adequate, but i do not know that we have a better number, either. sueprvisor kim: can you go over what we were down this year from the state measured reserves? >> certainly. let me grab the report. so, of the $50 million allocated in the current year, just over

$10 million has been allocated by the board for other services. including health programs, restored for the current year. it was a major source of funding for the department of public health appropriation issue with state cuts that were approved several weeks ago. those were last lead to draw from ryan white. all told, after those, there was a balance available that was soon closed into the general fund as of the nine month report and has been real appropriated, largely to fund the new 15 million. sueprvisor kim: thank you. >> flipping to the general fund, quickly, the revenues are expected to improve by $280

million. about $130 million in the second year. this is being driven heavily by large growth taxes. transfer, payroll, and registration fees. each of which is growing in each of which is now above a pre- recession level. for transfer tax in particular, we have set a record in the current fiscal year for collection and are expecting the real-estate market to run hot in this city for the first year, setting a new record in the current -- in the fiscal year. that is a largely high-end commercial property.

the budget again does assume continued economic growth and recovery during this period of time. this slide shows you the growth rates in the last projection. you can see very healthy growth rates for the majority of our taxes, payroll, sales, hotel, assumed in both years of the budget, part of it covering the recession from the last couple of years, the pressing lee's beyond long-term norms. property taxes, we assumed, crethad growth above meaningful levels, with lower growth rates on other parts taxes. you can see that we are expecting the level of property transfer taxes to be modestly higher than the future. so, we do not see that

overheated level continuing, approximately 10% of of that piece in the second year budget. supervisor chu: supervisor avalos? supervisor avalos: i thought that we had seen a dip from the six month report to the nine month report. >> so, these are -- we actually, at the nine month mark, we expected growth related to property taxes in the fiscal year. this is really driven by a handful of factors. number one, prop. 13 does not contain inflation factors where in any year the property tax rolls rose by 2%. for the last several years, inflation has been under 2%.

for the coming two years, we will have our usual 2% automatic adjustment for the currently assessed properties in the city. the assessor's work through a bf supplementals pending from prior years. we are expecting that to continue. in particular, in the first year. and we are assuming hear some recovery in residential and commercial property values will mean, while we continue to see a large number of appeals coming to the city in this two-year period, we are assuming as the markets begin to recover for commercial and even residential, that means we will have to set aside less money for those appeals, which we anticipate in both years. those three factors together are the dominant factors of it.

underlying property growth, supplementals, escapes, the need to set aside less for appeals. the budget does, and a couple of cases, use reserves as a funding source. first, the mayor does propose in the budget to withdraw the maximum allowable amount from our rainy day fund for the school district. that is 25% of the remaining balance in the fund. that is 6.3 million in fy12-13. the budget also spends available balances in their rec and parks savings incentive desert, -- reserve. secondly, as you just talked

about, the budget spent the available balance in the available savings and incentives fund in both fiscal years on one time projects. as ms. howard noted, the budget does, while it is drawing on some reserves, is growing others. the general fund reserve is scheduled, per the board adopted a set policy, to grow to $32.2 million in 12-13, off $4.7 million in 13-14. the growth in the property transfer tax, which i mentioned earlier, which is above the rolling five-year policy adjusted average, a portion of the growth that is up deposited to the stabilization reserve. if the transportation tax comes to pass, a portion of that

comes off the peak and is deposited into the reserves. we would expect to end a two- year period with approximately $52 million in the stabilization reserve that would be available the next time the city goes into a downturn. lastly, baselines. the report does report on our various voter adopted set aside ordnances and other requirements. generally speaking, the fed to baselines have been adopted by the voters are funded by the mayor's proposed budget. the children's baseline is funded above voter mandated levels in both years, approximately 12 million over mandated levels in 12-13, 7 million the year after. the two records that would appear not to be met in the

budget before you are police staffing and substance abuse treatment on demand. policemen and staffing requires 190071 full duty officers in the city, given the hiring plans that are contained in the budget. we see progress toward that goal in both years but we anticipate remaining well short of that mandate in both years of the budget. approximately $200 million below the prop d staffing levels in the first year, 175 in the second year. there is no allowance in proposition c, which was adopted later, for adjustments to be 1971, in cases where the mayor of civilianize his positions. we're looking at opportunities for that this wednesday when we have the police department. i can report more at that time.

supervisor chu: supervisor wiener? supervisor wiener: this is perhaps more of a question to ms. howard about prop h. i saw that the mayor proposed pulling the trigger, which i think reduces the cash contribution fo. i know in the past we have done that because of awful budget years, not at this year is perfect, but it does improved. maybe i could get the mayor's rationale for pulling the trigger once again. >> i can mention the role and then ms. howard can comment on the policy implication. the voter mandate for proposition h. did allow for the mayor and the board of supervisors to reduce the voter adopted funding allocation to the school district. the shortfall exceed $100

million. that leaves this option open for the board and mayor. >> supervisors, a kid howard. budget director. the threshold was met. as you recall, the projected to shortfalls at the time of the report were $170 million and $312 million. for that reason this seem to be an appropriate part of balancing. you will note the budget does on the full transfer of the rainy day fund to the school district. supervisor wiener: i am not expressing an opinion on it because, obviously, $15 million -- unfortunately, is a zero sum game in our budget situation. some folks have asked about that, so it is important for

people to understand the rationale. supervisor chu: supervisor avalos? supervisor avalos: i appreciate the question. we are seeing a lot of growth in departments in better times. we have the rationale for pulling the trigger on the prop age funds because we were seeing difficult times to balance our own budget here. now we are having better times and we are still pulling the trigger. it is important to know that is already happening in the mayor's budget, which is a time which is difficult when racy state cuts to a child care impacting what we can do here at the local level. i know that prop h states this money needs to be provided to the department, to the school district in years to come as well, so that is a position we

are happy for prior to the reauthorization of the -- a new authorization would have to state how we pay back those funds or not. supervisor chu: supervisor kim? supervisor kim: there are valid reason for why we are pulling the trigger. i understand mechanically we can because we projected a deficit of more than $100 million. having a look at the department of budgets, i see some large increases, sometimes up to 152%. while i think a lot of those requests are about in terms of job creation, schools are also a priority. i think we will be hearing a number of valid questions being raised over the course of the next few weeks as to why we are pulling the trigger and whether that can get reduced at all. especially because of the state cuts we are seeing in our public education system, and another

reduction of our school year, this year, they are proposing a four additional days that they will shorten the school year by which tremendously impacts our student's ability to learn and for us to close the achievement gap, which is our cities number one priority. i do think we need to ask questions about the priorities we are putting in our budget this year, seeing that we have more breathing room. supervisor chu: supervisor wiener? supervisor wiener: i appreciate the comments. obviously, once we know how much money we potentially have for making additions to the mayor's proposed budget and changes, we certainly have to park your ties. -- poor guys. we have already had very large requests from our nonprofit partners come forward including

additional costs of doing business increases as well as replacement of some federal stimulus one-time funds for shelters. this will be on the list as well. we will have to figure out how we juggle all of these large requests. i do hope that our public schools are certainly on that list. supervisor chu: thank you, supervisor. the only other thing to add, in terms of context, this is a choice for the board of supervisors and budget. when the talk about the trigger being pulled, 25% reduction, that is not from the current year level. just so folks are aware. the level of funding allocated for public schools under prop. h

grows with discretionary revenue. the amount of money in the proposed budget bursa's the amount approved in the current fiscal year is scheduled to increase modestly in the incoming fiscal year. we are talking of a 25% reduction from the larger amount contained in the ballot measure. that amount was not funded in the current fiscal year. supervisor kim: the trigger does not represent a cut in the allocation year? it is not the growth in the level that we are providing? >> correct. the last baseline is the treatment on demand baseline. this is a voter-approved ordinance, so it is not binding in the same way that others are that affect our charter in terms of its ability to affect the mayor and boards ability to appropriate funds. the part of public health reports at that threshold is not a poet -- met in the proposed budget as well. there is obviously a lot more

information in the revenue letter, but that law lot -- provides a high-level summary. i would be happy to answer any questions you have. supervisor chu: i do not think we have any question that this moment. in terms of updates to the budget, anything that the comptroller's office or mayor's office with a to provide? colleague, for this item, we have to take public comment. members of the public, is there anyone from the public that would like to comment on this item? item 4, a hearing on the budget update. we have heard the revenue letter as part of that as well. seeing none, public comment is closed. colleagues, can we continue item for to the call of the chair? without objection. now with that, we will go into our department hearings. we have a number of departments before us today to speak. quickly, they are the office of economic and workers to relman, treasure island development board, planning, assessor

recorder, treasurer, controller, general responsibility, city administrator, dept. technology, human rights, borders supervisors, mayor's office, at the commission, as well as the department of elections. because a number of these departments have a role to play in the redevelopment agency reorganization, i will ask the mayor's budget office to provide for us a general overview of what happened with the redevelopment agency. we will see bits and pieces of the reading of an agency in many of the departments that we see today. >> thank you. kate howard, mayor's budget director. i have a summary of the post redevelopment budget for you today.

i am trying to provide an overview of what has happened with the redevelopment agency, where its services and functions have been absorbed in the city, where its staff has been a guard in the city, but the work plan going forward looks like. i have with me today my colleagues tiffany from the city administrator's office and can draw from the city administrator's office, jennifer from the office of economic and workforce development, angie from the mayor's office of hounding. -- housing. i thought i would do a brief overview of the dissolution. most of you are aware of the broad strokes of that. talk about staffing changes and staffing loss. walk through the budget with you had an overview level, talk about tax increment, the gsa

budget impacts and the general fund impact. finally, talking about the general fund supported activities that will be and absorbed into the general fund in this budget, rather than in the redevelopment agency's budget. as you remember, earlier this year, the state legislature passed and the governor signed ab 26 and 27. 26 was found to be constitutional and dissolved the redevelopment agency throughout the state. in our case, the city and county became the successor agency to the redevelopment agency. the assets of the agency were transferred to the mayor's office of housing, port, and city a minister's office. you will recall also each successor agency is required to have an oversight board. our oversight board oversees the

fighting to management of certain real development agency assets. at the highest level, the three major approved development projects and the house and work that was done by the former agency will continue. the oversight board has adopted what is called a recognized obligation payment schedule. that details all of the eligible, enforceable obligations. you may have also heard that there was a piece of budget legislation that may affect redevelopment agency, and we are looking at the potential impact of that on the city. i think this line gives you a healthy overview of what has happened with staffing at the redevelopment agency, and also gives a helpful said the were

the bulk of the work that remains continues. the redevelopment agency in fiscal 11-12 had 112 budgeted full-time positions. 58 of those positions were eliminated as a result of the dissolution of redevelopment. 54 were retained. of those were retained, 10 were transferred to the mayor's office of housing to continue to enforce a work related to housing. 35 were transferred to this id minister's office to continue work on those three major approve development projects, mission bay, transbay, and hunters point shipyard, as well as to manage the responsibilities associated with those projects. nine were transferred to the port. to manage the south beach harbor. supervisor chu: supervisor kim? supervisor kim: i noticed a few

of the departments that are not listed on the slide have requested positions related to redevelopment duties. could you address that? i know the city attorney wanted to absorber one attorney and a legislative policy analyst. i think economic development wanted to absorbable position or two. i was hoping that you could address this as well. are these new positions, or are these of the 58 fte's that were eliminated previously? >> a few different things happening. the city attorney's office, there are -- the city attorney is able to absorb much of the work that was previously done by attorneys at the redevelopment agency but is reorganizing and needs to get several positions to accommodate the full workload

related to property management, the complicated land use and housing related deals. those are two additional positions they are requesting in their budget. supervisor kim: will they be observing the attorneys that were already at redevelopment or are they hiring new individuals to fulfil that absorption? i understand the need for the work. i'm just curious. >> my understanding is they are going through a hiring process. at the office of economic and workforce development, there were certain positions that were previously funded by the redevelopment agency. they were not actually positions -- they are not new positions, per say, but they had received funding through developer reimbursements. supervisor kim: that is for existing individuals but a source of funding has not changed. >> that is correct. those are the primary other

things that you are not seeing here. overall, in terms of the fiscal impact on the city, you recall the redevelopment agency's budget was comprised of a variety of sources, including tax increment on proceeds and other revenues. going forward, these same sources are available to the successor agency, the city, but there are somewhat more restricted uses because of the rules associated with as 26. -- ab 26. over all, the agency tax increment, the successor agency tax increment request is increasing a little bit. that is primarily driven by mission bay and the requirements to transfer all of the increasing tax increment to mission bay. as well as increases to certain required passthroughs back to the state.

there have been some changes in the windows are calculated by the state. debt service continues to remain the largest cost in the successor agency budget, and that is relatively flat. project and staffing costs are lower, both because the agency is no longer allowed to do the same range of things that it did before, and because there is a limit to administrative costs that is permitted by ab 26. this next slide is showing you the tax increment that is allocated to enforceable obligations. tax increment, as you will recall, is basically our general fund property-tax that is dedicated to these projects. the board has made the decision to set those funds aside. to the extent that the tax

increment request increases or decreases, that does have an effect on our overall fund, because it is a property tax dollar. what this table is showing you, at the highest level, you can see the net tax increment that is available in these project areas. in the current year, the $134 million, and it is increasing next year, 135.6, and the following year, $143 million. that is the amount that could be allocated to the agency. you recall the city has the story made choices about how much tax increment to provide to the city and has never fully provided that full tax increment value. down at the bottom, uc the actual tax increment provided in the current fiscal year to the

agency, $112 million, increasing to almost one harder 14 in the second year, $123.8 million in the third year. that increase is primarily driven by redevelopment -- by mission bay pastor's increasing and by this change to the way the pastors are calculated. -- passthroughs increasing in by this change to the way the pass- throughs are calculated. briefly, what is continuing at the successor agency and the city administrator's office in the community reinvestment division. community reinvestment division is continuing the activities that are permited on the rops, debt obligations including paying bonds, continue to implement the major approve development projects i mentioned a minute ago, mission bay,

hunters pay shipyard, transbay, managing certain assets and continue to be the responsibility of the agency, and then managing the transfer of certain responsibilities into the rest of the city. overall, the successor agency 12-30 proposed budget will be $140 million, off following year, decreasing steadily to $127 million. for the mayor's office of housing, you see a significant increase in the or on mayor's budget due to the transfer of these assets and responsibilities. the mayor's office of housing began implementing the responsibilities related to the house and obligations in february of this year and is completing the commitments related to the pre development and affordable housing construction for the enforcement obligations that are on the rops, as well as coin