tv BOS Special Budget Finance Committee 121416 SFGTV December 29, 2016 7:00pm-8:31pm PST
to thank, lindy wong and sfgtv for covering the meeting. do you have any announcements? >> silence all cell phones and devices completed cards and documented to be included as part of the file should subm submitted to td clerk. >> call item one. >> hearing on the recent updates regarding the city's financial position, including the mayor's budget instructions to departments for the physical year, 17, 18, and 18, to 19. and requesting the mayor's budget director and the controller to report. >> thank you very much, supervisor tang has joined us, and this is an item that we called and i want to thank the budget dreker for being here and i thought that it was the end of the year here and the mayor's instructions that came out last week and it would be a good idea to get the up date as a board and a city hall and thank you for being here and i know that you have a presentation to go through. >> great.
thank you chair farle and so i'm melissa the director and i am joined by the controller, and we will be going through this presentation for about the next 20 minutes. feel free to stop me if you have any questions. talk about three things today, the first thing is the post election rebalancing plan, the city's five year plan that will be publicly released later today. and budget instructions for department heads which we actually delivered last thursday. so this first slide is just telling you we want to make sure that we said to people right away, what are the few things that we want you to leave the room understanding. at the very highest level with this presentation covers is the fact that the mayor felt it was really important after the election to rebalance the budget. and i am going to talk about that in more detail. we look at the up coming two years that were charter mandated to balance by june first, we are seeing a $400 million deficit, over those two years. this is not significantly worse than about a year ago today when
that two year deficit was 350 million, but i will say that today compared to a year ago we feel a lot more unserpt, especially as a result of the federal election and on our timing of our economic cycle where we are at. we are mindful of these numbers and paying a lot of attention to them. >> another thing that i will talk about is that the deficits were on the rise. why this was happening and why it is happening you will see is employee is largely around the employee cost are the largest drivers are both the deficit projection and why our deficits are increasing and really another thing is just on revenue which the controller will talk about and we have seen in the past few years that revenue is the thing that has allowed us to balance the budget every i couldn'ter for the last few years, and add a lot of new service to the public that the public was demanding and they were good things to the mayor
and the board partnered on many of them. and we are not anticipating that we are going to see the high revenue growth in the up coming years. what does all of this mean? what this means that we are not in a recession, the mayor's instructions are not to cut or do layoffs or not for people to panic. just for people to be mindful that we need to be disciplined and make trade offs if we are going to add new programs, we need to be figuring out what in our budget is not as important as the new things and try to fund things in our existing budget. so we need to grow at a lower rate. the targets that we issued were 3 percent in each year and we have a very strong, in fte growth which i will talk about later. >> could i ask a question? >> please. >> as we talk about the federal impact and the new president-elect coming on board, in terms of our exposure, what i understood to be generally about north of $400 million in direct federal funding to our city and about a billion state pass throughs. i just want to make sure that we
are all thinking along the same lines. >> supervisor that is correct. we received just about $400 million from the federal government as a city and county. we received billion from the state of that billion that we received from the state, a significant portion is also federal pass throughs for predominantly public health and entitlement programs. so we have been estimating at a high level approximately a billion dollars in money that originally comes from the state government here locally. we are doing a lot of work with the mayor's budget office and departments to kind of tease those numbers apart and put them in different buckets to understand the revenue streams. >> okay, thanks very much. >> great. so really quickly i am not going to spend a very long time on this because i know i believe that the supervisors are some what familiar with this plan but feel free to ask me any questions. the budget included 37.5 in 16, 17, the current year and 155 in 17, 18, related to propositions
jand k on the ballot. and the mayor terminated proposition j, in early november, after k did not pass, and this is just showing you the category that the funding was planned and which was largely transportation of 100 million and homeless around 50 million and other things that the mayor was paying attention to was part of the rebalancing plan was the college street trees and it was not on the november ballot, but as a result of the federal election, the mayor was really concerned about legal representation for our immigrant community and so that was something that he asked me very early on after the election to also pay a lot of attention to and to make sure that was if the additional funding whats need to fund that as part of this plan, on slide five, you will see a high level of the rebalancing plan and what this says is that in the current year and the up coming two budget years that we are going to have to balance by june first, that we rebalance between our expenditures and our revenues and so you can see the expenditures here are homelessness, street trees and, free city college and legal
services and the revenues are transfer tax and whole person care, and our department head from the new department of homelessness in support of housing is here today right after this item to ask for this 6.5 million in this balancing plan, related to homelessness to be removed from the reserve, and consistent with this plan. so i am going to move on from this unless you have additional questions. >> colleagues? >> no, we are good. thanks. >> office our works with the controller's office and the burg team and the budget and analyst. and our three offices come together to really do a look at our base case projection of the up coming five years, when we say base case, what we mean is if we take all existing policies to date, and we just move them into the future and do nothing, what would our revenue and expenditures be? and so, obviously that can't be the world that we live in because it shows a deficit and so we need to take action to
close those deficits. but that is with the base case projection means, it also assumes that the budget is rebalanced after the election and it is how we rebalance that since this is a report being put out by all three office and it just assumes that revenues and expenditures are equal. it is not saying what it is spent on. >> as far as revenue and the controller will talk about this but the revenue projection and the report is that it is still strong but that we are seeing the signs of slowing growth and constraints on our growth and so we talk about that in the report. also some assumptions that we make so we fund all benefit cost increases on health and pension for employees, and also, there is an assumption for planning purposes in the report that we fund consumer priced index increases on all of the personnel and non-personnel costs and it is an average of the moody and the california department of finance. and that is just a planning assumption and then later on, i am going to talk about why i actually think that we need to not grow as quickly and we can't afford those cost increases but
i think that it is a reasonable thing to assume and a financial projection moving forward. we assume the full funding of the capitol it plans in the out years of this plan. very briefly, a high level of interview of the revenue growth assumptions that sit under the 5 year projections and many more details specific to specific revenue streams, it will be included in the five year financial plan base case, when we release it in the incoming days, but generally speaking what our office is seeing at the moment indicates continued but slowing growth. here in san francisco for revenue and just economic activity and that is the assumption that sits under the revenue pro-ejections include thanksgiving plan. we have included a couple of key take aways on this chart regarding the economy. again we are continuing to see growth here in the city and private sector employ employment but that is slowing in most
recent august, to august, data, year over year you see that 15.4, growth rate in the technology sector in the city, slowed to under, 5 percent for the first time during this recovery. and similar we see a slowing grow rate in the employment here in the city from 5.3 percent to under 2.4. during this most recent period. this month, does not a trend make. but we have seen kind of this downward trending in terms of growth over the last several months. and generally, speaking we are projecting it to continue into the future. and this is likely, frankly due to the fact that we are nearing capacity here in the city and county of san francisco, in terms of capacity to house jobs and available office spags and to houseworkers and available housing, and that we are reaching the limits for our capacity for transportation infrastructure to bring the people to and out of the city
and that is given to how fully we are and we will expect those constraints to lead to more normalized growth rates that we have seen for the majority of this recovery. >> translating that at a high level, into general fund projections this is a summary of all revenues and what we have seen in the recent past and what we are projecting in this document looking ahead into the five year period, and you see really the tremendous growth rates we have had during this recent period. with growth rates above, 7 percent during this recovery, topping over 12 percent a couple of years ago. but again, in what we just released regarding our physical results for 15, 16, you can see the growth rate slowing. and so still very hel yth and strong growth in over all general revenues of 5 percent for the most recent audited period but that is the lowest growth rate of any year during this recovery, and we are expecting that moderation to continue into the future. and settling in to a going
forward growth rate of really between 3 and 4, 4 and a half percent, in a given physical year, and so these are fundamentally the growth rate assumptions that sit under what we are talking about today. >> so if you will look at this revenue growth in the last two recessions, it looks like there is basically two years of declining revenue, is it generally two-year, slumps when you look at it from a percentage basis? >> yeah, each of the last two recessions felt a little bit different. the dot com bust was more acute here in san francisco, likewise the bounce back was sharp, kind of what we called a vshaped recession, and the most recent one was a little bit more of a u, but again, a very sharp snap back after really a couple of downed years and the different recessions are going to feel different in how they impact our revenue and these are probably relatively quick recoveries but
on average, i think that we generally say two to three year recovery. during a given recession. okay. >> and i guess, as i think about it, it is obviously revenue but it is also smoothing out a pension and what that does from our general fund perspective. >> and one of the things that we started doing in the financial plan and we did this in the last document as a city is including a recession, scenario. and so we are not projecting a recession to occur during this period in these assumptions. but if one does occur, how it will effect revenue and we will touch on that later in the presentation, to give you a sense as policy makers of what that case might look like and how it effect revenue. >> but you are right, it effects both revenue and pension contributions. >> okay. so slide nine, this is telling you the high level of what the five year financial plan is showing and so i will spend a minute on this slide, and so it is the source as it changes from the current year, so what this is saying is that by the fifth
year of this plan, we are projecting additional 560 million in revenue that will be available for the mayor and the board to appropriate ate and if you look at the uses line, this is saying, that if we do nothing, the expenditures are expected to grow by 1.4 billion, and this is the issue, growth of 29 percent and eleven percent and you can see on the expenditure side, 50 percent of that, is driven by increases in salaries and benefit and i will get into that with more detail, 32 percent on city wide operating costs and, and then three percent on departmental costs.
>> thank you, so speaking of salaries and benefits, and again, just to reiterate that you project that 85 percent of the projected growth is wage increases and heling benefits. so how are we addressing that and i know that in light of the various actually many of the labor contracts that will be negotiated how are we going to deal with this? i know that we put this information out there, but i don't know how we are getting a handle on this. they were such a big driver of the deficit and then of the increasing deficits that we spent a lot of time thinking about that and making sure that we can explain it to people and we met with labor yesterday, and presented all of this information to them, you are correct, that we are going into negotiations this spring, with all of our labor unions except for the police and fire, that we
will be negotiating with next year and it is a big driver and it is something that we have to pay a lot of tension to and later in the presentation, the mayor is required to put out strategy to balance these deficits in the report. and so we will talk about that later on. >> designs each year with each of the three major health plan
providers and in the recent years, the service system has done a good job of developing new and lower cost alternative to benefit plans and they have been able to hold those rates down but we have seen the cost pressure in the recent past, but it is for the heling benefits it is a mix of collective bargaining, and the work that influences and contains some of those costs. pension costs are a function of the charter and have restrictions on those but to change those involves the voter action and then of course, the employee wage cost is strictly a function of the collective bargaining.
>> we are also asking for know ftes this year. >> when looking at the salaries that will go up as the natural factors that is one way to look at the how to control that. but i guess, when supervisor tang was asking questions, partly, the other piece would be to look at, the number of staff members. >> yes. >> and we will be looking at that through the budget process as well. >> so another way to think about this cost growth, if it is helpful is that this top blank
line is showing our revenue growth over the five years, the dark blue section here is showing the voter adopted base lines and set asides and the light blue is showing our employee cost and the health and pension only, and does not assume any cpi, and nothing else, and 84 percent of the revenue that we projecting is taken up by those two things alone, that leaves, 16 percent to fund all of the other things, so i just think that this is a helpful way to think about this. that is something that i have been talking about it is an important thing to keep in mind. >> the voters, you meant? >> yes. >> well, yes. you are correct. >> okay. and so another thing that we think is important to pay attention to and that i talked a lot about with the mayor, is the historical deficit projections so when i started in the city in 1011, our project was over 800 million and we made a lot of
progress in the years since then, i remember being freaked out about that large number and we brought it down to half when we put down the plan two years ago and now here we are putting it up and we are back above 800 and we did not come out of a recession and i think that this is a big deal, we spent a lot of time thinking about why.
>> in regards to when you look at the projections for the deficits, and you are -- you need to compare it with what was a budget at the time. because the budget has grown so much that you are comparing 800 million, over the period. but it is a smaller percentage of the budget. >> you are correct. >> yeah, that is definitely true and we can get that for you. that is a good question. >> so, why are these deficits on the rise again though? because we see that they are on the rise from two years ago. and so there is three main things and so the first thing is rising employee cost and the controller will talk about that and that are is largery related to pension, and new base lines and set asides for the last few years and then an increase in services of the positions and the ongoing point to your point. and as we add employees the benefits are growing faster and so we are adding to the long term liability and we added a lot of employees which i will have a slide on. >> so briefly to touch on the
tensions as one of the contributing challenges here, and we have talked about this a lot, actually at this committee over the last couple of years at this moment, and this is showing you at the bottom, the bottom line is the projects of employer pension costs two years ago, when this plan was prepared and adopted. and where we are today. the top line is the current projection looking ahead to the future. and two years ago, the expectation was that as investment losses through the system were smooth through the actual math, and the provisions of proposition c, and the pension reform measure that was adopted by the voters in 2011, began to take shape and we would see the gradual decreases over time in the employer pension contributions and we talked last year about the factors that are reversing that and this is playing through now the projections looking ahead, rather than seeing the declines, we are seeing the increases looking ahead into the future, and by the fifth year of the plan, and the difference between
where we expected to be two yoerz ago, and where we expect to be today, is approximately, 171 million. and so a significant change in the forecast for pension. and that is really fund men shall as we talked about before it is driven by three factors and it is driven by the retirement system is updated mortality tables which we do about a year ago at this time and the good news in those table our retireees are leaving for longer than they were the last time that they were updated that means financially that we paid for pensions for longer. that pushes the liability up, and secondly one of the key provisions in proposition c was a restriction that said, supply mental colas will be paid out when it was funded, the city was challenged on that provision, and the court struck down a portion of the prop c, screen on supply mental and so that is now assumed here and, then lastly,
we have seen two years in a row, where investment returns in this system have been lower than the actual assumption of 7 and a half percent, 4 and a half percent, two years ago and 1 and a half percent during the most recent years, when we fall short, those losses end up or that revenue that was expected that does not come in is then smoothed into the future, so these are the three drivers of that change. and they are roughly equal in terms of the impact, each one of them accounts for a third of the impact that we are looking at her. >> quick questions for you. on the mortality tables, is it system tick every year that we review it, just when they feel like it? >> the society that the u.s. society until recently updated these tables for the u.s. pension, calculations everywhere. only about every five or more years as i understand it. >> okay. >> and our retirement system had not updated these assumptions that sit under their projections in more years than that. so it had been a number of i
couldn'ters and so there is a catch up happening here in terms of the most recent up date. and i believe that the society of actualaries that the u.s. want to do this annually. and so they are going to begin doing these mortality up dates annual annually, and how our retirement system will account for that. i don't know. >> we are just going to follow the table that gets published by the national group. >> no, they take the national group as the starting point and then it is adjusted for dem graphic and mortality, and our local populations but the starting point is this national study that occurs. >> where, sorry just, i think that you are asking, where are we right now? what is the mortality of the age? >> it is actually very nuance and very specific to specific job classes, specific union types of the mortality table is not a simple number that says on average we expect the city retireees to leave to x, it is nuanced based upon what an employee was doing when they
worked for the city and what age it retired and so it is a complicated table. >> it is safe to say that the supervisors have a much lower or higher mortality rate at an earlier age than other job classifications. >> i have not reviewed that. yeah. thank you. and then again, just without getting into the details and opinions about it, the rate of return of our pension can you just explain again, let's just say, that it falls short of 7 and a half. how does that roll through and maybe you can explain one against how it rolls through our system and why we feel the effects of not just that year but going forward. >> sure, so the employee contribution, what drives the city contribution to pensions is largely a function of what is the gap? what is the expected gap between resources they have on hand, contributions that are employees, and putting in, and then the city is on the hook for the difference effectively. and so they make assumptions about for the 16 billion dollar,
plus, crust they have, what is the return on that going to be that can offset the employer contribution and so they make an assumption going forward about what that return is expected to be 7 and a half percent is that assumption, but when that falls short, it leaves the actual mass short and then the city and the employer contribution makes up the difference. >> okay, thanks. >> do you have something? >> so next on our earlier conversation, we just have a couple of points on lever we talked about the cpi in the report, and if you look at our report two year ago, it was projected under 3 percent and in this report it is projected to be over 3 percent in every year, that is driving up our deficits that we want to point that out, one percent chance in employee wages is 20 million in the general fund and if you look over the past three years, we obviously have had a three year contract with most employees for raises of 3.25, with the different start dates and we are seeing that the cpi was around
2.7 and so looking at our last contract was higher than cpi ended up being. and so this is our health cost assumptions as i said, much faster than inflation, health is projected to grow, 7 percent and retirees, 9 percent and that is what the areport assumes in every year. >> and miss house, what report are we in this from hss? >> say, and yes, from hss, yes. >> and we actually in the last report, the assumption on actives was 5 percent, and so we just revised it based on more current information, but that is another reason why the deficits are going up because we are projecting that into the future the health costs will be more than they were the last time. >> and i would, and i mean, being the hss board member from the board of supervisors i should be talking to the director about this, but i imagine with the president-elect and comments around the affordable care act, the fluctuation could be wide. >> this assumes no changes to
the affordable changes and none of that right now, because we as a controller mentioned don't feel like we have enough information to make assumption today or in any of those things. >> this is a slide that kind of underlies what i was talking about earlier on being adopted on the base lines and set aside, so this is just ones that have been added since 2011. and i should say, you know these are all wonderful. i was not trying to say that they are not. it is just that we are making commitments to that bind us in the future, it gives us less flexibility and you can see that the mta population growth and the children's fund increase are by far the largest here on this list. because there is the last column and the bottom are cumulative. so this slide this slide is talking about kind of what supervisor yee was talking about earlier. so if you look over the past 20 years, we have a pattern and it is add 1500 employees, cut 1500,
and here we are today and we have added 5,000 employees. this is a very large number of employees but i will say that we are not upset about this, we think that this is a good thing and we have done so many good things with the board on this and you can see that this chart shows you where the position vz been added and a lot of them are non-general fund as well. and so at mta, ten percent sfrgs increase, the airport and the puc and the port are really this blue section and that makes up the largest portion, and our department of public works and the capitol programs, public health and human service agency about hundreds of positions for affordable care act, and the public health opened a new hospital and we have added new social services and we have added the street cleaners and the people in the parks and library hours, and so all really good things that we want to continue, and what we said to our department heads today, is not that we want to roll any of this back but that we need to stop growing, no more growth, do not add more ftes because we want to be sustain able over the long term and we just feel that
this is the time is now with all of the uncertainty, it is important to be a little bit more disciplined and making sure that we are making conscious choices as we add new things. now to tang's question before, there is another the mayor's office is mandated to also come up with fiscal strategies to propose how we will balance these deficits over the coming five years, and i am going to slide 21 shows you the numbers but i am going to talk off slide 22. >> just real quick. >> of course. >> on the ftes. >> yeah. >> it wasn't broken down this way, what would you guess it is right hand 5,000 ftes since 2011. the break down between enterprise and general fund. >> yeah, if you look at this chart, so the blue section is largely enterprise, and the orange section is part general fund but also part state and federal and the same thing with the gray section. the yellow section is almost all
general funds so in that, the police and hiring are public safety, and actually it was a six year hiring plan which we are nearing the six year of, which is great. and probably the other green is probably the mostly general fund and i think that is the three positions at 311 and more administrative positions. >> okay, thanks. >> yes. >> and so with this slide is showing you is what our office is proposing a balanced approach to tackle hez deficits over the coming five years, this is the same graphic that i showed you before, where the bottom is revenue and the top line is expenditure, what this is saying is that we are hoping to increase revenues and to decrease, to bring these two things in line, instead of the 11 percent revenue, and the 29 percent, growth that i mentioned before, wither hoping for a 14 for a 14 percent growth over this period, we are hoping that the economic policies and we will keep the economy strong and we will pursue more revenue, than we have currently
projected. and on the department mental side, we are telling the departments we need 3 percent cut targets in each of the coming years and we need them to be part of the solution, with the revenue and efficient proposals to the request he, supervisor yee to balance the budget on city wide expenditures looking at our certificates of participation program and to
please not grow fte and the enterprise, and the self-supporting need to absorb all of the known cost increases. one thing that i think is great and you might be interested in it, the mayor over a year ago, asked all departments for a strategic plan and we have been spending a lot of time reviewing those and we had a city wide planning retreat with the department heads in september and the mayor in this plan is going for put forward the city wide values and vision that he sees working with all of the department heads that he want to publicly come out and state and really the point of this is also to kind of to make sure that our culture is really around, thinking forward think and long range plan and what do we want to accomplish? and so when we put out the five year plan, there is a city wide plan of that report, the mayor hopes that two years from now, we will put it out again, and it
will be sophisticated because the departments will be cycling their plans with ours and talk to each and the controller's office will help to the departments and many are sophisticated in the long range plan and some are brand new and it is the first time that they did this past year, and we are hoping that this is really a process that will set the city up to make it part of the culture along with the five year financial planning and the ten year capitol planning. >> i am going to turn it over to the controller. this reflects the projects and reflects a projection into the future, by our office and the mayor's budget office and the board's budget analyst and of course, it is budget to change and it is a forecast after all. and so what could significantly change these projections? and we have highlighted some of tho s key risks on this slide. sxh i will say just generally speaking from my perspective while the shortfall for the coming two year period is only modestly higher than at this
time last year, the number of risks seems to be growing and it seems verses the moment that we were here last year before this committee, there are more dark clouds looking ahead then there were at this time last year, as we talked about the single largest being possible actions from the federal government. reductions are coming in particular for the county functions and here in california and around the country. we will keep you updated as we roll into the calendar year as we know about it, and no assumption here. changes in the economy are important to what ch and we don't feel like the recession risk is low at this point, given twha is going on with the u.s. over all economy. which seems to be increasingly stable frankly. but, some time and during this period, it is likely that the u.s. will enter a recession it
will significantly five year period this u.s. recession and it will effect these revenues. and then lastly, this time last year, when we were presenting presentations, basically all employee contracts were closed for the coming fiscal year, that is not the case this year, police and fire, contracts are closed for the coming year but all other major unions are open and so we are making forecasts here about the cpi, but the ultimate negotiation, of the negotiations will change these forecasts. so those are three key risks that sit out in the future, of course, as always, any new budgetary or supply mental appropriations that are put forward by the mayor or the board of supervisors will create new costs that will change these forecasts as well. >> our always cheerful ending to these presentation a discussion of what a recession looks like and how it might effect our forecast. so you have seen this chart from
us before. this is showing you, 23 periods since 1900, and that is the niem in between recessions in the country. and you can see at the top bar, where we are today. so we are now 89 months into this recovery. approaching two times the average since 1900. of 47 months. we are not projecting a recession during this period for forecasting purposes but it is worth noting if we do get through this five year period without a recession occurring in the u.s. it will be by far the longest period of economic expansion in the u.s. modern history. so it is unlikely to occur. but, given that it is impossible for us to estimate when that might occur, we are not baking that into your revenue projections. you asked what the recession
would look like, and it will contain more information, but if we model a recession, equally weighted of the last two that we felt here in san francisco, the dot com bust and how it impacted different revenue streams and this is what that loss would look like. and revenue growth becomes revenue declines for a period of two years before you start to see the recovery. sxh the difference between base case and that scenario is in the forgone revenue, you asked earlier about how it effect the moyerer contribution rates and that is something that we have modelled and that will impact the rates and would lag this. but would likely be in the order of magnitude of approximately shths 75 million and increased ongoing cost. so, significant. the plan does also curtail kind of we would also base lines would share in this loss of revenue, available reserves would be depleted and the net
impact would be approximately 200 to 250 million dollar upward revision of the shortfalls that we talked about earlier. sorry, could you, that is annex youal basis? >> correct. >> so, shortfalls, would grow, when we net out the base lines, and the revenue, available reserves shortfalls would grow in this view and they would grow by 130 million, and 243 million in 1920, and 223 million in 2021, and then about 50 million dollars ongoing after that. so, all told between those years, about 600 million in cumulative change to the forecast. so, to the prior conversation and forgive me in i'm not thinking about it right. there is a revenue impact but is there a cost impact as well
likely? is that just pure pension return, and we have modelled the impact on the returns and of course, other things happen for the demand of the public services in a recession, and so we have not accounted for those in this simple recession, scenario forecasting, but it is likely that in a recession, you will see the higher demand for the key safety net services that the city and county provides. >> oh, so this on this slide, >> and this is just showing us revenue. the plan itself, though, will have shortly, for summary, revenue, but the plan itself, includes much more information on reserves and pension. >> and so, if it included pension, i imagine that 960 grows. >> the 960 grows and by the cost of the tension increases and then it reduced by the draw down reserves that have been put in place, and it is reduced by some of this revenue loss shared by those voter adopted set asides that we talked about earlier. >> thanks. >> great, so that is really the
end of our presentation. high level we rebalance the budget, deficit over the next two years is 400 million, projected deficits on the rise and we are paying attention to it. but you know we are not in a terrible period. we are not doing layoffs, we are not cutting service, we just feel that we need the mayor believes that now is the time to be disciplined and make trade offs as we go into the labor negotiations and the budget deficit and uncertainty with the federal government and we are happy to answer any additional questions that you have. >> colleagues, any further questions. comments? >> thanks for the presentation, and i mean that is good to know what we are facing. and it's not great, but it's not outside of the federal unknown, essentially not that bad. >> okay. supervisor tang? >> thank you. i really appreciate this
overview. i guess it is not really's question but more of a comment that i know that you do a really great job, i mean the mayor's budget office and the controller's office in laying out what our challenges are. and what we need to do. to be disciplined in the up coming budget season. but of course, once we get there, whether it's eleven of us, having different issue priorities, whether it's community stake holders or the city departments, we just never can seem to you know, really be disciplined. and so, i think that i mean, that we are not going to solve this in this hearing, but it warrants i think, more conversations around how it is that we deal with this, whether it's the ongoing conversations regarding salary. and benefits, and healthcare costs and pension and all of that, so to be continued i guess, but, i just want to thank you for this great overview. >> okay. likewise. thank you, both for this overview, and certainly, as we
head into next year, i think that it is important that we set the stage early. and so thank you for the time and effort that you p ut into this. and look forward to continuing to work together on it. >> with that we will open up item one to public comment, anybody wish to comment on this item? >> okay. seeing none, public comment is closed. >> colleagues, double check. could we continue this item to call of the chair? >> i will make a motion to continue the hearing to the call of the chair. >> motioned by tang and seconded by yee and we can take it without objection. >> madam clerk, will you call two, please? . >>hearing to consider the release of reserved funds to the department of homelessness and supportive housing, placed on the budget and finance committee reserve by the fy2016-2017 annual appropriation ordinance (file no. 160628), in the amount of $6,500,000 to continue funding critical homeless services frment >> okay, thank you very much, so colleagues, related to the budget process last year and certainly as we talk about the rebalancing plan right now, for the current fiscal year, part of what we did was put a significant amount of money on budget committee reserve.
and related to the homeless department and so she is here to ask us for the to describe to us the potential release of funds for his department. >> good morning, supervisors, jeff director of the department of homeless housing and joined by the star marissa and geegee, who have been working hard with melissa and her staff and i want to thank them for the efforts on the ongoing work on the budget. we are here to request the release of 6.5 million dollars off of the budget and finance reserve in the current fiscal year, as recommended by the bla. while we were disappointed that proposition k did not pass, the department originally included 12.1 million dollars in expenditures associated with the sales tax, we have worked wr closely with the mayor's office to identify 6.5 million in critical services and needed
funding to continue those services. these are just to support the services that are already in existence as well as services that were well along in the development process. we have provided you with the hand outs that shows, how that 6.5 million dollars will be spent. i would be happy to answer any questions or walk through this with you. >> colleagues, any questions or comments? >> on item two? >> all right, mr. rose, back from vacation, welcome. could we get a report for item two? >> yes. mr. chairman, and members of the committee. on page 3 of our report, we report that as a result of the increased real property transfer tax and waiver revenue and that total of 6 million, 486. 766 the department of homelessness will allocate, $3 million, 391,694 to fund the
existing shelter and centers and the opening of a new navigation center in 2017 and then, also, 3 million, 95,000 to fund new permanent housing units and so those two numbers, total the 6 million. in the fiscal year, 16, 17 and that is shown in the details are shown in table two. on page 3 of our report. i would also note as we state on page 4 that expenditures for the homeless services for 17, 18, will be subject to future board of supervisors approval. we do recommend that you other prove the requested release of the 6 million on budget and finance committee reserve. these expenditures are consistent with the budget. >> okay fshgs thank you very much. there rose. >> any questions or comments? >> welcome back. >> all right, we will move on to public comment, anybody wish to
comment on two? >> seeing none, public comment is closed. >> colleagues, right now we have a hearing, i think that probably the motion if we are in agreement would be to motion to release the reserves from our budget committee reserves pro-budget analyst recommendations and file the hearing request. the one thing that i would just add is i made some comments as related to the free balancing plan i want to thank them for their great work and i hope that as we go forward, we continue and prioritize, the homeless. and especially exits off the streets, and for me, i think that it is one of our most critical and pressing issues as a city but i thank you for your effort and look forward to our continuing discussions in the next budget year. >> go ahead and make that motion. >> okay. >> motion by supervisor yee. and to release the reserves off the budget committee and to file item number two seconded by tang and we can take that without objection.
>> will you call three? >>hearing on the status of the activation of three publicly owned buildings in district 11, 35 and 45 onondaga street, and the geneva car barn and powerhouse, including activation and construction timeline, budget and sources of revenue, potential partners, and development options and contingencies; and requesting the office of economic and workforce development, real estate division, and the recreation and park department to report. >> thank you, madam clerk, so colleagues, this item was sponsored by and requested by supervisor avalos, and actually president breed submitted paperwork and so supervisor avalos is replacing me in the budget committee, and so i will turn it over to him. and thanks for bring tg home. is there a vice chair? >> >> so now i am a budget committee member? >> so thank you colleagues for scheduling this item.
the title sounds really really complicated because there has been a lot of complicated work that has been done by multiple departments. and my office to get to where we are on activating to three buildings. and that is what this hearing is about, first off i want to thank beth from my office, for her work in moving these projects and getting the katz herded together in the same room to talk and work together. and in the katz have been really great to work with as well, amy, and nicole, and john, and his staff and their staff, and phil, and the others. and i want to thank you all. so today is just basically to get an up date on the activation of two buildings of onon-daga and the hel and this home side and the former emergency hospital, and the hel and this home site is a building that
actually has two incredible murales in it or frescos by sachime and richard is here and he has been helping to preserve those, and so there is a lot of complicated work just about how we were able to restore our historical legacy. and that we have inherited from the years past and the other building is the gene va car barn office building. and these have been long term projects that we have been trying to work at to activate and i think that we have made a huge amount of progress, step by step over the years and now we are at a time where we actually are very close to having negotiated arrangements and financing to have these projects, you know, have us uncertainty about these projects being made active in the years to come. and so, first off, i want to invite, amy cohen from office of economic and workforce
development who can give a broader overview about the effort to activate the public spaces. thank you. >> thank you. i will be brief because the office of economic and workforce development through the neighborhoods program came in in 2015, with some support from the mayor to look at a number of seemingly intrackable commercial and sort of funky buildings in the outer neighborhoods. and so we started kind of a qui quiet effort to look at public and private buildings that have been long desired by the community members to become activated but they were either under utilized or remained vacant, and so the gene va car barn and the buildings were two of them and we also looked at the lray theater and we have worked on other spaces like the
jerry garcia ampitheater and the goal of this he have port which we were calling the neighborhood program was to work with the community groups to see if we could catalyst activation and come in as a technical team and figure out is there something that maybe could be done differently? or quicker? or you know, some creative approach that no one had thought of before. so we brought in the northern california, community loan fund. we then did assessments of a handful of buildings, including these.
which brings us to the key piece of the puzzle that is the non-profit that will provide the arts related programming in this space, and to all ages but specifically to under served youth in the district. and there are a number of organizations who are interested in providing us this programming. they will submit the proposals demonstrating the capacity as well as the ability to meet the targeted population requirements for the new tax credits unfortunately, although, lucky for us, most teaching artists who work for these non-profits fulfill the criteria, requirement, and for the historic preservation, the first is a small return on the tax credit equity, as they were meant to spur, the economic development and in the second is the interest tax, taken together, these amounts over a year, will provide a deserving non-profit a spectacular space for very affordable monthly,
rental rates. the good news is that san francisco's community development entity, the san francisco community interest or in investment fund, recently received a 45 million dollars, allocation, and the project is in the pipeline, they have expressed strong interest in investing in the project, and so the goal is to select a user inn and to present a financial package to the community investment fund by the end of january, if we receive annual indication, and the letter of intent from investors in february, i will come back to you in march and describe to you the legal structure in which had the city can use the funding source as a power house, and i will ask for the board of super approval. and if the legal structure is proved, we expect to be able to put the project out to bid in march. and complete financing over the summer, and break ground in the
fall, and have the building ready for occupancy in september of 2018. and in time for the beginning of the school year. thanks so much for your time and your continued support of the project. >> thank you for your great work on all of the places that we are trying to activate around the city as well. next up, a presentation from mr. updike? >> thank you, supervisor avalos, john updike, director of real estate, and first i want to thank you and your staff for the passionate and the sustained interest in the two as selects and onoddaga, and when we first started the conversation a few years ago, it was all about our office wanting to move forward
straight forward sale of an asset. that we deemed surplus to the city's needs. and through a very creative approach, to future uses, and more refined and analysis of restoration costs, we are in a really good place at this point to offer this property up for reuse, retain it in the city's inventory and have a sustain able project going forward. so, really two aspects of the property, at 35 and 45, and one is simply restoration of the building to make it ha bitable, and so the core and the shell improvements that the city would need to provide. through an analysis done by ventura partners we have a fairly good handle on those costs for each of the buildings. and then, on top of that, args analysis has allowed us to pinpoint the mural restoration,
costs in the building. and also, a range so when you put those two together, we are looking at a city participation in a project ranging from about, 294,000 to up towards of 370,000, and that is the range. and that will require further refinement once we see a proposal going forward. and so with that knowledge, we then worked off a successful request for proposals that we executed recently, for space on jessy street and building on that, and with your staff, comments, to that, we have an rfp that we would like to issue by the end of this week, that will put the property out to market to non-profit organizations, and with the additional points awarded for those who have gone through a certain rigorous process to qualify under the non-profit anti-displacement process or
received assistance from ncclf. and as well as additional points for providing service directly to district eleven, and so with that. >> and nclf is the northern california loan fund, thank you. >> thank you. very much. yes. with that proposal going out, we will ask for the responses back in february from the non-profit communities and interested in pursuing this asset. and they would need to show a sustainable funding plan for tenant improvements and on top of any core and shell improvements the city will bring to the project. and we in real estate, would seek in our budget application, to our fine budget director, funds in next fiscal years's budget, and to mary. and that is project together.
so that we can execute together both the tenant improvements and the base improvements to allow the occupancy, probably in about, 9 months there, after, and assuming some costs from time for the design, in improvements and getting the funding together. so we would see an award most likely before the board of supervisors of a lease for either one building or the other or combined, we would like to keep it open and see what we get from the market place, of non-profit whose might be interested. it is about 8,000 skwaur feet and refly, 50/50, and there is someone that could put to use the entire building or a master lease with multiple non-profits and so keeping that open. and so for the final hope for. and for the lease term to be determined, and most likely, no less than 5 years. but i think that we are going to
be very open. and with with respect to the lease term. the city offers the space, athe a very reduced rate and i think that that is the benefit here that we can find a way, to help with the structure of the building and to do so at a cost that is really quite attractive in terms of a base lease rate of around, 12 dollars a square foot. per year. so i think that we have an attractive opportunity for the non-profit to pursue, and happy to answer your questions that you might have. >> most of all i just want to say thank you, it is great to work with you over the past couple of years to get the buildings to where they are today and to have, you know, this structure in place for an rfp to go out, and this week, and it, you know, over the original, plan was to sell these buildings off and we will look
at that and it was too much money actually at the time, but our office is now working with you, a couple of times to get, you know, estimates that this is the best way possible and you have shown, the great flexibility to work with us and i just want to say thank you for your great work, and the news that the rfp is going out on friday is very, very significant. and so thank you. i don't have any other questions. >> i want to thank you, even before coming to rec and park you were working on the car barn as the director of that project and i just want to thank you for all of your work and so what i am hoping is that we will have an understanding actually before i leave office, which is a couple of weeks from now. to see if we actually have a
real structure in place for moving forward on the plan that you described and so if we could just stay in touch over the next three, and i think that it is 25 days that i have left in office and so it is a little bit of time and i just want to make sure that, you know, as successive supervisor comes in, that you will be supervisor and like, and can pick up where we left off, and work towards activating these spaces with your partnership. >> absolutely. >> that is our goal. >> thank you. >> we will go into the public comment. >> good morning, my name is richard roth man, who is city resident and interested in wpa mural and this is a really great what is happening, it's important that this building stay in the city ownership, so
that the art commission can super vice the restoration of the murales in and be responsible for it. bernard could you put on the overhead. he pointed one and the second one was at the uc medical center and, if you have not seen those, those are really beautiful and in between them, he painted this mural, which was really forgotten about. and there was a reference in the 50s about it. but, i found out about it, about
the same thing that the department of real estate went in the building and told the art commission that i found out from bernard daughter about it. and these are the murales inside there. community spirit, and growth. and the bottom one was painted over and then this is the top one here. growth. and i think that it is really important that this building will be opened to the public and be able to enjoy and see these beautiful murales. and so thank you supervisor for your help in getting this project through. >> thank you. and thank you for all of your work on helping the city to restore these murals.
>> good morning. i a lot of you guys know me here. i have been in a non-profit in the day in the tender loin, and joe called san francisco horizons in the tender loin. we used to -- and that is why we have the mondejnon-profits they tap into other resources that the city budget does not have to spend so much money, that is a good thing. what i wanted to tell you about, i was kind of excited whenever i was in the mission district living there, and there is a california savings and loan just around the corner, 16th and mission. and i looked inside and there was this mural behind some sheetrock. and i said, oh, my god, look at that, it is beautiful mural, and i don't know if you have seen it, it is the california savings and loan. and they were about to just tear it down.
and this is a pretty good mural, maybe you should not tear it down, and so when the contractor showed up, they didn't tear it down, it was in the california loan at 16th street and that is just one thing that i although of that i did. and that was david's district, now, one thing that i love about non-profits, is you can tap into unlimited money if you do it right. but i wanted to say, have a merry christmas, because especially to the budget guy. and i like him the best. because he is the one that has to carry all of the big budget around and i think that he is doing a better job this year, because it is not quite as big. he is not going to get an hernia right, you guys have a great christmas. have a good one. >> happy holidays. >> have a good one. >> good morning, members, and supervisor avalos, i want to speak in terms of activating the buildings with the district
eleven community serving programs. my name is marco and i am the director of the works which is an employment support services non-profit in the district eleven. and i wanted to just encourage you through by sharing with you some of the work that we have done. most recently with the gentleman by the name of car loss hernandez to give you the sense of what the work that we do. this is a gentleman that came to the works and he just moved here from hills boro oregon. and 48 years old and had been laid off. and so came to us asking for help seeking employment. but then, also asked us if we could help him fill out his unemployment paperwork. so, he was part of his story as well he was living with his sister and husband who rent their space. and the landlord had told them that they had to ask him to leave because he was not on the lease. so he came to us with no employment and really the potential of becoming homeless.
so, one of the things about him is that he had 16 years experience as a baker. so one of the first places that we looked was safeway, so we helped him to apply for a position at safeway. and just yesterday, they let us no he that he was hired for the position as a baker. so again, i want to share ta story with you to give you a sense of the people that come through the non-profits that are serving. and so, you know the issue of homelessness, was on your agenda. and you know, looking at our work, and with mr. hernandez as work which is preventing people from actually reaching or becoming homeless by helping them with employment. so i hope that when the issue comes to you again, when the supervisor, when the board con veenz, that you will support us, thank you. >> marco just a request for you. so, you have this new work space. >> yes. >> you are in. >> and i am trying to get the
feathered serpent in my office that is hanging there to come to your site. my brother made it and it is a gift. so just to want to arrange that. over the next couple of weeks. >> okay. >> it might be stored at my place before i can get it to your place, it would be good to work on that together. >> we would love to have that together. >> we can talk about that. >> thank you. >> hi, my name is reid and this is burks and i am the executive director of youth art exchange and we are and i wanted to speak to the importance of activating these buildings and the hope that they can go to some of the many amazing non-profits and i donyouth and community members that work and exist in the exelcier and these buildings and the activation of these buildings would be incredible to bring artists and
youth in and it is something that we have dreams about, being able to have these amazing resources within the community. and i encourage the board of supervisors to really look forward thinking and to see, what impact that could happen for it with the building being activity and affordable which as we know in the city is incredibly important, so thank you so much. >> thank you very much. >> thanks for come and for kwour work. the next time that you come to the podium with your child, the child will be grabbing the microphone. >> any other members of the public that would like to comment? >> okay, we can close public comment. >> all right. >> public comment is closed. >> that is pretty much it, i wanted to make sure that we got before i left office, a status report on the project, and these projects and also have a chance to acknowledge all of the work that our city staff have been
putting to activate these spaces and i appreciate all of your work. and i am really actually proud that we got to this place before i left office. so that has been really significant to a lot of people in the district. so thank you. >> very much. >> with that, >> would you like us to file or continue the hearing? >> this you can continue and maybe we can get new status up date later on, and the new supervisor can decide. >> all right. so maybe we will entertain a motion to continue the hearing to the call of the chair. >> go ahead and continue this hearing. >> all right. >> we will do that. without objection. >> all right, so madam clerk, are there any other items before us today. >> before you adjourn, >> before we adjourn, i didn't get a chance to say thank you to the people who are on that side of the rail, they were not here at 9:00 last night when we were
ending our board of supervisors meeting. but i did give it a good bye, some what to harvey, and to sevlon and i want to thank you both and harvey for all of the i couldn'ters that we have worked together and i really valued our relationship and i value your work. and you made me a better supervisor. and i read your reports. and you know, even as a legislative aid right off of the ba the we worked well together, and i was actually came into the board of supervisors with a grade understanding of how our budgets worked and i got to chair the budget committee my first year and our partnership on that was great and i will never pour get that experience and thank you for all of i don't you are great work over the years and it has been a pleasure and i am going to keep in touch with you. >> and then, ben i want to thank you as well. we have the same kind of
partnership over the years. and you have been very, very helpful for me to do my work as supervisor. and i will, you know, i will always value your work and our relationship. and your staff as well. and it has been tremendous. and i knew you before you were even controller of course, and before i was even working at city hall, and i always felt that you were very accessible and someone who was good to work with. and so, hopefully you will continue with the city, and passed to the next another decade and we will see. that is up to you. >> melissa great to work with you as well. it was actually really, enjoyed our work together this year. and i really liked your forth rightness and i liked how you really took seriously the responsibility and the tremendous you know, responsibility of balancing the budget. and but also, really trying to ballet lot of the interests that were coming i don't you are way. and that has not been very easy
thing to do for someone in your position. and i think that you did a really well, and even as the interim budget director, and you were actually the budget director, and so, congratulations and it has been really great to work with you, and you used to be a district level, resident and i guess that the district line moved and i thought that you were, but, i will probably run into you on ocean avenue. >> okay. thank you. >> thank you, supervisor avalos. and we look forward to working on your deappropriation and reappropriation ordinances as you leave us with that. thank you for that gift. and madam clerk, are there any other items before us today. ? eno further business. >> this meeting is adjourned. thank you.