed terms to the city
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have the following benefits -- a 15-year lease with a five-year extension at a minimum rent of $160,000. 33% of the boat rental revenues will go to the department in red. that is an increase from 31% at the moment. 10% of the food and beverage will go to the department, and the department will receive 7.5% of the retail rent. the minimum value of the capital improvements are $233,000. additionally, for the first time that stow lake -- first time at stow lake, we will be creating a maintenance revenue fund where 2% of proceeds will be dedicated for the maintenance of stow lake going forward.
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this is important to us because one of the reasons why the building has reached the state of deterioration is in is that the current tenants for quite some time have been on a month- to-month lease and have not had the security necessary to invest in the property. this dedicated fund will ensure that we do not reached the point -- reached that point at the end of the lease, and that the building is in the same condition at the end of the 15- year lease or 20 years that it is upon the completion of the capital improvement project, and that is very significant for the department facing $1.7 million in deferred capital needs. in addition, the least he will be setting up a dedicated personal property funds -- the lacey -- the leasee will be setting up a dedicated personal property fund. while the city does not directly
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benefit from that expenditure, the reality is that as the boats have become worn, we have seen a decrease in revenue, and this will prevent a similar situation from occurring towards the end of this lease. when we look at projected rents, we see a year one projection of $200,000 to the apartment, which as the general manager said is over a 33% increase in the five- year average for the last five years. again, we see projections for the next five years would average approximately $213,000, ranging from $200,000 in year one up to $225,000 in year five. again, that is a significant increase. that is 42% over the last five
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years. if we compare the financial terms of the existing lease to the ortega lease, we see significant advantage. an increase in the boat rental rate of 2%. we do see a decrease in the food and beverage rent, but the -- that is really due to the fact that for the first time, we are offering an expanded menu. we will have food that will require labor on-site to prepare. it should be noted that the industry-standard for such brands -- for such rent is about 4% to 6%. the initial capital investment for the existing lease maintenance fund payments totaling an estimated $162,000
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over the lease, and if you annualize those last two expenditures, the initial couple of us men and maintenance fund payment, you get a total of $33,000 per year for ortega and just over $2,000 for the existing lease, such that over the respective 15-year terms of the lease, we would have total annual contribution by ortega of $193,000 compared to the existing lease, where we have $112,000 annual contribution to the city. while we did not request financial proposals as part of the last rfq, we have the benefit of having received unsolicited from the other two respondents financial proposals, so we have a good sense of what's -- what the market value
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for the concession is. we can see that in the other come parable proposals, where there is a significant capital improvement package, we see a total annual contribution to the city of approximately $170,000. for the stow lake corporation, where there is a much smaller capital improvement plan of $23,000, we see their total contribution at $216,000, but that really did not meet the policy needs of our commission. department commission have consistently prioritized the improvement of the concession, and essentially, the policy decision is a little bit less money annually for the assured insurance -- the insurance that it will not have to be replaced
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at the end of the lease, that we have a revived customer experience for generations. that is it. before i turn it over to the committee for any questions, i did want to thank all the people that have come out to the numerous community meetings over the years. we have had dozens over the last five years. we also wanted to thank the current concessionaires for their efforts. they have been a partner of ours for the last 67 years. regardless of the outcome here, they will remain a valued partner of ours at the marina green kiosk, and we look forward to working with them there. supervisor chu: thank you very much. if i could ask our budget analyst, harvey rose, to provide his presentation. >> madam chair and members of the committee, you will note on the bottom of page four of our
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report -- first of all, let me state that i want to thank mr. ginsberg and the department for considering our recommendations and for suggesting such recommendations for consideration by the budget and finance committee and the board of supervisors. on the bottom of page four on table 1, based on the department's rfq process, a selection panel has awarded the highest score of 91.75 points out of the total 100 to the stow lake boathouse, llc. that is shown on the bottom of page four. on the top of page five, two of the respondents proposed a minimum annual guaranteed interest -- in percentage rates, although those amounts were not required, requested, or considered under the competitive rfq process to evaluate the
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respondents in table two. that is again on page 5 of our report. that table shows the values of the unsolicited minimum annual guarantee in percentage rinse as well as the value of the solicit capital improvements and maintenance submissions -- guarantees in percentage rents. page six summarizes the primary financial terms of the proposed stow lake boathouse needs with stow lake boathouse, llc. actually, that table is on page 7 of our report. as summarized in table 3, the proposed lease would generate several revenues, and i'm basing this not on what has been
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submitted today to the committee, but on what we had reviewed, based on the minimum annual guaranteed band of $140,000, adjusted annually for inflation, or the cumulative 33% of gross boat rentals, 10% of food and beverage sales, and 7.5% of retail sales. we project that in years 1 through 5, the proposed lease percentage would be greater than the minimum annual guaranteed and that they would be taking increased percentage rent payments, estimated to remain from $200,000.250 $4 -- $200,254 -- on the bottom of page eight, we state that has shown in table 5, which is on page 9 of our report, that over the course of the 15-year lease, stow lake boathouse will invest an
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estimated total of $858,403 or an average of $33,000 a year for 15 years. the capital improvements in maintenance, and $363,399 or an average of $24,226 per year for their own personal property and for the personal property fund. on page 9 of our report, we state that the proposed lease does not specify the amounts required as a minimum investment for the required capital improvements or for the new boats. the department has addressed that in suggesting to you that you implement our recommendations on that matter as well as the fact that section 7.1a of the proposed lease requires that 50 new boats be purchased at an estimated cost of $152,000, but both those
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instances would not specifically require that, so that is why we made that recommendation. on the bottom of page nine, we state that the competitive rfq selection process neither required nor consider the annual guaranteed percentage rental rate. both the minimum annual guarantee and percentage rates were negotiated between stow lake boathouse, llc, and rpd after stow lake boathouse was selected. on the bottom of page 10, we state that the rpd has projected that under the proposed lease, the percentage grants will be greater than $200,000 per year in each year of the lease, and that is shown in table four, so that the minimum annual guaranteed grant, again, not
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the $160,000 now being proposed, but the $140,000, is 30% less than rpd's projected percentage rent. the additional guarantee amount was originally proposed at $140,000, which is low compared to actual payment paid over the existing lease, where minimum annual guaranteed adjusted for inflation and minimum annual guaranteed read standard used for food concessions at the san francisco international airport. at the bottom of page 11 of our report, we note that the rpd made a policy decision to prioritize capital improvements, deferred maintenance of rental boats and food and beverage quality over rental income in their valuation process, and we totally agree with the department that the rpd
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priorities are very important considerations, but we do note that since the competitive process neither requested nor required or considered the minimum annual guaranteed and the percentage rental rates, the rpd has no way of determining whether they could still achieve the same amount of capital improvements, deferred maintenance, and the maintenance of the rental boats in the same high quality food and beverage options while at the same time also receiving higher rental revenues to operate and manage the stow lake boathouse. instead, rental revenues, as i stated, were negotiated after the competitive selection process was completed, and our recommendations are on page 12, and as i understand it, the department is suggesting the same recommendations, and that is to require that the lessee make an investment of at least $233,000 in capital improvements and $152,000 in new
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boat purchases. they state that specifically in the least. if the committee is satisfied with what the department has submitted, i withdraw the recommendation to continue the proposed resolution, since it appears like this would be implemented. for all of the reasons that i have mentioned here to fore, i consider the proposed resolution to be a policy for the board, and i would be happy to answer questions. supervisor chu: because we have a number of speakers who have come to comment on this item, what we make a recommendation to allow the committee to the public comment first? by show of hands, how many individuals are here to speak on item one day -- today? and if i could ask how many folks are here to speak for the item?
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how many against the item? pretty even. because of the large number of folks who are here today, we will have public comment be two minutes each, so i will request that folks up in the center of the aisle so we can move too quickly. if i could invite up very quickly our representative from the ggnra, who is here, first. >> good morning. thank you for the opportunity to go first. i appreciate that. i'm the public affairs specialist for golden gate knack for it -- national recreation area, and we were requested to talk about our concessions operations. can you hear me ok? ok. the national parks service entered into a 10-year concession contract with a subsidiary of the ortega
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enterprises in the early 2009 after a competitive bid process. the contract emphasizes several elements beyond revenue and earnings. solid waste management, including 100% foods throughout composting, and reducing the amount of landfills -- excuse me -- reducing the amount of land fill that comes from that operation is part of the contract. as is sustainable purchasing, including purchasing of office equipment, and supplies for the gift shop, and energy. we also in the national park service have an emphasis on healthy and sustainable food and beverage services throughout the country. healthy parts, healthy people is a program that golden gate national recreation area is a forerunner of in the country -- healthy parks, healthy people.
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this was a major part of the contract as it was put out for bid. the mere words trading company has done a fantastic job of meeting the challenge posed in the perspective to provide sustainable menu ingredients while providing a menu filled with fresh, healthy, minimally processed and sustainable foods that originate from close proximity. the other element that the -- [bell rings] supervisor chu: thank you. >> they received the highest rating possible on their review. supervisor chu: thank you. for the public

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