we just talked about the sessions by their nature capella somewhat marginal but we are projecting significant revenue growth as a part of this plan. even without so, now ibm salary inflation and this is heard one of things we're assuming in this plan as the departments will be asked to fund the growth. they will be asked to plan to live with what they're getting

right now. that generates significant savings over a time. another significant piece of this is inflation and the cost of community-based organizations or nonprofits in particular. it has been a regular source of discussion with our cbo's about whether or not they are going to get there: in any given year. they have medical cost inflation for their employees. when we do not give them an increase, it is a factor reduction to their budget. we have not been able to provide the to the cbo's for several years, and what we are assuming in the plan is that we will not be able to fund it in the next three years either, which is going to be a burden on those providers, and i think the light at the end of the tunnel is that we are assuming that starting in the fourth year of the plan,

that we will begin to once again given to some of the savings as pension reform from other savings initiatives began to kick in once we get back closer to the structural balance we anticipate we will once again be able to start fining them and giving them some relief from the inflationary pressures within their budget. bass lines and revenue allocations. this is a relatively simple one. it essentially assumes that we will continue to exercise our options to, as we say, pull the prop h trigger, which means deferred 25% of our contribution. that is about $15 million per year savings to the general fund. i think it is safe to say that

the school district is anticipating this, but that will allow us to avoid some costs, some inflation or deficit numbers. lastly, the hotel tax allocations, the last couple of years, rather than giving growth to hotel tax recipients as the hotel tax grows, we have been sweeping that growth to the general fund to help us balance. this assumes we will continue to do that for the first three years. in your four, we are closer structural balance that will start continued or once again reallocate growth in the hotel tax to the departments and providers that receive hotel tax funding from the city. supervisor kim: just a quick question. i was curious -- was last year the first time that the city pulled the prop h trigger?

>> no, we have done that for at least the past three years, i want to say. either two or three. we have done a couple of times. i think one of the differences, which you know as well as anybody, is that in many of the previous years, we had a higher balance in our rainy day reserve, so we were able to offset the prop h trigger by providing a rainy day funds to the school district. that is not so much the case going forward, since our rainy day reserve is depleted. supervisor chiu: -- supervisor chu: i nearly had a paint that that 25%. you just remind me, by how much that payback was, the restoration was. >> i actually do not have the number of hand with me, but i think there were two potential

some areas. one is back -- that prop h will be extended. i think that as a probable -- probably a discussion coming up relatively quickly because we have a few years left before they have scheduled the sunset, in the event that that is extended, there could be some kind of change to the formula or the schedule for how those financial interactions occur between the city and the school district. and then, in the second case, should the city not choose to extend prop h, i believe we would have to repay this 25% deferrals in 2015, 2016. within three years after it expires in 2015-2016. in that case, we would most likely do so with the savings from no longer making a general fund contribution to the school district.

and thank you. >> the last two pieces of this plant are sort of a catchall for the remaining balance, and there are two components. trying to find my summary table. so under this last section, ongoing department revenues and savings initiatives, there are two things going on. one is back it is sort of a balance of savings that we need over and above the other categories that are outlined above to get ourselves balance, so i think you could think of these to some extent as the department of targets that will be required to balance the

budget in subsequent years -- departmental targets that will be required to balance the budget in subsequent years. also aboard are the policy statements included in this plan, which is that we are setting a policy goal of phasing out the use of one-time solutions to balance our budget over the next three years. the line on here that says non- recurring revenues and savings -- it assumes we will use about $40 million of one-time solutions to balance in the coming years, and then 30 and then 20 and then zero, so this would mean by the fourth year of the plan, we would be setting a goal to completely wean ourselves off of the use of one- time solutions to balance our next year's budget. there are certainly going to continue to be one-time funds available to us. i think the policy goal would be either that we use those to pay

for one-time expenditures or we use them to replenish our reserves so that once we are in a position where we are facing the next recession that we have our reserves built up to try to ease the impact. that will require some discipline on the part of the city, but i think it is a very fundamentally sound policy decision for us or policy goal for us to pursue in that it will help us avoid these kinds of ups and downs in the continued repeated budget deficits if we can get ourselves out of the habit of using those one-time solutions. supervisor chiu: in this example -- supervisor chu: in this example, this is what the department cuts would look like a cross all of our general departments, generally? to the extent that we keep our solutions at the 63 million

level, and they are all one time in nature kinds of cuts, they end up being a solution of humility -- cumulatively worth $311 million. >> if they are ongoing in nature. >> so then the interplay is to the extent that those items, to the extent that they are one time in nature, then we can expect the cumulative savings to drop, and then, anyone giving year's worth of cuts to be higher really? >> that is correct. to the extent that we use one time solutions, we will have to have bigger budget targets in each year of the plan after that. the goal here, which i think you are getting at accurately, is that if we can hold ourselves to kind of that policy goal of not using, not relying on one time

solutions to balance, it allows us to have relatively still challenging but relatively manageable levels of production targets that we are going to have to make over each of the years of the plan, and i do not want to minimize that because those are always difficult policy decisions, but it we hold ourselves to that goal, then on the out years of the plan, we will be in very significantly better condition, and we will have to make less deeper cuts to balance the budget. >> thank appear this is a budget with all hope for but it is often harder to do in reality, so i wonder what we have all four, are you suggesting we pass a financial policy that puts this into requirement, or this is sort of a wish list? >> i would be interested in your

thoughts on that. i think it is an interesting idea. we do have the tool of financial policies which also require the plan, and i think, the goal of having a plan and financial policies is that those would be somehow interrelated. it is the controller's office that proposes the policies. it might be worth asking them, but i think that is a reasonable thought. if we are saying our policy goal is to have this discipline in future budgets that we could try to think about how we could set some formal policies that would sort of enforce the discipline. >> i understand why it is so challenging to do and why so many other governments do not do it, but we are serious about phasing this out over the next couple of years, we would have to have some target, that it is hard to imagine we could do it without some sort of requirement.

do you have a perspective? >> certainly an interesting idea and one were talking about war. i mentioned at the beginning your thoughts on what to do next with a document like this are important, and this is certainly one, and you can lead us to honor for a week, and we can talk about it next time the item is before the committee, but we do have another whether to propose financial policies to the mayor and the board this fall, but by that time, the mayor will have adopted the financial plan for the city in whatever form that takes and thinking about ways we can use that financial policy-setting process to reinforce what the board and the mayor have indicated our their goals in this process seems to make sense to me. supervisor chiu: thank you. supervisor wiener. supervisor wiener: i just wanted to second that, and i know we have had discussions about this in the past. we hear over and over again accurately that even in good economic times, we have these

structural deficits. we have to go and ask for more and more tax measures, which largely are rejected by the voters. we have to restructure the way we budget in san francisco. my concern is that the second of the economy picks up in a way -- and we are already seeing increases in tax revenue, but the second week start seeing decent budget years and have money to do things with, we are going to start spending like drunken sailors again. it is like we cannot help ourselves. i sort of feel like while we are in the midst of a budget where people might be more open to making long-term structural budget changes so that that does not happen, we have to strike while the iron is hot and actually make these changes before we start having the

money that we hopefully will have in the future and so that we can make sure that we are spending in the future on some of these capital needs and other needs that are so important but have been neglected. supervisor chiu: -- supervisor chu: thank you, supervisor, and at the many of us are interested in that conversation because it is so important. one of the things that i would like to see when the item comes back before us, as you are giving thought about what supervisor chiu ask, as you think about how the reserves come into play with the financial plan would be helpful as well. so what our balances look like and whether and how we get to the levels we have said, given our policies that we have passed. >> we can do some of that modeling for the committee using some of the tools we have built to produce this document. we can certainly do that. supervisor chu: thank you. >> lastly, not to belabor this

point, but i think it is worth noting that this chart here shows if we do follow this policy of using ongoing solutions, that over the life of the plan, the level of department of solutions that will be required to balance the budget, so the level of operating reductions at departments, will decline significantly as a percentage of the total solutions. over time, if we have this discipline by the end of the horizon of the five-year plan, the cuts that we will need to make to achieve those savings or the revenues we will need to generate will be less deep. so that is all i have for you. again, as we have already kind of talked about, we have got a plan to be back on this topic next week. so to the extent that you have

talked about additional information, additional content that you would like to see, please let us know now or over the course of the week so that we can prepare for that next year. supervisor chu: thank you. supervisor kim. supervisor kim: [inaudible] on page 13. i just had a couple of questions about the bigger differentials amongst the fiscal years and interest and investment income and rent concessions. i noticed that most of the other line items were pretty stable, but there were some wide variances here, particularly in fiscal year 2012 through 2013. >> the chart on page 13, for those that do not have that in front of them, is outlining the

growth rate assumptions used across different revenue sources in the plan. the federal and state declined you see in year one of 12.6% is largely due to the one-time loss of federal revenue is used to balance the current year, and then our expectation for both federal and state revenues during this time is very slow growth, and that is consistent with what we have seen in recent years from both federal and state government. it is one of the underlying problems. these revenues fund about 15% of our general fund budget. we have cost inflation on the whole of our general fund budget. that is what lies there. your question about interest investment income i will have to look into because i do not know what is driving that variability. it is a relatively small revenue source in the general fund, about $20 million of the $3 billion, but there is certainly something going on underneath those numbers that i am not

familiar with. i will have to research and get back to you at the next committee meeting. >> also, that seems to be with the biggest variance was for both of those items, nine items. >> i will have to look into that. supervisor chiu: -- supervisor chu: thank you very much. does that conclude the presentation? >> yes. supervisor chu: ok, so why don't we open this item up for public comment? are there any members of the public who wish to comment on this item? >> good afternoon, supervisors. let me comment about process. it would be helpful to the public if the public could have access to the documents that you are speaking of. you know, you have a lot of vacant, dart fiber. you could use some of that putting some of the information and public documents online said the public can give you more

substantive public comment that is offered by walter. secondly, i think you should request that both the controller's office and the mayor's office give you some recommendations as to how you eliminate these deficits that will occur over the next five years. thank you. supervisor chu: thank you. next speaker please. >> good afternoon. while listening to this presentation, since the five- year financial plan was only required by proposition a in 2009, i would like to pose the question -- before 2009, does that mean that our leaders may be for the past 20 years can be

accused of dereliction of duty for not having enough foresight to manage the budget process for the last 20 years? i'm just throwing that out for consideration. in terms of solutions, it seems like everything obviously is pretty broad, so i would like to make a few concrete comments and suggestions for consideration. one, it is pretty obvious our leaders need to distinguish between needs and wants. just imagine yourself like a typical mother or father, and you have to tell the children, and " this is what you need, and we are not going to pay for what you want." that is pretty common sense. secondly, as i think, technical solution is to cut from the top down. i think the unions will not object to whatever happens as long as you cut from the top down, and then, a final solution is across the board uniform

cuts in salary and benefits. i doubt if any public workers will object as long as everybody is cut by the same amount and everybody is treated fairly. all i'm saying is that a lot of citizens in san francisco quietly whispered, "white do our leaders not understand some pretty common sense solutions -- "why do our leaders not understand some pretty common sense solutions?" try to understand that you are running the city like a bunch of young children who need to have a backbone. thank you. supervisor chu: thank you. are there any other speakers who wish to comment on either one? seeing none, public comment is closed. i want to thank the presenters here just so my colleagues know, i believe the supervisor chiu

introduced the resolution accepting the five-year financial plan, and that will be coming before us. these are hearings really to get us to start to understand what is in the five-year financial plan. it is a pretty lengthy and large document, so we will be hearing this item again. in the ensuing weeks, if we could ask the mayor's office with the assistance of the controller's office to help us think through a couple of the questions that were raised today because ultimately, we will be approving a five-year and a to plan that puts out a road map for how we consent to close the gap. one thing that's supervisor chiu mention was with regard to policy recommendations to deal with the boom and bust cycle of spending that we do have in the budget. the other item that i am interested in is if we could take a look at the different reserve levels that we would see over the time of the five-year plan. finally, another question that i would just add is the five-year

plan, like anything else, assumes a certain type of economic recovery. assumes certain levels of revenue growth over time, and i wonder if you would be able to share with us what and how this five-year financial plan would swing if we thought that revenues would be better or if we got a worst-case scenario would occur, where the big swings would be and how the plan might have to readjust assuming that. and for my colleagues, if there are any other specifics that you would like for the upcoming presentation, please either let me know, and we can share the affirmation or directly let the mayor's office and controller's office know. >> one other thing to add, and we will look at the scenarios on record, but in addition to what we talked about here, there is also -- actually, the bulk of the report is focused on specifics -- specific departments. many of our large departments

have write ups in the plan. there are a number of issues outlined in those ridings. we have a section which is relatively new information on our upcoming i.t. plan. so all those sections, i think, are things that we, to the extent that you had issues you want to call out in the sections, we did not want to have every department here, since we have been and are going to be doing that on budget hearings, but to the extent that there are issues that you want to call out on those, we would be happy to do that as well. supervisor chiu: i think you just answer the question i was going to ask, which is i really appreciate all the work that was done on the high level analysis, but i am interested in understanding probably at a later date to drill down department by department to understand what are their five- year plans and was sort of changes and adaptations they are

making to policy changes within their fields. i think that is exactly the type upper -- type of hope that we had with these plans. other question i have, and this is not something i think that we can answer now, but typically, from my perspective, the budget process from year to year looks at prior year department budgets and changes we make comparing your and your department to department. we are often not having a discussion comparing overall budgets of agencies with regard to each other and really tried to understand what our best practices, ratios of how much we spend on all of our major areas. you look at, for example, the federal government budgeting process, they typically have a two-the budget process, where, first, they debate the appropriate levels of military thsspending and education spendg to better health spending compared to other types of spending. then once those major decisions are done, they look to see what

is the best way to spend an education budget of a certain number of dollars. that is not something we do here, and those types of trade- offs -- i wonder if there is a way for us to take a step back and think more holistic play that way. but i know you did a lot of work here, and i know that was not necessarily within the purview of this five-year plan. supervisor chu: with regards to -- i think today's presentation really was a big overview, and i think there probably will be interest from certain members to drill down on particular departments, but i think it would be very long and very -- probably very difficult to do to have every single department come through on a five-year financial plan, so i am wondering if there are particular departments or particular city-wide areas, whether it is i.t. or other things that people are interested in. perhaps they work with the mayor's office quickly so that we can get a sense of what those things are and perhaps we can schedule them over time.

>> yes, i would absolutely be interested in hearing. the other thing is there are items in this plan that are sort of, you know, we may want to discuss in the short term because the plan is before you, but kind of in the bigger picture, our anticipation is that we would also be asking departments as they come before this committee for budget hearings to discuss the contents of the five-year plan, highlight those issues in the context of their budgets, so that might also be another way to kind of get into the details of the departments, is to have them talk through their five-year financial plan sections of their budget presentations to this committee. supervisor chu: thank you. and if that is the interest of this budget and finance committee, to really see and hear the five-year financial plan and thinking broader planning from the province as they come before us, we certainly can integrate that as

part of the budget process. do we have a motion to continue this item to the call of the chair? we can do that without objection. thank you very much. ok, can we call the next item, item three please. >> item 3, hearing to receive update on the recreation and parks department budget for fiscal year 2011-2012. supervisor chu: thank you very much. we have mr. ginsburg here, the general manager for recreation and parks. >> good afternoon. we are going to go a little low- tech today because our computer program -- [inaudible] our jump drive is not functioning. as i think you all know, last year was one of the more challenging years, but to years in our department's certainly

recent and probably long term history -- budget years. i am proud to be here before you today to say that while our structural challenges are far from solved, and we still have very significant need, this year's budget begins to reflect a little bit of a rebound in which, despite a $6 million budget target, you will see and the city will see no layoffs, no service reduction, and no fee increases from the recreation and park department. i think it is useful to start with a quick overview about from where we have come. last year, we had to solve for a $12.4 million budget gap. our strategy was to prioritize revenue over service cuts to the greatest extent possible, so we increased our approach to earn revenue and actually increase our revenues to offset cuts.