San Francisco Government SmartTranscripts:

[Supervisor Connie Chan (Chair)]: Good morning. The meeting will come to order. Welcome to the 12/03/2025 meeting of the Budget and Finance Committee. I'm supervisor Connie Chan, chair of the committee, and I'm joined by supervisors Danny Sauter and Balat Mahmood. Our clerk is Brent Khalipa. I would like to thank, Jamie Averture from Esa GovTV for broadcasting this meeting. Mister Clark, do you have any announcement?

[Brent Jalipa (Committee Clerk)]: Thank you, madam chair. Just a friendly reminder to those in attendance to please make sure it sounds 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 and city hall at one. Doctor Carlton would be good with Place, Room 244, San Francisco, California 94102. And finally, items acted upon today are expected to appear on the board of supervisors agenda of December 9, unless otherwise stated. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you, mister Clerk. And, with that, before we call the first item, we first need to excuse by Cher, Matt Dorsey. I'd like to move to excuse by Cher Dorsey and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion to excuse, supervisor Dorsey from attending today's meeting. Member Mike Mood. Mike Mood, aye. Member Sauter? Aye. Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. And before again, for everyone here, including my colleagues, supervisor Souder and supervisor Mark Moo, generally speaking, we will have department presentation, and then we'll go to the budget and legislative analyst to report back, should they have a report. And then this body can ask questions, and make comments, and then we will go to public comments. But usually we hold off questioning and comments, until after the department presentation and the budget and legislative analyst report. So with that, mister Clark, please call item number one and two together.

[Brent Jalipa (Committee Clerk)]: Yes. Items one and two are resolutions. Retroactively authorizing the office of the district attorney to accept and expand the following grants, through the California Department of Insurance. For the grant period of 07/01/2025 through 06/30/2026, item number one is in the amount of approximately 1,100,000.0 for the workers' compensation insurance fraud program. And item number two is in the amount of approximately 347,000 for the automobile insurance fraud program. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And I believe we have the district attorneys here or district attorney's office here. My apologies.

[Tina Noonzober (Managing Attorney, Economic Crimes Unit, SF District Attorney’s Office)]: Yes. Good morning, chair Chan and other members of the committee. Thank you for your time this morning. My name is Tina Noonzober. I'm the managing attorney for the economic crimes unit of the DA's office. Every year, the DA's office applies for the workers' comp insurance and auto insurance fraud grants from the California Department of Insurance. One of the requirements of our grants is obtaining these resolutions, which are here before you today. These two grants are vital in the fight against insurance fraud in the city and county of San Francisco. The grant funding specifically for workers' comp pays for two full time DA investigators, as well as 1.35 attorney positions. With regard to the auto insurance fraud grant, it pays for half of an attorney and half of a DA investigator. Additionally, the funding covers, important training for our personnel who are assigned to the grants. It also allows outreach efforts to prevent fraud by informing the public. Insurance is, right now, a very critical issue affecting all Californians as we have all seen our premiums rise over the last few years, and some of us have even seen our policies canceled. And part of the reason for premium increases is the prevalence of fraud that we're seeing today. Investigation and prosecution of insurance fraud is critical to stemming that tide of fraud that we're seeing on a daily basis at the DA's office. In particular, with regard to workers' comp, one good example is that the city itself is self insured for workers' compensation. So this means that any fraud that's committed by either claimants or providers or by dishonest city employees takes funds away from important services to the residents of our city. Grant funds provide resources for the DA's office to investigate these cases and to also prosecute them. With regard to our auto insurance fraud grant, a good example is that those funds are assisting the DA's office in tackling the very big problem of predatory towing in San Francisco. And obviously, it's always around the state, but we see a lot of it in San Francisco. And it's particularly harmful to our drivers and consumers in San Francisco. These are just two examples of insurance fraud and where our grant funds have provided needed resources to investigate and prosecute these cases. And with that, I'm happy to take any questions.

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

[Supervisor Bilal Mahmood]: Thank you for the presentation and the context on insurance fraud. I'm just curious. You implied that there was maybe escalating levels of increasing in insurance fraud. Do you have any numbers on what that level has been over the last several years? And how is that affecting average caseload for your employees and staff?

[Tina Noonzober (Managing Attorney, Economic Crimes Unit, SF District Attorney’s Office)]: I don't have any specific numbers on our statistics, but, I could provide that to the board if you would like that at a later time. We are seeing that there is, an uptick in just, the number of cases that we're receiving, the referrals that we receive from the Department of Insurance, from insurance companies, in particular with with regard to auto fraud. And we're seeing bigger cases, more complex cases where there are rings involving multiple defendants, multiple types of, fraud. So we we have seen an uptake over the years.

[Supervisor Bilal Mahmood]: And will this funding provide the sufficient capacity for funding the staff to meet the caseload that you need to address these issues?

[Tina Noonzober (Managing Attorney, Economic Crimes Unit, SF District Attorney’s Office)]: Unfortunately, it doesn't cover it doesn't cover fully what we really need, but it is a good chunk of what we do need because, we build our cases from the ground up. For example, other units within my office get cases that are investigated by by the, SFPD or other law enforcement agencies. Our cases come to us from insurance companies, so they're not fully investigated in the way that we need to investigate them to prove them beyond a reasonable doubt to a jury. So the fact that we can have two full investigators devoted to workers' comp, for example, and half of an investigator for auto, really helps us to build our cases from the ground up. My investigators are doing, drafting warrants, executing warrants. They're doing all the work that other units get those cases pretty much ready made from the police department. So it's vital for us to have those funds, and it all also opens up resources within our office to investigate other types of cases.

[Supervisor Bilal Mahmood]: Thank you, and thank you for your work.

[Tina Noonzober (Managing Attorney, Economic Crimes Unit, SF District Attorney’s Office)]: Thank you.

[Supervisor Connie Chan (Chair)]: Thank you. Seeing no other name on the roster, let's go to public comments on these two items. Yes.

[Brent Jalipa (Committee Clerk)]: We are now opening public comment for both these items, one and two, 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 comment, public comment is now closed. Colleagues, I would like to move these two items to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward both items to the full board with positive recommendation, member Magmood Magmood, aye. Member Sauter Sauter, 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. And, mister Clerk, please call item number three.

[Brent Jalipa (Committee Clerk)]: Yes. Item number three is a resolution approving the third amendment to the grant agreement between Episcopal Community Services and the Department of Homelessness and Supportive Housing for shelter services at Sanctuary Shelter, extending the grand term by twenty four months from 06/30/2026 for a total term of 07/01/2021 through 06/30/2028 and increasing the agreement amount by approximately 15,100,000.0 for a new total not to exceed amount approximately, 40,900,000.0 and authorizing HSH to enter into any amendments or other modifications to the amendment that do 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 we have Department of Homelessness in Supportive Housing here.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Good morning, Chair Chan, members of the committee. My name is Emily Cohen with the Department of Homelessness and Supportive Housing. This resolution before you would authorize the department of homelessness and supportive housing to extend our grant agreement with Episcopal community services for continued shelter operations at the sanctuary shelter. This would approve the third amendment to the grant agreement, and extend the term by two years for a new end date of 06/30/2028. The amendment would also increase the not to exceed amount by $15,000,000 for a new total of $40,900,000 to support two additional years of operation, increasing case managers and shelter monitors, and adding a cost of doing business increase. This agreement funds shelter operations and support services at the sanctuary on 8th Street. The site has the capacity to serve 200 adults. It's a really it's quite a cost efficient program at an $88 per bed per night rate, which includes lease costs for the site, as well as meals that ECS provides on-site. I do want to note that as we go through our multi year procurement and re procure our entire shelter portfolio, we do expect to see costs rise, to reflect the reality of the cost of doing business in San Francisco. But for now, this remains a very cost efficient program. The 200 beds at Episcopal sanctuary are an important part of our larger adult shelter system, which includes over 1,800 beds of congregate shelter. This is also one of our self referral sites. So people, are placed into the sanctuary through the three eleven self referral process. Sanctuary had a 90% occupancy rate in the last fiscal year, which is slightly higher than our average. And we served over seven eighty unique clients last year. The demographics of the clients reflect the population of people experiencing homelessness, including thirty one percent were black or African American, and 20 African American, and 24% were older adults over the age of 55. And, we've included a couple of pictures here of the outside of the sanctuary. You probably walk by it often and are familiar with the property. And, the inside, the inside has a lovely communal space, a large dining room, and then sleeping dorms, for men and women. And I will stop there. I'm also joined by Episcopal Community Service staff if there are questions that are more appropriate for them. Thank you.

[Nick Menard (Budget and Legislative Analyst)]: Good morning. Nick Menard from the budget legislative analyst office. Item three is a resolution that approves an amendment to HSH's contract with Episcopal Community Services. The contract funds a shelter in SoMa at 201 8th Street that has a capacity of 200 people. And the amendment would extend the agreement by two years through June 2028. We summarized the performance on page three and four of the report. You can see that Episcopal Community Services was generally meeting their requirements of the grant with the exception of a couple objectives, including referring all clients to coordinated entry, which is basically the intake to the homeless response system for long term exits from

[Supervisor Bilal Mahmood]: the

[Nick Menard (Budget and Legislative Analyst)]: shelter. We show the budget for the contract on page five of our report. This is about a $6,400,000 a year program that is funded by the general fund. I think the costs are reasonable, and we recommend approval of item three.

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

[Supervisor Danny Sauter]: Thank you, chair. For HSA, I just had a few questions about the performance monitoring. In particular, you know, the it seems pretty far off on on a couple of these goals, around the referrals, the nineteen percent versus 100% requirement, the 5% versus the 80% requirement on, on the housing referral. And then, so I'd love to hear about maybe what went wrong on there, on those two items, and how they're being corrected. Item of the requirement for attending community meetings, this is something we've seen in other, sites where there's just a really wide gap and there there seems to be the the response seems to be able to remove this requirement for the future. I would be curious instead of just removing if there's a different goal or directive that is more appropriate. I know that there's difficulty in mandating attendance. But if there's some sort of other participation or engagement, that could be pursued. So, again, just those questions on performance monitoring. Thanks.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you, supervisor. Through the chair, HSH completed fiscal monitoring in FY twenty four, twenty five. And program monitoring for the site was completed this fall. This cycle was completed this fall, September 2025. For this monitoring, ECS had nine service objectives. We did end up removing one out of the appendix A for the amendment, as we felt it was a poor indicator of program success. And out of, generally, out of the control of the provider. And that's what, when referring to the community meeting participation. ECS achieved seven out of the remaining eight service objectives within their program monitoring, and achieved two out of their three outcome objectives. As you mentioned, and sorry, I should also say, ECS provided responses to all service and outcome objective findings in October for their September monitoring. So they quickly implemented solutions to the areas where they had deficiencies or shortages. The referrals to coordinated entry is, I mean, that was a big question for all of us. Both ECS and HSH staff noticed that right away, and it was addressed immediately. So we, when the numbers came in and we saw the below average referrals, overall case management training was conducted. There was work with this on-site staff to ensure that they were not just referring people to affordable housing and housing outside of the homeless response system, which had been a big practice there, but also doing the coordinated entry referral. And so we've seen those numbers go up dramatically since that improvement was put into place. So while problematic initially, we were very pleased with the speed and urgency with which ECS, corrected the issue. In terms of comp, attending non mandatory community meetings, this is something that had been longstanding in our contracts. And both HSH and the providers didn't feel that that goal necessarily contributed to a client's success, or continue contributed to the success of the community. And so, therefore, we are pulling it out of our standard, contracts going forward, and looking at other things around service participation that may be a better indicator of client success in the long run.

[Supervisor Danny Sauter]: Do can you elaborate on that, what that might look like?

[Emily Cohen (Department of Homelessness and Supportive Housing)]: So we're looking at it. It's definitely not, in place yet, but as we go through our our multi year procurement process and redesign, we're looking at what level of, like, case management participation would would we consider successful, knowing that case management is much more closely linked to positive housing and health outcomes rather than attending, a monthly community meeting is.

[Supervisor Danny Sauter]: Okay. K. Look forward to that. Thank you.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you.

[Supervisor Connie Chan (Chair)]: Thank you. When are you gonna re procure all the contract out, and what does the process actually

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Yes. We've already begun our multi year procurement process. This is a process that's going to take several years to complete. We are beginning with our scattered site housing and our youth shelter and transitional housing program. So those processes are underway. Shelter and permanent supportive housing are coming later in the process, in part because of the significant size of each of those portfolios. And the process is about a year long for each segment of our portfolio. It starts with what we call a D3 design. I forget what all the three, the three Ds are. But it's a human centered design process that includes subject matter experts, providers, and people with lived experience to iterate on our program models, iterate on the outcomes and objectives that align with our strategic plan, but better reflect what success looks like for our clients. And we are really baked this into our strategic plan. So it's a fundamental part of our work now. And then, from there, we will issue a request for proposals, go through the traditional procurement process, and select providers. You know, we do anticipate that this will have a pretty significant impact on the makeup of our portfolio, as well as on, cost. You know, we understand that in many instances, HSH is not able to pay, or the city is not able to pay the full cost of many of the services we deliver. And non profits raise money and do other things. And so I think through the re procurement process, we're gonna try to right size that. And, you know, that could, really

[Tina Noonzober (Managing Attorney, Economic Crimes Unit, SF District Attorney’s Office)]: impact,

[Emily Cohen (Department of Homelessness and Supportive Housing)]: I think, what our system looks like afterwards, both in terms of improving performance and sort of right sizing the budgets.

[Supervisor Connie Chan (Chair)]: Yeah. And I

[Emily Cohen (Department of Homelessness and Supportive Housing)]: can get you a date by date calendar. I just don't have it in front of me.

[Supervisor Connie Chan (Chair)]: I think what we're gonna expect for budget process is it's gonna be that, and just kinda help us understand, the rollout. I mean, I think that DCYF had done a tremendous, like, work in terms of, as an example, for a five year procurement process. I mean, it's extensive and it's intense, because it's like series of workshop and outreach and trying to get people to train up in how they should respond to the process. Exactly. That in itself. And then what even after all their work, what we didn't think about or anticipate a lot. But eventually, they caught up, but in a very short and intense time period was an appeal process.

[Brent Jalipa (Committee Clerk)]: Mhmm.

[Supervisor Connie Chan (Chair)]: And and so that was intense too. And, I I look forward to seeing more of that information coming from HSH. I know you've been working on it. But I We're

[Emily Cohen (Department of Homelessness and Supportive Housing)]: happy to provide you a briefing. We're really excited about this work. I think it's going to be really transformative.

[Supervisor Connie Chan (Chair)]: Thank you. And I I mean, I see some of these contracts are coming through for anywhere between a twenty four month period, my assumption is seeing that it's good. Because it it's an indication, at least for me, that your thinking is, hey, we gotta have some of these put in place for the next two years time period as you're going through the process. So, am I making an assumption correct assumption?

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Yes. So we're trying to align all of our contract extensions right now to the reprocurement timeline of that particular component of the portfolio, so that we will be on a much more consistent cycle going forward. And we're definitely learning from DCYF. We've looked at their model quite a lot.

[Supervisor Connie Chan (Chair)]: Great. Thank you. And so with that, I don't have any other question. Let's go to public comment on this item.

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

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

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

[Supervisor Connie Chan (Chair)]: A motion passes. Should Clark please call item number four?

[Brent Jalipa (Committee Clerk)]: Yes. Item number four is a resolution approving the third amendment to the grant agreement between Felton Institute and the Department of Homelessness in Supportive Housing for drop in center operations, extending the grand term by twenty four months from 06/30/2026 for a total term of 04/01/2022 through 06/30/2028 and increasing the agreement amount by approximately 7,100,000.0 for a new total amount not to exceed approximately 16,800,000.0 and authorizing HSH to enter into any amendments or other modifications that do not materially increase the obligations nor liabilities nor decrease the benefits to the city and are necessary or advisable to effectuate the purposes of the agreement. Madam

[Supervisor Connie Chan (Chair)]: chair. Again, we have thank you. Again, we have department of homelessness and supportive housing.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Good morning again, chair Chan. Emily Cohen with the department of homelessness and supportive housing. I'm here before you today with a resolution to authorize HSH to enter into the third amendment to our grant agreement with the Felton Institute for the Bayview drop in center. This agreement was heard and approved by the homelessness oversight commission in November. This resolution is also cosponsored by supervisor Walton, and I'm thrilled to be joined by Latoya and Lynn from Felton Institute, who are in the room with us today. As was mentioned, this resolution approves a third amendment to the, to the grant agreement, and extends the term by two years to 06/30/2028, similar timeline to the previous, amendment to, back into our multiyear procurement timeline, and to increase our not to exceed amount by approximately 7,000,000 for a new total not to exceed amount of $16,900,000 The Bayview drop in center is a '20 fourseven operation that is a deeply rooted Bayview institution. It's been there for upwards of forty years and has a longstanding, relationship with community. This contract funds Felton to provide respite for people experiencing homelessness in the neighborhood, showers, laundry, and locker access, mail service, two meals a day. And in our FY 2425 client survey, 95% of respondents reported that services were satisfactory or better, demonstrating the high quality of service that Felton has provided since they took over the contract in 2021. The drop in center puts on service events every month and, brings in the Department of Public Health to provide healthcare services during those robust service events. This drop in center was previously known as, or is otherwise known as, mother Brown's Kitchen. Folks are probably quite familiar with them and their, delicious food. And as I said, they've been serving the Bayview community for over forty years. Felton, in the last fiscal year, provided over fourteen, one hundred and fourteen thousand meals, through the program and brings the department of public health to give urgent medical care on-site. And, I'm happy to take any questions after the BLA report. Thank you.

[Nick Menard (Budget and Legislative Analyst)]: Item four is a resolution that approves an amendment to a contract that HSH has with the Felton Institute, to fund a drop in center at the Bayview. The amendment extends the agreement by two years and increases the value to $16,800,000 A drop in center provides services to people who are homeless, but it doesn't provide beds. So you can go there and take a shower and make phone calls, but it's not exactly a shelter. We show the performance of the program on page 10 of our report. The contractor met the objectives of the grant and delivered the services that the city was paid for. And then we show the contract budget on page 12 of the report. You'll see this is about a $3,000,000 a year program funded by the general fund. And we recommend approval item four.

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

[Supervisor Danny Sauter]: Thank you, Chair. For HSH, I'm just curious. I see that there's, I believe, two drop in centers in your portfolio. Can you speak to kind of how you see this fitting into your larger portfolio of services and sites?

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you, supervisor. That's a it's an excellent question. So the vast majority of our resources go into programs that offer a place to to live. Right? A shelter or permanent housing. But we know that there is often a gap, especially in neighborhoods that historically have not had adequate shelter, which was the case in the Bayview for many, many years. It's no longer the case, necessarily, in the Bayview. And the drop in center provides an immediate response to somebody's urgent needs to get off the street, come inside, get respite, get connected to care. This is a place where you can go in and get on the shelter waiting list. You can go in and get support with, benefits or housing. It's essentially a hub where people are fed Mhmm. And offered showers as the set sort of the primary service, but really the intent is to connect them with the larger system of care. And so it offers a really important fills a really important gap between the street and something more long term. You know, there are people who have eaten at Mother Brown's Kitchen probably for forty years, who may be precariously housed in the neighborhood, who may be extremely low income. And then there are many, many people who come in and use the chairs and use the showers who are literally homeless in the neighborhood. So it serves both as a neighborhood hub, but also a critical linkage from the street to long term care.

[Brent Jalipa (Committee Clerk)]: Thank you. Thank

[Supervisor Connie Chan (Chair)]: you. And I don't see any other name on the roster. Let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes. We are now opening public comment for this item number four. 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. Thank you. I wanna thank, Department of Homelessness and Supportive Housing for your presentation. Again, continuing adding the photos of all these sites that in discussion. I really do think that it brings a perspective, and and really, at least on a personal level, a whole new, level of appreciation about the work that you and our partners, are doing. And I I just wanna say thank you for that. So with that, 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 positive recommendation, member McMood. McMood, aye. Member Sauter? Sauter, aye. Chair Chan. Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. And thank you. And, mister Clerk, please call items five through eight together.

[Brent Jalipa (Committee Clerk)]: Yes. Item numbers five through eight are all resolutions approving and or authorizing the following. Item numbers five and seven authorizes the city and county through the Department of Homelessness and Supportive Housing to execute standard agreements with the California Department of Housing and Community Development for a total, for total awards under the Homekey Plus program, including funds to be dispersed by HCD, has grants for acquisition of real property for permanent supportive housing, and supportive operating costs and rehabilitation of their respective properties, accept and expend anticipated revenue from the city's portion of Houghton Key plus grant funds for the rehabilitation of the following properties. Also approving and authorizing the city to commit amounts in required matching funds for rehabilitation of the properties and a minimum of five years of operating subsidy. Additionally, the city committed up to fifteen years of operating subsidies through the city's local operating subsidy program, subject to budget appropriations. Also, authorizing the city to assume any joint, hence, several liability for expenditure of the home key plus grant under the respective agreements, adopting the planning department's findings of consistency with the general plan and the eight priority policies of the planning code, and authorizing HSH to enter into any additions, amendments, or modifications to the standard agreements and the Homekey Plus documents that did not materially increase the obligations nor liabilities to the city or materially decrease the benefits to the city. Item number five executes an agreement with CalHCD and co applicants, Swords to Plowshares, Veterans Rights Organization, and ten thirty five Vets LLC for a total award not to exceed approximately 39,000,000, including up to approximately 36,000,000 disbursed by HCD as a grant to ten thirty five Vets LLC for acquisition of real property located at 1035 NS in support of operating costs, and up to 3,000,000 dispersed by ECD as a grant to the city for rehabilitation of that property, accepting and spending. Anticipated revenue from the city's portion of grants funds in the amount of 3,000,000, also for the rehabilitation of that property, and approves and authorizes the city to commit up to 8,000,000 in required matching funds. Item number seven, executes an agreement, with the co applicants, eight thirty five Turk LLC in five key schools and programs for a total award not to exceed approximately 17,300,000,000.0, including up to approximately 3,600,000.0 disbursed by HCD as a grant to eight thirty five Turk LLC for support of operating costs and up to approximately 13,700,000.0 disbursed by HCD as a grant to the city for the rehabilitation and associated relocation costs for a real property located at 835 Turk Street, Retroactively accepting and spending anticipated revenue from the city's portion have grant funds in an amount up to approximately 13,700,000.0 to support the rehabilitation and associated relocation costs for that property for costs incurred from 03/05/2024 through HCD's capital grant expenditure deadline and approves and authorizes the city to commit approximately 16,300,000.0 in required matching funds. Item number six and eight approves agreements and makes findings the respective projects are consistent with the general plan and that you priority policies of the planning code and authorizes the mayor and director of OCD to execute agreements and make certain modifications and certain actions and furtherance of their respective resolutions and authorizes the director of MOCD to enter into any any additions, amendments, or other modifications to the agreements that did not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the respective resolutions. Item number six, approves and authorizes a loan and grant agreement and amount not to exceed 11,000,000 consisting of a loan in the amount of 8,000,000 for a minimum term of fifty five years and a grant in the amount of 3,000,000 with ten thirty five vets LLC for the purpose of rebuilding rehabilitating the real property located at 1035 Venice Avenue for veterans exiting homelessness under the Homekey Plus program administered by the California Department of Housing and Community Development. And item number eight approves and authorizes the director of property and HSH to enter into a ground lease for the real property owned by the city located at 835 Turk Street and eight thirty five Turk LLC for a lease term also fifty five years and total rent ought to exceed $1 in order to rehabilitate and operate the 100% permanent supportive housing and approves and authorizes the departments to enter into a loan and grant agreement with eight thirty five Turk LLC to finance the development and rehabilitation of the project with a loan in an amount not to exceed approximately 12,900,000.0 for a minimum loan term of fifty five years and a grant in the amount of, not to exceed approximately 13,700,000.0 from Cal HCD Homekey Plus funds adopting findings declaring that the property is exempt surplus land pursuant to the California Surplus Lands Act and determining that the less than market rent payable under the ground lease will serve a public purpose by providing affordable housing for low income households in need in accordance with the administrative code. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you, mister Clark. I really appreciate that. And, I think for the, both the department presentation, as well as the BLA, what we're going to do is, do it by site. Let's start with, 1035 Venice first, and then we'll go to the BLA report, and then we'll come back to the 08:35 TURC. My assumption is your presentation is one presentation. So I think just give it a pause, and then we'll go to BLA, and then we'll come back for the second site. If that works, great. Thank you.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you very much, chair. Again, Emily Cohen with the Department of Homelessness and Supportive Housing. Here before you with four items, related to two projects, and we will go through them together, or one at a time, excuse me. And I will walk through the legislation associated with each project. I'm joined by this is a these are a couple of very complicated and, dense projects, and so I'm joined by a team of experts here to help answer any questions that you might have, both from HSH and from MOCD, as well as from swords to plowshares and five keys. All of our partners are in the room. So thank you. And I also wanna start by thanking Nicholas and the BLA for their thorough work on this. It was complicated. There are many reports and a crunched timeline because of the holiday. So really appreciate everyone collaborating to move these forward. So I'll start with 1035 Van Ness. There's two pieces of legislation before you today related to this property. The sorry, the Homekey accept and expend and the loan and grant agreement. So for 1035 Van Ness Avenue, this was a former assisted living facility, nine story building with private bathrooms and small kitchenettes already in every unit, swords to plow shares under their development LLC ten thirty five vets, acquired the property through a financing loan provided by the housing accelerator fund, MOCD, and HSH, with funding coming from HSH to operate the site as permanent supportive housing for veterans. The Homekey Plus grant will support with the rehabilitation and operations of the program. The project will have 20 124 units following the rehab, with operations supported by Homekey Plus, the local operating subsidy program, or LOSP, and the veterans supportive housing voucher program, otherwise known as VASH. So this is a combination of many sources to bring to life this really beautiful, permanent housing program. We estimate that the rehab construction will begin in January with completion in July 2026. The accept and expend resolution, authorizes HSH to execute a standard agreement for a total not to exceed amount of approximately $39,000,000 with our co applicants, eight thirty five Turk LLC. Sorry, that should be a ten thirty five Van Ness LLC. And, to accept and expend $3,000,000 of Homekey Plus grants to support the rehabilitation of the project. The remaining funds will be dispersed from HCD directly to ten thirty five vets, foresight acquisition costs and support the initial operating. This resolution approves the city to commit 8,000,000 in capital and five years of operating subsidies, which represent the required match. Additionally, the city is committing to fifteen years of operating subsidies through the local operating subsidy program or loss. So funding overview, just to break this down, this slide shows the detailed breakdown of the Homekey Plus grant award for ten thirty five NS and how that award is dispersed between the city and swords or ten thirty five Vets LLC along with sources of matching funds and capital operations. The second piece of legislation related to this project is a resolution approving a loan and grant agreement with mayor's office of housing and community development. So I'm speaking a little bit on their behalf in this moment, but they are here to answer any questions that might come up. On 11/07/2025, the citywide affordable housing loan committee recommended approval to the mayor of a loan to the ten thirty five vets for the project in the total amount not to exceed 8,000,000 to support the capital rehab. And a grant to ten thirty five vets LLC for the project in a total not to exceed amount of 3,000,000 in Homekey Plus funds from HCD. And this is supports the pass through of HCD home key funds from the city to ten thirty five vets. The term for both the loan and the grant agreement are fifty five years and a zero interest loan. I will stop there and hear from the BLA and then take any questions you might have on October. Thank you.

[Nick Menard (Budget and Legislative Analyst)]: Items five and six are two resolutions pertaining to 1035 Van Ness. One is a resolution that would accept $39,000,000 from HCD as part of a Homekey Plus grant to the city. The grant requires the city to commit $8,000,000 to operate the site over five years, which the city will far exceed that requirement. And the other file is a resolution that approves a loan from the mayor's office of housing of $11,000,000 which consists of actually a loan and a grant agreement, to help fund renovations at that site. We summarized the renovation work on pages fifteen and sixteen of our report, as well as the sources and uses of the development budget, on the following pages, you can see that the total development costs, including acquisition, are about $334,000 per unit. Where the city, because of the size of the Homekey grant, is only funding about $64,000 per unit. So it's actually a really low cost compared to other preservation or new development projects. But the city is going to incur ongoing costs to operate the site, both in the form of rental subsidies from the local operating subsidy program that would kick in around year six of the program after the Homekey operating subsidy runs out. And that's a general fund cost that starts at $1,300,000 And then HSH is gonna be delivering supportive services at the site starting at $400,000 a year paid for by proposition c funds in year one of the program. We also know it as a policy consideration that although the city is pulling down $39,000,000 from the state, the site will actually be owned by Source to Plowshares, which is going to oversee the renovation and then operate the property as supportive housing for veterans. So it is a little different than other supportive housing on this agenda that you've seen before, where the city owns the land and the property, but somewhat consistent with NYCD's other preservation work. The loan documents include an option to purchase that the city can exercise if the property is for sale. If source is unable to operate the site in the future, we recommend approval of items five and six.

[Supervisor Connie Chan (Chair)]: Thank you. Let's continue. Yep.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you. In terms of the second property or project, just a little, additional context before I jump into the eight thirty five TURC, overview. This, Homekey Plus is a new, relatively new source of state funding that developed out of the original Homekey program. And in the original program, we were incredibly successful in San Francisco. We leveraged two, approximately $235,000,000 from this program, which funded nearly 900 new units of permanent housing for adults, families, and transitional age youth across eight different sites. And supervisor Chan, you probably remember many, many times coming to this board and talking to you, over the past several years as that home key program was rolled out. And this new home key plus is sort of the next iteration of that. Earlier this year, we were at the board, and received approval to apply for the home key plus awards for both projects, eight thirty five and ten thirty five, eight thirty five truck and ten thirty five van Ness. And we were, we're thrilled to be back before you with the accept and expend. Under the, this set of awards, the city will be leveraging over $56,000,000 to support an additional two, to support two thirty units of housing for veterans and adults across two sites. So eight thirty five Turk has two pieces of legislation related to the project, the Homekey Plus accept and expend, and the ground lease and loan the ground lease, loan, and grant agreement with five keys. So as a little bit of background on this project, the city acquired the property at 835 Turk Street in 2022 and has been in partnership with five keys schools and programs operating the site as permanent supportive housing for adults exiting homelessness since 2023. The home key plus grant will support with rehab and associated operations, related to the construction, which are anticipated to begin in 2026. The rehabilitation will include, focusing on the 106 units in the building, including six, creating, creating six new ADA units. The need for ADA units continues to grow and increase across our system. So we're be thrilled to be able to add some capacity there and also provide critical structural improvements to the property that are are necessary to ensure its long term stability and safety. The resolution, the exception expense resolution allows HSH to execute the standard agreement for a total not to exceed amount of approximately 17,300,000.0 with our co applicants of eight thirty five Turk, LLC, and five keys with the state of California's Department of Housing and Community Development. It allows us to retroactively accept and expend 13,700,000.0 in Homekey Plus funds. The remaining funds will be distributed from HCD directly to eight thirty five Turk LLC to support the initial operating cost. The retroactivity enables the city to reimburse the project sponsor for eligible grant costs dating back to March 2024 as allowed under the state NOFA. NOFA. Excuse me. The grant or excuse me. The resolution also authorizes the city to commit approximately $16,000,000 in capital and five years of operating subsidies as the required match to these Homekey plus dollars. Additionally, the city is committed to 15 years of operating subsidies through the LOSP program, local operating subsidy. This slide shows a detailed breakdown of the Homekey Plus grant awards for eight thirty five Chirk and how that award is being distributed between the city and eight thirty five Chirk LLC, along with sources of matching funds and capital operations. The second piece of legislation before you for eight thirty five Turk is a resolution approving a ground lease and loan and grant agreement between the city and, Five Keys. Through the city the city through HSH and the director of property would enter into a long term ground lease with Five Keys, schools and programs for eight thirty five Turk. The ground lease would replace the current short term lease and property management agreement that HSH has in place with five keys. The total term of the project is fifty five years with a total rent of $1 The ground lease would make five keys responsible for ongoing management, maintenance, rehab, and operation of the project as a for permanent affordable housing. In terms of the loan and grant agreement, on 11/07/2025, the city wide affordable housing loan committee recommended approval to the mayor of a loan to eight thirty five Turk LLC for the project in the total not to exceed amount of 12,900,000.0 to support the rehab And a grant agreement to eight thirty five Turk LLC for the project with a total not to exceed amount of 13,700,000.0 in home key funds from HCD. This supports the pass through of HCD Homekey Plus funds from the city to eight thirty five Turk LLC once, made available. The term of both the loan and the grant agreement are fifty five years and an interest rate of 0%. And I'm happy to, take questions after the BLA report. Thank

[Nick Menard (Budget and Legislative Analyst)]: you. Item seven and eight are two resolutions pertaining to 835 Turk, a city owned property. One resolution approves a Homekey grant of $17,300,000 and requires a matching fund from the city of $16,300,000 And then one resolution is a loan of $12,900,000 from the mayor's office of housing to 5 Keys to renovate the site. We discussed the renovation work in our report. It consists of seismic upgrades and upgrades to building systems and making units accessible. On page 27 of our report, you'll see the total development budget. This is about $400,000 per unit. So it is at a higher cost than the prior project we just reviewed, driven by these higher renovation needs in this building. The building's older and in poor condition. We also note that the city is incurring ongoing costs of $1,800,000 a year for rental subsidies through the local operating subsidy program, as well as HSH and public health services at this site. We recommend approval of items seven and eight.

[Supervisor Connie Chan (Chair)]: Thank you. You know, I think ultimately, the question has always been and really just generally across, and not just targeting these two sites about 1035 Venice or 835 Turk. I think it's, again, across the board, be it meal delivery, or any type of social services provided on-site, in this case, for these two contractor, again, to manage these two sites. I think all as you continue to procure all the contract, I I think the challenges for Department of Homelessness and Supportive Housing in the line of work that you do is that, how do we do a couple of things? Making sure that you you know, having diverse options of people that you can work with and services. And that they're competent. You know, they meet the demands and need. But they also are flexible and adaptive. And I think that over the last, like, six years, you've been doing as a department, you've been doing a lot of that work, and try to build up yourself as a department, but also your contractors, the community partners that you work with, and build up their capacity. What I do look forward to seeing and learning more and it may or may not be a budget hearing prior to June process is that partly wanted to understand, you know, just the contract procurement standard, your capacity evaluation, but also the existing vendors that we're working with. What are their financial managements and evaluation been like for us as a city? I think that there are challenges, meaning not everyone is like the standard of, like, capacity is not consistent, and not everybody is the same. Some clearly stands out. And in this case, I would say five keys clearly stands out. And we've been really consistently relying on them in multiple sites. This is just one of the sites. And again, I would say Sorts and Plowshares also stands out consistently because of their capacity. They are doing work in Treasure Island. They're doing work in multiple sites, Lumbar Street. Like, we we have learned over the years to build capacity in partnership with our partners that are not only that they're we're growing, so are they, together. And I think that through the May, potentially leading to June, when we start talking about your budget, is that I would like to understand then, how do we make sure accountability, but also deliverable evaluation. Again, this kind of referencing back to the civic, the civil grand jury report that we had, like, discussion. Was it last year or a year before? Right? And again, the recommendation is you have 100 over 100 something contract. It's the reason why you're now going through this re procurement process. You're kind of in the middle of it, but it is a two year budget projection, in a very, like, difficult budget. So I just wanted to sort of like a heads up, you know, to where we're heading. I'm supportive of both contract. I do see that, you know, some of the sites, according to the BLA report, some of the sites that, for example, you know, sorts of to plowshares managed has high vacancy. And and sort of, kind of, how do we figure out this ten thirty five NS? I mean, you're I'm happy to hear what you have to say, but but I I think that is, like, we we know there's great needs. How do we continue to make sure the sites that we manage and have be adaptive, meeting the demands? So, yeah, please, go ahead.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you. To your, thank you for the heads up on what's to come during the budget process. Always helpful. In terms of vacancy rates across our portfolio, this has been a huge area of focus for HSH over the last two or three years. We've brought that number down pretty significantly portfolio wide. The veterans portfolio is a uniquely challenging portfolio because of the role of the federal government Yeah. In these buildings. When buildings that have VASH subsidies braided in with local operating subsidies, you they're just different requirements, longer processes to get a VASH voucher holder into a property, and so it does create some challenges. But we are excited. Part of the work that we're doing at ten thirty five is to move existing tenants with vouchers into this property, because it's a really an upgrade for them in terms of their housing and the conditions. It's also a known and stable community, so we think it's gonna really help, and then we'll be able to add to that.

[Supervisor Connie Chan (Chair)]: Great. Thank you. I don't see any name on rosters. I don't have additional questions. Let's go to public comment on these four items.

[Brent Jalipa (Committee Clerk)]: Yes. We are now opening public comment for these items five through eight. If we have any members of the public who wish to address this committee, now is your opportunity to approach the lectern. 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 these four items to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on the motion to forward all four resolutions to the full board to the positive recommendation, Member Mahmoud. Mahmoud, aye. Member Sauter? Aye. Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

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

[Brent Jalipa (Committee Clerk)]: Item number nine is a resolution approving amendment number one to the agreement between the city and county, acting by and through the Department of Public Health and Priority Healthcare Distribution, Inc, doing business as Cura Script Specialty Distribution for the procurement of specialty drugs to extend the term by four years from 11/30/2026 for a total term of 12/01/2023 through 11/30/2030 and to increase the amount by approximately 89,500,000.0 for a total not to exceed amount of approximately 98,500,000.0, and to authorize DPH to enter into amendments or modifications to the agreement that do not materially increase the obligations nor liabilities to the city and are necessary to perpetuate the purposes of the agreement for this resolution. Madam chair.

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

[David Smith (Chief Pharmacy Officer, Department of Public Health)]: Hello. My name is David Smith. I'm the chief pharmacy officer for the Department of Public Health. Good morning, supervisors. As noted, this is a contract amendment to request an additional 89.5 of contract authority, pushing it to 98.5 total from and an additional three years through November 2030. And overall, just because of the large numbers, I wanted to emphasize this is contract authority only. The actual spend associated with the contract is part of DPH's annual budget that is reviewed and approved by the, board of supervisors and the mayor's office already. Some background. Cura Scripts is a pharmaceutical distributor. So they're, like, a wholesale distributor. We currently have a contract for a primary distributor, McKesson. However, these sets of medications are actually not available from any other distributor except Cura Scripts. So they're they have the market, so to speak, on these. So they're really the only only place in town that we can go. They have three main buckets of medications that we utilize. One is long acting injectable buprenorphine, which is used for substance use disorder. That's really what's driving the majority of this contract spend about 88% or so. The second is implantable birth control, known as an explanon. And the last one is for a disease state called pulmonary arterial hypertension, which is usually used at our CSFG campus and our cardiology clinics and at the hospital. I do want to say that those long acting injectables for buprenorphine are really around trying to save lives for the overdose crisis here in the city. So very much being pushed because increased utilization of the medication in line with the priority to to try and decrease deaths. This drug actually decreases deaths by fifty percent when utilized. So it's become heavily favored because it's an injectable. People can it can stay in their system for a much longer period of time while they gain stability and engage in in treatment and recovery. The reason we need this now is essentially because this utilization has increased so much in the prior year and a half. We've run out of authority on the initial contract, which is only for $10,000,000 or a little less than $10,000,000 And also because, of large numbers, I think it's very important to talk about cross recovery. So all of these medications are generally reimbursable. We try and maximize reimbursement by utilizing distribution only through our pharmacies so that we can bill insurance. I believe in the BLA report, they said we put forth about 95% cost recovery. Right now, we're generally trending towards 98, 99% recovery. So that it really does as little as possible to draw down from general fund. And so with that, I know BLA has a report. And I'll defer to them and happy to answer any questions after that. Thank you.

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

[Nick Menard (Budget and Legislative Analyst)]: Item nine is a resolution that approves an amendment to a contract that the Department of Public Health has with Priority Healthcare Distribution, a pharmaceutical reseller. The amendment extends the agreement four years through November 2030 and increased the contract value to about $98,500,000 About 80% of the spending on this contract so far has been on long acting buprenorphine. And the cost has not been driven by price increases. It's really been driven by utilization, which has been increasing by 10 to 20% a year as DPH rolls out this treatment to more patients within their systems of care. That rate of increase is projected to persist over the next five years of the contract, based on the results of the treatment so far. We show the spending of the contract on page 33 of the report. It's about $10,000,000 a year now, rising to $22,000,000 a year in fiscal year two thousand and thirty. Historically, most pharmaceutical costs on this contract, or on the McKesson contract, about 95% of them have been reimbursed by Medi Cal. Of course, that's slightly at risk now, as the eligibility rules are being changed from new legislation from Washington. But that has been the historical nature of the reimbursement. So for this contract, dollars 98,000,000 in spending would translate only into about $4,500,000 of local funding being spent over the next five years. That would primarily be funded by the general fund, and any gap would likely have to be backfilled by the general fund as well. But we do recommend approval of item nine.

[Supervisor Connie Chan (Chair)]: Thank you. Is there any response to, from DPH, just kind of the potential changes? We don't know, but just anticipating potential changes from the federal guideline for reimbursement, and also criteria for qualification.

[David Smith (Chief Pharmacy Officer, Department of Public Health)]: Yes. I think that is a question on all of our minds. Right now, when patients do have insurance, whether it's Medi Cal or Medicare, reimbursement is a little above the drug cost, which is good. And that helps to make up for those that have no insurance. Considering that right now, I think the 95% does take into account the idea that if we're reimbursing at 99%, we anticipate our insured population to go up. I also think they're mitigating decisions that this may not be the medication of first first line medication used for those that don't have insurance. I see. And so that there are other oral options that present different challenges and probably not as effective. But I think trying to maximize that as a much cheaper alternative. Just for for good financial stewards of this, especially knowing the, significant unknowns that are coming in the in the in the federal budget.

[Supervisor Connie Chan (Chair)]: Great. Thank you. I don't have any other question. 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 joined us today, we 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 recommendation, member McMood. McMood, aye. Member Sauter? Aye. Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

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

[Brent Jalipa (Committee Clerk)]: Yes. Item number 10 is a resolution approving amendment number two to the agreement between the city and county acting by and through the Department of Public Health and Hyde Street Community Services Inc to provide mental health services to extend the term by two years from 06/30/2026 for a total term of 07/01/2018 through 06/30/2028, and to increase the amount by approximately 11,800,000.0 for a total not to exceed amount of approximately 38,800,000.0, and to authorize DPH to enter into amendments or modifications to the agreement that did not materially increase the obligations nor liabilities to the city and are necessary to perpetuate the purposes of the agreement or this resolution. Madam chair.

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

[Dr. LaDonna Norman (DPH, Adult & Older Adult System of Care)]: Yes. Good morning, Chair Chan, Supervisor Mahmood, and Supervisor Sauder. My name is LaDonna doctor LaDonna Norman. I am the director for intensive services and access for adult and older adult system of care. And my slide, please. So just as an overview, this will be an amendment. This contract was funded back in 07/01/2018. The contract amendment amount is 11,700,000.0, not to exceed 38,700,000.0. Noted timeline, 07/01/2018 to 07/30/2028. High Street Community Services provides both outpatient and intensive behavioral health services for our system of care adult and older adult. Under this proposed contract, High Street would continue to provide the following services. So for the outpatient program that would include crisis intervention, medication support, as well as behavioral health services, and targeted case management. For the full service partnership program, it will include outpatient, wrap around services as FSPs or whatever it takes model. And serve approximately 50 clients per year. Whereas, our outpatient, to note, serves 540 clients per year. DPH, humbly asks, to, uphold the BLA and request approval for this item, and I'll land.

[Nick Menard (Budget and Legislative Analyst)]: Item 10 is a resolution that would approve an amendment to a contract that the Department of Public Health has with High Street, a nonprofit mental health provider that operates two programs in the Tenderloin. One is an outpatient mental health clinic, and one is also a budget for intensive case managers for a portion of the patients there. We summarized the performance on pages thirty seven and thirty nine of our report. The bottom line is that they are meeting all the objectives in the contract. And we showed the budget for the contract on page forty and forty one of our report. This is about a $3,000,000 a year program, and it's only 28% funded by the general fund. The remaining sources of funding are state funds, including Medi Cal funds. We recommend approval of item 10.

[Supervisor Connie Chan (Chair)]: Thank you. Help me understand the evaluation of this contract. Why was it, if if if it's correct, was it exempt from the units of service monitoring, and and why that was? This is according to the BLA report. And if you can walk us through what this units of service means. I think it's like, right now, you're saying that you serve about five forty clients per year.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Mhmm.

[Supervisor Connie Chan (Chair)]: My assumption is that is a definition of the units of service, but please go ahead.

[Dr. LaDonna Norman (DPH, Adult & Older Adult System of Care)]: No problem. So, in accordance with California Advancing and Innovating Medi Cal, prior contracts were cost reimbursement, which posed a lot of risk to our city and fellow counties. And so to be in compliance with CalAIM payment reform from that fiscal sustainability piece that also allowed us to have FFP, so federal drawdown, as well as programmatically to be able to have performance objectives and performance monitoring that is consistent with deliverable client services. So, units of service is based on overall service delivery to said client And then also so, yes. So I think that that answers your question.

[Supervisor Connie Chan (Chair)]: Thank you. That's very helpful. Thank you. And so is it because then is the transition from previous, as you indicated, therefore exempt from the units of service? Yes. Understood. Great. Thank you so much.

[Emily Cohen (Department of Homelessness and Supportive Housing)]: Thank you.

[Dr. LaDonna Norman (DPH, Adult & Older Adult System of Care)]: I appreciate it, chair Chan.

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

[Brent Jalipa (Committee Clerk)]: Yes. We are now 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, again, I would like to send this item to full board with recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: Can I have the motion to forward to the full board with a recommendation? Member Mahmood. Mahmood, aye. Member Sautter? Aye. Sauder, aye. Chair Chan. Aye. Chan, aye. We have three ayes.

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

[Brent Jalipa (Committee Clerk)]: Yes. Item number 11 is a resolution approving an agreement between the city and county acting by and through its Department of Public Health and the California Department of Social Services and its third party administrator, BDO Government Services LLC, having anticipated revenue of approximately 7,400,000.0 for a performance based period commencing on execution of the grant agreement through 06/30/2029 and authorizing DPH to enter into amendments or modifications to the 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, again, we have Department of Public Health here.

[Yoonjang Kim (Director, Residential System of Care, DPH Behavioral Health Services)]: Good morning, chair Chen, supervisors, and Mammut. My name is Yoonjang Kim, director of residential system of care at behavioral health services. So today, I'm here to request a formal approval for the grant agreement for the California Department of Social Services community care expansion preservation project. So here I'm here today with Max Rocha, director of our system of care, and David Edelman, the analyst at Behavioral Health Services, to support, the project. The Community Care Expansion Preservation Project program is funded by, California Department of Social Services. It and FIA, its third party administrator, PDU Government Services, through June 2019. So its total amount, grant amount, is $7,400,000 So today, I'm presenting the project to request authority for DPH to accept nonstandard terms in grant agreement with the CDSS through BDO government services. Next, please. So, before going into the details about the nonstandard terms in grant agreement, I'm going to I would like to provide the overview of the project. So, the purpose of CCE, Community Care Expansion Preservation Program grant, is to preserve and avoid a closure of licensed residential adult and senior care facilities. So also known as assisted living facilities or boarding care homes, with a priority for the facilities that serve individuals experiencing or at risk of homelessness. So the grant is split into two parts. One of them is for operating subsidy, the program, that is time limited through 2028, and has been appropriated for cover to cover potential or projected operating deficits in existing residential care facilities, serving low income residents, adult individuals who are also beneficiaries of social supplemental security income, which is known as SSI, or cash assistance program for immigrants. So the operating subsidy program accounts for about 40% of a grant, which is $3,200,000 Another type of funding is for capital development, which allows the facilities to make essential fiscal repairs or necessary upgrades to avoid a closure or make the facility compliant with the licensing standards. About 60% of the grant that is $4,200,000 is assigned to capital project. So DPH has, worked with, CDSS, to identify 20 eligible facilities, that serve low income clients and may have, demonstrated, financial needs. So DPH plans to engage California Mental Health Service Authority, which is called Calmesa, to disperse grant funds and provide technical assistance to selected facilities as soon as this grant agreement is approved. So next slide. So I'm going to review what the nonstandard terms in grant agreement, CDSS, and BDO government services request are. First, dispute resolution process closes, obligated the city to settle disputes under binding arbitration. Second, obligated the city to defend, indemnify, and hold harmless CDSS and video government services. So N, a third, waives the city's right to seek any special consequential punitive damages, indirect or incidental damages, or for any loss of goodwill, profits, data, or loss of news resulting from grant agreement. So these nonstandard terms are actually similar to ones in other state grants, including behavioral health, cont cont continuum infrastructure program, which is known as a B CHIP, the round three, four, and five, and CC expansion programs, which have been approved by board of supervisor in the past. So the city attorney reviewed, and approved, bringing this resolution to the board of supervisors. So DPH respectively request, formal, approval over this grant agreement. Thank you so much.

[Supervisor Connie Chan (Chair)]: Thank you. Thank you for your work. I don't see name on roster. I don't have additional question. 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 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 that motion to forward to the full board with a positive recommendation, member McMud. McMud, aye. Member Sauter? Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. And, mister Clerk, please call item number 12.

[Brent Jalipa (Committee Clerk)]: Item number 12 is a resolution authorizing a two year extension of the agreement amendment between the recreation and park department and Active Network LLC for use of city recreate recreation programs and facility reservations for a term of 12/31/2025 from 01/01/2016 through 12/31/2027 with no change to the contract amount of 100,000 annually and to update certain standard contractual clauses. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And we have rec and park department here.

[Anne Marie Donnelly (Assistant Superintendent, Recreation & Community Services, RPD)]: Thank you, chair Chan, supervisor Mahmood Sauter. My name is Anne Marie Donnelly. I am the assistant superintendent for recreation and community services with the recreation and parks department. I'm here, on behalf of the department, to ask for a request for extension for two of two years for the current contract that we hold with Active Net services. Active Net is a comprehensive business software service, that we use for public recreation. We use it for program registration, memberships and scholarships, point of sale transactions, and for processing permits and allowing the public to make reservations. It's an online system, as well as a front end system. If you've ever, gone to a swimming pool, you've scanned your pass. If you've ever signed up for a yoga class, or signed a kid up for a day camp, you've used Active Net. And so, along with, it running our recreation business, we also have it, it is, provides financial and metrics reporting that we can provide to the city. We process over $20,000,000 in financial transactions annually. The current contract expires December 31. Obviously, without an extension, we wouldn't be able to to to do regular business, at Rec And Park. And, so we're requesting the two year extension through December 31. There's no change to the cost. We pay, per transaction fee to Active Net. It's, approximately $100,000 annually.

[Supervisor Connie Chan (Chair)]: Thank you. Ann Marie, time has fly. Both of us are wearing reading glasses. I know. I know. I do have a quick question. Is this system different than the pickleball reservation system? I see nodding behind you. Okay. I I do have I just wanted to ask about court reservation system. But I I I think I do know this system that's been existing for a long time. Yes. I don't have any other question. I'm glad that you're and we're happy to able to accommodate you to schedule for this so that you can extend the the the contract.

[Laura DeCaro (Attorney; Public Commenter)]: So or

[Supervisor Connie Chan (Chair)]: extend the system.

[Anne Marie Donnelly (Assistant Superintendent, Recreation & Community Services, RPD)]: Thank you, chair.

[Supervisor Connie Chan (Chair)]: Thank you. Let's go to public comment on this item.

[Brent Jalipa (Committee Clerk)]: Yes, sir. Any members of the public have joined us today who wish to address this committee regarding this item number 12? 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 definitely wanna move this to forward with recommendation. I use the system. I know it well enough to say we need it. And the roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion to forward to the full board with a positive recommendation, member McMoed. Mahmoud, aye. Member Sautter? Aye. Sautter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Thank you. Mister Clerk, please call item number 13, the lucky 13.

[Brent Jalipa (Committee Clerk)]: Yes. Item number 13 is an ordinance amending the business and tax regulations code to repeal the cannabis business tax beginning on 01/01/2026 and remove references to the cannabis business tax from the common administrative provisions of the code. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And I believe we have, president Mendelmann's, legislative aide here, Sophie Marie, and the floor is yours.

[Sophie Marie (Legislative Aide to Board President Rafael Mandelman)]: Good afternoon, Chair Chan, supervisor Mahmoud, and supervisor Sautern. My name is Sophie Marie, and I'm a legislative aide to president Mandelmann. The item before you today is president Mandelmann's proposed ordinance to eliminate the collection of the cannabis business tax. The tax is currently scheduled to take effect on 01/01/2026. Based on discussions with colleagues and the mayor's office, president Mandelmann is proposing that this committee amend the ordinance to suspend the tax for ten years rather than eliminate it outright. As you know, the cannabis market has been and remains highly competitive, characterized by a dominant illicit sector offering comparable products at substantially lower prices and a smaller legal sector constrained by extensive regulatory and tax obligations at the local, state, and federal levels. It's estimated that in San Francisco, the illegal market may make up as much as 50 to 60% of cannabis sales. Let me be clear. Illicit sellers do not pay taxes. They do not apply for business permits, and their product is not subjected to the rigorous quality control that legal operators are subject to. All of these factors mean the illicit market can sell products for far cheaper than legal operators. To avoid further burdening legal cannabis businesses as they struggle for market share against illegal businesses, President Mandelmann has previously asked the board to defer collection of the local cannabis tax three times. Voters originally authorized the one to 5% tax in 2018, with implementation scheduled to begin in January 2021. The first suspension, passed in late twenty twenty, pushed the collection date back through December 2021. The second pushed it back through December 2022, and the latest pushed it back through December 2025. After suspending this tax three times for a total of five years, the significant burdens on the legal cannabis market remain. The illegal market remains dominant, and the rationale for not collecting this tax remains as strong as ever. And it does not seem likely that any of these facts will change in the near future. Chair Chan, supervisor Mahmoud, and supervisor Sauter, I respectfully ask you to forward the ordinance with president Mandelmann's proposed amendment to the full board with positive recommendation. I'm available to answer any questions today. Thank you.

[Nick Menard (Budget and Legislative Analyst)]: Item 13 is an ordinance that would repeal the cannabis tax, If it's amended as proposed by supervisor amendment's office, it would suspend the cannabis tax from beginning for ten years. Right now, it's scheduled to begin January 2026. We summarized the market dynamics in our report, but I think you'll see on page 43 that statewide, cannabis sales have decreased over the past three years by about 6%. And then locally, they've decreased by about 12%, driven by declines in prices, not by declines in quantity of cannabis purchased. This tax is basically an additional gross receipts tax on cannabis businesses that ranges from 1% to 5%, depending on the level of sales. Again, that would kick in and generate 2026. So by suspending this tax, you are giving up a general fund revenue that the controller projects would be $3,700,000 next fiscal year. That would only be half Next fiscal year only captures half a tax year, because the tax years are on calendar years. So the full revenue loss in the following fiscal year, 'twenty six-'twenty seven, is about $8,700,000 So this would exacerbate the structural budget deficit that the general fund faces. So for that reason, we consider approval to be a policy matter for the board.

[Supervisor Connie Chan (Chair)]: Supervisor Mahbub.

[Supervisor Bilal Mahmood]: I just wanted to echo, some of the statements that president Mandelmann's office, made to indicate that while this is a tax measure, I do view it as a public safety measure. Every day when I walk to work, I walk past a corner in Market And Jones, which has to this day, people normally associate the tenderloin with an open air fentanyl market. What they don't often see is during the day, there is a regular weed illegal weed market. And, on my morning commute every single day, that illegal weed market is there. And, these illegal weed markets persist because of overregulation by the state, and due to just general, red tape that makes it difficult to operate any type of small business in San Francisco. So, this measure in having a waiver, for an additional ten years on these businesses is necessary because by making it harder for legal retailers, we make it easier for black markets to persist in all the issues that come with them. And, I think this is important in this climate to ensure that we are making it easier for cannabis dealer cannabis stores that are operating legally here, and sending a statement that we do not tolerate illegal activity for those who are trying to comply with the law. And for those reasons, I'm in support, for this legislation.

[Supervisor Connie Chan (Chair)]: Supervisor Souder.

[Supervisor Danny Sauter]: Thank you, chair. I will be supporting this with the, proposed amendments today. And, you know, I think, I think back to, kind of how we got here with, the ballot measure and what the voters had in mind. And, I think the reality of of this market and the sales, are probably not they probably don't match what voters had in mind when they when they cast their vote for this. It hasn't quite been the gold rush or the green rush that everyone had in mind. And I think, you know, I do have some pause with the, budget impact for the general fund, but I also think about the, the consequences, of all of the small business largely small businesses that would be impacted here if we don't give this relief, all their employees, all of the, you know, activity that they've helped generate in our in our commercial corridors. So for all those reasons, I I will be supporting this.

[Supervisor Connie Chan (Chair)]: I do not support this, for a variety of reasons. First and foremost, in 2016, I believe that the California voters really voted to support recreation marijuana with the understanding and the recognition is that, cannabis can be treated just like we do with alcohol and can should be regulated as so, and that the benefits come with it is the tax revenue. And the local perspective mirrors the state perspective when we pass the local tax, and, again, encouraging. In fact, San Francisco is the, I would say, the starting ground for, first medical marijuana, eventually, when the state approves that we can transition into recreational marijuana. And it has been, the case for a very, very long time in San Francisco. The flourish of the black market, in my opinion, is not because that it was legalized. I think, in my opinion, is because of lack of enforcement, both on the state level and a local level. If there's a crime, black market selling cannabis is a crime, and then it should be enforced. I don't see that the solution to it is simply to, repeal or suspend a tax. What it should be addressed is enforcement. Now whether we spend how we actually spend the tax revenue, in my opinion, particularly in the state revenue, you know, generated from cannabis tax, should actually back like, put it back, to enforcement. And that is the way that I see how that actually could address, and justify continuing to generate tax revenue from the industry by helping the industry to thrive, helping the industry to continue to operate and generate profit, because that is how tax revenue works. It's the reason why I would I do support knowing that now the state has spent its state tax increase, I think, by at least two fiscal year, if I understand it correctly, perhaps more. And and I'm supportive of that. I'm also supportive of the moratorium of new application, because we had these conversation about potentially saturation, not just in our neighborhood, but saturation of the market in San Francisco. And I am, again, in support of extending that moratorium, which I understand is expiring. The moratorium makes it expiring in 2025. Is isn't it that correct? I see Ray Law from office of cannabis.

[Ray Law (Office of Cannabis)]: Thank you, Chet Chen. Ray Law office cannabis. The moratorium will be expiring in December 2027.

[Supervisor Connie Chan (Chair)]: In 2027. That's right. So we already have it in place. I'm happy to continue to extend it in the 2027, because I then I think that is the economic impact report that is due for the the for the industry. Isn't it there's an economic impact report?

[Ray Law (Office of Cannabis)]: Ray Law offers cannabis, in, the same ordinance, that enables the moratorium. It is also codified, to mandate the controller's office to produce a market, study, by June 2027. So, yes, to to your question. Yes.

[Supervisor Connie Chan (Chair)]: So I think that there's a impact economic impact report. There's already a moratorium in place. I look forward to learning more about it and to continue to extend that moratorium. And by the same in fact, one of the reason why we have that is also because is to trust that we understand that suspension of this tax is expiring this year. Look. The suspension the projection, previous three fiscal years' suspension of the cannabis tax was at the projection of $30,000,000 total. So in the last three years, the city has suspended the tax, in its total of $30,000,000 Clearly, the projection now, again, a concern around black market. Therefore, the tax revenue projection is lower than previous. I think the questions for the colleagues who supports it, including board president Mandelmann, where is this money gonna come from? Like, how do we offset what we have projected as a tax revenue to the deficits that, again, we're facing $800,000,000 for the next two fiscal year. I asked the colleagues who are gonna vote in support of this to be able to answer the very same question during budget, including board president Mendelmann, how are we gonna offset the money that he now proposed to be in suspending and collecting? It's gonna be a harsh question, but there's no doubt as a budget chair, I will ask that to colleagues who are here now on this committee, should you remain on this committee as well as board president Mandelmann, figuring out how this money is gonna come from somewhere, because it gotta come from somewhere. That's one. I think two is that I'm actually also in a position where I can understand the challenges the industry face. In fact, I have offer and counter an amendment to, again, for president Mendelmann, that instead of a ten years, a decade long of suspension, can we actually figure out for two years, one year or two years suspension that goes along? Again, there is gonna be a moratorium in place expiring, and then as well as economic impact report. There's no reason to not to consider a shorter term suspension instead of a decade long suspension when there is actually there's no other it just took kick the can down the road. It doesn't really help the industry. It can like, there's no it's not a it's not a a solution to black market. I I can understand the black market argument, but there's no this is suspending of the tax revenue, is not a solution to black market. So for those reason, as it's currently written, I'm against it. I'm also against even the suspension, not because of suspension itself, but it's the date of 12/31/2025. But I will be in support of the amendment today. But, colleagues, what I do ask though, I will not I do not wish to send this out unless you can tell me right now how you're gonna offset the dollars loss at this moment to address that. I cannot support sending this out from a budget committee with recommendation. I'm more than happy to have this and continuing this conversation at full bore, because it has got to be on the minds of all of us, all 11 of us, when we are gonna about to tackle this budget deficit. We're gonna face this mayor's instruction, budget instruction, in about a week or so. And, you know, we're having our finance let letter from the controller. And with our five year projection report, I would like to have a intellectually honest but really just honest conversation about budget. I will not be supporting to having this out there with recommendation. I don't think we should do that. It's not fiscally responsible to simply recommending this. But we can have this debate at full board. Supervisor

[Supervisor Bilal Mahmood]: Mark Moon. I just wanna acknowledge and appreciate the the comments and the feedback that, we are losing potential tax revenue here, and it's a reasonable question. I will just reiterate, though, that, there are multiple ways to estimate, and the financial impact of different decisions that they that these type of decisions have in the city. One, by increasing, obviously, having taxes on these businesses from basic supply and demand, they pass these on and have to raise prices to consumer. That's what allows the black market to persist because the prices for legalized cannabis are higher than what the black market can offer. And, in turn, allows them to undercut the market through the black the black market has undercut the legalized market. And so that's what the intention is here, is to allow a lever to really hit the heart of a black market that has been persisting for some time. And it's one tool amongst many. I agree. We have to complement this with enforcement. And we have to work with SFPD to understand how can we improve those things. I don't view those as, mutually exclusive. I view them as complementary. To the question about how do we, make up the gap, it makes a difficult year. I'm, I would be glad to put in the work. We don't have answers for those questions right now, because we're just focusing on this legislation and isolation.

[Supervisor Connie Chan (Chair)]: I disagree. I mean, I think that the way that I view it is that if you are going to approve, a legislation with recommendation, Xiaoyu, then I I would like to understand. Like, if you are if you're in the capacity to recommend something as such that you can see and indicating that the by the budget and legislative analyst report in a projection of revenue loss of 20 point 24,800,000.0 over the next four years' period, Tell me how you're gonna make up that dollars right now if you want to send this out with recommendation and approving it before we even have a conversation about the upcoming budget. I am not in a place where that I can be supportive of fee waivers or any type. And right now, when we're in the middle of trying to put together a budget or when I say we, I really mean the mayor. But I I can send this out today, but without recommendation.

[Supervisor Bilal Mahmood]: The the last one I wanted to make in this context is what's missing from the BLA analysis report is the economic impact analysis of the illegal black market on the surrounding businesses in the neighborhood. That is what we're not accounting for. So, yes, there's a loss in tax revenue from repealing this tax, but we're not estimating the loss in tax revenue from surrounding small businesses that have to suffer at the proper at Fifty Jones because they're losing out in tax revenue. At the Hibernia, right next to Fifty Jones, which is right next to the black market, which is losing out in tax revenue that could be coming to the city as well. So, there's additional impact analysis that could be done provided by the legal aid that we're not measuring in that sense as well. So, that's why, from my perspective, this repeal actually helps to, again, undercut the black market, which is undercutting the legalized market, and in turn, help to boost the revenue for sales tax revenue around the surrounding businesses. So what I would hope is that we can have an analysis in the future to actually estimate this. And that's why I think this will have a could have some. It's not a complete reduction in tax revenue. We will see a commensurate potentially increase over time through undercutting the black market. But, again, I agree with you as well. This has to be complemented with SFPD action, and that is something that has to be done. But I view them as complementary rather than mutually exclusive.

[Supervisor Connie Chan (Chair)]: Sure. But, supervisor Mabu, like, the reality is that, like, when we do budget, we do it with number. We don't do it with theory, like, theoretical. So the question is, while we have I would like to have to talk about the economic impacts in general, but that is not that data is does not exist before us at this moment, right now. So there's no data that I can base on to be able to say, let's go and go with this. But not to mention this, though. By that very same philosophy and same policy attitude, or actually say, principle, when we talk about illegal vending, that we actually put together enforcement. We put out, staffing, city staffing to do those illegal vending enforcement. I don't see a conversation about waiving the very same sales tax. In fact, we're increasing sales tax because we find that sales tax to be funding our public transit. I think that that's the question that I lay out before us. That, again, the address the the solution to enforcement or I should say black market, because that is our attitude to illegal vending. It's enforcement. Then let's address enforcement. Because, I would say the association of economic impact on both cracking down illegal vending, cracking down black market, enforcement has to be in place. And we can debate on economic impact, but a dollar is a dollar, and here is a $24,800,000 over the next four years' period. There's no economic impact report to show us and indicate us at this moment that is otherwise. So I wanna make the motion to send this out without recommendation. But, again, I am here for debate because I can clearly see it's two vote to one. But I believe I have expressed that very same desire to president Mendelmann. I don't think he object to me sending this out without recommendation. He understands, where I'm coming from.

[Supervisor Bilal Mahmood]: Can we do the motion to amend first?

[Supervisor Connie Chan (Chair)]: Yes.

[Supervisor Bilal Mahmood]: I'll make a motion to amend, the legislation, as read into the record by president Mandamin's, office staff.

[Supervisor Connie Chan (Chair)]: Do you wanna reallout the amendments?

[Supervisor Bilal Mahmood]: The amendments include, on page one, lines one through two, adding extension suspension of and removing appeal. In the long title, page one, lines through five, adding, extend the suspension of the cannabis tax through 12/31/2035 and remove repeal the cannabis genesis tax beginning on 01/01/2026. On pages one through 17, section one, restore article 30. On section one, subsection 3,003 C, page nine, lines 13 through 14, add the imposition of the cannabis business tax under this section 3,003, which shall be suspended for the tax years 2021 through and including 2035. In section three, subsection b, pages 36, lines six through seven, add upon the effective date of this ordinance, this ordinance shall be retroactive to 01/01/2026.

[Supervisor Connie Chan (Chair)]: We have two motion on the floor, but let's go with the motion to amend first. Roll call, please.

[Brent Jalipa (Committee Clerk)]: Before we take any action, madam chair, we should call public comment.

[Supervisor Connie Chan (Chair)]: Oh, yes. Let's go public comment.

[Brent Jalipa (Committee Clerk)]: Yes. We're now opening public comment for this item number 13. If we have any members of the public who wish to address this committee, as soon as the first speaker approaches the lectern, I'll start your time. First speaker, please.

[David Goldman (Public Commenter)]: Good morning super excuse me. Good morning, supervisors. My name is David Goldman. I'm the president of the Brownie Mary Democratic Club of San Francisco, a cannabis policy oriented Democratic club. I'm also on the board of California Normal, a statewide advocacy organization devoted to cannabis regulatory reform, and a board member of the Green Cross, San Francisco's only non profit cannabis retail dispensary. I urge you to pass the legislation to avoid a 50 fold increase in the gross receipts tax rate from point 1% to 5% on cannabis retailers. Can cannabis businesses are currently struggling to stay afloat as evidenced by several closures in the past few years. When proposition m was passed by the voters in 2024, only cannabis retailers, no other retailers were not excused from any gross receipts tax if their gross receipts tax income was less than $5,000,000, a glaring omission on our part. I also would point out that since prop d, which was the impending tax increase on gross receipts, has not been implemented. There has been no loss of income during this period. And if this legislation passes to end this tax increase, there will be no change. It'll be a continuation of the status quo. I urge you to do what the board has done before and suspended passing of this tax increase. I urge you to pass the legislation to eliminate it completely. Thank you.

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

[Bram Goodwin (Public Commenter)]: Good morning. My name is Bram Goodwin. I'm a resident of the Haight Ashbury. I'm a state cannabis medical patient and a member of the San Francisco Brownie Mary Democratic Club. I asked the supervisors to please pass this with recommendation. This is an affordability issue. You talk all the supervisors talk constantly about affordability. That's what this issue is about. And it affects not only retailers, but medical cannabis patients. I'd like to emphasize something very, very important. And to the chair, supervisor Chan, I'd like to address this specifically to you. Cannabis is medicine. It's not like other substances that you're taxing. It's medicine. Most of the people, many of the people who use this product are medical patients. You wouldn't be taxing other kinds of medicine to this extent. I'd like to point out that the tax rate right now is 30%. Does that is that a fairness? Is that does that sound fair to you? No. Please pass this resolution and recommend to the board that it it also passes. Last thing quickly, you supervisors sit on the shoulders of other supervisors who when our government turned against HIV patients, they passed, our ability to help deal with cannabis.

[Brent Jalipa (Committee Clerk)]: Thank you. Time has expired. Thank you much, Graham Goodwin, for addressing this committee. Next speaker, please.

[Indiana Davis (Public Commenter)]: Good morning, Chairman Chan. I ask you to take a deep breath. Okay. I'm Indiana Davis. I am opening a cannabis delivery right now. Hopefully, I'll be opening it in the next month. More importantly, I'm a medical patient. I have a seizure disorder. And, chairman Chan, I heard you when you talked about enforcement, and I agree with you. However, I would like to be said, I'm from a small town in Alabama where they have the breadth of a law force where they can do the enforcement. The town is small enough, and it's being done. And I'm gonna tell you what happens. The black market grows. If you wanna talk about numbers, I like to talk about the huge amount, the potential of capital of people that go to the black market simply because it's cheaper. Unfortunately, for them, it's much more toxic, and they could maybe even die from fentanyl. So I think it's very important for medical reasons as a person who takes it, procedures for this to pass. And, also, when the budget was passed, however many years ago, the tax was punitive then. So if you wanna talk about why the numbers aren't why the math isn't mathing now, it's because when it was implemented, it was in a punitive manner. Thank you.

[Brent Jalipa (Committee Clerk)]: Thank you for attending Davis. Next speaker, please.

[Alex Aceffa (Public Commenter; Owner, Obsidian Dispensary)]: Hello, supervisors. My name is Alex Aceffa. I am born and raised here in San Francisco in what many people would call a rough neighborhood. Actually, my store okay. I've come a long way to get, in order to open my store here in my city and making sure that I'm doing it the right way. Let's see. My store's name is Obsidian Dispentry. I work let's see. I think we all understand the challenges of the cannabis industry. Supervisor Chan, I heard mention of enforcement versus, repealing the tax. I think two things can be true in the same instance. Yes, enforcement is essential. But if cannabis businesses fail, then we don't have, much to enforce for relative to this matter. The more immediate and impactful change would be repealing the tax for the businesses who contribute to the city in many ways, like employment, taxes that we pay, and so forth. I'd like to point out that many cannabis retailers have already closed, a whole bunch of them, and I don't think any taxes would, you know, help the situation out much. I would like to echo supervisor Mahmood's, and and many other sentiment if we continue to impose these taxes, these kinds of taxes on the legal cannabis market. We are impacting the cost for seniors and cannabis medical patients. We are indirectly supporting the illicit market and during and directly hurting cannabis small cannabis business. So these things, I hope you can consider. And yep. And, you know, your attention is greatly appreciated, supervisor Chan. Yeah. Thank you guys for your time. Appreciate it.

[Brent Jalipa (Committee Clerk)]: Thank you much. Thanks, speaker.

[Jesse Stout (Public Commenter)]: Good morning, supervisors. Thank you for hearing this item. My name is Jesse Stout. I live in District 6. I'm here as a member of the Green Cross, which is the city's last nonprofit retail dispensary like in District 11. I support the repeal of the cannabis tax, and I also support the repeal as amended to delay the tax. I would point out that all sales taxes are inherently regressive and should be replaced with progressive income taxes anyway. And in particular to this morning's committee discussion, I would point out that the issue of replacing the funds that we would have gotten from this cannabis tax is a matter that this issue take up with the state. The state already taxes cannabis with exorbitant 15% excise tax. And to replace the potential lost revenue, we ought best go to the state government to ask that the state give us the taxes that they're taking from San Francisco at our cash registers and bring it back to the city budget. Thank you very much.

[Brent Jalipa (Committee Clerk)]: Thank you much, mister Stipe. Next speaker.

[Nina Parks (Public Commenter; Equity Trade Network)]: Good morning, supervisors. My name is Nina Parks. I represent an organization called the Equity Trade Network. We help to create the equity program in, multiple municipalities. I also have a stakeholder in a in a dispensary in the Mission District, as well as a as a distribution in Oakland that helps to distribute equity businesses. Now I hear everything that you're saying on, you know, wanting to make up some revenue, but we do have 60% of Canvas users that are not coming over into purchasing in legal dispensaries, and so there is a huge gap of, like, potential funds that could be brought over if we create a greater market and a greater environment for these folks to cross over by making it affordable. We are seeing a rise in the cost of living everywhere, from gas to groceries, and any increase, because what we saw in the three months of the state increased to 19%, retailers lost from 11 to 23% of their business. That is a problem. Right? The city also gets sales tax. You guys get about 2.9% as the city county of San Francisco through sales tax, because you guys are not not getting cannabis money. So the idea would be in not increasing the tax to try to squeeze blood out of a stone, is to create an environment in which people can cross over and we can actually have extended businesses with longevity. I have so much more to say, but I will leave it at that. Thank you.

[Brent Jalipa (Committee Clerk)]: Thank you much, Nina Parks. Next speaker.

[Duncan Lai (Public Commenter; SF Cannabis Alliance)]: Good afternoon, supervisors. My name is Duncan Lai. I'm the head of the San Francisco Cannabis Alliance and the owner operator alongside my equity partner, Jakari Donaldson. I wanna echo supervisor Moot and Sauter's support for the cannabis tax sunset. Appreciate that. The tax will cost San Franciscan jobs. Our industry doesn't outsource every job. Every dollar earned stays here. When voters pass Prop m to eliminate gross receipts taxes for small businesses doing under 5,000,000, it's hard to believe they intended to leave cannabis behind. Our industry is still struggling. Affordability challenges for patients and consumers are at an all time high, and now is not the time to enforce an additional tax. Supervisor Chan, we will take you up on your offer to discuss continuing the moratorium, increased enforcement on the illicit market, which we know will drive more revenue and thus taxes to the legal stores in the city, and we'd love to see that economic impact report.

[Brent Jalipa (Committee Clerk)]: Thank you, mister Duncan Lye. Next speaker.

[Romuald Connolly (Public Commenter; Dispensary Owner)]: Good morning, everyone. My name is Romuald Connolly. I am my husband and I own two cannabis dispensaries here in San Francisco. One in the heart of Fisherman's Wharf, and the other one in the heart of the Castro. One serves all the tourists to the city. The other one serves the majority of medical patients. You know, while I sit here, I'm a decreed economist. I spent twenty three years in the software industry. Majority of it, we're looking after worldwide sales for the number one software company in the world. And now my husband, who is in biotech, we own cannabis dispensaries. I'm hearing an 8.1 deficit. I'm hearing a 24 x point four point x number deficit over the next couple years. But no one is is reflecting on the decline of the taxes that you guys have been that the city has been receiving over the years because we're we are your market. We're the ones that are impacted by the economy, inflation, and the taxes. And on top of this, I don't think you're taking into consideration that the five percent tax then gets taxed by the CTTFA. You do know that they tax the excise tax, and they will tax this tax. So it's not just a $24,000,000 deficit that you're gonna lose on your budget, but that deficit is going to drive probably, I would say, maybe 50 to $60,000,000 into the black market. So if you put this tax in, you're going it's not $24,000,000 on your books. It's going to increase the black market by 25 to 40% increase because we're gonna lose customers, and they will go to the black market. So I hope you understand that. And really because I'm afraid that this is going to backfire if it's approved. Thank you.

[Brent Jalipa (Committee Clerk)]: Thank you very much, Ronald Connolly. Next speaker.

[Laura DeCaro (Attorney; Public Commenter)]: Hi. Good morning. I think it's still morning. I don't think there's much I can add. I actually feel like following the credentialed economist is, difficult. My name is Laura DeCaro. I'm a lawyer who's been practicing in San Francisco cannabis for twenty years almost. And I've never seen a more dire moment. So I'm here to support the full repeal. I would support deferral language as amended, but I really do support the supervisor's, consideration of this particular and very important issue. The goals of tax policy, right, are to influence behavior, right, and collect revenue. Right? In a cannabis environment where almost all people have access to what is already essentially untaxed cannabis, in an illicit market, it will do neither. So I urge you not to try to use this particular tax to try to close that looming budget shortfall on the backs of small businesses, because it won't do that in the end. There was a whole there

[Emily Cohen (Department of Homelessness and Supportive Housing)]: were a whole bunch

[Laura DeCaro (Attorney; Public Commenter)]: of articles that came out in June right before the state tax increased to 19% from 15%. Talking about the 11% drop in sales compared to the same quarter of the earlier year, right, 2024, according to tax data analyzed by multiple journalists and news outlets. 11% before the tax went up. We saw such a decrease in sales immediately following the implementation of the 19% tax that they immediately reversed it. The data is there. It may be empirical at this point, but the consumer behavior is evidenced by the tax rate. And I thank you for your time.

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

[Jesse Stout (Public Commenter)]: Morning, everybody. I'm Eric Alfaro, the manager at the Green Cross. Just wanna say that it's a it is a medicine. It does help out a lot of our members. There are a bunch of our members that come in that solely just need this medicine for them, and it's affordability issue for them.

[Eric Alfaro (Public Commenter; Manager, The Green Cross)]: And they I've seen it more and more as, it's just hard for them to get their medicine at you know, and raising their prices doesn't help them at all. They just have told us so many times they have to stretch it out a little bit longer, and it's, not helping them at all. So I just wanted to make sure that is known. Thank you for your time.

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

[Kevin Reed (Public Commenter; President, The Green Cross)]: Hello, supervisors. Thank you for your time. My name is Kevin Reed. I am the president of the Green Cross, and I've been a medical patient for twenty five years here in the city. And the majority of the people that we serve are medical patients. When California decided to legalize recreational use, we've seen so many so many people in the industry just completely disappear. But the customers, they stayed the same. If you have a place down in the Fisherman's Wharf, you do you do see a lot of tourists probably these days, but the neighborhood dispensaries that we have, they're still waiting on our patients. And in California, we just don't tax medication, but that's not what we did when we legalized marijuana. We didn't consider the medical marijuana patients at all. And it's so sad to see people have to spend so much money because every product in my store is double what it was, at least double what it was when it was medical, and now recreational. And our government just sees us as a revenue. This entire conversation you had, nobody said medical, medical marijuana. Nobody said patient. Nobody's thinking of that in government. And while I appreciate anything that you do for our industry, we have to think about this as a medicine because it is an unaffordable medication. And if these people have to go back to the streets to get their medication, there's no telling what they're consuming. And it's just it's it's the wrong thing to do. I implore you. I implore you to do the right thing.

[Brent Jalipa (Committee Clerk)]: And thank you much for addressing this committee. Seeing no more speakers in the queue, madam chair, that completes our queue.

[Supervisor Connie Chan (Chair)]: Seeing no more public comments, public comment is now closed. I wanna thank everybody to come you know, that came out to make public comments about this. I, you know, voted for cannabis during the COVID period. Voted for cannabis as essential business, as an essential service. Because recognizing that it does actually have its medical, like, needs for a lot of people. And there is not a debate about whether cannabis is important or not. In fact, it is. I I wanna acknowledge the medication aspect of cannabis, and how it has been long standing. It's the reason why I mentioned that in San Francisco, we started the the with the recognition of what that is. Again, I I think the challenge is that it's no longer just medical marijuana. It has transitioned into recreation marijuana business. And if anything, I think that perhaps it is time to have a conversation about reforming the tax code itself, how it is double taxed, and that, like, what else can we can do, both on a state level, on a local level. Is for that reason, I am, again, in support of suspending it, and to for a short period of time. But a ten years long, it's a long time. So with that said, I want to first make the like, I believe that motion was made by supervisor Mark Moo. So I wanna make sure that we do the motion to amend, and a roll call for the motion to amend.

[Brent Jalipa (Committee Clerk)]: And on the motion by member Mike Moo, that we accept the amendments as so written to the record. Alright. I. I moved, aye. Member Sauter? Aye. Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. And I would like to go on recess at this moment. I would like to check-in directly with board president Mendelmann for a brief period before we move on. So right now is 12:05. Give me ten minutes, 12:15, that we will come back. Recess.

[SF GovTV Announcer]: SF Gov TV, San Francisco Government Television.

[Supervisor Connie Chan (Chair)]: Thank you, and welcome back to the budget and finance committee from recess. I would like to make the motion to move the item, which was in discussion item 13 to as amended proposed by supervisor Mark Moo, to full board without recommendation and a roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion, that we refer this ordinance to the full board, without recommendation as amended. Yes. Member Magmood? Go ahead. Yes. Okay. Aye. Magmood, aye. Member Sautter? Aye. Sautter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. And, mister Clerk, do we have any other business before us today?

[Brent Jalipa (Committee Clerk)]: Madam Chair, that concludes your business.

[Supervisor Connie Chan (Chair)]: The meetings adjourn.