short-term note, there is the expectation to take up financing, even though the final maturity is not until next year, due to the provisions. there is a provision that allows the mccp to take advantage and issue their debt in advance of the termination -- maturity of their existing debt. that would result in a more competitive rate. as a result, they have engaged first republic bank for the purpose of this bond, fixed interest rate of 5.5%. in order for them to take access under the provision, they have to issue the bonds by the end of the calendar year. we have worked with mccp and we have reviewed their financials. we believe it is in their best interest to take advantage of this opportunity. i have representatives from the mccp here as well.

they will be able to respond to questions that you might have. one thing i would note, these bonds would be paid from revenues collected from garage revenues. looking at the financials, when you take account the rent paid to the rec and parks department, taxes are coming back to the city. i will be happy to answer any question that you might have. supervisor avalos: thank you. supervisor mirkarimi? supervisor mirkarimi: thank you. we have come a long way since the voter-approved backing of the installation of the parking garage. it appears to be a decent deal, the sooner we pay it off, the

more money comes to the city. what is your estimate on how much money will come to us, once it is paid off? >> when it is paid off, there is an annual cash flow that comes to the city. based on the figures that we have, $55 million over the life of the transaction would resort back to the city when the ground least terminates. supervisor mirkarimi: several years ago, there had been an unusual circumstance where money had been absconded from the parking garage itself. what was that loss, how was it recovered? >> i think i would like to have the folks from mccp respond to that. >> managing director of mccp. the actual loss was about $3.6 million. we were able to recover about

$90,000 from the sale of the culprits home. the bottom line is, he is in the big house, and while we have a judgment against him, the likelihood that over time we will recover the remaining funds is not very high. supervisor mirkarimi: improbable, as these cases go. as part of that loss, were those realized in the calculations? >> basically, the transaction that will come as a result of this financial action really deals with retiring in the band itself and expenses related to that transaction.

the ongoing catch up with the fraud itself has been taking place through our operations. supervisor mirkarimi: understood. initially, with the public- private partnership for the development of the garage, subsequent caretaking, there had been a pledge of private funds. had that pledge been realized, completely? >> yes. there were about $36 million in philanthropic dollar that went to do the initial improvements to the music concourse itself. supervisor mirkarimi: and that had been completely satisfied. >> yes. supervisor mirkarimi: thank you. supervisor avalos: mr. rose? if you could share your report. >> mr. chairman, members of the

committee, our report points out on page 3-5, the existing bonds, revenue bond anticipation has a revenue rate of 6%. it is estimated the new financing will have a rate of 5.5%. so that is certainly advantageous. also, to make it very clear, there will be -- the issuance of this debt does not create any liability to the city. we recommend threcommend -- i bs already been submitted -- but we have a suggestion of a public hearing on this matter. we recommend that you approve the resolution as recommended. supervisor mirkarimi: that is on the amendment as a whole. supervisor avalos: let's open up for public comment. any member of the public that would like to comment on item 3?

>> ♪ you found health just in time you found health just-in-time before this item came our city was running low our city bridges were all junk know where to go now the items here i know just where the money is going no more doubt and fear we have found a way help just came in time. you found monday in time and changed my lonely grave life and made it a better, help the day ♪ supervisor avalos: any other member of the public that would like to comment on this item?

it is not correct on the screen. it is related to the concourse parking lot. ok, we will close public comment. supervisor mirkarimi: glad to hear that a parking garage could cause someone to sing. that is good. in the spirit, i will motion, as amended, except with recommendations. supervisor avalos: without objection. victor, please call item no. 4. >> item 4. resolution approving retroactive contracts with non-profit organizations and the university of california at san francisco to provide behavioral health services for the period of july 1, 2010, through december 31, 2015. >> good morning, supervisors.

deputy finance officer from the department of public health. this item we are asking for approval for a number of our contracts for community behavioral health services. is contras are a result of a large rfp process that we referred to as our mega rfp, where most of our favor help services were rebid this fiscal year. these are results of that rfp process and they represent most of the contracts that will be going to the board for approval. i would also like to introduce joe robinson. she is our new direction of community behavioral health services. she and i are available to answer questions. supervisor avalos: let's go on to the budget analyst report. i think we could probably have a robust discussion based on the report. we would like to hear your

response and see where we can find a pathway to possibly approve the contract today. mr. rose? >> the best way to summarize the report is to go to page 4-16. based on our increase, the budget analysts increase, the number opposed contracts will be revised numerous times by the department of public health. we have had this item in our office or close to six months. the proposed 22 contracts between the dph and other organizations equal $688,000, which is 14.7% less than the original dph total of $77

million. that is the number that was submitted to the board of supervisors for approval. i believe the department now concurs with this final revision, which is a reduction of $160 million, or 14.7%. the total amounts of $674 million, includes $602 million for the paper health services under 22 contracts, and on top of that, there is a 12% contingency for each of the 22 contracts, $72 million. on page 17 of our report, we point out during the budget and finance committee meeting on october 27 of 2008, the budget and finance committee requested dph submit report to the board of supervisors on the use of 12%

contingencies in service based contracts. we were questioning the contingency because we do not know what it was used for and the budget finance committee decided, rather than to eliminate the contingency, to get more information on it. however, d p h has not submitted any such reports to the board of supervisors. i would also point out, it is unknown now how much of the 12% contingency in the proposed contract is actually warranted. i mention that is about $72 million. our recommendations on page 17 are that you amend the proposed resolution to state revised total amount of $602 million for the riposte 22 contracts without the 12% contingency awarded by d p h to the 19 contractors and identify the name of each contractor, the actual amount to be awarded under each contract, and the length of contract. legislation was couldn't --

submitted to the board of supervisors, i believe it was one page. without specifying what contractors or who gets what. since back in 2008, the budget and finance committee previously requested dph submit report to the board of supervisors on the use of the 12% contingencies. dph immediately submitted such reports to the board of supervisors. we recommend you approve the resolution as amended, and this would be retroactive to july 2010, for a total not to exceed $602 million. since the prior use of a call% contingency in an existing contract is unknown, we consider approval of the call% contingency for each of the proposed 22 contracts totaling

$70 million to be a matter of the board supervisors. i would further add, it is unusable for professional service contracts, and these are behavior health service contracts, to have contingencies. and i understand the department wants contingencies. one nonprofit is not doing a good job. it gives them the flexibility to move money to another nonprofit. but typically in the board of supervisors wants oversight, and there is nothing wrong, in my judgment, of approving the contracts in the finalized amounts. then if the department needs more money, they should come back to the board of supervisors -- and this is not the money -- but they would have to come back and justify what they need, why they need the additional contingency, what additional amount they need.

supervisors, i would be glad to respond to any of your questions. supervisor avalos: thank you. i would just be curious to hear from dph. certainly, we have an allocation, and contracts fall within that part of dph. >> certainly, we agree with the budget analyst on the amount of $674,000. -- six under $74 million. the department is requesting the contingency be included. let me tell you a bit about the contingency. the 12% contingency is only used as needed. and it is if there is additional funding available. typically, what we used a contingency for is to add back funding. this year, the budget analyst

report did indicate $4 million in these specific contracts that were added back, allocated in the budget this year. those are things that are foreseeable things happening each year. we also used the contingency for -- if one contractor is under delivering services and we transfer the units of service to another contractor, we use the contingency for that. basically, this was cited by the nonprofit contacting task force as a best practice. it is a way to process contracts faster. i would like to point out, if the contingency is not included in the contracts, we are required to come back to the board so that anything of it -- under a $500,000 modification. these are large contracts.

without the contingency, we will probably be required to come back to the board often to add money back to these contracts. many of -- the one advantage of the contingency is that it avoids these multiple contract modifications. unlike the first speaker talked about contingencies for the foreseeable future, the contingency for our professional service contracts is specifically for foreseeable things like cola's, board addbacks. we do not put contingency funding into a contract without the appropriation. as you know, you give us a budget. we are held to that budget. we are basically moving one money from one contractor to another, 11 contractor either

cannot deliver the services or we have new services that are appropriated in our budget that go to a specific -- supervisor avalos: part of this contingency has not even been appropriated yet. >> that is correct. all it does is gives us the flexibility to modify contracts. i forget how many professional services contracts we have. probably 50 with behavioral health providers. we constantly move money from one provided to the other. we are given an appropriation. let's say we have $100. if we give $50 to one contractor and $50 to another, and during the year we find out one contractor is not delivering services, then we will move 20 of those dollars to another contractor. the total dollars are controlled by the appropriation the board

gives us. supervisor elsbernd: if you had $100, 50/50, and then one program is not delivering and you want to go to another program, you shift the money. where is the extra contingency money coming in? you are using the same $100. >> for contractor a, if the contract was approved at $50, and contractor b $50, if we wanted to shift $20, we would have to come back to the board to ask for a $78 contract for contractor b. it allows us to move money between contractors about asking for a modification. >> through the chair to supervisor elsbernd, the department could not increase one contract without reducing another. i think that is the answer to your question. it would be a reduction to the

contractor that it is not performing, not providing the service. supervisor elsbernd: so if they are increasing the cost from one and reducing the cost from another, it seems to me you are still using the same total amount of money. why do you need a contingency pile? >> because the contractor dollar is capped at the amount through this resolution. in order for the department to move money from one contractor to another, they are asking for this contingency that would enable administratively those contracts to be increased. i understand what your asking -- if we have a contract with the abc company and it has a $50 maximum not to exceed amount, and we decide another contractor is under delivering, we reduce

the second contract. but in order to increase the contract for abc, it says it is $50. we would have to come back to the board to ask, can you increase contractor abc, to $70,000. supervisor elsbernd: i understand procedurally what you have to do, but what i am not understanding -- what happens if you are reducing program a to those dollar that you are now saving? does that go into the contingency fund? >> no, we reduced the contract for the other contractor and remove the dollars. supervisor elsbernd: so if you are moving those dollars, other than the procedural point of not having to come back to the board of supervisors, why do you need a contingency pop? it seems this is purely about procedure. if it is just about procedure,

there has to be a way we can fix the procedure so we do not have to appropriate 12% of the money you are not using. i am not hearing you tell me that you're spending that money. i am here you tell me that you just need the money available to procedurally avoid having to come back to us. that money is not being drawn down. >> i think the confusion is, the money does not exist in a pot. it is just a not to exceed authority in the event that we need to modify a contract. we have the authority to modify the contract. dollars are a completely separate process. this contingency had nothing to do with a pot of money sitting there. it is just a not to exceed amount. supervisor elsbernd: so you're giving yourself the flexibility to increase contracts up to 12%? >> yes.

over the five and half years, we are expecting these contracts to increase. the way we figured out the amount of the five and half years, we take the current year. if it is $100, a contract would be 500 plus half. if -- supervisor elsbernd: ok, i get it. i am not quite there, but i want to move onto something else that you said that created more questions. the add backs that you use in this contingency to appropriate add backs. >> it is not appropriate the board added tax. the board appropriates adds back. supervisor elsbernd: give me a specific example. i do not want generalities. >> if this contract was $10 for

one year, $55 for five years. if the board ads back money in your two, then we do not have the money in the contract not to exceed amount in the contract in the future years to accommodate -- supervisor elsbernd: monique, can you give this a shot? this is not working for me. >> looking at a million-dollar contractor, allocated $5.5 million. if there is an add back or additional money grant funds that the department would like to add, they would have to come back -- even if the money was appropriated. supervisor elsbernd: that is the problem i am having right now. my understanding of board add

backs, the money being added back is dollars that we have cut from someone else. >> the health department is getting a different appropriation. that is fine. the cap on those contracts lasts for a five-year period. if there is no growth allowed, the board would have to come -- we would have to come back to the border supervisors to get those contracts approved at a higher amount. whether there was a cola, if they decided to give a grant to a contractor. every time the contracts are increased, the department would have to come back to the board of supervisors for an amended resolution. supervisor avalos: supervisor mirkarimi? supervisor mirkarimi: supervisor elsbernd touched on a few things that i am interested in. the 12% contingency fee practice, how well is that

understood, in terms of how that was applied in the past? >> let me give you another example in a different department. child services, when they come to you for a multi-year contract, they assume growth. they assume growth for cola and additional services, so they may ask you for the approval of a contract amount that is greater than the current dollar value, and it is explain that way. the health department here is saying, for this year, we are paying this amount of money to these contracts as a total. they are estimating, over the next five and half years, any one of those contractors might be receiving up to 12% more than the first year amount, because of colas, add backs, grants,

shifting from one agency to another. supervisor mirkarimi: in the process of trying to figure out the add backs, which is among the most high-profile debates regarding our budget process, cut from dph budget and then add back to that, is their money returned, reallocated? it had already been thought of as a contingency, but it seemed unnecessary because of an add back fill the particular needs? >> if the grand does not come madin, funds are not transferreo a different agency -- supervisor mirkarimi: but if it is made, we often restore -- >> that is in the budget -- supervisor mirkarimi: the

contingency would be placed to air that maybe would not have received an add back? >> it would depend on the contractor. if they had a million-dollar contract and you provided services for substance abuse, then that contract would have had to come back to the board of supervisors before the health department was able to give that add back to that particular agency. again, the way the calculation is done is the department is looking at the first year dollar amounts. then it is essentially growing that authority at the departmental level to allow them to increase any one of those contracts over the course of the five and half years, only as money becomes available. the money would become available from the an ad back, grant,

shifting of funds, additional appropriations that may occur in the year. >> mr. chairman, supervisors, let me make one other point. the department represents that they will not -- this does not result in real dollars because they are just moving money around. in fact, if the board of supervisors authorizes these contingency amounts, there is nothing to preclude the department, whoever might be there, to come back to the board of supervisors and say, supervisors, you authorized a $77.2 million contingency. we need that money. i am requesting your authorization to appropriate enough might to extend that $77 million. the whole process, in my judgment, is flawed. supervisor mirkarimi: part of what mr. rose just said resonates with me, in the respect that i understand the

need to streamline, so that it is not onerous to dph in case they need to operate a maneuver as they see fit, with that contingency as a latitude to do what they feel is best. but it does feel that we are a bit divorced from a process where we take such painstaking effort to try to create a level of sunshine and backstop. is there something in this conversation that would help activate our ability to at least a prove that use of a contingency without making it that much more onerous? >> the contingency cannot be used some -- beyond the amount appropriated by the board of supervisors. if you approve a budget next year that grows the contract by 2%, then the health department would use their contingency