single number. to supervisor david chiu's point, i think he said we spend $200 million a year on i.t. that is not in one pot of money. so it makes it a complex challenge to save that money. i think the data center consolidation approach project is perhaps a template for the city on how departments can come together, pull funds and resources to solve complex problems related to i.t. again, we said at the beginning, the data center of the piece of the i.t. expenditure represents may be less than 10% of the total expenditures city-wide. the challenge for the city now in working together under the direction of coit is how do we address those remaining funds? are they being expended well, can we be more efficient? are there other opportunities like data center consolidation that we should focus on to generate savings? i think we should take credit

for the good progress we have made on data center consolidation, should release the reserves to allow departments to continue to provide operational services they need, hospitals, puc, police department. on the other hand, we need to continue to look for ways for i.t. to help solve the budget problem. speaking simply from my department's standpoint, we have been able to achieve, in the last two years, looking at the portion of the budget that the department of technology overseas, we have continued to provide services over the past two years. we have reduced our budget by $15 million, 16 positions. some of those we moved out to other departments, some were reductions. it is a hard challenge to face as a department to reduce our budget and positions and continue to provide service and leadership. but that is really the role of coit. the recommendation you see before you, i think coit is

trying to provide that leadership now. members are very engaged. in working with the board, coit can help to answer this question. how much are we spending, are we spending be a corporate amount? if we have to make reductions, where is the appropriate amount? supervisor chu: thank you. does that compare your presentation? i don't go to the budget analyst report. >> madam chair, members of the committee, based on the cost and savings reported by coit, page 6 of the report, as shown in the attachment on page 8 of the report, the attached and that has been displayed. coit projects net savings from

the data center consolidation project at $308,739 in a 11-12, $29,386 in 12-13, $1.7 million per year in fiscal year 2013-14 through fiscal year 2015-16. while we know the city will incur certain costs for the consolidated data center project, the associated savings are less certain. we point out on page 8 of our report, which is our recommendation, we recommend you request the department technology to provide a written status reports on the data center consolidation project every six months. the status report should provide details on the project cost and time lines for constructing the new airport data center,

increased license cost for 200 paul street, the transfer of the equipment from city departments to the consolidated data center at the airport, and 200 paul street, specific reduction in the city departments i.t. budget for equipment positions and other costs related to data center consolidation. if the departments have not reached budgetary savings from the consolidation project, the department of technology should provide the reasons for not achieving such savings. the consider release of the requested money of funds on reserve to be a policy matter for the board of supervisors. we note that not approving the requested release in bonds on reserve would result in layoffs of existing positions in the 14 city departments. supervisor chu: thank you, mr. rose. just a follow-up question to the mayor's budget office about the capturing how it is -- how is

your intent to capture savings. it looks like the current year does not have any savings, per say, but in the next fiscal year, the budget year we will be deliberating on, there are supposed to be savings from the consolidation of the equipment, savings regarding staffing. have you been able to roll through those savings, $1.6 million in savings, the $600,000 roughly, and staffing? >> mayor budget director. one point i want to make, we have been making the run the course of this discussion -- just to reemphasize it again -- is that there are two types of savings we can talk about here. one is an actual cut to a department's budget. another is an avoided cost that frees up a resource for a more needed activity within the

department. so, for example, we have a process right now where the department of technology reviews purchases of equipment, and that process is going to allow us to look when a department requests a piece of equipment, that would be duplicative under the new data center, we can look at that go to the department and ask, why are you requesting this purchase, given that we know within the next two years we will be moving to a consolidated center. then we can save the money on the purchase by deferring it until we consolidate. that is one way that we will look to do that. in that example, we can choose to cut that money out of the budget, or we can choose to use that money to purchase a different piece of equipment where the department makes an argument that that is going to

result in improved operations or efficiencies. so that is the key element on the purchasing and avoided the equipment cost. on the staffing, that is going to have to be an ongoing discussion as part of each department's management plans and budget process in the mayor's office and here at the board of supervisors. for each department will be a management decision when a resource -- staff resource becomes available due to no longer having the need to staff the data centers, the dispersed data centers. we will have to have a management discussion with the departments on how we treat that. i think the strategy will be to increase the number of vacant positions that we can hold a bacon at department over time, or figure out within the department's five-year i.t. plans, the city's five-year i.t.

plan, whether we can reallocate those savings to a high priority for other technology investments. supervisor chu: thank you. to the comptroller's office, just a question. there was a comment made by the budget analyst, that if we were not to release the reserves, meaning that we would not allow department to spend this money, that layoffs would have to occur. the apartments would have to figure out a way to reduce their expenses since we would not be giving them the resources. given the time line on layoff noticing, what would we expect, given that we are looking at this, at this moment? >> supervisors, then rosenfield, comptroller's office. it is impossible to put a hard count on the number of layoffs that would have to occur, if this were not released. we are certainly dealing with this time in the year, a timing

issue with the amount of fiscal year that is left, during which departments would need to readjust their budget were this reserve not given. as of today, the vast majority of our labor contracts continue on the 60-day layoff notification provision, which effectively means any eliminations of build positions would have to take effect note earlier than june 1, effectively leaving one month for departments to make up this loss of funds. what we do not have insight into is the number of positions in any given department bacon or killed, but we know as a city, the majority of positions are filled. it is hard to put a specific number on it, but it would be a significant number, given the fact that this annual reserve would have to be achieved in savings in a single month for those positions. supervisor chu: does the mayor's office have anything to elaborate on that? >> i would basically echo what

the controller said. given the time line that we are under, the operational expectation has been, at some point, we are going to have flexibility within the i.t. salary budgets as a result of the release of the reserves. departments have not been operating under the assumption that they will have to cut this money from their budget. so to react, at this point, would require a very compressed time line to achieve that level of savings. so i do not know -- i think the numbers that have floated around out there were a calculated value, just doing the math on how many positions it would result in. i do not know -- i do not know how many layoffs would be required, but it would require a

relatively quick and sharp adjustment in the park operations to achieve that level of savings within the remainder of the fiscal year. supervisor chu: thank you. supervisor kim? supervisor kim: i know this is my first time, in many ways, dealing with reserves. but i have to say, if departments are not prepared for reserves being approved, what is the point of doing it? the board puts reserves in place so that we can ask for a certain outcome that we would like to see that are not happening. so while i appreciate all of these discussions in terms of what would happen if we do not release the reserves, on a certain level, i am not that sympathetic because the board reserve these for a reason. everyone knew that we had this much time left, and this was the time to come back to the board. i just feel like there is a certain level of -- everyone should have known this was on the table and there were certain

expectations coming back. i do want to say i appreciate what supervisor carmen chu had to say earlier, that there were not necessarily expectations as to what would be in the expectations in terms of savings, what president chiu had said earlier. i was still be voting no on this today. i think there needs to be a level of urgency in which we engage in effect of cost savings for the city. i think it is important that we still have that pressure. i would like to insert the recommendation from our budget and legislative analyst about having a report back on june 1, 2001. i do appreciate the work that is happening. i am not blaming one department. i know multiple departments are involved in this, we have a large bureaucracy, and it is not just a part of technology. there are multiple departments that have to come to the table and be willing to do this work for consolidation. since this impacts multiple departments, it seems like an

appropriate way to push and put pressure on that plan. pressure on that plan. supervisor chu: thank you. >> i know that you have heard these comments from me directly. when we discussed this in june of 2010, what we were doing, we were looking for cost savings. the idea was that by september of 2010 but have a road map of how we were going to save this money. we did some work, had some answers by september. the conversation was kicked to november, december. now we are in april. from my perspective, for better or for worse, the reason we are at where we are today -- confirmed in study after study, as we all know, we have dozens

and dozens of by t. fiefdom's around the city that are not working together, that are engaged in their own expenditures, spending $200 million per year in i.t. yet every department is unwilling, i think, to work collectively together with each other and the department of technology. it has taken us almost one year to come up with a plan. and we are just doing data center consolidation, which just represents -- $70 million of the total $200 million of the city wide annual i.t. operations. what i hear from supervisor kim, and i have had this conversation on a number of occasions with many of you here, it is very frustrating to talk about this and ask departments to come together and find savings. before there -- there could be years before we see any actual

savings in the budget process. i do not know what we can do short of having conversations around the i.t. reserves. i understand the challenges of doing this right now. on the other hand, this has been a very frustrating experience for me, sitting in these meetings. we need some help and assurances in what it will take to actually see and squeeze out cost savings. what will we do in the next two months, when the mayor's budget office -- what sort of cost savings can we expect to see for 2011, 2012? what are the plans to move beyond what i view as years of i.t. bureaucracy delay and lack of work in doing what we need to do? >> supervisor, i am the mayor's

budget director. i understand and share the frustration. obviously, i m in a role where i need to balance the budget. no one would be happier to see cost savings out of this than meat. one thing i would like to point out is -- i think that it is worth noting that when we put these reserves on the budget, and i've worked with you -- i understand the reasons for doing that -- we put the reserves on in the budget to move the program along, hoping and anticipating that we would be cost savings. we put the money on reserve in the budget to force the data center consolidation to move forward. we have not seen the savings, but the data center consolidation did move forward. it is fair to say that the department of technology have done what we asked. it may have been slower than

anticipated, but it is worth noting that there is a positive thing that has happened. this project has moved forward as a result of the discussions we have been having a year dan thatand at coyt over the last y- and-a-half. i would have loved to see savings come forth from this effort, but as you explained, as we look at the economics of this project, it requires an upfront investment to construct a facility to house the new data center equipment. had that not been the case, we might have been able to see some short-term savings. but that is simply not how the economics of this project work. there are two things here. the desire for savings and also the fact that we did, over the course of the last year, with

your help and guidance, selected set of projects that we wanted to pursue that we defined as a city as i.t. consolidation. we are moving forward with those projects. unfortunately in this case we have not been able to pull the cash out. i think that there is a positive effect. the city departments, the department of technology, they're working collaborative leigh better than they had been previously. especially before the process that we started over the last year and a half. it is not to say by any means that it is perfect, but i think something good is happening here. supervisor chiu: i absolutely appreciate the work being done on data center consolidation. but we know that the point of i.t. reserves was to incentivize to find savings. we went through this to figure

out how to consolidate the data center, but at the end of the day if we could not find savings that represented 3% of the i.t. budget, should i lose hope as our ability as a -- in our ability as a city government to manage these functions in a good way? >> i absolutely do not think that we should do so. i guess the point i am trying to make is that our strategy for achieving those savings in the way that we thought we would get there was through data center consolidation. i guess the next step is to identify other initiatives that we can pursue. hopefully those will yield better savings. the vehicle to get those savings was data center consolidation. that is how wide you did in this particular case. -- that is how i viewed it in

this particular case. >> from my -- supervisor chiu: from my perspective, when the next budget submit all comes to us, when the department of technology comes back before this committee, our colleagues will be looking for those ideas. one thing we would like to emphasize -- the big challenge that we have in the city, as a city the department of technology has one-third of the overall budget. two-thirds of the city's budget rests in the several dozen groups of i.t. throughout the city. that is not how an efficient organization should be structured. your centralized i.t. groups should have at least a majority, if not two-thirds, of the system. we have the exact opposite ratio. i am looking at savings that we can find from all city departments, particularly the major departments. we cannot go in this direction of allowing individual i.t.

groups to continue to do business as usual. this is not how we have to work at this time. given the advances in technology that should be driving down costs. >> thank you. given the comments you have made, -- supervisor chu: thank you. given the comments you have made, it would be worthwhile to look at these improvements again. john and i have had conversations about where the other opportunities might be on master contract savings. in addition to other potential savings for telecom. i think to the point of supervisor chiu, we would not be where we are without the staffers on reserve. supervisor murphy? -- supervisor mirkarimi?

supervisor mirkarimi: can we back up a little bit? i think i am the senior member on this committee, on this issue. my, how time flies. part of that motivation in those earlier conversations that been involved in to some of the good work steps president chu and others have taken up in pursuing consolidation projects, that this was supposed to arrive at a idea of greater efficiency within city government. hopefully those efficiencies of data management, of the i.t. functions, would somehow also make it easier for the public, the people, to find some benefit in this particular endeavor that we are striving for as well. somehow, i am wondering, is

there some sort of capture track that helps us to identify those by other empirical savings or in time savings? efficiencies whatsoever? so far, to date, no information has been provided to help us anticipate an answer to that question or to be able to answer that question now. >> supervisor, this is an interesting conversation that i know we will have throughout the budget process, as someone who has worked on multiple consolidation proposals for many years, we all often have this issue or rise. as consolidation proposals, be a technology or other units in the city, the more complex they are, typically the greater the up- front cost and the harder they are to implement in terms of resources and time required. part of the conversation we are having here today about

consolidation in the time line for data centers is heavily the time that it takes to construct a new physical facility for us to use, creating an unfortunate but realistic delay that comes from the time and effort required to construct, and other costs that comes with it -- that comes with it in years later. we have talked about consolidating health centers, recreation clinics around the city. whether the changes physical or a resource, often there is a delay in time. we see this effect in your point of investment and time required. >>supervisor mirkarimi: a very good point that does not come up enough.

but the psychology of us having a debate about whether to close or consolidate fire stations, something that is very front and center in front of the general public is one that sort of folks the kind of debate where, on this question, this is invisible. this is a ghost part of what helps the engine run of our city government. that people do not see and realized in terms of direct and indirect benefits. yet, it really is the central nervous system, if you think about it, of exactly how our government is running. if it is running efficiently at the dollar rate that we can justify. i have note -- for example, i have no basis to conclude --

compared to other cities what they spend on a level of data management and i.t. performance the way that we do here. it might be worth just giving some reference, what other cities are striving to do. you know,, modern cities like san francisco, of course. kidding, tongue-in-cheek. but i mean cities that have similar challenges per capita, etc. in this case, consolidation has been completely astute by voters and in the general public. things near and dear to their hearts. in this case we have consented to the idea that this is the right thing we should be pursuing because of how torturous the information and data systems at, say the police department, others, it is just a

relic. it has been screaming for this kind of intervention. we get that. the bottom line on our minds is that you would think that the theory is with modernization and consolidation, yields would come from a particular dividend of savings. we are not sure what the savings are, but we are hearing that some might be delayed. delayed release. what i would love to understand is efficiencies. where are the efficiencies that help us make a government run better? this is that nervous system that makes it that much more effective, both internally or in the public. you might not be able to answer that now, but no one has ever been able to present that to us. that has helped to underscore this particular achievement, consolidation.

>> if i may respond to the supervisors comments and questions. again, i think that we are at somewhat of a crossroads in our discussion on technology and how it supports the city is a nerve center. when i came three years ago, there was not a clear understanding of how much was spent, a citywide, and i t. the magnitude and challenge of the opportunity, perhaps it may have taken too long in the view of people, but we are at that point now, having that conversation strategically. are we spending enough? how do we benchmark against other cities? i know that we are getting that data. los angeles, chicago, new york. other cities that we typically judge ourselves against in terms of spending and what busy roi benefit of technology in terms

of overall city spending. fire stations do not operate without technology. hospitals do not operate without technology. it is an underlying element of how we provide the importance to the customer facing city services. as we enter the city's budget discussions over the next few months, we will be able to provide you with that data so that you have taken textual view of how we are performing in relationship to large municipal organizations around the country. that will help you, maybe, i think, provide us with challenges or areas that we could focus on where we could do better. i think that the department of technology is here to offer its services, be a spokesperson, facilitate conversations. it is not the problem of a single department. anit is an i.t.