San Francisco Government SmartTranscripts:

[Supervisor Connie Chan (Chair)]: Good morning. The meeting will come to order. Welcome to the 09/17/2025 meeting of the Budget and Finance Committee. I'm supervisor Connie Chan, chair of the committee. I'm joined by vice chair, supervisor Matt Dorsey, and supervisor Cheyenne Chen, who is filling in for supervisor Joan Gardio today. Our clerk is Brent Halipa. I would like to thank, Colina Mendoza from ESSA GovTV for broadcasting this meeting. Mister Clerk, do you have any announcements?

[Brent Jalipa (Committee Clerk)]: Thank you, madam chair. Just a friendly reminder to those in attendance to please make sure to silence all cell phones and electronic devices to prevent interruptions to our proceedings. Should you have any documents to be included as part of the file, it should be submitted to myself, the clerk. Public comment will be taken on each item on this agenda. When your item of interest comes up and public comment is called, please line up to speak on the west side of the chamber to your right, my left, along those curtains. And while not required to provide public comment, we do invite you to fill out a comment card and leave them on the tray by the television to your left by the doors if you wish to be accurately recorded for the minutes. Alternatively, you may submit public comment in writing in either of the following ways. Email them to myself, the budget and finance committee clerk at brent.jalipa@sfgov.org. If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file. You may also send your written comments via US Postal Service to our office in City Hall at 1 Doctor Carlton B Gildeth Place, Room 244, San Francisco, California 94102. And finally, due to our observance of Rosh Hashanah, items acted upon today are expected to appear on the board of supervisors agenda of September 30 unless otherwise stated. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you, mister Clark. And before we call, item number one on the agenda, we will need to excuse supervisor Envadio. I move to excuse him and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion, excuse supervisor and Gardeo from attending today's meeting. Vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen? Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Also, just for general reminder that we for items that have budget and legislative analyst report, we typically go to the department presentation, budget and legislative analyst report, then comments and questions from this body, then we'll go to public comment. And so with that, mister Clark, please call item number one.

[Brent Jalipa (Committee Clerk)]: Yes. Item number one is an ordinance amending the administrative code to create a procurement legislative analysis authority for the city administrator, revise or create threshold dollar amounts for application of various contract requirements tied to the statutory minimum competitive amount or statutory federal single audit standard, reorganize, standardize, and narrow chapter 12 f, relating to the McBride principles concerning Northern Ireland, including sunset of the ordinance in 2035, repeal 12 j relating to city business with Burma, and narrow coverage of and reduce meeting requirements in chapter 12 l relating to the certain nonprofit organizations receiving funds from the city and amending the labor and employment code to reorganize, standardize, revise, exemptions, and waivers narrowing coverage, create threshold dollar amount for application tied to the statutorily based minimum competitive amount, and update article one thirty one relating to nondiscrimination under city contracts, including sunset of the ordinance in 2036, and repeal article one thirty two relating to nondiscrimination under city property contracts, while incorporating some of its provisions under article one thirty one, reorganize standardized revised exemptions and waivers narrowing coverage, create a threshold dollar amount for application tied to the statutorily based minimum competitive amount, and update article one fifty one relating to city procurement of sweat free goods, including abolition of the sweat free procurement advisory group and sunset ordinance, sunset that ordinance in 2035, and repeal article one forty one relating to salary history and the hiring process of city contractors, article one forty two relating to criminal history and the hiring and of and employment process of city contractors, and article one sixty one relating to an earned income credit forms for employees of city contractors. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you, mister Clerk. And, first, I wanna thank, board president, Rafael Mendelmann, for his, commitment to making sure that we can, continue to work on this legislation. This is not the duplicated file. This is the, actually, file that returned from, the full board and that, with president Mendelmann. And thank you to also the city administrator's office, particularly, Molly Peterson, our contract reform manager, that we now come to the sets amendments before you today, colleagues. But first, I would like to, if I may, call on, Melanie Matheson, legislative aide to president Mandelmann.

[Melanie Mathewson (Legislative Aide to Supervisor Rafael Mandelman)]: Thank you. Good morning, chair Chan, vice chair Dorsey, member Chen. My name is Melanie Mathewson, and I'm here on behalf of supervisor Rafael Mandelmann. While the supervisor couldn't be here today, he accepts these amendments and is excited to see this legislation move forward.

[Rosa Shields (San Francisco Labor Council)]: Just quickly, much of

[Melanie Mathewson (Legislative Aide to Supervisor Rafael Mandelman)]: this debate has focused on one small piece, but I wanna bring us back to the bigger picture that by most standards, this is a modest proposal, but it is the most significant contracting reform that San Francisco has seen in decades. It'll make small businesses more competitive when bidding for city contracts, free up staff time to focus on larger projects and make it easier to deliver services to San Franciscans. I just wanted to thank the city administrator's office, especially Sophie Hayward and Molly Peterson, Gus, Gibert in the city attorney's office, and chair Chan, thank you for your work on these amendments.

[Supervisor Connie Chan (Chair)]: Thank you. So with that, colleagues, I'm gonna quickly, go through the amendments that has been agreed upon, so that we can then go to public comments on this item. Colleagues, the amendments are mainly, really, is to restore sweat free procurement advisory group, remove the sunset dates of these policies, restore the no property wage provision, and update the legislation enactment date, and that you will see these amendments from page one, lines 20 to 21. And then, again, page 73, line 24, and page 74, line 10. As well as page 78, line 17, through page 80. And then again, page 83, lines two to seven, and then also page 147, lines 11 through 14. And these are the amendments that proposed today for your approval and review for approval. Let's go to public comments on this item. Oh, my apologies. No. Okay. Vice chairs Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Oh, sure.

[Supervisor Matt Dorsey (Vice Chair)]: I can do either before or after public comment. I I wanted to express my appreciation to, President Mandelmann and everybody who has worked with, him on this, especially, Chair Chan and, other colleagues and, the city administrator's office. I will say I, as we are gonna be working in the next couple of years on addressing some of the structural, issues that are causing San Francisco's persistent deficits, We have close to $6,000,000,000 in contracting, and I think this is a step in the right direction to make competitive bidding more competitive. One thing that really, I think, for me at least, came up that was influential in my thinking was when, city administrator Chu reported that in f y twenty twenty three, I think it was 46% of bid solicitations came back with one or zero bidders. So we're not just minimizing competitive bidding, we're eliminating it in nearly half of cases. When we're talking about $6,000,000,000 of contracting, any marginal improvement in value is gonna be tens or hundreds of millions of dollars. So I think there's a lot of opportunity here. I think this is the beginning of a conversation that I will be participating in as well. And hopefully we we all will, but I I will say at, you know, at the end of the day, we've got 6,000,000,000 on contracts and we've got 7.2 or 7.3 in city, you know, wages and benefits, and I've always felt strongly about this. I think taxpayers get more bang for their buck from these people who are dedicating their careers to the city and county of San Francisco. If we're gonna have to make tough decisions in the years ahead, I wanna make sure that we're protecting jobs and getting as much value as we can out of our contracts, And that includes making competitive bidding more competitive. So I'm excited that this is moving forward, and I'm happy to support it.

[Supervisor Connie Chan (Chair)]: Thank you. And with that, let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: We are now opening public comment for this item number one, if we have any members of the of the public who wish to address this committee.

[Rosa Shields (San Francisco Labor Council)]: Good morning, committee members. Chair Chan, Rosa Shields of the San Francisco Labor Council. We urge you to vote yes on this legislation as amended because it protects our advisory group, and eliminates the sunset date. And we really believe in centering worker voices on important committees like this. And we look forward to working with you all to strengthen the committee and make sure that, we have great quorum and that worker voices continue to be at the center of all of these conversations. So we urge you to vote yes as amended. Thank you.

[Brent Jalipa (Committee Clerk)]: And thank you much for addressing this committee. Next speaker, please.

[Corey Hallman (Teamsters Local 856)]: Hello. Corey Hallman with Teamsters Local eight five six. I'm here to speak in support of the amendments and urge you to vote yes on this legislation as well. Thank you.

[Brent Jalipa (Committee Clerk)]: And thank you much. Next speaker.

[Adam Wood (retired San Francisco firefighter)]: Morning supervisors, Adam Wood, recently retired San Francisco firefighter. And I'm also speaking in favor of the amended legislation, in particular in appreciation for the preservation of the SweatFree Procurement Advisory Group. I spent my career confident that the uniform I was wearing was produced under fair and equitable conditions. And it's important to me, I think important to the city that my brothers and sisters in uniform continue to have that confidence. And my concern is, in the current trade environment, with the tariff regime out of Washington, it's gonna be harder and harder to find the true source of the material that the city will be providing to its workforce. There's gonna be tremendous pressure for countries with a high tariff to find any way they can to slap a low tariff countries label on their product and without a dedicated advisory group penetrating the fog of trade, I'm afraid some as some will slip through the cracks. So I greatly appreciate this amendment and urge you to support it.

[Brent Jalipa (Committee Clerk)]: And thank you much for your comments. And seeing no further speakers, madam chair, that completes our queue.

[Supervisor Connie Chan (Chair)]: Seeing no more public comments, public comments now closed. Colleagues, I would like to first make a motion to I I would like to make the motion to amend, and to move the amendment amended merge version to full board with positive recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion, to amend the ordinance as so written to the record by the chair and to forward the ordinance to the full board with a positive recommendation as amended. Vice chair Dorsey? Aye. Dorsey, aye. Member Chen? Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Thank you. And, mister Clerk, please call item number two.

[Brent Jalipa (Committee Clerk)]: Yes. Item number two is a hearing to consider the release of reserved funds to the zoo placed on budget and finance committee reserve by this year's annual appropriation ordinance in the amount of 3,000,000 to fund the general operating needs for the San Francisco Zoological Society. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And I believe we have SF Zoo here.

[Jeff Pace (CFO and Co-CEO, San Francisco Zoo)]: Good morning, supervisors. I am Jeff Pace. I'm the chief financial officer of the San Francisco Zoo, and I'm also currently the co CEO, while we're in the search for a new CEO, along with my partner, Cassandra Costello, who's the co CEO and also the chief operating officer. I come here today to petition for a release of the reserve of the 3,000,000 of the $4,000,000 annual contract that we have with the city. As you know, back in late late last year, you authorized a audit of the zoo, which started in January. And, we cooperated, through the first several months of that audit. But in June, we got a a letter that said that we hadn't cooperated as much as we, could have. And then in July, the reserve was put on $3,000,000 of the contract. I would have to say that we've redoubled, re tripled, and we re quadrupled our efforts to be cooperative in responding to the inquiries from BLA, and we continue to do so even up

[Jamie Whitaker (Property Tax Manager, Controller’s Office)]: to

[Jeff Pace (CFO and Co-CEO, San Francisco Zoo)]: yesterday and going forward. So I would request that you release the reserve of the remaining $3,000,000 so that we can continue to do all the work that's necessary to do at the zoo. The San Francisco contribution is around 18% of our total revenues, last year. So it's a a very significant number. And, thank you for consideration.

[Supervisor Connie Chan (Chair)]: Thank you.

[Dan Goncher (Budget and Legislative Analyst)]: Good morning, Chair Chan, members of the committee. Dan Goncher with the Budget and Legislative Analyst's Office. As you can see, starting on page one of our report, the San Francisco Zoological Society, which operates the San Francisco Zoo for the city, sent a letter on September 10 requesting the release of $3,000,000 that was put on reserve in June. As you may recall and as the CFO of the zoo mentioned, December 10, the board of supervisors passed a motion directing our office to conduct a comprehensive performance audit of the San Francisco Zoo. On June 2, I, as the principal in charge over the performance audit of the San Francisco Zoo, sent a letter to the then executive director of the zoo with a copy sent to the chair of budget and finance, the chair of the gen government audit and oversight, and a cc to the supervisor Melgar who requested the audit, informing the zoo that they were not meeting our expectations to fully cooperate with the audit. At that point, during that month, subsequent to that letter, the budget and finance committee and the board put the 75% of the annual subsidy on reserve. Since that time, I and my audit team have noted a significant change in the zoo management's approach to our audit, and we feel like we are getting the cooperation that would be expected of any entity that would be audited by our office. And so, we, as you will see in our report on, page one as well as, page three of our report, we are recommending that the committee approve the requested release of reserves. We are available for any questions. Thank you very much.

[Supervisor Connie Chan (Chair)]: When do we anticipate this audit will be, complete?

[Dan Goncher (Budget and Legislative Analyst)]: Our estimate right now is that the audit will be completed in the spring before next budget cycle.

[Supervisor Connie Chan (Chair)]: Wonderful. And if I understand it correctly, I think there's additional consultation that you have provided to complete this audit or that that you have hired, I should say.

[Dan Goncher (Budget and Legislative Analyst)]: That's correct. Madam chair, We have brought on a subject matter expert from outside of San Francisco. His name is Dennis Pate. He is the former CEO of the Omaha Zoo, and he will be joining us in person in a few weeks to conduct site visits at the zoo. He's also been involved remotely working with the audit team and will continue to provide guidance. He will be heading up our review of animal welfare, as part of our audit scope.

[Supervisor Connie Chan (Chair)]: Thank you. And I think this is back to the zoo. How has it been for the new leadership search going, and what is gonna what should the board and the public anticipate in terms of the hiring process?

[Jeff Pace (CFO and Co-CEO, San Francisco Zoo)]: Yeah. So we retained Russell Reynolds Associates as a recruitment firm. And we've started working with them. And there's, like, an employee survey. There's a job description. It's a national search. So we're looking at people with deep animal knowledge. That's really one of our focuses. But we want to get the right person that's going to fit with the evolving culture that we have going on, which has been quite positive in the last month and a half. And so we're really excited to be part of this. I think we probably won't land somebody until around the same time that the audit gets released. So maybe spring of next year, some people are more hopeful than I am on process.

[Supervisor Connie Chan (Chair)]: Understood. I I so how how is the board directors managing both the audit simultaneously, trying to, you know, hire a c the a new leadership, a CEO? So, and and will there be a inclination to either wait for the audit or priority the audits? Like, what is the what is sort of the approach to to the timing of all of that?

[Jeff Pace (CFO and Co-CEO, San Francisco Zoo)]: You know, there's there's a lot of energy, both from the board and from senior management, in the last six to eight weeks. And I would say that we have one of the most operationally involved boards in a in a good way that I've been involved with for the last twenty five years or whatever. So we're able to walk and chew gum at the same time, and we're doing that.

[Supervisor Connie Chan (Chair)]: Great. And, of course, you know, we're gonna probably see you again, in budget, and along with the audit, released in the spring, so then we can have a further conversation, what that actually looked like for the zoo, and what is required for the zoo, for the well-being of both the animals and their caretakers. We appreciate you stepping in at this time and to just guiding the zoo through this process and a time period of transition. So thank you. I don't see any name on the roster. I don't have further questions. Let's go to public comment on this hearing.

[Brent Jalipa (Committee Clerk)]: Yes. If we have any members of the public who wish to address this committee regarding this item number two, now is your opportunity. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I believe that the motion is to file and have this hearing heard and file and release the reserve fund And, a roll call on that motion, please.

[Brent Jalipa (Committee Clerk)]: And on that motion, to approve the release of 3,000,000 to the zoo and that this hearing be heard and filed. Vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen Chen, aye. Chair Chan. Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Thank you. Mister Clark, please call item number three.

[Brent Jalipa (Committee Clerk)]: Yes. Item number three is a resolution levying property taxes at a combined rate of approximately $1.18 on each $100 valuation of taxable property for the city and county, San Francisco Unified School District, San Francisco County Office of Education, San Francisco Community College District, Bay Area Rapid Transit District, and Bay Area Air Quality Management District in establishing pass through rates per $100 of assessed value for residential tenants and based on tenancy commencement dates pursuant to the administrative code for the fiscal year ending 06/30/2026. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And, of course, today, we have the controller's office here.

[Jamie Whitaker (Property Tax Manager, Controller’s Office)]: Good morning. My name is Jamie Whitaker. I'm the property tax manager in the controller's budget and analysis division. And the legislation before you is is setting the the secured property tax rate for twenty twenty five twenty six. On the overhead projector it might take a little bit. The the main tax rate, the 1% is established by the constitution. California constitution prop 13 crushed that down to 1%. And the part that we're really determining is how much is the rate needs to be to raise money to pay our voter approved bonds, the debt service on those bonds. And it's gone up 0.96% this year at 1.18% compared to last year, about 1.17%. So comparing the median taxable value, so not the market value, but the the median taxable value from last year, fiscal year to this year, a property owner will be paying about $259 more, or 3% more this year on the ad valorem property tax. There's also direct charges that appear on property tax bills, property parcel taxes, and so on. That's in addition to the the ad valorem, property tax. And if you have any questions, I'd be happy to answer them.

[Budget and Legislative Analyst staff (unidentified)]: Good morning. Item three is a resolution, that sets the property tax rate for fiscal year 2526. The the rate is increasing from 1.17% to 1.18% as we detail on page seven of the report. We recommend approval of item three.

[Supervisor Connie Chan (Chair)]: Thank you. Thank you. We do this, I think, every year. So very routine and technical, but very important work. Thank you so much. We'll go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: We're opening public comment for this item number three, if we have any members of the public who have joined us today who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to move this item forward with a recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward to the full board with a positive recommendation, vice chair Dorsey. Dorsey, aye. Member Chen. Chen, aye. Chair Chan. Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister Clerk, please call item number four.

[Brent Jalipa (Committee Clerk)]: Item number four is a resolution approving modification number 15 to an airport contract, a project management support services for the Terminal 3 West modernization project with WCME JV to increase the contract amount by 76,000,000 for a new not to exceed amount of 126,000,000 and extend the contract for services for an additional five years from 12/31/2025 for a total term of 04/12/2016 through 12/12/2030 pursuant to the charter. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And we have SFO here.

[Diana Volek (San Francisco International Airport)]: Good morning. Diana Volek with SFO. The airport requests your approval of modification number 15 to the project management support services contract with WCME JV for the Terminal 3 West modernization project. This modification increases the contract amount by 76,000,000 for a new Nautuk seat total of a 126,000,000 and extends the contract duration by five years through 12/12/2030. The Terminal 3 West modernization project expands and renovates portions of Terminal 3 to provide seismic retrofit, replace end of life building systems, install additional swing gates, and a new TSA checked baggage inspection system, expand concessions to increase revenue generation, and the security checkpoint to increase the cap capacity to meet forecasted passenger growth, upgrade the facade, and construct the core and shell for a new building in Courtyard 4 that will accommodate operational functions and office and airline lounge space. WCME has been providing project management oversight, which includes project controls, managing project costs and schedule information, providing project budget analysis and cost estimating services, and preparing monthly project status reports. The contract is funded by airport revenue bonds under the care airport's capital improvement plan, and there are no impacts on operating costs. This contract results from a 2016 competitive request for proposals process, and WCME has met or exceeded expectations in performance evaluations. There is a local business enterprise subcon consulting participation requirement of 20, which WCME JV surpasses with 30.7% currently. The BLA has recommended approval, and I and the project manager are happy to answer any questions.

[Supervisor Connie Chan (Chair)]: Thank you.

[Budget and Legislative Analyst staff (unidentified)]: Item four is a resolution that approves an amendment to the airport's contract with WCME JV, which is a joint venture of PGH Wong and Consor, and a couple other engineering firms, as well as other sub consultants. The amendment extends the agreement through 12/12/2030, and then increases the value of the contract from 50 to $126,000,000 The contract provides project management support for the Terminal 3 modernization project. And we detailed the budget for the contract on page 17 of the report. Although this is a substantial increase in the contract value, the project budget itself has also increased a lot. And so it's still four and onetwo percent of the total project budget. So it remains proportional to the project budget relative to when the contract started. We recommend approval of item four.

[Supervisor Connie Chan (Chair)]: Thank you. Is the overall scope of the construction also has increased?

[Diana Volek (San Francisco International Airport)]: Since the original of the Yeah. Modernization project?

[Supervisor Connie Chan (Chair)]: Yeah.

[Diana Volek (San Francisco International Airport)]: It has, and I can ask, our project manager, Derek Homer, just to describe some of those changes since the original project was, approved.

[Supervisor Connie Chan (Chair)]: Thank you.

[Derek Homer (Terminal 3 Project Manager, SFO)]: Good morning, supervisors. Derek Homer, SFO, terminal three project manager. So, yes, a number of scopes have been added to our project that was already a part of the airport capital program. Significantly, one of the, elements was the Courtyard 4 connector building that creates those additional revenue, capabilities for, future airline lounges. In addition to that, we also have the addition of the east addition, which was closer to the E Gates compared to the west side. So we have a west side and a west east side, and that creates another opportunity for a 30,000 square foot lounge for an airline, as well as a more convenient location for aircraft gates and more revenue retail spaces in a larger concessions area. With that expansion, it also allows the airport to push back the security checkpoint for a larger expansion, which created a significant check pinch point today from a circulation standpoint. So these impacts will improve the passenger experience. And some of those those are a few of the major elements that were added. In addition to a number of infrastructure upgrades, we also included, prior to the project being suspended for COVID, we are now including the full replacement of the land site facade. So as you drive up to the building, that exterior curtain wall will be of complete replacement. In addition to that, we are also doing a significant overhaul of the West Pre Security Lobby, which renovates the entire check-in function and brings up the inter the independent carrier system baggage system all the way directly into the lobby as well.

[Supervisor Connie Chan (Chair)]: And so, basically, the project was at 627,000,000 in 2017, but to date, it has increased to 2,800,000,000.0. And you're expecting it to close out in December 2030?

[Derek Homer (Terminal 3 Project Manager, SFO)]: That's correct. Yes.

[Supervisor Connie Chan (Chair)]: Thank you. I don't have any other question. I don't see any other name on the roster. Thank you so much for your work. With that, let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes. If we have any members of the public who wish to address this committee regarding this item number four, and that was your opportunity. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to move this item with recommendation to full board, and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward to the full board with a positive recommendation, vice chair Dorsey. Dorsey, I, member Chen. Chen, aye. Chair Chan?

[Supervisor Connie Chan (Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes.

[Diana Volek (San Francisco International Airport)]: Thank you so much.

[Supervisor Connie Chan (Chair)]: Thank you. And, mister Clark, please call item number five.

[Brent Jalipa (Committee Clerk)]: Yes. Item number five is a resolution authorizing animal care and control to enter into a cooperative agreement with the Presidio Trust to provide animal control and welfare services for an initial term of five years with an option to extend for an additional five years effective upon approval of this resolution and to authorize the SFACC executive director to enter into amendments or modifications to the cooperative agreement that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the agreement for this resolution. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And we have animal care and control here.

[San Francisco Animal Care & Control representative (unidentified)]: Good morning. Good morning, chair Chan, supervisors Chen and Dorsey. We're here today to ask for approval to enter into a cooperative agreement with the Presidio Trust. Animal care and control and the Presidio Trust have worked together on animal related issues for many years. This agreement memorializes our working arrangement. Under this agreement, animal caring control provides animal control and welfare services within the Presidio's Area b. At the request of the trust with park police, we impound dangerous animals or stray dogs, rescue sick or injured wildlife, advise on animal neglect or abuse incidents, and ensure humane care and legal compliance for all animals in custody. All actions are coordinated to support public safety and animal welfare. While this is a continuation of the work that ACC has always done on trust property, under this agreement the city will now be compensated for the time expended and costs incurred in conjunction with the services provided. Based on last year's activities, we estimate that compensation will be around $6,000 a year. Happy to answer any questions. Thank you for your time.

[Supervisor Connie Chan (Chair)]: Thank you. I'm glad that now you're being compensated for the work that you've been providing. I appreciate that.

[San Francisco Animal Care & Control representative (unidentified)]: I don't know. It's a tiny dent.

[Supervisor Connie Chan (Chair)]: A little bit. Everything counts. More treats for the animals. So we will go to public comment on this item. And thank you so much for your service.

[San Francisco Animal Care & Control representative (unidentified)]: Thank you.

[Brent Jalipa (Committee Clerk)]: Yes. Right now, opening public comment for this item number five. If we have any members of the public who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to move this item to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward to the full board with a positive recommendation. Vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen. Aye. Chen, aye. Chair Chan? Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister Clerk, please call item number six.

[Brent Jalipa (Committee Clerk)]: Item number six is a resolution approving and authorizing the director of property on behalf of the fleet management department or central shops to execute a lease agreement for 1908 To 1950 Innis Avenue for a term of six years to commence on 10/01/2025 through 09/30/2031 with one five year option to extend the term with Innis Group LLC, had a base annual rent of 631,800.0 per year with 3% annual increases. And the city will contribute up to an additional 349,000 for tenant improvements and authorizing the director of property to execute any amendments or modifications to the lease, including exercising options to extend the agreement term, make certain modifications, and take certain actions that do not materially increase the obligations nor liabilities to the city, do not materially decrease the benefits, and are necessary to effectuate the purposes of the lease or this resolution. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And today, we have real estate division here.

[Jeff Seese (Transaction Team Manager, Real Estate Division)]: Good morning, chair Chan. Good morning, supervisor Dorsey, supervisor Chen. My name is Jeff Seese. I'm the transaction team's manager for the real estate division. And I'm here to, bring you a proposal for a lease for 1908 To 1950 Innis Avenue. I also have with me, Don Jones, the director of, fleet services. If you have any questions regarding the use of this site, I'll give you a little bit of background here. Central shops provide fleet management services for over 70 city departments with a combined fleet, a size of approximately 8,000 vehicles and operate six maintenance and repair facilities across the city. So the question is why do we need this additional space? The state water control, state water resources control board has mandated that we replace all single walled tanks. And so we need a temporary refueling station and we need a location for that. We also need space for commissioning and decommissioning city vehicles. Currently, the fleet department has to do this very inefficiently. They actually have to travel out to, client departments and do that work. This would make it a lot more efficient if we could do it, at this location. This location is one of four properties that's adjacent to 555 Selby, which is the central shops facility. So, it would allow us to labor savings of of having travel time for, mechanics and laborers to go out and bring vehicles in and work on them. It also would allow us to easily meet the state mandate of having a temporary fuel station in place. We have a deadline on that of having that done by December 31 year. We have, oops, sorry. I'll go through the deal points. The deal points are that, we have a six year lease, a little different than our five year lease. We've synced it with the other leased facility at 450 Tolland so that we have some flexibility when that lease comes up for, expiration. I'll be bringing you that renewal in, in probably about thirty to forty five days. The we're paying, a dollar 80 a square foot here. We've got, and we have a fixed purchase price that we've negotiated in this deal of $12,000,000 So, and that that fixed price lasts for three years. So it gives us, again, some additional flexibility in that. And with that, if you have any questions.

[Supervisor Connie Chan (Chair)]: Thank you.

[Budget and Legislative Analyst staff (unidentified)]: Item six is a resolution that approves a new lease with Innis Group LLC for use of property at 1908 Innis Avenue. We summarize the deal terms on page 22 of the report. You'll note that the rent for this lease starts at $631,000 a year, then escalates by 3% per year during the initial six year term. And so we estimate that the city will pay $4,100,000 in rental costs. And those costs will be funded by charges to city departments through the central shops and real estate division work order funding. In addition to that, the lease has the landlord constructing tenant improvements at the site to improve. The site includes a lot and then two buildings. So there are improvements to the buildings, and there's charging stations that are being installed. That amounts to about $350,000 And that will be paid for by certificates of participation debt. The overall fuel tank replacement project is actually going to cost $20,000,000 and take place over the next several years at two sites that the city owns that are used by central shops. And that will also be paid for by certificates of participation. The final thing I'll say is that the lease cost is based on comparable transactions in the area, which we reviewed as part of this report. So we recommend approval of item six.

[Supervisor Connie Chan (Chair)]: Thank you. I don't have any other questions. Actually, just one quick question. With the $20,000,000 along with the temporary fuel tank, and then with the actual $20,000,000 worth of fuel tank renovation. How long is that project going to take?

[Don Jones (Director of Fleet Services, Central Shops)]: John? So the project at 2323 Cesar Chavez will be eighteen months to two years. Once that's complete, we'll start the project at 950 Bryant Street, which will take the same amount of time another two years.

[Supervisor Connie Chan (Chair)]: And because the Cesar Chavez is a temporary fuel tank.

[Don Jones (Director of Fleet Services, Central Shops)]: So We're going to need the temporary fuel tanks while we're doing both stations to make up for the amount of fuel we have to have for all the vehicles in the city.

[Supervisor Connie Chan (Chair)]: So it's roughly about eighteen months, and then plus two more years?

[Don Jones (Director of Fleet Services, Central Shops)]: Say that again. I'm sorry?

[Supervisor Connie Chan (Chair)]: How long so help me understand. How long would it take for the $20,000,000, for the fuel tank renovation?

[Don Jones (Director of Fleet Services, Central Shops)]: It's gonna be a total of four years. Two years for Caesar Chavez and two years after that for the other one. I can't have both stations down at the same time because we need to fuel vehicles and keep the city moving.

[Supervisor Connie Chan (Chair)]: I see. So eighteen months and then two more years, and then it will be completed. Understood. And then is the eighteen months starting soon after we commence this, lease?

[Don Jones (Director of Fleet Services, Central Shops)]: So the goal is to have the tanks out of the ground at Cesar Chavez by December 31. So once we get this lease done, then we'll set up the temporary fuel station. They expect to give the contractor for the Cesar Chavez site notice to proceed hopefully next week.

[Supervisor Connie Chan (Chair)]: Wonderful. Okay. Thank you. Sure. Thank you. I don't have any other questions. And, with that, let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: If you have any members of the public who wish to address this committee regarding this item number six, that was your opportunity. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to move this item to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward to the full board with a positive recommendation, vice chair Dorsey. Dorsey, aye, member Chen. Chen, aye, Chair Chan. Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Thank you. And, mister Clerk, please call items seven and eight together.

[Brent Jalipa (Committee Clerk)]: Item number seven and eight. Item number seven is a resolution approving and authorizing the director of property to acquire certain real property located at 1660 And 1670 Mission Street, approving and authorizing an agreement of purchase and sale for real estate for the acquisition of the property for the purchase price of 18,500,000.0 plus an estimated 30,000 for typical closing costs for a total amount of 18,530,000.00 from two ninety division, EAT LLC, r e a t LLC, sixteen sixty Mission LLC, and Skyline Capital, a Wyoming limited liability company, authorizing the director of property to execute the purchase agreement, make certain modifications, and take certain actions in furtherance of this resolution and the purchase agreement effective upon approval of the resolution, affirming planning department's determination under the California Environmental Quality Act and adopting the planning department's findings that the purchase agreement and transaction contemplated is consistent with the general plan and the eight priority policies of the planning code. And item number eight is a resolution authorizing the Department of Public Health to enter into a grant agreement for a term commencing on execution of the grant agreement through 06/30/2027 between the city and county acting by and through its Department of Public Health and the California Department of Healthcare Services and its third party administrator advocates for Human Potential Inc. Having anticipated revenue to the city of 10,000,000, including a, permitted and a restricted use, authorizing DPH to accept and expend grant funds, authorizing the grantor to apply for a receiver in the amend in the event of the city's default, and authorizing DPH to enter into amendments or modifications to the grant agreement that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purpose of the grant. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And, again, we have real estate here.

[Jeff Seese (Transaction Team Manager, Real Estate Division)]: Good morning, chair Chan. Good morning, supervisor Dorsey, supervisor Shen. I'm pleased to present this, acquisition of 1660, it's actually 1660 and 1670, Mission Street. The two parcels kind of serve each other. Go ahead. Yeah. I'm Jeff Seats, the transaction team manager with the real estate division. And, let me give you a little background. 1660 Mission is a 75,321 square foot building. It's six stories tall, has underground parking with 51 spaces, and there's seven surface spaces that are, that are also part of that, which is the other parcel that was in there. The building was built in 1990, and the city acquired it in 1993. We then sold it in 2017 for $36,000,000 And we occupied it until 2020 when we reached substantial completion at 49 South Van Ness, where we opened up the permit center and relocated the staff to that facility. The building has been empty since then, and we are now, have negotiated a price of $18,500,000 to acquire the building. We are expecting closing costs to be about $30,000 And then project delivery costs, which we'll address in a minute here, but is about we're estimating at $56,470,000 right now, but not to exceed number of $75,000,000 Now to tell you about what we're going to do in this building, we have Kelly Kirkpatrick, director of new beds and facilities from the Department of Public Health. Thank you.

[Kelly Kirkpatrick (Director of New Beds and Facilities, DPH)]: Good morning, supervisors. I am so pleased to be here today and to have the cosponsorship mayor's office and supervisor Dorsey on this item. So thank you. We are very excited to share our plans for 1660 Mission, a new health hub for San Francisco, which we're calling our Health Recovery and Connection Center. The Department of Public Health will transform this unused building at 1660 Mission to create a central hub for health care services. The proposed project will expand access to treatment and recovery, and secure a permanent home for city clinic. The proposed project creates the opportunity to provide streamlined, coordinated, and care with behavioral health services, treatment programs, pharmacy access, and sexual health care co located in one purpose designed building. Many of these programs currently operate in inadequate leased spaces that can't expand to meet demand. 1660 Mission solves that. This building will allow SFTPH to connect more people to care and treatment, including serving as an access point for people to start treatment. The enhanced space will improve access to on demand medication treatment, medical services, health assessments, caseworker meetings, and pharmacy pickups. The city is using a combination of voter approved bonds, state grants, and existing local funds to secure this building at a favorable price, leveraging time sensitive funding via our estate from the grant. City clinic. Voters overwhelmingly supported a new home for city clinic in the 2024 healthy, safe, and vibrant San Francisco bond. Now, 1660 Mission will be their new home, providing city clinic staff and clients with an expanded and clinically appropriate place for care. City clinic desperately needs a new building to continue providing essential services. It currently operates out of a 100 year old firehouse that can no longer meet the need of city clinic staff and patients. A better functioning clinic space will improve the health outcomes of patients by expanding lab functions for on-site testing results, processing the same day diagnosis, strengthening coordinated care, and other needed services, ensuring faster, more streamlined services, and providing much needed ADA accessibility. The new building at 1660 Mission will increase access to treatment and recovery services by securing a permanent home for key behavioral health resources that are currently located at the wholly inadequate 1380 Howard Street. This secures a permanent home for these services, and a leased space that is and gets us out of a leased space that is cramped, outdated, and cannot expand to house new treatment and recovery services. We will be able to connect more people to care and treatment, including serving as an access point for people to start treatment. The enhanced space will improve access to on demand medication treatment, medical services, health assessments, caseworker meetings, and pharmacy pickups. Specifically, the following programs from thirteen eighty Howard, currently in District 6, will move to 1660 Mission. This includes our behavioral health access center. We will be able to expand our BHAC, as we call it, into a hub where clients can be assessed for behavioral health needs, prescribe medication, and receive access to mental health, and start treatment. Behavioral health pharmacy will also be relocated, to help fill prescriptions, including medication assistant treatment for substance use disorder, as well as our office of buprenorphine induction clinic, which is operated by UCSF, a clinic that helps initiate buprenorphine treatment for opioid use disorder via walk in or appointment. Consolidating these services will reduce barriers, speed up care, and help more people stabilize and recover. Additionally, we are actively exploring program models for intoxicated individuals where they can be monitored, stabilized, and connected to appropriate care. As with all of our new acquisitions, DPH is committed to being a good neighbor, including transparency and accountability and engagement. The facility will include on-site security, indoor waiting rooms and well managed services, regular meetings with neighbors, and stakeholders to hear feedback. Additionally, we are bringing over 300 city and UCSF staff to a vacant building and revitalizing that block to help support local services. As for the grant, we are appreciative of the state. We were awarded a $10,000,000 capital funding grant from DHCS towards the acquisition of this building to serve the behavioral health programs that I outlined. As a condition of the grant, DHS requires the city to agree to several terms, including a thirty year use restriction on the portion of sixteen sixty Mission dedicated to behavioral health programs. We must execute this BGIP five grant agreement by mid October or face likely rescindment of the funding from DHCS, as we have worked to secure this site after attempts for other sites, did not come to fruition. With that, I will turn it over to the BLA. I'm here to answer questions. And also have many people from BHS and City Clinic here, should there be any program questions.

[Supervisor Connie Chan (Chair)]: Thank you.

[Budget and Legislative Analyst staff (unidentified)]: Item seven is a resolution that approves a purchase and sale agreement with the owners of 1616 Mission to acquire that site for the city. We detailed the tenants on page 27 of the report. But as was noted by the DPH staff, the building will co locate city clinic, as well as behavioral health client facing programs and some behavioral health administrative functions in this building. And we detailed the fiscal impact on page 28 of our report. There are several fiscal impacts that we note in our report. One is the purchase of the building, which is $18,500,000 That value is confirmed by an appraisal and an appraisal review and will be paid for by homelessness gross receipts tax. In addition, DPH is estimating that there'll be $56,700,000 in renovation work to convert the building from an office to a clinical space. That will take place over the next several years, and the building will not be open until 2028. Those costs are funded by capital revenues that have essentially already been appropriated by the board, except for this $10,000,000 grant that's on the budget before you today. In addition, there's $7,500,000 for furniture and equipment that DPH is still identifying a funding source for. We estimate that by moving from a leased space to city owned space, the city will actually save $1,700,000 a year. So that will be a savings to the general fund. And then finally, we note, in terms of new operating costs, the footprint for the programs, for the behavioral health programs, is not expanding in this building. And the programs are not expanding either. The city clinic space is doubling, but DPH reports that they're not expecting to increase the operating cost of that program. The building will be able to house a new law enforcement drop off program for people who are intoxicated, but may not need to go to jail. That program actually was budgeted in this year's budget. It's part of the Break in the Cycle initiative. It's funded by the General Fund, dollars 1,200,000.0 this year and $3,100,000 next year. And then we'll annualize after that going forward. The money will be used to fund a temporary program, or a program at a temporary site, while the renovation takes place, and then relocate to this new building. And we recommend approval of item seven.

[Supervisor Connie Chan (Chair)]: Thank you. And Vice Chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, chair Chan. I just wanted to express my support, for the acquisition of 1660 Mission Street, and more than that to, express my enthusiasm for the focus on drug treatment and sustained recovery that it represents. As we've heard from the presentations, the site will allow us to, co locate the San Francisco City Clinic with essential behavioral health programs, including the behavioral health access center and pharmacy, which is right now about three or four blocks away. These moves will not only create ADA compliant modern facilities, this is gonna save taxpayers an estimated 1,700,000.0 as the BLA mentioned just by moving from leased to, city owned space. This project is about delivering care responsibly and prudently, saving taxpayer dollars, improving patient care, and advancing mayor Lurie's breaking the cycle initiative, which I strongly support to better, incentivize treatment and sustained recovery for those struggling with substance use disorder. So I'm happy to to support this. I want to particularly commend the Department of Public Health and Real Estate Division for their coordination and diligence, in this process and identifying this pross pro property and advancing a plan that expands services in a way that strengthens public health, while also respecting the, the needs and the sensitivities of the surrounding neighborhoods. As we saw through much of the debate around geographic equity for homelessness services, a small handful of neighborhoods is often called upon to host a disproportionate share of services for those who face some of the most serious behavioral health challenges our city sees. In West Selma, this was particularly true during COVID when the siting of several shelter in place hotels really changed the neighborhood and lost a lot of confidence among residents in anything that the city does. I really do appreciate that, city departments are sensitive to that in in engaging with the neighbors. They would they appreciate why why people may not trust the city, and I think everybody does internalize too that it is our job to win their confidence back. So I take everybody at their word for that. I'm committed to it. I know you are. So I wanna thank everybody, for that as well. I appreciate the commitment to minimizing potential issues with security services and providing for a wide range of services, as we said, from CityClinic to BHAC, together with office space for hundreds of workers, which will assure foot traffic, economic activity, and renewed vitality to this area. I know it will, greatly benefit, staff and patients, and I'm confident the neighborhood as well. It's the it's it is a forward looking investment. I'm happy to support, and I'm grateful to everybody at DPH real estate, Mayor Larry's staff for their persistence and professionalism in bringing this forward.

[Supervisor Connie Chan (Chair)]: Thank you, vice chair Dorsey. And, I don't have, many I I don't have, additional questions. I I think that, and but please do validate if, you know, with the city clinic, and just throughout the report, you know, there's a discussion about while there's more space, that doesn't necessarily means that you're increasing the operation budget for your programming. And my assumption is it just means that, you know, say a clinic isn't in the best space as it currently exists anyways. And so with the new space, the assumption is it's ADA accessible, just more space, overall, better environment, but the program's still going to continue to run as it currently budgeted.

[Kelly Kirkpatrick (Director of New Beds and Facilities, DPH)]: Correct. That is correct. We anticipate serving people better, in more space, having a safer, better functioning space for our staff. We expect to serve more people, but don't expect to increase the operating budgets with our ability to have more space to serve clients.

[Supervisor Connie Chan (Chair)]: Thank you. And, during the transition, just the moving, can you help me understand just kind of how does that work, and the timeline of it, like, for just transitioning from city clinic to the new space? How long, and what does that look like?

[Kelly Kirkpatrick (Director of New Beds and Facilities, DPH)]: I might defer to my colleagues in our capital facilities team, to answer the kind of timeline of moves. We do anticipate that, our goal is to open, 1660 Mission by the 2028. Between now and then, we obviously have to close the transaction, work with DPW on developing the bids and scope for the work, undergoing construction, and then there will be a phased kind of move in of services. If you need anything more specific than that, I will have to defer. Okay.

[Supervisor Connie Chan (Chair)]: No problem. Just kind of want to just understand approximately the timeline and we're anticipating. I mean, it's very exciting time for DPH. Not to mention, also, the public clinic number four in Chinatown. All of it. Just bringing a better level of health care all across the city. It's great. It's a great thing. So thank you so much for your work on this. I don't have any other questions. Let's go to public comment on these two items.

[Brent Jalipa (Committee Clerk)]: Yes. We are opening public comment for both these items, seven and eight, if we have any members of the public who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public no no public comments, public comment is now closed. Colleagues, I would like to move these two items or, actually, I should say, vice chair Dorsey, what would you what would you like to do with these two items?

[Budget and Legislative Analyst staff (unidentified)]: Sure. Thank you, chair Chen.

[Supervisor Matt Dorsey (Vice Chair)]: I would like to, move these items forward to the full board with our positive recommendation.

[Supervisor Connie Chan (Chair)]: A roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion by vice chair Dorsey that we forward these both these resolutions to the full board with a positive recommendation, Vice chair Dorsey? Aye. Dorsey, aye. Member Chen? Chen, aye. Chair Chan?

[Supervisor Connie Chan (Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister Clerk, please call item number nine.

[Brent Jalipa (Committee Clerk)]: Yes. Item number nine is a resolution approving amendment number two to the agreement between the city acting by and through the Department of Public Health and Edgewood Center for Children and Families to provide hospital diversion and crisis stabilization unit services, to extend the term by four years and nine months from 09/30/2025 for a total term of 10/01/2023 through 06/30/2030, and to increase the amount by approximately 22,000,000 for a total not exceeding amount of approximately 31,600,000.0, and to authorize DPH to enter into amendments or modifications to the agreement had to not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the agreement or this resolution. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And, again, we have Department of Public Health here.

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: Thank you, chair Chan, vice chair Dorsey, and supervisor Chen for taking the time to hear this contract today. My name is Varanas Farmand, and I'm the Director of the Children, Youth, Family System of Care and Behavioral Health at the Department of Public Health. Next slide, please. I'm here to present a contract for Edgewood Center for Children and Families and programs that are part of our crisis continuum of care, including our twenty three hour crisis stabilization unit and 20 fourseven hospital diversion program, inclusive of a partial hospital program step down. Together, these programs serve a total of two zero three placements per year. The annual contract amount without contingency is $4,200,000 with a not to exceed amount of $31,603,801 This request will extend the contract term by four years and nine months for a total term of 10/01/2023 through 06/30/2030. Under the proposed contract, EDGE will continue to provide three programs. Hospital diversion is an intensive 20 fourseven program for youth ages 12 to 17 who are at risk for out of home placement and or inpatient psychiatric hospitalization. This program serves as an alternative to inpatient care and or acts as a step down from inpatient hospitalization to further assess, stabilize, and support discharge planning for youth into our services. We contract for two beds and 35 placements per year, and the average length of stay is approximately three weeks. For youth in the hospital diversion program who no longer need the 20 fourseven care, but need continued intensive day services before discharging to an outpatient or wraparound provider, We've budgeted that 14 youth can step down to Edgewood's partial hospital program, which runs Monday through Friday, 10:30 to five. The third program is our crisis stabilization unit, which is a twenty three hour sort of psych emergency type services. Serves youth ages six to 17 that are in acute psychiatric crisis. This program functions as a 50 five-eighty five, which is the youth involuntary hold, receiving center, and supports coordination of hospitalizations when indicated. This, program is contracted to serve 168 placements per year. DPH agrees with the BLA recommendations and respectfully requests approval of this item. Thank you.

[Supervisor Connie Chan (Chair)]: Thank you.

[Budget and Legislative Analyst staff (unidentified)]: Item nine is a resolution that approves an amendment to DPH's contract with Edgewood Center for Children and Youth. The amendment extends the agreement through June 2030, and then increases the value by $22,000,000 to be $31,600,000 We detailed the services on pages thirty one and thirty two of our report. And we note that the programs are meeting expectations in the city's contract in terms of the amount of service delivered, and that Edgewood, is meeting the city standards for, for financial management and governance of non profits. We detail the fiscal impact of the contract on page thirty three and thirty four of our report. This is about a $4,000,000 a year contract, a quarter of which is funded by Medi Cal, and then the rest is funded by the general fund. We recommend approval of item nine.

[Supervisor Connie Chan (Chair)]: Thank you. I mean, I think, I do wanna flag, could you discuss a little bit about the monitoring plan?

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: Sure. The most recent monitoring plan for fiscal year twenty four, twenty five? Correct. Yes. There was an allegation in January 2024 of a child abuse allegation against the staff. It was found to be unsubstantiated, and Edgewood took all of the steps necessary to report. It was a non DPH client, another insured client. They reported it to the family, the insurance provider, and the state licensing. However, there was a failure to report, the incident to DPH and the HSA CPS hotline. So because of that failure to report, we put a pause on placements and worked with Edgewood around a root cause analysis to understand, you know, Edgewood's failure in making these reports and develop recommendations in a monitoring plan. So that investigation of this failure reported, highlighted a need for policy clarification with DPH for reporting on non DPH clients, in addition to clarity from HSA and the CPS CPS the Child Protective Services hotline in terms of, reports that they take and follow-up on. In addition, it resulted in a monitoring plan informed by the root cause analysis to further refine and improve communication and coordination of care, in terms of the their reporting practices, training of staff, around different protocols. The monitoring occurred, for one year through 06/30/2025. It included monthly meetings led by BHS's quality management department in collaboration with with me and the system of care. And at the conclusion of the monitoring, we feel confident that they met all of the requirements and are well positioned to respond correctly, swiftly, and appropriately to any future incidents. I also just want to emphasize that they serve a very vulnerable population, and allegations may come up. This, again, was, investigated thoroughly, unsubstantiated, but the concern was really around their failure to report, the incident, you know, through our quality of care reporting to DPH.

[Supervisor Connie Chan (Chair)]: Yeah. And was there could you just articulate a little bit more about you know, I I I agree. This is not about focusing on something that is unsubstantiated, because clearly then, there was an investigation. There's it's it's concluded. So that's not what I'm focusing on. And and I am focusing a little bit more on as I I agree with the monitoring plan that we it really was focusing on the reason of reporting. Was it just, you know, is it training? Is it staffing? The or the maybe even the lack of staffing? Can you help us understand was what was the cause of that gap of reporting?

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: Yeah. Part of it, I'll say, was ownership on our part. Part of the root cause analysis, there was confusion around reporting when it's a non DPH client. So this was a a kid insured by Kaiser because these programs serve all you know, per serve private insurance, private pay at Kaiser. So we took steps in DPH to update our policy and make very clear around the reporting protocols for clients for, you know, for incidents that occur for members that are not our members, where there's de identified reports, but we still need to be aware of what's going on since that impacts the milieu and clients we place there. So part of it was a lack of clarity around that that improved our policy development. Some of it was, working with the child protective service hotline because oftentimes, the staff were getting confused when they report allegations to the hotline. The hotline workers say this is in our jurisdiction to follow-up on this investigation, report it to the state licensing. And so we worked with CPS to really make sure they take all referrals and cross reference. You know, and some of it was internal leadership changes in internal communication gaps. The very top leadership absolutely knew the allegation should have been reported to both HSA and DPH. And there was a breakdown in that communication with folks more on the ground. So we really worked on that internal communication. We reviewed reports on a monthly basis to see how the timelines for the reporting, the cross referencing. And now I can say there is an over reporting of absolutely every single detail that takes place at Edgewood.

[Supervisor Connie Chan (Chair)]: I I mean, I always think that actually, all across the board, like, it's more communications, the better. About many things. Not just,

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: you

[Supervisor Connie Chan (Chair)]: know, something as a serious matter. But that's good to hear, and thank you so much for walking us through. Sounds like there's an improved communication channel. Not today, but I think separate and apart, because I assume that there is sort of, like, a formal process should, these reporting happen, and that you learn about it and have these information. I my assumption is there's a specific protocol, separate and apart from just communicating to determine action appropriate, to follow-up with the contractor.

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: Yes. We have a quality of care reporting process and policy, and so reports go to BHS. And within the Department of Quality Management, there's a risk management risk manager, director that reviews all of those incidents and takes appropriate action with with stakeholders based on the types of reports that are coming in.

[Supervisor Connie Chan (Chair)]: Understood. Thank you so much. I I learn something new every day, and this is something I really wanted to know about. So thank you so much for the information. I really appreciate it. Let's go to public comment. I don't have any other questions. Let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes. We're now opening public comment for this item number nine, if we have any members of the public who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, and public comment is now closed. And colleagues, I would like to send this item to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward to the full board with positive recommendation to vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen. Chen, aye. Chair Chan?

[Supervisor Connie Chan (Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Thank you, supervisors. Thank you. And, mister Clerk, please call item number 10.

[Brent Jalipa (Committee Clerk)]: Item number 10 is a resolution authorizing the Department of Homelessness and Supportive Housing to execute a subgrant agreement with the Urban Institute for a total amount not to exceed 200,000 of Just Home cohort one continuation funds, to retroactively accept and expend those grant funds to support continued project management of the Just Home program for costs incurred 06/15/2025 through 09/30/2026 and authorizing HSH to enter into any additions, amendments, or other modifications to the subgrant agreement that did not materially increase the obligations nor liabilities to the city or materially decrease the benefits to the city. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And we have HSA Xu or Department of Homelessness and Supportive Housing here. Thank you.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Good morning, Chair Chan. Good morning, supervisors. Emily Cohen with the Department of Homelessness and Supportive Housing. I'm here before you today with an accept and expend for $200,000 in grant funding to continue San Francisco's just home program. The resolution authorizes us to retroactively execute a sub grant agreement with the urban Institute to support continued project management for the just home program for costs incurred between 01/15/2025 and 09/30/2026. As I said before, it's a $200,000 A and E And the resolution is retroactive as HSH received the draft subgrant agreement on 07/15/2025, when it went into effect. So we brought it to you as soon as we could. A little bit of background about the just home program. It's a national program designed to advance community driven efforts to break the cycle and break the links between housing instability and incarceration. And this was launched in 2022 by the MacArthur Foundation and the Urban Institute. San Francisco was one of four communities chosen to participate in the program. HSH has, as the lead agency, is supporting the collaborative development of a comprehensive, equitable, and coordinated system to bridge silos between homelessness, housing, criminal justice systems, and has shared San Francisco's best practices on a national scale with the other partners. We are proud of the work accomplished under this program over the last few years, which includes, the development and funding of a transitional housing, a new transitional housing program for justice involved young people that will be opening this fall in a partnership with 3rd Street and through just home, sorry, through just home third street, we'll be activating this long vacant site in District 10 to become TAY transitional housing. And I believe that was before you to talk about that program last month. I'm happy to answer any questions that you might have.

[Supervisor Connie Chan (Chair)]: Thank you. I don't have any additional questions. I don't see any other name on the roster. Thank you so much for your work on this, and we'll go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes. We're opening public comment for this item number 10, if we have any members of the public who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to move this item to full board with recommendation and the roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion to forward to the full board with a positive recommendation, vice chair Dorsey.

[Budget and Legislative Analyst staff (unidentified)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen. Chen. Aye. Chair Chan.

[Supervisor Connie Chan (Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister Clerk, please call item number 11.

[Brent Jalipa (Committee Clerk)]: Yes. Item number 11 is a resolution approving the third amendment to the grant agreement between urban alchemy and the Department of Homelessness and supportive housing for shelter services and operations at 711 Post Street, extending the grand term by six months from 06/30/2025 for a total term of March, '21, 2022 through 03/31/2026, increasing the agreement amount by approximately 4,900,000.0 for a total amount not to exceed approximately 27,600,000.0, and authorizing HSH to enter into any amendments or modifications to the amendment that not materially increase the obligations nor liabilities or materially decrease the benefits to the city and are necessary or advisable to effectuate the purposes of the agreement. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And, again, we I wanna first acknowledge, supervisor Danny Sauer is here, and I am going to if it's Okay, we're going to have the department presentation, and then the BLA report, and then remark. Let's go. Thank you.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Good morning again, chair Chan, vice chair, Dorsey supervisors, Emily Cohen with the department of homelessness and supportive housing. And I'm joined today by my colleagues, Gigi Whitley, our chief financial officer, as well as Doctor. Lena Miller from urban alchemy. As the clerk mentioned, the resolution before you today is a third amendment to a grant agreement between our department and Urban Alchemy for the continued operation of the adult shelter located at 711 Post Street. We are proposing to extend the term of this contract by just six months to through 03/31/2026 and increase the not to exceed amount to $27,600,000 This proposed amendment was reviewed and approved by the homelessness oversight commission back in August. The amendment is short term, six months only, to allow HSH to continue to work with urban alchemy as they progress towards full compliance from them, both their fiscal monitoring and fiscal and program monitoring findings. Urban alchemy has been highly responsive to both the findings from the joint fiscal monitoring, as well as HSH's actions and are working very collaboratively with the city to improve their practices so that they can continue to be a really important partner to HSH as well as other city departments. We are in the process of, or urban alchemy has detailed, an action plan to come into compliance with all outstanding issues. And we feel like six months, the six month extension is intended to give urban alchemy the time to do that so that we can enter into a longer term contract in full confidence down the road. So the agreement itself, funds both shelter operations and support services for the adult guests at 711 Post Street. This the cost per bed per night is about $91 which is below our estimated cost for shelter. And this includes meals, twenty four seven staffing, case management, and benefits navigation. This site is really interesting. It's a semi congregate format. It's a former youth hostel. So people might have a single room. We might have doubles, and we might have quads with bathrooms on each floor. And so and a few of the rooms actually have private bathrooms. So it really lends itself to serving people very well in small, very dignified settings in terms of their room, and being able to access robust amenities on the Ground Floor of the property, including meals and community space, recreation space, etcetera. Additional program context. In the last fiscal year, Urban Alchemy served about six ninety unique adults at this shelter. On any, we have increased capacity at the site slightly. So to accommodate for some beds that are offline at MSC South for construction. And we are still able to maintain a really, competitive price at this site and high service outcomes. Per the chair's request, we have included some photos. As you can see here, this is the lobby of the building. Guests are greeted. It very much looks like a hotel lobby. Guests are greeted in a warm and welcoming way as they come in. This is the hallway on the 1st Floor. It's you can't see it here, but there's a really cool mural painted on one of the sides, and it is a very warm and welcoming environment. This is an image of a single room. But as I mentioned, there are singles and doubles and quads. And, you know, I think one of the other things I wanted to mention as we move forward with this proposed extension is the amount of work that's gone on between urban alchemy and the HSH and the controller's office to address some of the findings in the joint fiscal monitoring. But as well as the positive outcomes that the program itself is having. So outside, Urban Alchemy is obviously a very large organization, but seven eleven post, they, in this contract, they've met five of their six service objectives. Guests have very positive things to say about this shelter. I work very closely with the Lower Knob Hill neighbors and folks around the site. And while there have been challenges as there are with any project, we have really come together, brought ambassadors to the area and are doing everything we can to ensure that this site is not only great for the people staying in it, but that it's also a positive asset to the neighborhood. And that's a continuous work in progress, but something that I know we're all deeply committed to.

[Supervisor Connie Chan (Chair)]: Thank you.

[Budget and Legislative Analyst staff (unidentified)]: Item item 11 is a resolution that approves, an amendment to a grant between HSH and Urban Alchemy. The grant funds a shelter operation at seven Eleven Post. And the amendment would extend the agreement six months through March 2026, and then increase the value of the grant by $4,900,000 to $27,600,000 The shelter program, programmatically, is performing well. They are largely meeting the objectives in the grant agreement. And the beds are full. We looked at the past two years of data. But we also know in our report that there are serious corrective actions underway that HSS has asked Urban Alchemy to address related to their invoicing, and then overspending on city grants. The problem actually goes back to 2023. It has gotten worse. And apparently, at this site, Urban Alchemy knowingly overspent their budget by $800,000 after being told not to by HSH. And then HSH is paying them $336,000 of that demand for additional money for fiscal 2425. So this amendment doesn't just extend the agreement. It also provides the back pay for the spending beyond what the grand budget could support last year, and then annualizes that spending going forward. So we look at a lot of nonprofit contracts. I think this is fair to characterize as extreme. And we don't see this that often. And I think but as a practical matter, the city this grant ends in a couple weeks. So if it's not extended, the service would go away. And it would essentially be a 10% decrease in the city shelter capacity. So given the timing of when the department has brought this to you, I think the only option is to end the program or continue it for six months. I think other options going forward, though, after the six months pass, and presumably they come back to extend the agreement and provide an update on the performance towards the financial management goals that the city has set out for urban alchemy, You know, the the department is planning to re procure their entire shelter portfolio. They could change the timeline on that, and advance it. Because right now, it's not going to happen for another year, with new contracts not starting till 2027. But that's something that could be advanced going forward. But I think immediately, there's very little room to maneuver on this one.

[Supervisor Connie Chan (Chair)]: Thank you. Zoom advisor Sauter.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, Chair. First, I wanna spend a minute on the going further into detail on the controller's findings, if possible. And if if we don't have anyone from the controller's office, miss Cohen, if you might walk us through those two findings again, you know, because especially hearing them classified as extreme, I do wanna make sure we spend some time talking about specifically what the two findings were. And then, of course, I wanna hear from Urban Alchemy on on their response and how they're adjusting their practices to respond. I

[Supervisor Connie Chan (Chair)]: just wanna quickly flag. We do have someone from the controller's office here, but, but we let's continue with HSH, and then, let's give the controller's office a minute to to kind of figure this out if if they want to send someone else to here to speak specifically on the letter.

[Gigi Whitley (Chief of Administration and Finance, HSH)]: Sure. Thank you, Gigi Whitley. I'm the chief of administration and finance for the Department of Homelessness in support of housing. Good morning, Chair Chan and committee members. Happy to be with you. I'll start with the controller's, nonprofit, fiscal and compliance monitoring results. HSH was the lead monitor, so I feel, well informed to be able to speak to that monitoring. I think as you and the committee are aware, the controller's office has recently updated, their compliance reporting to a different tier system, tier one, two, and three. There are certain, guidelines in the monitoring. And there are certain requirements as part of the monitoring. So, the monitoring focused on two findings. First was, the city's guideline that the agency has at least thirty days of operating cash. This is, intended to alert the city of any sort of systemic, financial, issues. The second finding was related to time sheets. If employees are paid by more than one funding source, it is recorded and recommended that the, that a time study is conducted for that employee to ensure they are allocating their time appropriately. So those were the two, findings that resulted in Urban Alchemy getting placed on tier two status. And, I don't have more information on that, but it would defer to the controller's office. I am prepared to discuss our corrective action letter, you know, that we issued, near the end of the fiscal year.

[Sally Ma (Controller’s Office)]: Sally Ma from the controller's office. A representative from the controller's office city performance team will come down and address the committee's questions. Thank you.

[Supervisor Connie Chan (Chair)]: Do we know how long it's gonna be? Few minutes? I hope a few minutes. Okay. No problem. Let's let's make sure they they run really fast.

[Supervisor Matt Dorsey (Vice Chair)]: Sure. If it's okay, could we hear from Urban Alchemy for their response on this? And and, you know, I understand that they've put into place in early July a plan to address these concerns. I would love to hear details on those from Urban Alchemy.

[Supervisor Connie Chan (Chair)]: Well, actually, if I may then, I would actually hear directly from the HSH about, you know, of course, we're gonna look forward to see urban alchemy, you know, to be back on track and be able to be in good standing. But that is a, I believe, a different path. And meaning, it's not the same. Urban alchemy has an issue right now because it's not just with the seven eleven post contract. It's overall. And we know that there's heart. There's actually other contracts that Urban Alchemy has with the city. To address simply just seven eleven post is what I want to discuss at this moment, and then while we wait for the controllers to come back or to have sent someone to be able to speak the letter as a whole on a larger issue. What is HSA's plan about seven eleven post specifically, knowing that this is not just about, you know, urban alchemy issue, but it's also about the fact that the contract will come to an end in six months? What is your long term plan, for this site? And what is the alternative, particularly if in six months that urban alchemy is still not quite there yet to to come back to the good standing?

[Gigi Whitley (Chief of Administration and Finance, HSH)]: Sure. So a couple things. Separate from the controller's process, HSH proactively issued a corrective action letter based on our concerns about end of the year, overspending on this particular agreement. We have worked we have directed, Urban Alchemy with a five step corrective action plan. They've been very responsive. I've met directly with their relatively new CFO to see what she has put into place. So I think it would be helpful for to hear from the Urban Alchemy leadership. But this was really a proactive step by the department toward, greater accountability. And, you know, I think just a tier two finding would not have been enough for us to recommend a shorter extension. It was really that coupled with, our own observations about invoicing and overspending that we thought it prudent to say, okay, the contract's coming up for renewal. We would like to extend until we procure our portfolio on a longer period, but we need to make sure you're on track before we make that decision, and bring before the board a longer extension. So our plan, in short, Chair Chan, is to, be in close contact with Urban Alchemy on this five step plan, which I'm happy to go over. Check-in with them, you know, weekly, monthly. We're in, continual conversation. And if we see progress, great. We'll be back before you, before the end of that six month, talking about that progress, and hopefully recommending a larger a longer extension to the contract. If we're not, we'll need to make some difficult decisions, including bringing in another provider. I will note there is an opportunity to cost to all of this. You know, finding another provider to take over, is not, you know, a turnkey process. The other, consideration is that urban alchemy is the lessee at the site. And so, that would also take some working out. But we are committed to working with Urban Alchemy, on a corrective action plan, ensuring that they come back into compliance, and if necessary, bringing in another provider, to operate the site.

[Supervisor Connie Chan (Chair)]: Supervisor, looks like you do have someone from the controller's office here. Would you like to continue with the controller's office before you move on to Urban Alchemy?

[Supervisor Matt Dorsey (Vice Chair)]: Please. We're asking for a little bit more detail on the two findings, on Urban Alchemy at seven eleven Post.

[Laura Marshall (Controller’s Office)]: Hello. Laura Marshall with the controller's office. I can share a bit of detail about our corrective action, process in the letter that we issued recently. We, identified through the fiscal monitoring process last fiscal year. We've been doing analysis on the findings and determined that urban alchemy had one, finding that was criteria for, a an escalation to tier two. So, tier two is how we define what we call serious issues as opposed to tier three, which are the more severe issues. Right? So it's that, middle level. And, we issued a memo to, urban alchemy in a couple weeks ago to notify them of this, designation. The criteria that they met related to their their payroll and their time sheet records. Essentially, it's a little bit complicated, but the we asked them to do cost allocation of their employees who are salaried using an actual basis. So meaning they have actually identified how much time an employee has spent on each program that they may oversee and work on. They had been doing time sheets that are wouldn't we're not doing that. We're not communicating how much actual time each employee was spending on each program. So they were using a different basis for how they allocated costs across programs. We have a standard that says they need a functional time sheet or they need to use a time study. And so, to kind of communicate the actuals that, staff are spending. They are, we've met with them since we issued the memo. And so they're actively working on conducting time studies with their staff now. And we have some follow-up meetings with them planned. When we place an organization on a citywide corrective action, we create an action plan with them to determine milestones that they need to meet in order to come off of that that tier. So we're engaging with Urban Alchemy now to establish what those milestones are and how they can communicate that they're now in line with the standards. So what we'll expect to see is that they have conducted the time study according to general standards for these these practices, that they have then integrated that information into their cost allocation plan, meaning that they have updated their their budgets to show that they're allocating based on the the actuals that they've they've gathered through their time study process. And once we've identified that they've they've met those, standards, they've they've they've sort of implemented on those actions the way we expect, then we will take them off of the tier, and they will be presumed to be in conformance with our with our policies.

[Supervisor Matt Dorsey (Vice Chair)]: And I believe there's more. I believe there's staff increase in staff compensation beyond the amount of the grant. Can you speak to that?

[Laura Marshall (Controller’s Office)]: That is not a part of the controller's office corrective action policy. That's not the criteria that we used when placing them on tier two. There is a distinction between the work that the departments do to issue corrective actions to their own contractors as part of their contract management, And what, of those corrective actions have been escalated to be considered a severe issue that are, result in, citywide corrective action designation to tier two. So, the only thing that has put them on our citywide corrective action, designation is that time sheet issue that I mentioned.

[Supervisor Matt Dorsey (Vice Chair)]: K. Well, between the the guidance from the controller's office and the guidance from HSH, chair, I think it might be a good idea to hear responses from Urban Alchemy to all of those points, if we may.

[Supervisor Connie Chan (Chair)]: Sure.

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Hello. My name is Melick Toda. I'm the CFO of Urban Alchemy. I started in April 2024, so I've been here about a year and a half. I appreciate the opportunity to speak to you today. So I, I'll start with just sort of generally my mandate, if that's okay. And then if you have specific questions, I can go into that. Does that sound okay? Yep. So, when I was brought on, it was really important that we, you know, I focused on internal controls, financial acumen, really stepping up the entire agency's financial processes. And, I'm very proud to say that we've made a significant amount of progress already around these things. And, you know, I can share a few just overall comments around that before anything specific to the findings. So, the first thing that I really worked on is implementing and creating a structure of data so that we could create appropriate reports. And, so that was very important so that we could ensure we could get data, real data, metrics, things like that, out of our systems. The second thing I did is I hired staff that were, appropriate for financial analysis, and planning, and accounting. Prior to me joining, all of our accounting staff was outsourced. Okay? So, that was a really important point to bring all of that in house, so that we had direct control, and communication, and partnership with our programs. The third thing that we did is creating detailed budgets for all departments and programs, working directly with the program teams. And then, last but not least, supporting the, you know, identification and reporting. And to the extent that there were or are corrective actions or, you know, things that we need to do to make sure that we meet budgets, that's a huge mandate that we have as well with our team. So our team, our financial analyst team, is really about the reporting, but also, also, as I said, the relationships with the programs to make sure that there's understanding, knowledge, accountability around meeting budgets. And so that's a huge mandate that I have that I feel like we've made a lot of great progress on. That I just wanted to give you that background first, before, you know, any specific questions.

[Supervisor Matt Dorsey (Vice Chair)]: That's helpful to start. Are you able to speak specifically to the three items here that have been flagged around

[Corey Hallman (Teamsters Local 856)]: Absolutely. Please? Thank you.

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Okay, so I think there are the two areas that were spoken of. One was just the HSH corrective action plan that was around the overspending. And then the five items that the CFO spoke to. The first was to develop an internal staffing schedule that reflects the budgeted full time equivalent. And so what we've done is we've incorporated into our budget negotiations with our contractors a shift schedule. So, creating a budget is not just about, you know, identifying how many FTE it takes to kind of run a program, but it's also a comprehensive shift schedule saying how many days a week, what level of staff, how much staff do we need. And then that shift schedule is approved as part of the budget. And so, that then is incorporated into our payroll system. We have an enterprise wide payroll system called Paycom. And that system allows us to load shift schedules into the system. And so, we are able to kind of make that transition, loading that approved budgeted shift schedule into our payroll system. And then we also then can run reports that give us actuals to budget, Right? Which is another really critical piece. The second item was regularly and proactively monitor spending against budget, to observe and address variances before they lead to overspending. Okay? And, again, to me this piece is really about making sure that you have accurate reporting. That you're sharing that accurate reporting with the people who are making the decisions, like the program managers. And finance is leading that effort and working with them. So, that's something that we have implemented. And as of August 2025, I just wanted to say that we are below, our FTE count is slightly below budget on both of our HSH programs. So, that, we have a tracking mechanism now that we're issuing, and we're able to kind of monitor that and share that with the program, with the funder, which we did. The third is to seek written prior approval before incurring staffing costs beyond what is budgeted. And again, this is we acknowledge that we need to improve our collaboration, our communication with our funder, and we take that very seriously. We, you know, commit to providing any kind of, providing a written request for any kind of overspending that will potentially occur in the future, although that's something that we're really committed to not do. The fourth item was detailed written policy for circumstances in which overtime is approved and a procedure. And so we have in our employee handbook clear instructions about all overtime must be approved by directors and then also regional directors as well. And in general, we have a policy that when we have call outs in our staff, we have supervisors step in. So, we're not routinely, you know, adding staff through overtime. And, in fact, only 1% of the overage was related to overtime this past year. And then the last item is to demonstrate that urban alchemy program and finance leadership are regularly reviewing spending against budget internally, particularly when it comes to staffing and taking action as needed. And so, here, I just want to point out that we have about four different reviews that we're doing now. Starting with the board of directors. We issue a report every board meeting, which is every two months, where we show by program how we're spending against budget. We also share with our executive team. We also then share it with our regional directors. And lastly, we share it with our program directors. So, we believe it's really important to have this very strong net of financial review and accountability. And so that's what we've implemented. And we have added more financial planning, And, you know, as I said earlier, focused on educating and holding staff accountable, the program staff accountable. So those are the five items from the HSH corrective plan. I can move on to the fiscal monitoring and the two findings. Yeah, okay. So the first item was provider was found to have fifteen days of operating cash rather than thirty, which is best practice for liquidity. So, what I want to do is I want to just acknowledge that, yes, it would be ideal if we had more operating cash. That absolutely goes without saying. What I do want to say, though, is, you know, we are in a unique situation, like many non profits. You know, we are dependent on our funders. And we have about 45 funders across The U. S, mostly cities, to fund us in enough time so we can use the cash coming in to pay our bills. And, like many non profits, we find ourselves in situations where there is a long window of payment, a long payment window. Sometimes it can be sixty days or more. And that's just, you know, based on sort of the uniqueness. Right? It's just hard sometimes for us. So, what we do is we look for what's our strategy. What's our strategy for, you know, operating capital? And, what we've done successfully is we've gone to a bank, and with our balance sheet, which is a strong balance sheet, we have a strong net assets. We have strong accounts receivable. Our bank does a lot of due diligence on our balance sheet and says, We will loan you X amount of money for, operating capital. And that's what we've been using. And it's worked for us, you know. So we do have to have, you know, a line of credit. We have to pay interest on it. Many companies do that. It's not ideal, but that is kind of what we're using, and it's working. So I just want to kind of point that out. I don't I'm just hoping that we're not portraying us as our financials are not strong. Because I wouldn't say that. Right? Since we have clean audits and we, you know, have a lot of financial diligence around that. And then, I guess the one thing that we are really focusing on in order to improve our liquidity is our development. We have a development director. We're going after donations. And that's one way that we can actually get, you know, more unrestricted capital. So, then the last point was around the employee exempt. Exempt employee's time is allocated to grants based on proration of the grant budget to a region or agency pool rather than a time study. And so, you know, we understand this is a requirement. We have implemented it. We have implemented in June, July, I'm sorry, July, August, and September. We're having about 15 staff in San Francisco who actually are shared across our San Francisco programs do time studies, which means they're, you know, daily going into a log and entering their time across all the programs they work in. And, so, that's something that we're doing. And we're going to be incorporating all those results into our billing and our policy. Right? So, that's something we take it seriously. We're doing it. I do want to point out that the majority of our staff are hourly. About 300 staff are hourly. And, we use, as I mentioned, Paycom. And, the Paycom system, as I said, has an automatic shift schedule that you create in the system. And, we have what we call geofencing technology, meaning as staff enter a zone that they're working in, it automatically registers them as arrival arriving and departing. So, that's electronic technology that we have in place that we feel is the best in class. And that's for the majority of our staff. So, again, I just don't want to misrepresent that we're, you know, we're not recording time properly. The majority of our staff, we are we have this technology. And then for the 15 that we share, we have implemented time studies.

[Supervisor Connie Chan (Chair)]: Okay. Well, when did you come on as a CFO?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: April 2024.

[Supervisor Connie Chan (Chair)]: I see. And, so help me understand, though, did when you came on board, none of these were implemented? Like, meaning that it'd be at the time study, training of reporting, and sort of this kind of as particularly overspending was not being tracked?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Because you've been So it was done at the, you know, at a at a, like, a leadership level instead of being driven down through the organization. Right? And that's where I think the real change has been. So although there was spending done, it wasn't done as often, and it wasn't done as diligently, and we didn't have the tracking mechanisms. So those all those things needed to be in place to really make it

[Supervisor Connie Chan (Chair)]: work. But were you aware of the fact that they were overspending?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: So we The contract. Yeah. The contract situation, you know, we acknowledge that there was an overspend, and, you know, we had been communicating that overspend. But I think probably we could have done a better job of communicating that. Right? I also think that what we were putting I'm sorry.

[Supervisor Connie Chan (Chair)]: But you should have done a better job communicating with the city or with yourself internally?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Eight both. Both. Okay.

[Supervisor Connie Chan (Chair)]: I I mean, I think that I just wanna flag, and I am looking to the controller for confirmation as well, is that the this problem is, again, not only pertaining to seven eleven post. Like, separate and apart from seven eleven post, we're talking about urban alchemy today, right now, about the letter that the controller issue, that it's not just about seven eleven post. In fact, mid market was also overspending where OEWD came before us for additional $4,000,000 In fact, twice. One is for $3,000,000 in December, and another $4,000,000 in March. So let me also just be clear that it's not just seven eleven post that Urban Alchemy is overspending under your watch. It also actually overspend under your watch, again, with mid market, you know, contracts. So walk me through how is this happening all over the place as you as a CFO?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Yeah. So, what we often are, in a situation where we're asked to do work, and we don't always have budgets in place for that work. So, I think, to me, that's the key. We have to be a lot better about saying no when we're asked to do things where there are not budgets already approved. So, I think we try to be a very good partner. We have been successful in getting budgets approved. But usually when there's an emergency and departments ask us to step up and help, we're very willing to do that. And so, I think that is part of the mandate I see, is that we can no longer do that if we don't have committed budgets and contracts in place.

[Supervisor Connie Chan (Chair)]: I mean, it's sort of kind of confusing. Right? I mean, I think here, I think for the seven eleven post, and I think that Department of Homelessness and Supportive Housing can correct me if I'm wrong. But it seems like that you were told or you were informed that per pertaining to seven eleven post contract that there is no money for that. There's no budget for that. But you went ahead not only to go ahead and do the staffing and spending, but you also increased compensation. Is that correct understanding?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: The the, sequencing the sequence of that was different as far as I see it. Please. We, went through a budget process. We we asked if we could increase staff wages commensurate with the rest of the the the system in San Francisco because everyone's wages was going up. So we wanted to make sure that this program had commensurate wages because we believed if we didn't, that it would really create a very hard vacancy issue and challenges keeping staff in the program. So we felt like we really needed to have this. So we worked with the city department trying to figure out how we could create room in the budget to make sure that we could take those wages up. We knew that we might have to eat some of that ourselves. Okay? But we felt strongly that we needed to do that to make sure we kept the program strong. What happened then later is that we were asked to take on 30 additional guests. And in order to do that we added more staff than we should have. And so, again, the sequencing was different. We had less vacancy, that's true, but it was because we added more staffing to take care of sort of this change in mandate and adding more guests. And that's where, in general, of course, what the controls office is saying is correct. We had hoped to fund the increased salaries through vacancy, but that vacancy didn't materialize because other things occurred that were unplanned.

[Supervisor Connie Chan (Chair)]: I mean, I get it because during budget process, there's always a term that goes around, which I think you should familiarize yourself with. It's cost of doing business. And, you know, and there's a level of staffing, and then there's a cost of business increase. And totally understandable. I mean, there we have plenty of contractors and vendors come through and indicating that, you know, if we don't increase the the, per units of service, in terms of cost, if and and funding, then there's gonna be decrease of service. Was there any of those, like, conversation take place before you went ahead and hire more staffing?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Well, we knew that we had to hire more staff. That was part of the mandate. Right? They they asked us to take on 30 more guests, and there was a budget that was given to us for that, including additional staffing. But we added more than was agreed upon, and that's where the challenge was. Right? So I think, going back to sort of, you know, what these processes are, we need to have better communication, better, you know, accountability, in, you know, the weekly, monthly conversations that are happening. I think that is the crux. And I think those things, we take them very seriously and we have implemented them.

[Supervisor Connie Chan (Chair)]: Yeah. And then I think you can see, right, why I I can now see why you're at tier two. Because added onto that, you actually have a time sheets problem, like tracking problem. So on one hand, you're you're saying we're we're at this staffing level, we're overspending, and then on the other hand, the city cannot account you for the actual time sheets tracking and management. So there's not a data to be able to verify the type of level staffing required, or even deploy, sounds to me. And therefore, you're ending up in tier two. And again, you've been here for a year now, and then some. So and and now you're just starting implementing this. I mean, I think that I have a lot of questions moving forward, for Urban Alchemy to be a good partner in this. And I think that this is a question that I don't know if it's gonna be you to answer this. But if I understand correctly, are there any substantiated labor violation that Urban Alchemy actually has in San Francisco right now? Or or even, like, labor complaints filed against Urban Alchemy?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: Well, you know, I do you wanna speak to that, or do you want me to? Can you speak to that? So we we had, you know, PAGA claims that were settled. And so that is something that, you know, a lot of organizations across California have experienced. It's not unique to us. And, in fact, we've spent a significant amount of time improving our labor practices and our accountability and timekeeping. Even we've had external experts say that we're, you know, best in class in how we track our labor, you know, how we've communicated in our timekeeping actually allows us to be in compliance with labor laws. So I would say that we're better than most on that at this point. And I just want to also say that the bulk of the cost for seven eleven post overspending was hourly staff, not staff that would be completing time studies. Those hourly staff would be tracked in our timekeeping system through geofencing. So, on my side, I wouldn't say there's any issue with inappropriate allocation. I think the issue was more that we had too many staff working in that program.

[Supervisor Connie Chan (Chair)]: I think, let me just be very clear about city, and city laws, and requirement. And we have seen that. And, you know, I think when it involving any type of substantiated labor violation, you know, including wage theft and many other kind, it's it's gonna actually bring a contractor subject to potential a debarment process. That's not where I'm at right now. What I'm at is that I really do hope that Urban Alchemy do work with the controller, and to show that you can bring yourself back to good standing. The question now that I have for next one is that, will what is the timeline that urban alchemy expects yourself? But, of course, I also want to understand from the controller's office, what is the timeline that we can see that urban alchemy can come back on a good standing?

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: You know, so, I'm we welcome a conversation and to create the detailed plan with the controller's office. And based on that, I'm hoping that we can have some of this cleared up within three to six months, easily. But I think, obviously, I'll defer to

[Laura Marshall (Controller’s Office)]: We I don't have a specific timeline, but we will be we are initiating our planning steps. We're working on scheduling our first meeting to get the plan going. And so it really, we'll have to wait until we have that discussion to know exactly what the milestones would be, and the time it will take. When we do corrective actions, it can take, for sort of fairly straightforward issues, which I would say this one is. It it, you know, may take a couple months or a little longer. We have some issues that, result in corrective action that can take a much longer time if they're more complex and and detailed. This, because it is largely an an administrative sort of processing, issue, I don't foresee taking a significant amount of time. But I would have to get back to you with after we established an action plan with milestones.

[Supervisor Connie Chan (Chair)]: Wonderful. Thank you. I I think my next questions are for HSH.

[Melick Toda (Chief Financial Officer, Urban Alchemy)]: K. Thank you.

[Supervisor Connie Chan (Chair)]: I think, regrettably, you know, with the Department of Homelessness and supportive housing, that, in general, all across, you know, we're going to have I hate to bring that name, but Providence, like, coming through the settlement as well. And just to name one you know, anyways. So I I think the question that I have, that it just often feels, like, feels like this is hard work. It's really, really tough work, both serving the population that you serve, and the challenges and the complexity, You know, making sure that we serve the population well. And we're limited with option with our service providers, more often than not, because it is tough work. And when we do find someone, that actually works well, and clearly, in my opinion, that both actually the budget and legislative analyst report and yourself are reporting that seven eleven is actually, in itself, like, as a as a program, it's good. And the service is good. You know, we can talk more about, you know, of course, how what we want to do in terms of the best practice, all across the board, not not just about seven eleven post and how we can do better and be better neighbor. But that's not just seven eleven post. That's all our, be it shelter program or, you know, temporary housing, transitional housing. But I think the question that I then have for HSH, again, is to hammer back. Clearly, I think that Urban Alchemy, in good faith, wants to make sure that they can come back in good standing anywhere three to six months. But then I think that the controller is saying, overall, not just about seven eleven post, well, some of them are pretty straightforward. Some of them require a little bit more conversation before they can make the determination. Then what is HSA's plan, meanwhile, for the next three months? Can you just walk us through and maybe confirmation? I know you you mentioned we, you know, can't just find a service provider for turnkey. The lease is actually under Urban Alchemy. Just then what is the plan?

[Gigi Whitley (Chief of Administration and Finance, HSH)]: Sure, Gigi Whitley. Thank you for the question. So, you know, I as I mentioned, we laid out for our corrective action around the overspending issue some clear next steps. We documented that in June. Urban Alchemy responded, you know, within two weeks, their plan. And then you've heard from their CFO, new things that they've put in place for this time period almost immediately. And then, you know, I think more systemic challenges that, their team is trying to work toward. So our plan at HSH is to, respond to their last letter, you know, Thank you. Here's some additional documentation that we want. Be able to check some of these, requirements off our corrective action list. And then to continue to meet, monitor their budget, and work with them over the next sixty days or so. If, at that point, we're not seeing, you know, the kind of changes that we think we need, I think at that point, that would be an indication that we need to start, you know, winding down with this provider or finding a different provider. But I think it's incumbent on us as an agency, given what you've heard today, for us to continue to work with urban alchemy, given the stronger program outcomes. And we know from working with all of our providers, even those that do good work, that, you know, years and years of underfunding or lack of back office support has made compliance and some of the financial requirements that the city has put in place more of a challenge. So we're committed to working with all of our providers on that point. I will say, you know, we are one of the few departments that really, does a thorough job and has, since we were formed, of invoice review. Now that's being more standardized by the city, so I think we we've also been able to get ahead of some of these things, not always, but because before they've become more serious and are committed to doing that. So that is our our plan. Again, wanting to work in partnership with Urban Alchemy, given that, they do, provide services at a second shelter. So, you know, this isn't just limited to 07:11 post, But if we're not able to see progress, demonstrate it demonstrated documented progress, we would be willing to, you know, go in a different direction to try to re maintain the shelter capacity.

[Supervisor Connie Chan (Chair)]: I I think here's also my question, though. It's I mean, clearly, it it and you can correct us. I mean, and even the CFO, like, from Urban Alchemy has indicated that they have articulated to you the mandates that you put on them for additional 30 beds will require additional staffing. What was your reaction? I mean, I think if you're demanding additional services, you would then actually clearly would know that you need to amend the contract, or or maybe with the existing contract that you would increase the dollar value without coming to us. But still, like, help me understand what happened there.

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: Sure.

[Gigi Whitley (Chief of Administration and Finance, HSH)]: My understanding from our programs team is, so a couple things. We were, losing beds at MSC South, because of, some other delays on the city's part in construction timeline. We wanted to be able to maintain those beds. We knew that, the site at 711 Post could potentially accommodate at least 30 beds. We did work with them on a budget increase and amendment. We thought that was adequate. But as you heard, there was also a request, to rightsizing the wage increases across their portfolio. We are not the employer of record. We try hard not to get involved in wage, direct wage issues with a non profit. But the other piece of this is that other, urban alchemy agreements did receive a cost of doing and business increase by the city, because it's funded by the general fund. This particular program is funded through a state grant and did not receive a cost of doing business increase. So I think those cost pressures, plus the additional services we were requesting, We thought the money that we put in the contract was adequate. You know, as you've heard, there was a bit of a back and forth that that was not sufficient, and, we understood that the vacancies would provide enough flex within the contract so that we wouldn't have to go up further. Then at the end of the fiscal year, there was this underspending overspending issue. We reviewed that and, you know, some of that was fixed costs, like insurance and other things, and some of that was, wages for, covering these additional beds. So, you know, these are always sort of harder negotiations than sometimes they need to be because our budget is fixed and we are trying to, manage across our contracts to stay within budget. We do try, where possible,

[Varnaz Farmand (Director, Children, Youth & Family System of Care, DPH Behavioral Health)]: to meet providers where they are, and I think

[Gigi Whitley (Chief of Administration and Finance, HSH)]: we thought we provided the

[Supervisor Connie Chan (Chair)]: Thank you. I don't see other names on the supervisor's order.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, chair. I think there are, you know, coming into this, item, clearly a lot of concerns. And and, I have you know, those those concerns remain. Specific to this item, you know, what I would what I wanna make sure we're doing is that we're making the best of the next, you know, six months. I don't I I think right now, we're in a pretty hard spot. We have few options to do anything other than extend this. But I don't want us to be in that same position as we look at a multiyear extension. And so I want us to, you know, really understand quickly, if if these changes are actually, taking place and, how they're impacting seven eleven post and then, of course, the the broader, portfolio of of programs that are funded by the city for urban alchemy. What I would like, and I know, I'm in line with the Lower Nob Hill neighbors on this, is I'd like to see this back before us, you know, well ahead of any time we're talking about a multiyear extension. It seems like Urban Alchemy, you know, made a number of or they gave a response to all these findings in early July. So we already have a couple months, to start to look at this. I would I would love to check back in, sixty days or so from now and really see if there had been corrective actions taken, from a financial perspective, and then how that's impacting the service outcomes at seven eleven post. So that's my suggestion.

[Supervisor Connie Chan (Chair)]: Thank you. And we'll make a note of that. And then please be sure to make sure you submit a report back to this body, as well as to the clerk. And then they can share back out to supervisors. Just report back about the progress and corrective action. I think probably will probably follow if the controller's office can put a note in to sort of just saying the expected timeline for them to bring back them on track out of the tier two and back to back to normal, I guess. That's the status. Or good standing, I should say. With that, I I think let's go to public comment on this item. But before we do so, colleagues, I think given just where we're at, it is my intention, and I think unless you object, to move this item to full board with like, recommendation, and to just really allow continue to be all of us to be mindful about this item, and, and also to make sure that supervisors, from the District 3, from this, district also receive the report, before this contract ends. So, let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes. We are now opening public comment for this item number 11. If we have any members of the public who wish to address this committee. Madam chair, we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues as I indicated, I would like to move this item to a full board without recommendation, and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion that we forward this resolution to the full board without a recommendation, vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Aye.

[Brent Jalipa (Committee Clerk)]: Dorsey, aye. Member Chen? Chen, aye. Chair Chan? Aye. Chen, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister Clark, do we have any other items before us today?

[Brent Jalipa (Committee Clerk)]: Madam chair, that concludes our business.

[Supervisor Connie Chan (Chair)]: The meeting is adjourned.