San Francisco Government SmartTranscripts:

[Supervisor Connie Chan (Chair)]: Good morning. The meeting will come to order. Welcome to the 02/25/2026 meeting of the Budget and Finance Committee. I am supervisor Connie Chan, chair of the committee. I'm joined by Vice Chair Supervisor Matt Dorsey and member Supervisor Denny Sauter. Our clerk is Brent Halipa. I would like to thank Jamie Averchury from Essa gov TV for broadcasting this meeting. Mr. Clerk, do you have any announcements?

[Brent Jalipa (Committee Clerk)]: Thank you madam chair just a friendly reminder to those in attendance to please make sure to silence all cell phones and electronic devices to prevent interruptions to our proceedings should you have any documents to be included as part of the file they 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 in 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 invite you to fill out a comment card and leave them on the tray by the television chair left by those doors if you wish for your name to be accurately recorded for the minutes alternatively you may submit public comment in writing in either of the following ways e mail them to myself the budget and finance committee clerk at brent.jalipa@sfgov.org if you submit public comment via e mail it will be forwarded to the supervisors and also included as part of the official file You may also send your written comments by a U. S. Postal service to our office and City Hall at 1 Doctor Carlton B Good Look Place Room 244 San Francisco California 94102 and finally madam chair items acted upon today are expected to appear on the board of supervisors agenda of March 3 unless otherwise stated. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you and Mr. Clark with that please call item number one.

[Brent Jalipa (Committee Clerk)]: Yes item number one is an ordinance amending the health and business and tax regulations codes to revise the definition of a mobile food facility permit had definitions for compact mobile food operations mobile support unit and permitted auxiliary conveyance permits to reflect recent amendments to the California retail food code revised existing definitions of various other terms to reflect state law definitions in that code and expand the definition of stadium concession to include foods facilities in stadiums with a seating capacity of 5,000 or more established annual permit and planned check fees for auxiliary conveyance compact mobile food operation and mobile support unit permits and waive license and permit fees for compact mobile food operations amending the public works code to include a definition for compact mobile food operations and to expand the department of public works street vending authority to include regulation of compact mobile food operations and to require that department to consult with the department of public health and the fire department when issuing rules and regulations that regulate street vendors. Madam Chair.

[Supervisor Connie Chan (Chair)]: Thank you Mr. Clark and with that, though, I know that supervisor Jackie Fielder has requested a continuance until next week, March 4, for their ongoing dialogue to really improve this legislation so that we can make sure some of our vendors, especially the really micro vendors, will not be left behind and be punished due to the restriction of cooking facility with this legislation. So that she has recredit for this requested for this to continue to next week, March 4. And with that let' go to public comment on this continuance.

[Brent Jalipa (Committee Clerk)]: Yes we are now opening public comment for this item number one if we have any members of the public wish to address this committee regarding the continuance. Madam Chair we have no speakers.

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. Colleagues, I would like to make the motion to continue this item to our next budget and finance committee meeting on March 4. A roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion to continue this ordinance to the March 4 meeting of this committee, vice chair Dorsey Dorsey aye member sotter aye Sauter aye chair Chan aye we have three ayes

[Supervisor Connie Chan (Chair)]: the motion passes and mister clerk please call item number two

[Brent Jalipa (Committee Clerk)]: yes item number two is a resolution approving and authorizing the director of property on behalf of the san francisco employees retirement system to execute a lease agreement with double wood investment inc as landlord for use of a portion of 111 Pine Street consisting of approximately 47,000 rentable square feet for an initial term of ten years with two five year extension options to renew in twelve months of rent credit with an annual base rent of approximately 2,000,000 with 3% annual increases as efforts to contribute up to approximately 4,700,000.0 on tenant improvement effective upon approval of the resolution and execution of the lease by the director of property and authorizing the director of property to execute any amendments make certain modifications and take certain actions that do not materially increase the obligations nor liabilities to the city do not materially decrease the benefits and are necessary or advisable to effectuate the purposes of the lease agreement for this resolution.

[Farnaz Farman (DPH – Director, Children, Youth & Family System of Care, Behavioral Health)]: Thank you Mr. Clerk and vice chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you chair Chan. This lease has raised some policy questions for me including whether or not it is consistent with the Civic Center area plan, which I wish had been addressed earlier in the process. But the good news is we are having productive conversations on some of those policy considerations now. So I would like to make a motion to continue this item to the call of the chair.

[Supervisor Connie Chan (Chair)]: Sounds good and so let' go to public comments on the continuance.

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

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. How would you let's that was the motion. Correct? And so let's roll call on the motion to continue to the call chair.

[Brent Jalipa (Committee Clerk)]: And on that motion by vice chair Dorsey, do we continue this resolution to the call of the chair? Vice chair Dorsey? Dorsey aye member sotter aye chair Chan

[Supervisor Connie Chan (Chair)]: aye

[Brent Jalipa (Committee Clerk)]: we have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mr. Clerk please call item number three.

[Brent Jalipa (Committee Clerk)]: Item number three 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 ymca of san francisco to provide mental health and substance use disorder prevention services to children and youth to extend the term by one year from 06/30/2027 for a new term of 01/01/2018 through 06/30/2028 and to increase the amount by approximately 1,600,000.0 for a new total not to exceed amount of approximately 11,600,000.0 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 effectuate the purposes of the agreement over this resolution. Madam Chair.

[Supervisor Connie Chan (Chair)]: Thank you and we have department of public health here.

[Farnaz Farman (DPH – Director, Children, Youth & Family System of Care, Behavioral Health)]: Good morning. Thank you chair Chan, vice chair Dorsey, and supervisor Sauter for taking the time to hear this item today. My name is Farnaz Farman and I' the director of the children youth family system of care and behavioral health of the department of public health. Next slide please. The the department of public health seeks approval to extend its agreement with ymca of San Francisco for outpatient mental health services to children, youth, and families. This amendment extends the term one year from 06/30/2027, to 06/30/2028, for a total of ten years, 07/01/2018, through 06/30/2028. The amendment increases the not to exceed amount by just under $1,600,000 bringing the total to just under $11,600,000 In terms of the contracted services, the annual award for this fiscal year is $806,683 and this includes serving 111 unique youth. This includes outpatient specialty mental health services to children, youth, and families on Medi Cal and educationally related mental health services or IRMS on behalf of the San Francisco unified school district. Services include comprehensive assessments, individual and family therapy, case management, and is predominantly delivered in the communities, such as schools' homes, family resource centers, and YMCA sites. Next slide, please. As you can see on this slide, their office is located in the Japantown area, but as noted, services are predominantly delivered throughout the community. For example, the services for their services, they're delivering services across 17 different San Francisco Unified School District sites, as visualized on this map. It may look like there's only 16 pin drops, but in the Civic Center there's two campuses close to one another. Next slide, please. In conclusion, DPH agrees with the BLA recommendations and respectfully requests approval of this item. But before we do that, we have several amendments to introduce correcting the legislation so that it accurately reflects the contract, which focuses on outpatient mental health services. On page one, lines one through three, we would like to delete substance use disorder prevention services. On line one I'm sorry. On page one, lines five through eight, we are deleting substance use disorder prevention services. On page one, line nine, we are deleting the word January and adding the word July. On page two, lines two and three, we are deleting substance use disorder prevention services. On page two, line five, we would like to delete January and add July. And on page two, lines nine and ten, we are deleting substance use disorder prevention services. Thank you.

[Budget and Legislative Analyst (staff presenter)]: Item three is a resolution that approves an amendment to DPH's agreement with YMCA urban services. The amendment extends the agreement through June 2028 and increases the contract value to $11,600,000 Under this contract, DPH funds YMCA to provide outpatient mental health services to youth, primarily in the Bayview, Petraro Hill, and Western Edition neighborhoods. The contract serves about 50 clients per year. And we show the performance of the contract on page 10 of our report. And then you can see the fiscal impact of this amendment on page 12. This is about an $800,000 a year program. Only 30% is funded by the general fund. The remaining costs are funded by Medi Cal. And we do recommend that you adopt the changes to the resolution to correctly reflect the contract.

[Supervisor Connie Chan (Chair)]: Thank you. And we do see that it was contracted for 50 clients served, but then they exceeded the unduplicated clients served. I really do appreciate the services. It was like 50, and then they end up serving 76.

[Farnaz Farman (DPH – Director, Children, Youth & Family System of Care, Behavioral Health)]: In fiscal year 'twenty four, 'twenty five, yes.

[Supervisor Connie Chan (Chair)]: Yeah, unduplicated ones. And so I do appreciate the willingness to commit to the service with the city for the city. And so with that, let's Supervisor Sauter.

[Supervisor Denny Sauter (Committee Member)]: Thank you, Chair. Can you give a little more detail on the shortfall and why we got into this situation? Because it seems like a pretty sizable number.

[Farnaz Farman (DPH – Director, Children, Youth & Family System of Care, Behavioral Health)]: Sure. You'll see sort of the table of funding across different fiscal years on page 12 of the BLA report. And in part, the funds that are needed for it to cover twenty six-twenty seven are in part because of increases of cost of doing business. But also between fiscal year twenty four-twenty five to fiscal year twenty five-twenty six, you'll see an increase of about $191,000 We shifted money from a different contract they have serving probation youth due to low referrals and difficulty with engagement and a decreased need in that contract, but an increased need in the outpatient programming. Money shifted into this outpatient contract in 'twenty five, 'twenty six. So in part, there's the shift to this funding. In part, it's cost of doing business increase.

[Robert Icardi (SFMTA – Off-Street Parking, Parking & Curb Management Team)]: Okay.

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

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

[Supervisor Connie Chan (Chair)]: Seeing no public comments, public comment is now closed. I want to continue to encourage Department of Public Health to diversify its funding sources outside of city funding. Good to see that you have increased the Medi Cal, state, and federal reimbursements. And with that, I'd like to move to first amend this item number three, as proposed by Department of Public Health, changing the date from January to July in strikeout, substance, and use order prevention, and to move this amended item to full board with recommendation. A roll call, please.

[Brent Jalipa (Committee Clerk)]: And on that motion to accept the amendments as so offered by the department and that we refer this resolution to the full board with recommendation as amended. Vice chair Dorsey. Aye. Dorsey aye. Member Sauter. Aye. Chair Chan? Aye. Chan, aye. We have three ayes.

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

[Brent Jalipa (Committee Clerk)]: Item number four is a resolution authorizing the treasure island development authority to execute the standard agreement with the California department of housing and community development under the affordable housing and sustainable communities program for a total award of approximately 45,100,000.0 including 30,000,000 disbursed by hcd as a loan to icy four point three family housing lp for a 100% affordable housing project at Treasure Island Parcel Icy 4.3 and approximately 15,100,000.0 to be dispersed as a grant to the authority for public transportation improvements on Treasure Island for the period starting on the execution date of the starting agreement through 03/30/2046 and authorizing the authority to accept and expend the grant of approximately 15,100,000.0 for transportation streetscape and pedestrian improvements and other transit oriented programming and improvements as approved by hcd. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you. And we have the city administrator's office here. But before we start, Vice Chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, Chair Chan. I just wanted to say that Treasure Island, which I represent, represents something that has been sadly too rare in San Francisco for several years now, and that's forward momentum. This $45,000,000 state investment reflects the kind of long term discipline growth strategy that really benefits our city and that our city needs. This item advances a 150 unit, 100% affordable housing project. Just as importantly, it invests in the infrastructure that makes the housing viable and sustainable, including ferry service, pedestrian improvements, bike ways, stronger transit connectivity. There are challenges infrastructure build out, long term resilience, the pace of development. But that's really precisely why this kind of state partnership matters. It strengthens the foundation that the neighborhood needs to grow. And at a time when we've been grappling with population decline and affordability pressures and young people leaving San Francisco, I think Treasure Island really is telling a very different and exciting story. It's one of the few neighborhoods that's actually not just growing, but growing younger. The Chronicle did a feature story on this recently that Treasure Island now has the highest percentage of residents between the ages of 18 and 44 of any neighborhood in the city. I think the median age is just 30. There's a lot of use of the ferry. So this is really people are really fulfilling the promise of what Treasure Island is supposed to be. And I think if San Francisco is serious about making the progress into the twentieth century that we need expanding affordable housing, building neighborhoods that are sustainable, transit oriented, this is exactly the kind of work that we need. So I want to express my gratitude to everybody who has worked on this. And I'm not going to start with the acronyms. You all know who you are, because I know I will leave somebody out. The one thing about Treasure Island is that it has been thirty years of work and a lot of moving parts and a lot of agencies. But I will say, I will single out a thank you to the California Department of Housing and Community Development for this important grant. And thank you for everybody who's participating in it. Thanks.

[Supervisor Connie Chan (Chair)]: Thank you, Vice Chair Dorsey. And with that, City Administrator's Office.

[Jamie Krueben (Acting Director, Treasure Island Development Authority)]: Good morning, Chair Chan, Vice Chair Dorsey. Thank you for your kind words. And Supervisor Soder, my name is Jamie Krueben. I am the acting director for the Treasure Island Development Authority, or TIDA. I'm here to present this resolution on behalf of TIDA, as well as the office of the city administrator. The item before you is to authorize TIDA to execute a standard agreement with the California Department of Housing and Community Development, or HCD, under the Affordable Housing and Sustainable Communities Program, or ASIC, for a total award of $45,109,140 the award itself is made up of two components the first is dispersed as a loan in the amount of $30,000,000 to fund improvements that will support the development of 150 apartment units including 58 new affordable units 30 transition units and 61 replacement units planned for parcel plan for the parcel IC 4.3 on Treasure Island The second component includes a grant of $15,109,140 to support housing related infrastructure, electric ferry operations, 10 new bus shelters, over 1.5 combined miles of walkways and bikeways, as well as program costs. The resolution before you also authorizes TAIDA to accept and expend this grant portion of the total award. As I'm sure many of you are familiar with this program, as a reminder, the affordable housing sustainable communities, or ASIC, grant program is developed and administered by the state of California's strategic growth council and department of housing and community development. The AISC program targets implementation of transportation, housing, and infrastructure. It provides grants and loans of up to $50,000,000 for disadvantage for sorry, for development of projects that achieve greenhouse gas reductions and benefit disadvantaged communities, connecting locations to employment centers and key destinations via low carbon modes of transportation. TADA applied jointly for this grant with IC four point three Family Housing LP, who will receive the $30,000,000 loan portion of the award and lead development of this project. Slide four shows the location of the parcel IC 4.3 on Treasure Island. And again, this grant will support the development of 150 permanently affordable family apartment units, 58 which will be affordable, 30 which will be transition, and 61 replacement units for residents and housing programs that were present on Treasure Island prior to 2011. This site is planned to be developed by John Stewart Company in partnership with Catholic Charities who will operate a childcare facility on the Ground Floor. In terms of timeline, the funding application notice was issued by HCD in March 2025. TIDA jointly filed the application with IC four point three Family Housing LP, which was approved by the Board of Supervisors in April 2025. On December 10, HED issued a conditional award letter, which triggered the process of tied up board approval, which occurred on 01/14/2026, which leads to our final step today, as we respectfully ask this committee for your consideration and approval of this resolution. The construction of the IC 4.3 project on Treasure Island is anticipated to begin in Q2 twenty twenty seven. With permission of the chair, we have submitted some non substantive amendments to the file, were distributed today. These non substantive amendments were directly provided by HCD state grant staff and are required to be made to this approving resolution. I'd be happy to read these amendments into the file, if you prefer.

[Supervisor Connie Chan (Chair)]: Please.

[Jamie Krueben (Acting Director, Treasure Island Development Authority)]: Great. So on page one, line five, adding S to standard agreements. Also on page one, lines 10 through 13, adding the phrasing approving the standard agreements and removing the phrase of the standard agreements and adding the phrase acknowledging the expenditure deadlines are set forth in the standard agreements. On page three, line one, removing the word has after tied a board of directors. On line five, changing the word finds to found. On page four, lines nine and ten, removing the phrase that the city and county of San Francisco acting by and through and the reference to the city. Also on page four, lines 21 through 22, adding the word the and removing the word funds after AISC program. On line five, lines one through four, including the freezing AISC program loan award across lines one and two, as well as line four. On lines nine through 11, adding the whereas clause reading whereas the AISC program loan award and AISC program grant award expressly identified above will here and after jointly be referred to as, quote, AISC program award. On lines 20 to 21, shifting the reference to city to the authority and adding the word award instead of funds lines 24 through 25 adding the reference one or more STD two thirteen and removing the phrasing the ASIC program funds are to be used for allowable capital asset project expenditures identified in the application package and program guidelines. On page six, lines 10 through 12, adding in the phrasing one or more STD two thirteen, comma, standard agreements for a sum not to exceed the full amount of the AISC program award, and execute and. Line 13, adding the word award. And lastly, on page seven, changing the reference to Robert Beck, treasure island director, who has retired as of the January, to myself, Jamie Krueben, as acting treasure island director. Those are all the amendments to read to the file happy to answer any questions you may have related to this grant or the project.

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

[Brent Jalipa (Committee Clerk)]: Yes we' 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)]: Thank you seeing no public comments public comment is now closed.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, Chair Chan. I would move to adopt the amendments that the title acting director read into the record and then forward this resolution as amended to the full Board of Supervisors with our positive recommendations. And I should add how much I appreciate your presentation. Thanks so much.

[Supervisor Connie Chan (Chair)]: Thank you and with that a roll call please.

[Brent Jalipa (Committee Clerk)]: And on that motion by vice chair dorsey to amend this resolution to accept the amendments as so offered by titer and to refer the resolution to the full board with the recommendation as amended. Vice chair Dorsey. Aye. Dorsey. Aye. Member Sauter. Aye. Sauter. Aye. Chair Chan. Aye. Chan. Aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mr. Cook, please call item five and six together.

[Brent Jalipa (Committee Clerk)]: Yes. Item numbers five and six are resolutions approving contract amendments with the following and the city and county by and through the municipal transportation agency for the management of off street parking facilities under the jurisdiction of the port both effective on 03/01/2026 with no changes to the term of 02/01/2023 through 01/31/2032. Item five approves the third contract amendment with imco parking llc for the management of two off street parking facilities located at Pier 30 And 32 or through 32 and Pier 70 for an increased amount not to exceed 12,000,000 for a total contract amount not to exceed $219,000,000 and item number six approves the second contract amendment with LAZ parking California LLC for the management of two off street parking facilities located at Triangle Lot in Seawall 321 for an increased amount not to exceed 9,000,000 for a total contract amount not to exceed 189,000,000. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you and today we have sfmta here.

[Robert Icardi (SFMTA – Off-Street Parking, Parking & Curb Management Team)]: Morning Chair Chan, Vice Chair Dorsey, Supervisor Sauter, Robert I. Cardi, off street parking for the Park and Curve Management Team. We're here today to amend our parking operator contracts to add two locations to each for first and foremost twenty twenty one-sixty four-one for group a last parking California LLC and a third amendment to contract twenty twenty one-sixty four-two for group B mco parking LLC. Contract history. We had RFP in 2022, which the two contracts were awarded as of 02/01/2023, for both contracts A and B. Both awarded contracts were five year with two two year options. And the both contracts have an allowance for us to add or to subtract up to three locations throughout the life of the contract. Currently for Group B, we have already added Music Concourse in December 2024. So that's really the first one we've added to it. The proposed amendment, as I mentioned, providing two new locations that will increase contract A, or twenty twenty one-sixty four-one, by 9,000,000, not to exceed 189 for the life of the contract, And for contract twenty twenty one-sixty four-two, amending two locations to the EMCO parking one and maximizing the total value by 12,000,000 and not to exceed $219,000,000 A little history. We have an ongoing partnership with the court with the S. Port and our on street division, which manages all their Embarcadero parking on street as well as enforcement. And back in 2022, S. F. Port reached out to our off street team to look into a potential partnership expanding parking across onto their on street or sorry, off street meter slots. And at this time SFORT, after much review with our team and their staff, is to add four locations: Seawall Lot 301, aka the Triangle Lot Seawall Lot 321 to the Group A contract and Pier 3032 and Pier 70 to Group B contract. And the remaining Austrian locations, as you see in the picture, would be managed by our meter lot portfolio, similar to the rest of the meters throughout the city. Overall benefits for this partnership is as SFR currently does not have any control over their lots, it's currently through a lease through other vendors. And with our model, they'll be able to have direct control on maintenance oversight or to and overall functionalities. We at the SFMTA have our off street expertise department with our team throughout the last ten years of my tenure, and it would be better for us to do rent from them instead in house. Also, potential increase in enforcement revenue, which the Port does not receive for any of the off street locations. The ESSA Port Authority approved it back in November on their board, and our MTA Board approved it in December, earlier last or at the end of last year. And, with that, I can wait for any questions.

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

[Budget and Legislative Analyst (staff presenter)]: Items five and six are two resolutions that amend MTA's contracts for parking lot and garage operators. The LAZ contract is getting an increase of $12,000,000 and the EMCO contract is getting an increase of $9,000,000 with no change to the terms on either contract. The purpose of the amendment is to add four port owned parking lots to these contracts so that they can be managed by MTA. And we showed the fiscal impact on page 19 of our report. You can see that after the switch of operators, port is still expecting to get about $4,000,000 a year in revenue from these four lots collectively. That's comparable to what they're getting now from the information we got from the port. And that over the next six years, the remaining term of the contracts, the lots will generate about 23,800,000 in revenue for the port, for the Harbor Fund. So it's not a general fund revenue. And the purpose of the changes is really to have more direct control over our parking lot operations under the contracts. MTA can approve the operating budget of each lot each year. And so it provides the city additional, like I said, control over the operations at those sites. We do recommend approval of item six and five.

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

[Supervisor Denny Sauter (Committee Member)]: Thank you, Chair. I had a question about the Triangle lot specifically. As I'm sure you know, there's a lot of ideas circulating in the Fisherman's Wharf community about the broader area and then about that lot in particular. I just want to understand, you know, with this, I think you're saying we have more control. I mean, does that amount to more flexibility if the lease were to be ended early or if there was other plans that went forward to use that space for use other than parking? How do these changes impact that? And then what is the contract term of this that we're looking at?

[Robert Icardi (SFMTA – Off-Street Parking, Parking & Curb Management Team)]: Yeah. So to defer about future things, overall for parking with the way that the MTA would oversee, we'd have direct control with the port about if there's certain events or certain things going on, whereas right now it's a lease. But to your question regarding sort of expansive use or the plan in the future for that lot, I think I would defer to my partners at the SAT Port to answer that question.

[Supervisor Denny Sauter (Committee Member)]: Thanks.

[Kimberly Beale (Port of San Francisco – Assistant Deputy Director for Real Estate)]: Good morning, Chair Chan, Supervisor Sauder, Supervisor Dorsey. My name is Kimberly Beale. I'm the Assistant Deputy Director for Real Estate with the Port. And in response to your question, this will allow us more flexibility. As it was mentioned, currently what we have are expired leases, which have term that we are required to then go through certain steps if we were to terminate. And with the partnership that we have with MTA, or would have with MTA through this, again, it would allow us more flexibility than to, as you're aware, with some of the things that are proposed for that lot, again, us flexibility to then either reduce the size of the lot to accommodate some of those uses, or when we get to the larger project, then actually then being able to terminate.

[Supervisor Denny Sauter (Committee Member)]: Very good. That's helpful. Thank you.

[Kimberly Beale (Port of San Francisco – Assistant Deputy Director for Real Estate)]: You're welcome.

[Supervisor Connie Chan (Chair)]: Thank you. Just kind of curious, this sort of contract between and I think I have through the BIA just kind of help us understand the ports approach along with SFMTA in partnership you're managing the entire I believe 11 lots and out of which according to the BLA report seven of them are going to have pay station and then the four is really the two contract under the two contract that we're evaluating right now Help us understand sort of the ratio or strategy of staffing because staffing was part of also what you have in presentation. So just like how does the port manage it better with SFMTA and then now with the contractors? And just kind of help us understand a little bit more about the approach, both from the port and SFMTA.

[Robert Icardi (SFMTA – Off-Street Parking, Parking & Curb Management Team)]: Sure. So the way the current contract works with these lots in particular, they're lease, their revenue split lease, 60 six-thirty three split, where essentially the port has only collects the revenue, and the operators get to do as they see fit. You know, essentially, staffing, maintenance, or whatnot is on their basic on their agenda, if not and it's up to port cannot direct directly. If it's more staffing, less staffing, it's whatever the end needs because of the expense. On the MTA model, since it's a management account for the four locations specifically to the contract, we continue with the port and manage with the operators. Unfortunately, we were not allowed to speak to the current operators of how they ran us, so our projections at the moment is based off what we saw based from afar. And as we dive in, we'd understand a little bit more, but we have the ebbs and flows of high season, low season, and with that, actually, to also correct with excuse me, all 11 locations will be seen in McKay meters. So, the current 11 set the current four under the operator contract will be metered still with enforcement, but will be still overseen staff wise by our operators, and same with any maintenance requirements or whatnot with their approval as support for any expenditures.

[Supervisor Connie Chan (Chair)]: Understood. I think that it's a long overdue conversation. Eventually, we will come back to it, and particularly this May, when SFMTA returns for the enterprise agency budget process. And

[Farnaz Farman (DPH – Director, Children, Youth & Family System of Care, Behavioral Health)]: I think that

[Supervisor Connie Chan (Chair)]: we're gonna have a bigger conversation actually around SFMTA approach to revenue generation and revenue approach to parking garages all across the city. And this is not about the port, clearly, but just for SFMTA notes, just something to think about, that when you return, love to have a more in-depth conversation about the group A and group B that you have broken into according to the budget and analyst report and just help us a little bit on I'm just going to throw it out there for example the fifth admission parking garage what we know previously generated annually of $25,000,000 before the pandemic but then during the since pandemic it's been dropping to you know $5,000,000 of tax revenue per year and just wanted to understand better about the approach and along with these contractors I I know that they it's really within these two which one is which I can't quite remember all but I look forward to that conversation.

[Robert Icardi (SFMTA – Off-Street Parking, Parking & Curb Management Team)]: As do I.

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

[Brent Jalipa (Committee Clerk)]: Yes we're opening public comment for both these item numbers five and six if we have any members of the public who wish to address this committee.

[Mark Gleason (Teamsters Joint Council 7; Local 665)]: Good morning supervisors mark gleason with kingpsters joint counsel seven our affiliate local six sixty five has members at these locations performing both revenue and maintenance work and to that end we support this amendment it' a good place for our members to continue to find their work and their employment there. Thank you.

[Brent Jalipa (Committee Clerk)]: Thank you much mark gleason. Seeing no other speakers madam chair that completes our queue.

[Supervisor Connie Chan (Chair)]: Seeing no more public comments public comment is now closed. Colleagues I would like to send these two item to full board with recommendation. Roll call please.

[Brent Jalipa (Committee Clerk)]: And on that motion to refer both resolutions to the full board with the recommendation vice chair Dorsey

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

[Brent Jalipa (Committee Clerk)]: Dorsey aye member sotter 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. Mister clerk please call item number seven.

[Brent Jalipa (Committee Clerk)]: Item number seven is an ordinance appropriating 4,000,000 from the general city reserve to the department of emergency management for expanded street conditions staffing and 150,000 from the general city reserve to the human rights commission for community initiatives in fiscal year 2025 to 2026. Madam Chair.

[Supervisor Connie Chan (Chair)]: Thank you and Ms. Sophia kitler.

[Sophia Kittler (Mayor’s Budget Director)]: Good morning chair Chan members of the committee. Thank you so much for having me today. Sophia Kittler from the mayor's budget office. The item before you I will have a brief presentation. The item before you is a $4,150,000 supplemental from the general fund reserve that is meant to establish an operational posture basically from October through March as kind of like a not quite a pilot program, but kind of a short term sprint on understanding what resources are necessary to maintain increased levels of staffing for response to night markets and special events downtown. We found we kind of back in I'm gonna go on the storytelling venture here. Starting back in October, we kind of looked at the calendar and realized that while we had we believed we had budgeted enough within our individual departments to do normal staffing levels and and had considered special events, We were looking at how many special events were coming forward and the amount of national attention that we were getting as a city and really wanted to make sure that we had all of the resources we needed to focus on the things that were getting us bad press, for lack of a better term, but we're kind of really bringing national attention to San Francisco and in time when we really needed the city to shine at its best. In particular, I think the national attention on our local drug markets in supervisor, two of your districts actually was something that I think we really wanted to spend a lot of focus on. But what we kept hearing from our departments is that if we pull, if we ask them to really focus on those areas, they would pull from our neighborhood commercial corridors. And that's that is, I think, what we really were trying to avoid. So what we said is for drug market response and special event response, we wanted to say, like, all right, we are giving you a little bit more leeway in your budgets to flex up staffing when when necessary for an event. This is thinking about, in particular, drug markets. We were thinking about the swing shift. We had found that the police department had done a a really spectacular job of of holding night markets until the end of a shift. And then as the shift turned over at the police departments, we'd kind of have like a bunch of chaos come back. And so we were asking like, all right, what can we do on overtime on a short term basis to kind of flex that couple of hours and then bring DPW in, for example, a little bit earlier than their normal shift would be also perhaps on overtime or on increased staffing to kind of like hold that zone in kind of those critical hours. And so that's how we started thinking about the operational changes on drug market response and then replicating that in certain key areas as we looked at the special events calendar. October through March I think I have a calendar dates here kind of marks like when we started getting an increased amount of national attention on these issues through holiday safe shopping, JPMorgan health care conference, the Super Bowl, and Lunar New Year parade. Kind of looking at these things where we expect a huge number of people, we express a large we expect a large influx of of national attention. And we really wanted to make sure that we had both our community corridors getting the baseline resources that they have come to expect and they deserve and not sacrificing that in order to make sure that we kind of had our increased staffing. The way the mechanics of this are working and I will get to the $150,000 for the agency for human rights shortly, is we put it in general fund reserve. And instead of giving it directly to departments just kind of as a general bunch of money for their operations. We put it in the DMACC project funds, not because we expect the Department of Emergency Management to actually administer or spend these funds, but because DMACC is the organizational body that determines those staffing levels and what is necessary for those flexes. And so we said, all right, if we kind of have an agreed upon policy body that says this is the level we are needing, then as they charge against that as they charge against that project, we can validate whether or not that was in fact the operational priority of that weekend and then kind of let it off of mayor's reserve as that passes. So that way it does not become just kind of like an extra bucket of funding for any individual departments. Along with that is a $150,000 addition to backfill of state grants that we lost at the Department of Status of Women. It's one that I think we will continue to evaluate in the budget, but particularly given the nature of large events like Super Bowl, we were really concerned about an uptick in human trafficking. We saw that at Super fifty. There was a huge uptick in human trafficking and sex work in San Francisco. And we really wanted to make sure that we weren't losing that critical community work right as we had kind of like this influx of visitors from out of town and kind of this, again, this attention. So that we didn't think we needed to put to DMACC. We just put that directly to HRC so that they could operationalize that quickly. So again, we think the idea was to fund a sustained operational posture to look at actuals of what was being spent and kind of compare that to the DMACC operational plan rather than just kind of giving it directly to departments. That does kind of like slow down the urgency of the timing. But it is kind of like a current year need in order to allow people the flexibility within their budgets to go meet the staffing requirement that we are asking of them. And then, as I mentioned, the other goal is to preserve baseline resources across the city. I' happy to answer any questions.

[Budget and Legislative Analyst (staff presenter)]: Item seven is a supplemental appropriation ordinance that draws from the general reserve It provides $4,000,000 to the Department of Emergency Management and $150,000 to the Human Rights Commission. The $4,000,000 will, as stated, go to DEM to help the mayor's office validate expenditures that have been incurred by the Public Works Department related to illegal vending and street cleaning around drug markets late at night from October 2025 through March 2026, and then extra overtime that the police department has incurred in that same time frame around those same activities. The HRC money is to extend two grants that ended in December 2025 that provide about 10 people each with about $1,000 a month as a kind of basic income. And the grants are geared towards people who are survivors of domestic violence or human trafficking. So when you draw from the general reserve, you have to put that money back into the budget next year. So any money spent now from the general reserve essentially becomes another reduction in the general fund budget next year. The balance of the general reserve this year is about $160,000,000 So that's the fiscal impact of this legislation. We note two policy considerations. One is that the definition of whether this program or intervention is succeeding, I think, is still under development. I think it would be helpful for the Board of Supervisors to request a report back from any department drawing on the supplemental funding about the effectiveness of these interventions late at night. And we have recommendations about performance metrics to track in the report. But I think that would be beneficial for all. And then the other consideration is rather than drawing on the budget reserves, you know, the departments could just do less for the remaining fiscal year, do less services in other neighborhoods for the remainder of the fiscal year to avoid drawing on the general reserve. That would be a more fiscally prudent option in my opinion. But for this reason we consider approval to be a policy matter for the board.

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

[Supervisor Matt Dorsey (Vice Chair)]: Thank you Chair Chan. So I am generally supportive. Actually, than that. I'm enthusiastic about these kinds of initiatives. And I think they're widely supported in my district. With that said, I always have mixed feelings about overtime. I know enough about law enforcement to know that even if we had a fully staffed police department and fully staffed sheriff's department, overtime is a reality because we just don't know if the warriors are going to win the title. There are things that happen running a major city, good and bad, that we have to make adjustments. I think what gives me pause whenever it's an overtime question is I don't feel good. I may feel good about the initiative, I don't feel good about asking taxpayers to spend more money on less policing because we're dipping this far into our overtime. I guess my question is, as we are making progress toward a fully staffed police department, can we expect that the overtime ask is going to be smaller in years out?

[Sophia Kittler (Mayor’s Budget Director)]: That is such a good question, supervisor. You only asked one question, but I'm going to answer two. So on your question of can we expect overtime to go down, I think that this is something that the new chief is taking seriously. And I believe that the interim chief was also focused on, and AC Lazar kind of had a a strong hold on. I think there is a certain amount of and this is to the BLA's point. Where are we asking the police to be? Some of it is is operational. You know, I think we we want to trust the departments to determine the correct level of staffing to keep the public safe. Right? And that that is what we choose a chief to do, and that is why we trust that organizational structure. And then I think the question is how do we, on those staffing questions of like the BLA report last year, right, when we're thinking about how people draw on their sick time, when they draw on overtime, when they draw on 10b, and kind of what the controls there are, I think that is something that we that that we need to continue to make progress towards. And I believe until we make significant progress on those controls and have a central thought about where we want our police to be and not have as many special events that require large scale restaffing, you know, I I don't think it'll come down. Right? I think and this is one thing that we've been seeing a lot of it. There have been a lot of large events this year, and that does require additional staffing. And the question is at what level? Right? And and at what level and with which police officer is using which time. And so I think I think it would be correct for us to expect it and to hold a department accountable for it. And then I guess the question is on what timeline is it realistic? And that is I think what we're trying to figure out. On the question you did not ask, but I will answer anyway, is that is I think it is those exact considerations that led us to put this in the DMAC budget. Budget. Right? And I think what we really we really did want to say, we do understand that you cannot be three places at once. We do not want this to be yet another ambassador contract. Right? We think that this is work that should be done and that needs to be done by city employees, both on the DPH like on the DPW side, on the police side, potentially on DPH side if that's the intervention that we determine is necessary. And we wanted to have some of that flexibility. But we also wanted that accountability of what specifically was this overtime for. Does it line up with this DMAC operation? And where else might might they have been drawing from otherwise? So that it is not just here's another $4,000,000 for your overtime to be wherever it is that you need to be. Right? This is something that we really wanted a level of control and accountability over. But it was a policy priority for us during this period. Does that approach an answer to your question, I

[Supervisor Matt Dorsey (Vice Chair)]: think so. I guess what I would like, one of the things that I have prioritized in my first term was getting the police department closer to full staffing. Yes. And I think, I actually, it was the, I think, Norman Yee and the board before me did a lot of great work that should have been done probably thirty years ago to have a methodology for how we developed How many police officers should we have? Many of these issues that we're grappling with, these are good problems to have. We've got a Super Bowl and JP Morgan and great events. And more people are coming to our Lunar New Year parade. That's all great. I like that we're policing that. It does feel to me that there is an inherent inefficiency when we just don't have I think we're still just a little bit above 75% staffing based on the recommended staffing level.

[Budget and Legislative Analyst (staff presenter)]: It would make

[Supervisor Matt Dorsey (Vice Chair)]: me feel good to know that while this is not an efficient use of taxpayer dollars now, we're getting to a better place where we're ultimately, I would like to think that we're not going to have these overtime asks that are this big when we have a fully staffed police department. That's

[Sophia Kittler (Mayor’s Budget Director)]: I share your aspirations.

[Supervisor Matt Dorsey (Vice Chair)]: Okay. Do I have cause for optimism in my lifetime?

[Budget and Legislative Analyst (staff presenter)]: It will take

[Supervisor Matt Dorsey (Vice Chair)]: it depends.

[Unidentified speaker (brief interjection)]: It's a good category.

[Budget and Legislative Analyst (staff presenter)]: I did speak to the police department about this very question. Their most recent academy was high. It was like over 55 people. And their actual full duty staffing has increased this quarter, which is the first time that's happened in the past couple of years. So I think that the trend right now is good. And as that staffing goes up, the overtime should go down. And I agree that, you know, as we stated in our audit, there are many areas of control that could be applied and implemented in the police department to bring down that overtime in the interim. Okay. Great. Thanks.

[Unidentified speaker (brief interjection)]: Thank you.

[Supervisor Connie Chan (Chair)]: Thank you, vice chair Dorsey. We want you to live long and prosper. It's like a Chinese New Year thing in me. I'm like, live long. But I I think we will have this conversation. We understand that, you know, you're going through your budget process right now, which we appreciate. We'll go into the next conversation, which is really your budget instruction. And I'm eager to hear that. I there was a part of me that we had this conversation already. You know, what is the reimbursement rates actually and and or an MOU agreement that looks like with the host committee, like for the Super Bowl? Can you elaborate just a little bit on that?

[Sophia Kittler (Mayor’s Budget Director)]: I can, although I am not authorized to speak about it. So I'll speak in the terms that I know to be true rather than any details that I think might be true. The city has been in talks about an MOU with the Super Bowl host committee, and we do expect an additional infusion of money to help pay for the expenses.

[Supervisor Connie Chan (Chair)]: And so like what is so I mean clearly it will be retroactive. Yes. And you know it's it's been a while since we've been planning this. I think what I do look forward to having is written record of the status of that Mhmm. To be included in this overtime spending. And I I think let me also just put it this way. It's not just with the Super Bowl but any of these events that you're listed to say as a example of why like is it with the San Francisco Chamber of Commerce for the holiday shopping or is it with JPMorgan Chase is the Lunar New Year like which is there's a whole list of sponsor like what do those kind of contribution actually look like what those conversations been look like and how sort of the staffing spread across among them look like do we actually end up spending more time and more staffing for Super Bowl then and Lunar New Year parade than we would for the holiday shopper which I assume so so sort of even out and what that will look like I think that I am looking forward to see a bit more analysis if possible. I am not stopping this supplemental today but I think that it will be retroactively like if we have some sorts of one pager indicating the approach indicating sort of like the the staffing but potential reimbursements agreements that we could land I would appreciate it before next week Tuesday March 3.

[Sophia Kittler (Mayor’s Budget Director)]: I will work on Monica.

[Supervisor Connie Chan (Chair)]: Thank you and then we will go into the next two items and then help us have a bigger picture about budget overall. You do or you had, I believe, introduce another supplemental for overtime staffing. That one is specifically for SFPD, which I believe we budgeted roughly about 30,000,000 or $31,000,000 last year for the entire fiscal year. And I believe what you have introduced is roughly about $34,000,000 So it's a little

[Sophia Kittler (Mayor’s Budget Director)]: But that is a trend. That is revenue neutral. So that is not a draw on the general funds. That is shifting dollars from within salaries. Yes.

[Supervisor Connie Chan (Chair)]: Yeah. Which is good for SFPD. I think you and I have some we were both skeptical, but we want to be cautious optimistic. And so I that we can so at first, was thinking kinda combine the two com this this one and that together, but I think that it is best that we do not. But I I think that I do expect similar to what Vice Chair Dorsey has indicated, I think what we're going to expect for the budget that's upcoming is then how do we be inclusive. This should be the norm. And it's not a it shouldn't be coming back for supplemental. But I do understand you're in a tough position because everything, it's not norm right now. So let's go to public comment on this item. Thank you.

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

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

[Brent Jalipa (Committee Clerk)]: And on that motion to refer to the full board with recommendation, Vice Chair Dorsey. And Dorsey, aye. Member Sauter? Aye. Chair Chan. Aye. Chan aye. We have three ayes.

[Supervisor Connie Chan (Chair)]: The motion passes. Mister clerk please call item eight and nine together.

[Brent Jalipa (Committee Clerk)]: Yes item number eight is a hearing on the mayor's budget instructions for fiscal years 2026 through 2027 and 2027 to 2028 and item number nine is our hearing on the city and county' joint report and the five year financial plan update for fiscal years 2026 to 2027 through 2029 through 2030. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you would it be problematic if we were to also call item 10 which is really the controller six months budget report I'm just trying to understand. This is the mayor's budget instruction and then it's a joint report for our five year and then it's a controller's report for the six months. It's all actually inclusive about budget projection. So I don' see anybody objecting to it. Please also call item number 10.

[Brent Jalipa (Committee Clerk)]: Yes item number 10 is a hearing to discuss the controller six month budget status report for fiscal year 2025 to 2026. Madam chair.

[Supervisor Connie Chan (Chair)]: Thank you, mister clerk. And so with that, we start off with, again, our May mayor's budget directors, miss Sofia Kitler.

[Sophia Kittler (Mayor’s Budget Director)]: Thank you, chair Chan, members of the committee. I'm somewhat pleased to present our joint report update followed by how our budget instructions and how we responded to those. A high level summary, our fiscal outlook is not so good. The rate of expenditure growth in our city far outpaces our general fund revenues. We have a two year nine thirty six as of the joint report issuance in December. We had a two year $936,000,000 two year deficit, which is approximately $300,000,000 in year one growing to $6.40 in year two. Specifically, our expenditure growth projections, which we will get into the details of later, grow by approximately $1,800,000,000 over the next four years by 2,030, while revenue growth is expected to increase by only $617,000,000. And in short, the mayor's direction to departments was that we needed to cut an approximately $400,000,000 of annualized spending through restructured service delivery and targeted program elimination. I will start with the fiscal outlook and kind of a debrief of the five year financial plan updates. So this is a visualization the deficit effectively and our revenues and growth. So as you have heard me talk about in this chambers before, the mayor has a large focus and and and kind of my mandate from his first day in office has been to think about how to reduce the structural deficit. And last year, in a series of very challenging budget choices, we were successful in reducing around $300,000,000 out of the then 1 ish billion dollar structural deficit. The controller's revenue projection was between 250 and $300,000,000. And so that is, as you see the projection of the cost line, that is the red is our projected cost growth over the next four years. A quick moment on this. When we project costs, we are effectively saying like if you take the city as it is operating currently and make no policy choices other than what has already been made, it is a status quo projection. Right? And so it assumes the current level of staffing with the known level of of increases. It does not assume any kind of like major policy shifts in the five year prudential report. And then we look at the controller's office does their revenue projections, which they update periodically. And then the exercise of the budgets is to close the gap, but is to make those policy choices that would bring spending in line with revenues. On this graph, the dotted black line is where the projection would have been at the end of last year were it not for HR1. And then the blue line is our revenue expected revenue loss, mostly at DPH, but also including some at HSA, which

[Michelle Allersma (Office of the Controller)]: are

[Sophia Kittler (Mayor’s Budget Director)]: a result of the federal bill that changed, that is largely driven by medical changes. We will get into that in more detail. So as you can see, start with kind of a smaller deficit that is that is it is much smaller in year on and would have been even smaller were it not for HR one and that grows. Our our cost projections continue to grow. Our revenue loss from HR one kind of stabilizes and our revenue similarly like continues to grow but at a very slow pace. The major assumptions in the five year forecast are that we do expect strong business tax growth, but it is modest on a local basis. And I believe that I don't remember your title, but Ms. Alersma will kind of elucidate this and kind of how those revenue projections come through. But basically, we capture a percentage of global business activity in our gross receipts tax. And because there is a lot of global business activity, we've had really strong gross receipts growth at that level. But when we look at local hotel taxes, sales taxes, like local payroll taxes such as they continue to exist, the local share of what we are generating here is not growing. And so what we see is kind of like a weird tax income structure for us. We also assume we are not, pointedly, assuming a recession at this point. Right? We do assume that that taxes continue to grow, that businesses continue to grow, and that we will continue to be in in a growth environment, however slow. Revenue loss, we are assuming $300,000,000 in the in the $936,000,000 deficit. 300 of that comes from HR one. And that basically it's it's around 80 ish in year one of the budget, growing to two something in year two. We'll get to those details in a moment. But that, again, kind of stabilizes in the $202.20 annual revenue loss assumptions. We assume CPI growth on all open contracts starting from July 1 onward and then assume the cost of the contracts as negotiated. We assume a 7.2 rate of return on pension investments and a 9% health rate cost growth. So salary and benefits is one of our largest cost drivers. In general, we assume that we will begin fully funding the ICT plan by fiscal year twenty eight. And then we took the first year of the budget as passed by the Board of Supervisors last year and then add $30,000,000 in annual growth to the capital plan. So that is, I want to be clear, not fully funding the capital plan in this. And then we do, per the legislation that the Board of Supervisors passed, I think three years ago, on out years, specifically starting in fiscal twenty eight and forward, we assume a 3% increase in the cost of doing business for grants and contracts. And then we assume that we will not hit any baseline triggers, but we do assume that we will be paying out all of our baseline growth in all in each year of the budget, end of the forecast. This is a mathematical representation of what we've just been talking about but it teases out as you can see the growth in reserves. Reserves grows by as much as $275,000,000 by the end of the projection. Salary and benefits is expected to grow by as much as $829,000,000 by the end of the projection, operating costs by 300,000,000, departmental costs by $380,000,000, and state impact costs by around $2.20. We wanted to show kind of like the structural city operations up top and then we added in the state and federal policy impacts lives so we can tease out the impacts of HR one in the deficit. Specifically on HR one, so HR one is very bad for our residents and for our city budget. We estimated that between twenty five and fifty thousand San Franciscans would lose Medi Cal or Cal Fresh coverage. That could be as high as $400,000,000 revenue loss annually by 2030. And so we took what we consider kind of like a middle of the road estimates on HR one. The largest driver in revenue loss in HR one comes from eligibility loss for Medi Cal. And there are kind of three different ways we were thinking about that. The first is that there is an expanded work requirements. There had previously been a number of waivers or kind of exceptions to the work requirements in medical and a number of those were removed in HR one. We expect that that could affect as many as 35,000 individuals. There was what they call unsatisfactory immigration status. If you lose eligibility or if you were not ever you have never qualified for Medi Cal as a UIS individual, you are no longer eligible to start being on Medi Cal. And so we expect that is like another 7,000 or 8,000. And then the third big driver here is six month redeterminations. We have historically resubmitted your Medi Cal eligibility once a year. And so we kind of have a large number of case managers that do the good work of making sure that everybody submits their paperwork to stay eligible. This increases that process to every six months. And so we assume that a certain number of people will just fall off with a friction. And that doesn't mean, unless they are UIS, that they can't come back on. But for that period of time, we would not be able to submit their billing for reimbursement. Not listed here but for the record and for those who haven't spent time on this, this is not it is I really want us to think of this as a revenue loss, not as a new cost, if you will. Typically, are health programs or food programs that we are running regardless. And then we provide the service, and then we have historically turned around and billed the federal government or the states for these services. What in assuming all of these lost revenues in the deficit, we are saying we are we are assuming that this coverage continues, that people continue to get their health care coverage, that we continue to give them this food, that they continue to kind of get the benefits that come with Medi Cal and CalFresh, but that we can no longer bill the state or the federal government for it. And so it is the policy choice here and this gets to my thing about the status quo is that we continue having the same level of service that we always had, but we no longer get the the reimbursement for that money. A couple other things, we also we assume a $26,000,000 loss in the administrative cost share. The federal government had said that they would outright not pay for their cost share anymore. There is an estimated $52,000,000 administrative cost, we are assuming we lose around half of it. And that may be picked up in the state in the governor's revise. So that's one of the things that we are closely watching. And then not included in the deficit, but a mitigating factor that could take on some of this is if the Human Services Agency were to increase their eligibility workers, they would be able to keep more people on their benefits. Some of that six month friction would potentially fall off. They would be able to help get more people work and kind of keep more people on benefits. So we have some kind of proactive initiatives to try and keep as many people on their Medi Cal coverage as possible. Any questions on HR1?

[Supervisor Connie Chan (Chair)]: Yeah, I mean, think that I'm just kind of curious how you were framing it. You said something interesting. I'm just trying to understand. Yep. I I don't see it the difference, but help me understand what you said about you don't see it as a cost, but then that it but it's just simply a revenue loss Yes. That there's a policy decision. And my assumption is what you're trying to tell us is that the policy decision is it means that the city has to decide, are we maintaining the same level service which then the city will then make up for that revenue loss by maintaining that revenue loss from the federal government and by maintaining the same level of service or if because the loss of the federal revenue therefore the city now is not receiving that reimbursement, therefore will then reduce the service?

[Sophia Kittler (Mayor’s Budget Director)]: Yes. And I think I will not pretend to understand the legalities of it, and so I will frame it as a poli choice. I would say that private health care would have the option to change that policy. Right? They would be able to say, we are no longer accepting any we are not providing care to anyone who does not meet medical eligibility. I do not believe the city will make that choice. And I am not sure, and I would not put the city attorney on the spot, but I'm not sure that we would be able to do that. I think that we we have kind of like an emergency system. And and the less we are providing preventative care, we have a, you know, like a tier I can't remember the title of the trauma center, but like our emergency room kind of tends to be the receptacle for people who do not have proactive health care. And so we will be paying for it in, you know, out of this pocket or out of this pocket. And I think the policy choices, do we kind of like take our take the risk of of saying we are no longer going to, fund our community clinics, for example, where we see that people kind of go to pro get proactive care, or are we going to wait for everyone to show up in the emergency room where it is more expensive?

[Supervisor Connie Chan (Chair)]: Yeah I mean I think that is essentially I mean that is also why we had the Beelenson hearing two years or a year ago and to basically is with the recognition of potentially a medic well, Medi Cal cut or Medicaid cut overall. And that is a policy decision Department of Public Health already said. We're not if we're not receiving any more if we are getting reimbursement reduction, the city is not going to put more general fund for these types of services. So we have a Billingsen hearing. We could, but then that will be a subsequently, we can make those decisions. But we we department department of health has to it's mandated to do so. I think similarly, I would say that, like, the approach for this budget should probably roughly be kind of the same. Like, I I would expect the administration sometime in May prior like, as or as you unveil the budget to us, is that, like or or I I don't know at which point. I'm not meant I'm not dictating the terms and conditions at which point you disclose that. But I am asking that potentially to disclose the fact that this we are making these are the policy options or decisions and potentially we're making or deciding on because we no longer are receiving federal reimbursements. For example, I don't know, mental health program. There are pilots that we're doing that we don't know if it will get coverage. And therefore, we're now using general fund to cover. We could or could not receive reimbursement. And we are decided that as a policy decision that we're making that investment. Or for security, we actually have funded for security beyond the terms allowable by both the states and federal for reimbursements too. Are we going to continue with that, which is roughly about $17,000,000 a year for security programming? So I mean, think those are the conversation and policy choices that Absolutely.

[Sophia Kittler (Mayor’s Budget Director)]: I think that's a great point. The one and that I would add to that is that it's not that the services themselves in the cases of HR1 are not eligible for Medi Cal. It is the individuals, right? And so the question for us is how do we make sure that the service is provided and we're not turning away individuals, but we are trying to make sure that as many individuals stay on Medi Cal and are eligible for reimbursement. At the same time, the Department of Public Health has been looking their portfolio of services that they've been provided and trying to figure out what is eligible for Medi Cal reimbursement that we haven't been billing. Where could we pick up extra revenue that has kind of been money left on the table? And how do we think about making sure that we are getting every dollar out of Medi Cal that we deserve?

[Supervisor Connie Chan (Chair)]: Yeah. I mean, think that continuum of care Absolutely. Both for housing and care and treatments and health, those that's probably one of the biggest Yep. Like in terms of that conversation. Sorry. I I mean just highlighting the difficulty of your task.

[Sophia Kittler (Mayor’s Budget Director)]: I thank you.

[Supervisor Connie Chan (Chair)]: Which I think you already know, but I think the public should know.

[Sophia Kittler (Mayor’s Budget Director)]: I appreciate

[Supervisor Connie Chan (Chair)]: Like, this is a moment where this you may be casually talking about slide seven you're not you're not but like it's just that it seems like this $400,000,000 of revenue loss or 300 potentially 300,000,000 for another one these are these are significant in terms of the budget deficits. And that is something that I'm not gonna opine further. Mhmm. But it is for policymakers, for everyone involved, should really look at the numbers and make sure the math actually maps when we begin to tweak local tax measures and to recognize that these are like the challenges that we face. And I don't think it's going to go away anytime soon. I wish we we like you could problems off within the one fiscal year. I don't know for sure Mhmm. By the federal government. And that local policymakers has the responsibility to say what locally we could do and need to do to make sure that whatever it is that we got, I don't even know that the conversation around tax measures that, like, you know, budget neutral is enough of a conversation for us to sustain for the next two to five fiscal years. I will leave it for that. Sorry.

[Sophia Kittler (Mayor’s Budget Director)]: My apologies. No, appreciate that, chair. Thank you. The one thing I just want to underline on this because I'm not sure I spent enough time highlighting it is that so these are we have all made assumptions about who falls off. We do not know who will lose their coverage. And we have taken, again, a kind of a middle of the road assumption here. More people could lose coverage. Fewer people could lose coverage. And so that what this number ends up shaking out looking like, we will have some understanding of in kind of July and August. And then it'll be re upped every six months thereafter.

[Supervisor Connie Chan (Chair)]: Yeah. Vice Chair Dorsey.

[Supervisor Matt Dorsey (Vice Chair)]: Thank you, Chair Chan. This really isn't a question. It's more just an observation on that. One particularly vulnerable population and one that we've really been prioritizing here in San Francisco is for drug treatment. In August, The New York Times did a really sobering editorial that America was finally turning a corner on opioids until now. And the estimate is because of HR1, one hundred and fifty thousand Americans are going to lose access to drug treatment. I would argue there's probably few things that we could spend money on that are better investments than helping people get on the other side of their addiction. So it is scary. I appreciate everything that you're doing. And hopefully, in ten fifty nine days, twenty one hours, and forty minutes when the Trump administration is over, we'll be in a better place.

[Supervisor Connie Chan (Chair)]: I mean, I think that we have put dollars on reserve like last fiscal year. That is including the healthy SF, the sheeted dollars that we anticipated or projected what is the approach of the administration in tackling the deficits for this upcoming two fiscal years along with the dollars that were already put on reserve and the sheeted dollars?

[Sophia Kittler (Mayor’s Budget Director)]: We are in, as is kind of like the mayor's budget development, we are in the process of developing exactly the details of that strategy. But generally, the way we have thought about the issued dollars and the reserve of our state and federal reserve is if we look at the changes we need to make over time and when we think those changes might take effect. So for I I think of it as a smoothing mechanism, not as a as a total backstop. Right?

[Supervisor Matt Dorsey (Vice Chair)]: I don't

[Sophia Kittler (Mayor’s Budget Director)]: we do not have enough time or enough money to fully backfill all of HR one for the duration of at least the current presidential administration or beyond that should the policies stay in place. And so what we're thinking about is what are the tough choices we need to make? And then how do we smooth the effect of that over time so that it does not feel just like a massive 400 to $600,000,000 hit in a single year. And I think that's where reserves can be useful for smoothing and kind of mitigating pain. But they do not outright we could not have enough money to backfill all of this forever.

[Supervisor Connie Chan (Chair)]: Yeah, I agree. To bridge the gap, to get us to build out the runway Exactly. A bit more. You. Please continue.

[Sophia Kittler (Mayor’s Budget Director)]: Alright. A few things that are not in our projections, just a few risks. First, the state a state budget shortfall. There could be potential revenue loss if cuts to things like excess e RAF come through. Every year we have done kind of a dance with the governor's budgets on which pass throughs they continue to give us. And so depending on what the state budget looks like, we could lose additional revenue there. Federal policies like that are less related to HR one but thinking about, for example, their policies around grants and DEI. We still do get a number of grants from the federal government. Much of the language that we have seen in the NOFOs are fundamentally changing policies from how we have applied in the past either because they say, you know, this the jurisdiction may have no DEI related programming. And then we have a legal question as to what the jurisdiction is and what DEI programming is and how you track that. And so we've been tracking very closely the grants that we do and do not get. I do not have a full rundown of that right now, but I know that some we have just outright lost and some we continue to get. And it has not been uniform across the board and it is very difficult for us to predict kind of where, which individual departments will fall on any particular policy. And then assessment appeals, we continue to see declining or flat property values as people continued as appeals continue to grow on the assessments of people's individual properties, particularly in the residential. So we do see revenue risk tied up in appeal account comes. So the mayor's budget instructions, as issued in December, were that we need to cut $400,000,000 of annualized spending. Because of the shape of our deficits, we have said that what we're really trying to get to is is by year two, we need to have identified a full 400,000,000. We will go as far as is appropriate and necessary in year one. But the idea is that by year two, have really identified that for $400 But we may not have $400 in each year, just so you can anticipate what the shape of that might look like. We asked, as you know, we've had a hiring slowdown throughout the year. We have asked departments to reorganize their staffing levels to reflect current staffing. So that is effectively deleting vacancies in the system and using existing personnel to deliver the services. We want them to eliminate non core programming. We are working collaboratively with departments to think about what the reason for existence of any particular department is, how they deliver those services most effectively. And then if they have other strategic programs that help them get towards those goals but are not necessarily their core reason for existence, we are evaluating those on individual basis to kind of understand what we can't afford to do. I want to be, as I have said to departments, very clear to this committee that the elimination of a program is not an indictment of that program. It is simply that we need to make tough choices. And it is because it is either not core to what the city needs to be delivering on. And so we are using this we are trying to protect certain services rather than proactively cut others, if you think about it that way. We are looking at enforcing a span of control for management and supervisory positions, thinking about how you have efficient decision making, how you make sure you have the right ratio of management for any particular initiative, and kind of giving guidance to departments on how they think about that restructuring that I mentioned in bullet number two. We are exploring establishing a pooled shared services for IT, HR, contract administration, and a few other financial functions. Again, this is where we are kind of looking at the total size, thinking about the implementation options and trying to decide what the right pace of that change is. And this is, again, supervisor, thinking about where those reserves are. If there is a large savings opportunity, but it would create a lot of chaos, this is where the reserves help us kind of smooth those decisions to maximize operations. We are looking at non personnel contract spending, going line by line through all of our contracts, not just in an individual department level, but seeing where a contract is held across the entire city and where the opportunities for consolidating those or kind of renegotiating or making getting efficiencies on those are. And then the last would be to revisit our one time spend on capital, fleet, equipment, and technology spend. As you have heard the mayor say, we do not want to use one time dollars on ongoing expenses. And so really cutting cutting one time expenses that kind of keep us from having cost growth in the later years is the last place I will hopefully go. And that is all. I'm happy to answer any questions.

[Supervisor Connie Chan (Chair)]: Thank you. I'm going to your next presentation.

[Sophia Kittler (Mayor’s Budget Director)]: Michelle is the next one.

[Supervisor Connie Chan (Chair)]: Oh, sorry. Oh, Supervisor Sauron.

[Unidentified speaker (brief interjection)]: Thank you. Director. Director.

[Supervisor Denny Sauter (Committee Member)]: Thank you for the presentation. Rewinding to some of the risks, the assessment appeals I know that we're seeing historic levels of appeals. Do we have any approximation of the financial risk of those in the coming years, what that looks like?

[Sophia Kittler (Mayor’s Budget Director)]: I think the controller might be able to better answer that question.

[Michelle Allersma (Office of the Controller)]: MICHELLE We definitely have an estimate of it, and it's baked into our projections in a couple of ways. I'm sorry, this is Michelle Ehlersma from the controller's office. We have appeals that have already come to the Assessment Appeals Board. They've been filed. We look at kind of what's on the AAB's docket once a quarter and kind of see what's the pattern of decisions and kind of what's the total, like, possible liability out there. So and we maintain a reserve to pay refunds that we think will come due on the appeals that we are holding in our hands today. So that's several $100,000,000 that we are holding today, given the changes in assessed values, especially with commercial real estate. In our forecast, in years where we don't yet have an appeal in hand, we expect to get appeals because they're temporary. They're unless you're changing a base year value, which is uncommon, every year that a building owner thinks that their property is over assessed, they have to reapply for it. They have to appeal that value. So, we think that through our forecast, those property owners will continue to appeal their values. And we've made a model using some CoStar data that says, okay, we think here's kind of like for all of our, for all of the properties in the city, we think here's kind of what their Prop 13 value is and what their market value is. If market value is lower, they will appeal, and we assume a payout on that. So it's a long winded way of saying our, our, our future, our forecast, forecasted property tax revenue is smaller because we assume we're going to have to reserve for appeals. If we didn't make that assumption, there will be more money in the budget. So we are planning to have appeals be paid out.

[Supervisor Denny Sauter (Committee Member)]: That reserve is to the tune of a couple 100,000,000. Yeah. Thank you.

[Supervisor Connie Chan (Chair)]: Please go. Move forward with the joint report.

[Michelle Allersma (Office of the Controller)]: Okay. I have a very short deck here today. Wonder if I can make that look better. Okay. So as the chair noted, we just heard from the budget director about kind of our five year forecast. That forecast is for fiscal years '27 through '30. And what I'm bringing to you right now is a status report on the budget year that we're in right now, so fiscal year twenty six, through kind of the first half of the year. So, some summary points. I'll start with the third one, which is really, there's a couple of key stories here. A big one is a revenue story in the current year that's kind of building on what happened at the end of last year in our close, where we see how did we perform for the last fiscal year. So in the current year total, we're projecting a revenue surplus of about $214,000,000 Some of that is news that was baked into the five year plan, and some of that is news that we have in the quarter after that plan. And really, where the strength is coming is in business taxes and real property transfer taxes, which we'll talk about. And at the same time, we budgeted $80,000,000 of COVID FEMA reimbursements for COVID costs. And we've just we've taken that out entirely. We still don't have final determinations from FEMA on some of our non congregate shelter costs. And the longer that goes, the less likely reimbursement seems. So we've just taken that entirely out. On the department side, this will probably sound familiar. So, we have good news in departments. It's really public health because they are so large. And also, combination of expenditure savings in lots of programs in the Human Services Department. There's expenditure savings kind of broad based in a lot of departments. And some of that is in salary and benefit costs. Because, as you know, the mayor's office has been holding a pretty tight line on approving positions in the current year. So we do see some savings, we think, from that, about $8,000,000 That's pretty much washed out by overtime costs in public safety departments, which you've already talked about a little. We see the need for supplementals for the PUC, police, fire, sheriff, and emergency management departments. One of those, the sheriff's department, will require a general reserve to pay for it. The other departments either have revenue or other expenditure savings that can cover that cost. But we, at this point, we don't see how it's possible that the sheriff could cover their cost. They will need a supplement. As you know, uses of the general reserve in the current year increase the shortfall in the outer year because you have to replenish the reserve. And we also make no assumptions in this report about federal funding rescissions or freezes or anything like that. So in table format, here's like the summary of the words I just said. If you're looking look in the center column, says six month, the first bolded number you see is 38.6. So kind of looking back in time a little bit, at the end of last fiscal year, we had had some good news. We ended up with more fund balance than we had projected. And that's the result of a few things, some of it being real strength in business taxes and property taxes at the very end of the last fiscal year. And some of that what's driving that is also carrying forward into the current year. So I'll talk about that in a second. So we're, for the whole year, we're the final point on that is that 38.6 is now subsumed in the five year forecast in the deficit numbers that Ms. Kittler provided. So that 38.6 is spent in making that shortfall smaller than it would otherwise be. Now, what's happening, we have a citywide revenue surplus of $214,000,000 so slightly better than our last projection. All the baselines take their bite out of that. They all receive their required portions of that. So, that's $55,000,000 that goes to the flows to those baselines. And departments have a little bit of an expenditure, a net surplus of about 56,000,000 And then I'd like to talk about a few revenues because I did say this is really like a revenue story. The first thing, just kind of looking at these highlighted cells, the first one is business taxes. What we learned at last year end there's a delay in getting data about business taxes because you can delay your filings, and it takes a long time to kind of go through some of those. But what we learned at the close of last fiscal year was business taxes really depend on two factors, the revenue that we get. It's sales in San Francisco. And between calendar years or tax years 'twenty three and 'twenty four, that grew kind of with inflation a little bit less than two and a half percent. What really, really happened, the other thing that grows our business tax revenue, that we get a portion of companies worldwide sales allocated to San Francisco based on their local payroll. And that grew eight over 8%. And that's really being driven by kind of the magnificent seven tech companies. You could read about their publicly reported revenues doing extremely well. And probably, you're feeling that if you have any kind of investment investments of your own, if you're looking at SBIRS investments, you're seeing that, like, the stock market, right, everybody is doing really well. The state is also doing well with the income taxes from that. So that's really what's that second factor is what is driving our local business tax revenue at the end of last year. And so we're building that's base building for the current year and looking forward. That's a lot of our revenue good news in the forecast. And then in the current fiscal year, as we settle, there's a very healthy flow of business tax litigation that you've heard from the city attorney about. Some of that has come before you, the settlements, particularly GM and Microsoft. We hold back revenue when the city attorney alerts us to a revenue risk with this litigation. When we have a settlement that is known and approved by the board, if we held back more revenue, we get to recognize it. If we didn't hold back enough, set it aside. In the six month report, we had held back more than we needed to for those settlements, and that's about $40,000,000 to the good in the current year. The access line tax, the $21,600,000 that second blue case, that's another case of that's a very sort of unicorn legal settlement, one time payment that we made a settlement for last fall. That's about $20,000,000 and a little bit of growth. Transfer tax is the real news story. 60 point 69,000,000 in the current year. This is really I mean, San Francisco commercial real estate is on sale. You can buy a building for 50 to 60% off. And, this has attracted the attention, finally, of investors beyond kind of local family investors. It's really attracted the attention of REITs and other just global investors. And this is really driving up our transfer tax revenue. We saw this at the end of last year, and we're seeing it. It's happening in the current fiscal year at a slightly slower pace than last year. And this is really just the this is really the large commercial transactions. So to give you a sense of scale, in the last the year that ended, half a percent, or 38 transactions, drove 48% of the revenue. So 38 transactions generated $144,000,000 So it's very top heavy. Sort of individual single family home sales, there's a lot of volume, but it just doesn't generate the revenue because of the sales values and the transfer tax rate is just lower on those.

[Supervisor Connie Chan (Chair)]: Do you have more details on that? Meaning, like, right now, you know, I think that as we know that the mayor and supervisor, Balaam Mahmoo, has just really proposed this transfer tax exemption and changing the rate. Do you have some sort of a not just projection but based on what we're seeing right now here is that it do we see the transfer tax mainly coming from residents or prop I should say properties that are $10,000,000 or at $25,000,000 Like, what what is really the what we're seeing is the strongest in terms of generating the revenue for the city?

[Michelle Allersma (Office of the Controller)]: I mean, in terms of, like, the the numbers, it's really it's really the large commercial transactions, which includes multifamily, too, recently. Actually, But that's it's office. It's big retail. It's multifamily. Some industrial is really driving it.

[Supervisor Connie Chan (Chair)]: Yeah. And then and so I mean, I think the question I also have is that do we have any ideas just by based on this $69,200,000 that we're looking at for the transfer taxes that we're we're looking at? The variance.

[Michelle Allersma (Office of the Controller)]: From budget. Mhmm.

[Supervisor Connie Chan (Chair)]: From the budget.

[Michelle Allersma (Office of the Controller)]: Yep.

[Supervisor Connie Chan (Chair)]: Are we do we have, like, somewhat an idea, like, of properties?

[Michelle Allersma (Office of the Controller)]: Of the total number of transactions that's generating that? Yeah. We can we have transaction detail for the year to date. Great. So if you're interested in kind of like how much is being paid at which tier

[Supervisor Connie Chan (Chair)]: Yeah.

[Michelle Allersma (Office of the Controller)]: Yeah, that's something that the assessor generates that, and they share that with us so we could

[Supervisor Connie Chan (Chair)]: Love that. We would love to have some ideas about the number like based on what we have already generated today and in the projection that we are anticipating different categories between the $10,000,000 and then the $25,000,000 and then the number of properties that we're generating this type of transfer tax. Okay. Thank you. Please continue.

[Michelle Allersma (Office of the Controller)]: We can do that. Interest income, just doing well. We had assumed just the yields are better. So, thank you, treasurer. The investments are generating a higher yield than we had anticipated in the budget, about four tenths of a percent better. And then, did mention that we've taken out our assumption of COVID FEMA reimbursements and some of the assumption about twenty twenty three winter storm reimbursements to the general fund. Looking at departments, we talked about the sheriff has a we're assuming that they need an overtime supplemental, and that is gonna be it's going to need it can't be entirely solved by the department. Public works and city planning really have revenue shortfalls. City planning just permit permitting fees being low, as we've seen for the past many years. Superior Court and Public Defender, this is a discussion about indigent defense. The public defender has been declaring more conflicts and having a higher caseload, sending more of those defense cases to the bar association. That contract is managed by the superior court. That's why you see there a budget for them. They're not part of the city, but they we give them general fund money to manage and pay this contract. So we're seeing probably the need for some kind of action to make that come in on budget by the end of the year. And then surpluses, public health. Story at the general hospital has lower revenue due to lower patient census and volume. And they're also having some higher expenditures on security and other things, and pharmaceuticals, as per usual. That kind of issue at the General is offset by some extra revenue in behavioral health and at Laguna Honda Hospital, some prior year skilled nursing supplemental payments that have been received in the current year. Human Services Agency is really a kind of a cornucopia of different programs with savings for many different reasons caseloads, reimbursement rates, etcetera. This is the last thing I wanted to share. These are our reserves. I'm happy to talk about any of them if you have questions. One note is you'll see sort of halfway down the page, the federal and state revenue risk reserve. The deposit of $240,000,000 that's a little bit, we've, that's a little bit smaller than it was a few months ago. Just, we've been updated on kind of, it's a good news story, really. More people are coming forward to spend the money in their health care savings accounts, which means that there's less, quote unquote, abandoned that will eschete back to the city. So they're seeing a lot of people coming and using the funds in their reimbursement accounts for medical services. So used for the intended purpose, that just means a slightly smaller deposit in our reserve. Happy to answer any questions.

[Supervisor Connie Chan (Chair)]: Thank you. I think we can also go into the six months budget status report.

[Michelle Allersma (Office of the Controller)]: That was it.

[Supervisor Connie Chan (Chair)]: That was it? I was like, that was the five year. I see. You did five. Thank you. I don't think that we have additional questions at this moment. Actually, I do actually wanted to, by definition, help us understand what is fund balance. Because there seems to always be a debate about what fund balance is and what we do with it. Could you just kinda walk us through, you know, changes in fund balance specifically? And and because clearly, people need to understand, or we all need to understand, myself included, have a better grasp and better understanding the difference between fund balance and reserves.

[Michelle Allersma (Office of the Controller)]: Maybe you could think of fund balance as, like, what's left over in your checking account at the end of the year, and reserve is a saving account that's off to the side.

[Supervisor Connie Chan (Chair)]: That's great explanation. And even with that fund balance, money that we have here, what we're looking at, dollars 5 and 25,200,000.0 of fund balance that we're looking at, roughly?

[Michelle Allersma (Office of the Controller)]: And

[Supervisor Connie Chan (Chair)]: even with that, we know that there are monies that, within this category, has been appropriated for the next two fiscal years.

[Michelle Allersma (Office of the Controller)]: Yes. And so the five year financial plan, kind of the methodology that we've been using between our three offices, the BLA and the mayor's office and the controller for the last few years, is that we assume whatever fund balance there is at the end of the current fiscal year, we're going to spend it over the next three in equal amounts. And so clearly, that's going to be what actually ends up being spent is a choice that you'll make. But for the purpose of forecasting we say we assume that we're going to spend it out over those three years so you don't have a third year cliff.

[Supervisor Connie Chan (Chair)]: Yeah and that basically we are saying you know we're we're using the remaining of the fund balance two thirds roughly about the $351,000,000 that we're going to use for 2728 And then for the remaining of $175,000,000 the remaining onethree is going to be for fiscal year 'twenty eight, 'twenty nine.

[Michelle Allersma (Office of the Controller)]: Sort of. So you've already actually approved a budget for the current for next year? I mean, like, yeah, that's the big picture, how we think of it. If you maybe well, I'm looking at the first table that I presented. The current year spent $382,000,000 of fund balance. The budget that the board appropriated and was finalized last July was balanced with $229,600,000 of fund balance. And the five year financial plan assumed $140,000,000 of available fund balance would be it's not appropriated yet, but we're we have in mind, and we reported it's reducing the shortfall in the third year. So it's not exactly thirty-thirty-thirty. But we spread any new revenue thirty-thirty-thirty. So this $89,000,000 that's to the good today, we're going to take, assume. This is, again, it can be changed. Our assumption is, based on our methodology with a five year plan, 60 of that is going to be to the benefit of the budget that you're going to be approving and considering in June. The last 30 is going to be assumed to be spent in the year beyond the budget that you're approving.

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

[Michelle Allersma (Office of the Controller)]: It's kind of yeah. Yeah. Fund bal it it's not like a maybe maybe the way to think about fund balance is like it's you have revenues and expenditures, and you have assumptions in your built in your budget about what those are gonna be. And throughout the year, you're constantly, you know, you're coming up a little bit above and a little bit below. Like, all of this is happening all the time. And then this is kind of the net operating result of all of that activity during the year.

[Supervisor Connie Chan (Chair)]: Great. Thank you. It's like if you can save on one bill, but then you now have to spend more on something else. The grocery just kind of off the chart. Now you have to get more. But then you may be able to say, well, you know what? I don't need cable TV, so you're cutting the cable bills.

[Michelle Allersma (Office of the Controller)]: Yeah. Or maybe Aunt Mabel left you $2,000 Yeah. Yeah. We get settlements, too.

[Supervisor Connie Chan (Chair)]: Thank you. So with that, let's go to public comments on all three items.

[Brent Jalipa (Committee Clerk)]: Yes, we are now opening public comment on all three of these hearings regarding the mayor's budget instructions, the joint report and five year financial plan update as well as the controller six month budget status report. As soon as the first speaker approaches the lectern I' start your time once you begin speaking.

[Rocio Molina (Director, Human Services Network)]: ROCIA Hi. Thank you. My name is Rocio Molina. I'm the director of the Human Services Network. We represent over 50 nonprofit organizations that partner with the city to deliver critical human services to the most vulnerable communities. In our city. First I'd like to recognize you know Sophia and the mayor's team's efforts to increase the cost of doing business allocation for FY twenty seven-twenty eight at 3% when compared to this year' and next year' allocation of 11.4% it is a clear recognition of what we' been trying to share consistently as that and that is that nonprofits are facing escalating costs just like the city just like its private contractors do each year over year the current CPI is 3% and that accounts for a 13% increase in food costs That accounts for a six to 10% increase in health insurance costs, which right now our organizations are shouldering completely. A 1.4% allocation for FY twenty six-twenty seven essentially only covers the m c o the minimum compensation ordinance which all of our organizations have to increase salaries at the base level and of course that reverberates through the whole organization resulting in assessments of budgets for staffing potentially closing positions or programs and all of our organizations are also facing similar challenges as the departments including facing HR one you know budgeting concerns they're taking a look at the same policy decisions of whether or not to continue providing medical care to those that are uninsured whether or not to continue delivering food assistance programs and figuring out ways to fund them on the back end as you mentioned, this is something that we're going to continue to work on for the next few years during this administration and we want to continue partnering effectively and successfully with the city and we need your help increase the FY 2627 cost of doing business

[Brent Jalipa (Committee Clerk)]: thank you you much rosy or melena and seeing no other speakers madam chair that completes our queue seeing

[Supervisor Connie Chan (Chair)]: no public comments public comment is now closed colleagues I would like to have all three hearings be heard and filed and a roll call please

[Brent Jalipa (Committee Clerk)]: and on that motion that we that we consider all three hearings heard and filed Vice chair Dorsey. Aye. Dorsey. Aye. Member Sauter. Aye. Sauter. Aye. Chair Chan. Aye. Chan. Aye. We have three ayes.

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

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

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