if they are approved, they do reduce the level. with that? supervisor chisupervisor wiener. having drawn down nearly half of our reserve with at this supplemental, that will be back up to $25 million? >> correct. supervisor wiener: in putting together the mayor's proposed budget, is there a particular policy? in other words, the $8 million in reserve, will that come out of what would have otherwise

been a code for next year? i know that it is speculative, in a way. i wondered if there was some kind of practice or policy. >> a good question. in this case there are times when there are supplemental appropriations where we asked for funding of supplementals and replacement costs. in this case the supplemental appropriation before you is factored into the nine month report. regardless of other news occurring in the general fund, what we are doing in this case is not asking the department to take part in making additional

reductions. essentially what we are doing is covering the cost of this lost revenue with other reserves that we had, in this case the money we had set aside for state cuts. there will not be a specific impact in next year's budget. replenishing the reserves themselves will be done through the general fund process and is a citywide issue. supervisor mirkarimi: $8 million is not -- supervisor chiu: -- supervisor wiener: $8 million is out of the general fund reserve? >> correct. supervisor wiener: that would be happy -- that would have to go back during the 11-12 budget? >> correct. supervisor wiener: where does that money come from?

>> the general fund. we will use the larger general fund. supervisor wiener: in doing that, is there any kind of practice where we tell the department that we will have to deal with that part of the budget in the upcoming process? or is the money going to be back-filled by reducing the parks budget or the roads budget? i am wondering if there is any kind of practice or policy in place to address that. by understand the supplementals are unavoidable when next to supplementals that could have been avoided. >> the short answer is that there is no policy and it is

taken case by case. so, i guess there are two ways to look at the first part of your question, which i think is a good question. if we had not had to go forward with this supplemental, we would have an additional $8 million and we'd be able to make fewer expenditure reductions to balance the budget. that is the big picture without affecting the bottom line. that said, we have other, good, offsetting news that has occurred elsewhere in the budget. property transfer taxes. payroll taxes that we will talk about during the hearing. those have more than offset the loss of possible fee. it does not force us to make additional expenditure

reductions over and above those that we had planned. it is overall good news for our budget. that being said, i think that i understand the question. the issue that you are raising about a loss in a particular the -- that particular budgets department, is there accountability attached to a requiring of drawing from the general fund reserve? that is a case by case question. in this particular case, we budgeted revenues knowing that there was some uncertainty and we kicked back in order to avoid deeper cuts. we decided to take that risk, knowing that there was some uncertainty. because of that, rather than

taking a more pessimistic view band making additional cuts last year, because of the collective policy decision i would doubt be inclined to involve the department or call them responsible in the coming year for making additional cuts in the backfield. supervisor wiener: in not suggesting that they did something wrong, but it is case by case and we have seen some supplementals. >> a great point, and there are cases where we want have some kind of policy tool to give departments an incentive within the appropriated budget. a good point. supervisor chu: thank you. supervisor mirkarimi: i wanted to follow up on the discussion about but trading out on the

sheriff's department on the security of the hospital. but was not a fan of this plan, that there would be any kind of reduction of services or contracting out, however it is to be characterized. i was curious at the delayed start on this, which seems to be due to -- one of the reasons is not for lack of plan, but for lack of accessory funding that would make the plan work. correct democrats >> to the extent that the plan was designed to reduce the general fund as a part of it budget balancing strategy, the fact that it did not achieve the savings that were intended or expected, the question really came up -- should we proceed with a plan that is ultimately, in the end point to cost nearly

as much as, if not more than what the current work orders were crossing? without returning savings to the city at all? we go through this entire process that does not the liver the savings that were anticipated or hoped for. supervisor mirkarimi: was there a continuation of tried to make this plan work? >> again, we brought a chief deputy from the sheriff's department. we ask them to work full-time on the civil service option. that was what she jet -- chief deputy butler did. isolating all of the expenses associated with recruiting and background checks, projecting

what the cost of the work force would be. so, we developed an entire implementation plan, working with our own human-resources department. we work done that in a responsible way, but it is clear from that time line that the very earliest implementation of laguna honda, even longer for san francisco general, would take us an entire year and that might have only been in the last month or two of this year. we would be looking at a work order for the entire year under any scenario. we found ourselves in a position where -- and i think that the conversations with the sheriff's

department were in line with ours, that this seemed to be a sensible and reasonable course to take. so, the conclusion, as we approached the budget process, facing another city deficit at the time, a citywide, asking for an augmentation of our budget for a civil service work force, it did not seem like something that made sense to do in light of the fact that we were facing continuing deficits. supervisor mirkarimi: what can we expect? >> we are proposing that this proposal be change from the way it has been proposed in the past. we are basically willing to take back all of upper formerly

hospital lymphoid ipo +. taking them into the budget, deploying them in clinics and administrative offices so that they're no layoffs or staff reductions of any kind, realizing the savings and our hospitals. questions that typically, when you look at this bar seemingly questions of security. i would say two things about that. a civil service work force is not a sheriff's deputy work force either. compared to the proposal for the full civil service work force by the department of public health , this option for contracted security work force is not more or less secure than the alternative. in addition, we are certainly willing to work with the board and the mayor's office to make certain that we achieve the

level of security needed. the entire purpose of security is to have security. it is to keep the hospital safe and secure. why would we do anything other than that? we may find, as we go through this, that we might want a heightened presence in the emergency department. we might find ourselves looking at modifications to this plan and evaluating security needs in each department. there are of savings in this proposal to do variations on what we're bringing forward. over $300 million in budget reduction savings. supervisor chu: deputies would

return to help with overtime? >> denn does exactly. deputies, ipos sergeants, security guards formed nine years ago would come back to us. we would deploy them in non- hospital settings. we do not want this to result in staff reductions or layoffs. we are simply looking for a less costly way to fund security services as an alternative to fee-for-service cups. supervisor mirkarimi: quickly, please. in the discussion that you that the supervisor wiener, it does begin to feel like a bit of a hit when you talk about the reserves for litigation settlements. talk to me about the question of the affirmative mitigation

fund that the city attorney is able to use? but never seems to come up? >> supervisor, the car roll was funding the city attorney costs, not a settlement. we do have a settlement reserve. those monies are used when the board of supervisors approve the settlement. there is language in that legislation that appropriates a reserve. we do use it over the course of a year but it is proved in a case by case basis. supervisor mirkarimi: where are we in the litigation reserve? >> we face it every year. so, the dollar amount in the litigation reserve is based on consultation with the city attorney an outside auditor as

to how much money needs to be set aside. there is a risk analysis that needs to be determined by the city attorney that the accountants take a look at. we budget for an amount that we believe we need to pay out in a given fiscal year. if that money is not used, it is likely they will be needed for the subsequent year. that amount of rolling reserve that is used every year to some extent, it you can find insufficient money in the reserve with a large settlement. we would consider issuing judgment bonds that will allow us to pay overtime. in smaller increments, if they deserve it. supervisor mirkarimi: i want to make sure that none of that settlement has exceeded the litigation reserve now. >> correct. in the current year we have not

used more than what is available. supervisor mirkarimi: and in the current year, isn't that also a reserve that we can technically apply towards the questions of supplemental? >> it's not a prudent thing to do, supervisor mirkarimi, because we have a lot of pending litigation. and, again, we meet with the city attorney a couple of times a year. they determine what they believe the risk is and the dollar amount that the city will have to pay out. and that's the amount that we set aside that is looked at and analyzed by our outside auditors. if they feel that we have an insufficient amount of money, then they urge the city to actually supplement that reserve, and then we budget that amount for the subsequent years. so that amount of money will be available for you to take a look at while you're looking at the

budget. but it's unusual for us to tap into that reserve. in some instance, in the past, and it's been a number of years ago when we've had more money than needed, those moneys get closed out to fund balance and is used subsequent year to balance the budget. but there never has been an occasion in my memory that we've actually used money from the litigation reserve for another purpose. those dollars are set aside for that particular purpose. and that's a basis that is reported in our financial statements. >> thank you, supervisor. why don't we go to public comment are there members of the public who wish to speak on item number 3? >> good morning, supervisors. thomas picarello. wow, another $30 million hit out of your general fund. i think it's time now for the

five of you to step up and become budget tiger moms. yeah, budget tiger moms. you should all come to work next week with t-shirts that say i'm a budget tiger mom. you could even have a contest. the best designed t-shirt will win the last $50 remaining out of your general reserve fund. thank you. chairwoman chu: thank you. any other members of the public who wish to speak on this item, item 3? >> my name is brenda. i work at san francisco general. i'm here to talk about the contracting out of our security and to let you know that we are adamantly opposed to this. working in a clinic where you see people come in and they quickly become violent and sometimes you have to wait for people, having somebody there who can't arrest them is not going to work.

if you have to wait for someone to call someone, it's not going to work. and we're going to be put in jeopardy. so we hope that you don't support this. >> thank you. any other members of the public who wish to speak on this item, item number 3? seeing none, public comment is closed. ok. we've got a motion to move this item forward with recommendations. can we do that without objection? actually before we do that, can we accept the budget analyst's recommendations, first? so we'll do that without objection. and then wale prove this item and send it forward with recommendation as amended. thank you. item 4, please. >> item 4, hearing to receive an update from the controller's office on the nine-month budget status report.

>> as you know, madam chairman, the controller's office issued its nine-month report last week. and the news overall is good. we're going to be ending the year with a fund balance of $136 million. that's an improvement of about $47 million more than the six-month mark. and city wide revenues of baseline transfers have improved by 61.6%. since the six-month report. and that good news in revenue is based on property transfer tax, payroll tax, sales taxes and other revenues. so this is good news in that the

recovery is starting to take hold. we're seeing moderate growth in our discretionary revenue and that money is becoming available to help balance the budget for the next fiscal year. so this is a snapshot of the finances for the current year with the starting balance o of $25 million that was better than expected in the beginning of the year. our general reserve here, supervisor, shows us 20.9. and we have further on in the report accounted for the various supplemental appropriations that have come before you but have not yet completed the entire approval process. city revenues and baselines. as you see, we have $61.6 million of additional discretionary revenue.

the various baselines to the library, the children's fund and so forth, municipal transportation agency will be assigned and transferred to those entities for a netflix, citywide revenue gain of $55.2 million. department operations. this is the area where we have accounted for, for example, the loss of revenue and the over expenditures at the health department that was subject of the supplemental appropriation that you just looked at. so, again, we have a negative balance there in departmental operations of $4.2 million for a netflix balance of $46.9 million. the revenues, property taxes, are $34.2 million better than the budget which is about the

same that was reported in the six-month mark. as of the date of the completion of this report. but where we are seeing gains are in the payroll tax. and although the unemployment is still high in san francisco, what we're seeing from the business tax receipts is that employees are starting to gain in the number of hours worked as well as in their actual pay. so that is resulting in a netflix increase to our business tax receipts. sales tax continues to be positive and strong, stronger than was projected in the budget. and we're seeing that both throughout the state as well as throughout san francisco. hotel room taxes actually tracking where we expected it to be. but this is the online travel companies where we had estimated that we would see a gain, but that did not get approved by the voters in november. so we're recognizing that as a

negative amount of receipts. and i think that the other big variance here is in property transfer tax. at the six-month mark we did report to the mayor and the board that we thought the transfer tax was going to be significantly higher than budgeted. but we also assumed that a lot of the transactions that occurred right at the end of the fiscal year was based on an acceleration of the sales because the transfer tax increase had been approved by the voters. but what we have seen in the last two months is exceedingly high number of commercial transactions that have yielded up to $20 million of tax amounts. we have never seen those kinds of high yield tax months in property transfer. and so, again, this is our most volatile revenue. it's very difficult to project. we've applied a number of

models, taking a look at averages and highs and lows. and, again, we have underestimated this particular revenue in the current year. as a matter of caution, we are recommending what we think is a prudent amount of property transfer tax for next year, assuming that we will not be receiving as much transfer taxes as we have in the current year. so, again, the good news is $61.6 million. we do need to fund the baselines with that additional discretionary revenue. the baselines and setasides, the two transfers to the m.t.a. for both for transit and for parking is indicated here so that will help them balance their budget to some extent, the next fiscal year. the library is getting additional funding, as is the

public education fund, a very small amount. departmental projections. so, again, the public health department had a $25 million revenue loss as well as over expenditures of $25 million. and the subject of the supplemental appropriation, where we took money from the reserve for state shortfalls, $8 million of general fund. and some of their other revenues for laguna-honda were greater, and so we were able to use that. the sheriff's department supplemental appropriation is included in here as is an expected deficit in the city attorney's office. and the last three here have been subject to the corolla supplemental appropriation for the city attorney assigned to those departments. so this table identifies the departments with deficits. the lower table identifies the

departments with surpluses. and taken together this results in about a $43.9 million shortfall. so we take a look at the good news and revenues and the netflix deficit in the department expenditures to yield our year-end. position. we focus on the general fund. but, of course, we have a number of enterprise departments that have fund balance. and so it's good to note that the building inspection operating fund has a fund balance. they did have to lay off a significant number of employees in the last couple of years. and they have started to rebound. the children's fund has a surplus. the convention facilities fund, and the gulf fund and so forth.

i think that another item of note is at the p.u.c., the water fund balance is significantly less than it has been. it's $11.5 million. that is a relatively low amount of fund balance for the water division of the p.u.c. you'll be hearing from them during the budget hearing tomorrow. but that is largely based on the fact that residents are conserving more. it has been raining more. they are selling much less to their outside clients. and so they are concerned with the low level of fund balance in the water division of the p.u.c. so in conclusion, supervisors, what we show, about

a $47 million improvement in the current year. those dollars is about $15 million more than what the mayor's office had been assuming when the mayor's office was working on the balancing plan. and then above and beyond that, we are taking a look at the property taxes and the property tax revenues for the current year and working very closely with the assessor. but it does appear as if there is more money in property taxes than we have reported in this nine-month report up to approximately $15 million. so those dollars are available to the mayor's office to assist in balancing the budget for the next fiscal year. i'm happy to answer any questions that you might have. su thank you very much.