if you could call item four please. -- supervisor chu: thank you very much. >> hearing regarding the city's five-year financial plan. item five, resolution adopting the city's five-of financial plan for fiscal years 2011-2012. supervisor chu: thank you. could you call item 5 as well? >> i have already called item five. supervisor chu: you called four and five? >> yes. supervisor chu: we did ask the controller's office to go back and take a look at additional questions that we had and refined for the the plan. these had to do with items relating to one-time uses, had to do with scenarios -- better case scenarios or worst-case scenarios, so with that, i will let mr. rosenfield begin his

presentation. >> thank you, supervisors. we have just a couple of follow- ups to the presentation from last time, given the questions of the committee, which we will talk to briefly. we had questions last time regarding what a better and worse case scenario might look like as we look out over the coming five years, and when we talk about projections over this time, there is obviously uncertainty. the further we go, the more likely our projected estimates are today, are likely to diverge from what will ultimately happen. for an order of magnitude sense for how revenue projections might dip -- differentiate from the base case we might discuss, this is a simple illustration showing what would happen where the blue line in the middle is the projected based revenue,

general fund revenue. what with the world look like in a slightly more optimistic scenario and a slightly more pessimistic one? this is taking -- if revenues depicted in the red line grow at about 1.5% more than we anticipate, which would be a more robust economic recovery, what with the world look like? the bottom line is a slow one, and more pessimistic view where revenues grow at about 1.5% less. given the horizon we're talking about, that is different. it becomes significant, in particular in years three, four, and 5. in american terms, the base case grows from its current $2.8 million up to about $3.2 billion over this time. if in a more optimistic world, we may well see an additional $120 million in revenue growth

or thereabouts, given this more optimistic scenario, and a more pessimistic view, revenues may well be short by approximately $120 million, given the different scenarios. obviously, in a constrained world where annual operating budgets need to be balanced, in a better world, $120 million in better news on revenue means $120 million in ongoing reductions or other revenue changes that would not need to occur to balance the budget. supervisor chu: in this situation if we were at a more optimistic scenario where we had 1.5% revenue growth higher than what we are assuming in the base case, we would see in year five revenues that were positive to the tune of about $124 million, which would basically relieve pressure to make cuts or other changes in our expenditure? >> exactly.

if we were to go back to the bottom line expenditure reductions or the revenue changes required to bring the budget into balance during this time, and this table is somewhat complicated, so i apologize, but just as a reminder, the five- year base case plan indicates that by year five, the city will cumulatively over this time have to have made -- would have to make approximately just short of $400 million ongoing, either reductions or revenue changes, to bring the budget into balance. in a more optimistic view, that $400 million or just short of $400 million could be reduced by as much as 25% or about $124 million. in a more pessimistic view, additional reductions would be required to balance, so i hope this is somewhat helpful to provide just an order of magnitude since as we work through this as to what the range of possibilities really does look like. it is a fair one that obviously what we think will happen today

will not be what ultimately happens, and this will probably provide some more realistic views as a there is uncertainty the father out we go. there were also some questions of the committee regarding reserve levels and reserve status. as of july 1, our two major reserves, the rainy day reserve and general fund reserve -- will total just north of $58 million. that obviously during the past five years represents a pretty significant drawdown in reserves as we work for this current downtrend. in 2008, the navy reserve had a balance of just under $120 million, and the purpose is to draw on it when it is raining, and we have drawn on it during the last downturn, with $50

million in draws allocated by the mayor and board in recent years to the school district and $34 million to the city. that reserve, we hope, will be replenished in future years if we have years of extraordinary growth. we do not anticipate those in our base projections, though, so we really will need to see a year of revenue growth outside of the norms we're talking about in a five-year financial plan. supervisor chu: this is interesting. our draw on the rainy day reserve looks like -- you said $50 million that went to the school district, $34 million that went to the city, but the actual calculation or formula is that for the rainy day reserve, we can draw down up to 50% for city uses and 25% of what is there for the school district? so the numbers are kind of not what i would expect. i would have expected the city share of revenue for the drawdown to be higher. can you explain why it is not? >> the threshold that determine

when we can draw from the rainy day reserve are different from the city and school district. for the school district, it is based on an inflation-adjusted indicated, inflation-adjusted per pupil spending. with that declines, the school district is eligible to withdraw if approved by the mayor and the board. the city posey does not have an inflation adjustment. because it has a more stringent withdrawal requirement, even though we are eligible to withdraw 50% if we ever did it, we will make it less often. the school district has been eligible to withdraw more frequently and larger amounts. the board last year did adopt a financial policy and will go into effect during this horizon assumed in the base case where the general fund will grow during this time until it equals 2% of general fund revenues in 2015-2016. the amount of money appropriated

on an annual basis in the general fund reserve will grow during this time, and we would hope that over this horizon, that we hope to see an economic recovery that is more robust than we have talked about here. we do have two reserves in place now to catch extraordinary growth. so we have a rainy day reserve we have talked about. we also have the budget stabilization reserve, again, that the board adopted. financial policy that in years of extraordinary tax growth for a couple of other volatile revenues will be the reserves, but it is certainly -- i think the point the committee made last week, which is certainly true, is that we into this coming five-year financial time having largely depleted reserves that we had built up during prior ones. we had hoped to see some rebuilding of reserves during the next upswing prior to the next downturn. supervisor kim had had some

questions regarding different growth rate assumptions in the plan, which are on page 13 of the plan document. i believe you noted some interesting fluctuations in interest and investment income over this time where we should 50% loss of interest and investment income in year one and then some growth and another decrease. the significant loss in the first year is predominantly related -- well, it is really driven by two factors. one is the our rate of return on the funds that we have invested has declined significantly in the current year's come just given the interest rate environment, so it is under 1%. additionally, the balance of cash we have available has been largely spent through in the last several years, so that a relatively -- and this is a relatively small dollar value, in the $3 billion general fund budget, about $10 billion, but

we do anticipate a rather significant drop-off in investment income next year in the city. supervisor kim: just to clarify that again, so the -51% is due to that, our spending down of the general fund, and some losses that we are experiencing? and then the following year, we expected a 2% increase? >> yes. supervisor kim: then it comes up to 34% increase? >> these are the treasures assumptions about how they expect our short-term interest rates to move on their investment portfolio over this time, so you can see that is pretty wide. they are expecting the world has to recover from its incredibly low return rate that we are experiencing in the current year of under 1%, so, yes, i agree that there is some significant variance. you see a quick bounce back, and another cycle down in the years after. these are the treasurer's

assumptions. because of the revenue source we are applying, the rates are small, it does not have a material effect on the bottom- line numbers, but it is a good point, and it is a curious trend. supervisor kim: the other question i had was undermanned and concessions, why there is such a drop. it is pretty steady. then, just for that one year, it is -13.9%. >> that is up on some further research after your question last time -- there is a specific revenue source coming into the recreation and park department that is scheduled to expire. it is a prepayment of some parking garage spaces, so once the one-time benefit expires, it causes a one-time loss which is then more steady growth going forward.

supervisor chu: thank you. >> we are back to it to answer some of the questions that the board have had, and, of course, happy to take any additional questions you may have. supervisor chu: why don't we open these two items up for public comment? are there any members of the public who wish to speak on four or five? seeing none, public comment is closed. for this item, i've reticulate item five, supervisor chiu and i both have some amendments reflecting additional analysis that the office provided to us today, so i would like to wait for him to return before we take those motions. he is currently on another item at gao, so if we could sit these two items and call items 6 through 8. >> item 6, hearing to review the

mayor's proposed budget, fiscal year 2011-2012. item seven, ordered its appropriating all estimated receipts and all estimated expenditures for selected departments of the city and county of san francisco as of may 2, 2011, for fiscal years ending june 30, 2012 and june 30, 2013. item eight, proposed annual salary ordinance enumerating positions at the annual budget appropriation or that it's for selected departments of the city and county of san francisco for fiscal years ending june 30, 2012, and june 30, 2013. supervisor chu: thank you. these items to come before us before we have heard many of the enterprise department budgets already. at the first week hearing, the san francisco international airport had not yet come to an agreement with our budget analyst in terms of cut recommendations, said that is the reason why we are hearing the budget again today. items six through eight will have to be continued to the call of the chair so that it has

time -- or the rest of the budget has time to catch up with it before we forward out all of these items to the full board. with that, if i could ask mr. martin from the airport, to come to the podium and reflect on any progress that has been made with the recommendation. >> the airport has reached agreement with the budget analyst on budget cuts. supervisor chu: thank you very much to the budget analyst. i know in our report, we do see reflected changes that both the budget analyst in addition to the airport have come to agreement with. is that your understanding as well? >> yes, that is correct. supervisor chu: ok, wonderful. if there are no other questions from the committee at this point, would we like to take the motion to accept the budget analyst with the recommendation? ok, we have a motion to accept the budget analyst recommendation, and we will do that without objection.

then, colleagues, on items 6 through 8, can we continue these items to the call of the chair so that the rest of the budget has time to catch up with it? we have a motion, and we can do that without objection. thank you. let's return to items four and five. if i could ask mr. young to contact our president and let him know that we are returning to it for the evidence that he would like to propose. meanwhile, i will speak to some of the amendments i am proposing for this. colleagues, before you, i believe these items could be put

in and would not require a further continuance. the items that i would like to propose that we amend has to do with item two, that you see on your first sheet, which talks about asking the comptroller's office to provide to us a regular review differ changes and decisions that we make. five-year financial plan is only as good as the decisions we have made and the assumptions we have put in. to the extent that we passed certain policies or change certain things, whether it is approving labor contracts or other things that impact expenses and revenues going forward, that by-your manager plan ought to be updated to reflect the best information that we have. some of the amendments being proposed today reflect a desire to make sure that that five-year plan stays current and stays relevant as we go forward. one of the amendments that i would like to make, which is item two, would require or would insert at the end of the section called control, wage, and benefit costs of the plan, which is on page 20 -- the part that

would be inserted would read, " the controller's office shall report on projected employee wages as a costs compared to the strategy adopted in the financial plan." this is intended to make sure that as we are proving mou's going forward for labor contracts, that we adopt key significant changes, for example in the pension reform package that will be coming before us, that we will be updating the plan to show this differences. the other amendment that i would like to make is on the back of the sheet that i passed out to you. it really is to acknowledge that there could be variance in the future your economic assumptions with the financial plan. again, as the controller's office relate, the revenue projections that we relate -- for example, if we had better than expected revenue -- really does alter and change what our five-year financial outlook looks like.

the proposed amendment would really speak to that and said that there could be differences in what we actually see in the future based on what our actual economic situation turns out to be. it is really making sure that there is variability in the economy and what really comes to be and also making sure that we are controlling and capturing potential big changes in the plan. those are the amendments that i would like to propose. supervisor chiu: thank you. in addition to what our chair just propose, and number of other amendments came out of our conversation last week. we have circulated a couple of these to you. the three additional amendments i would like to make would be to insert at the end of the strategy is to restore fiscal stability is section, to require the controller's office to issue reports advising us on changes to the long-range financial outlooks that are assumed in the plan as well as progress about

that in the annual budgets toward those financial strategies. that is the first amendment. the second would really be to do similar types of review with regard to our additional tax fees and other revenues. again, requiring the office to report on the various projected revenue increases compared to what we have adopted in the financial plan. the third amendment i would like to offer would be to think about how we move forward with the consideration of not using one- time solutions so that we are really implementing structural changes that will force or will help us not have to come up with one-time solutions every year. the language would say that the board of supervisors' request that the controller research and develop financial policies to achieve the strategy is to really help phase out onetime solutions. this is obviously a topic that is not an easy one but one that we all understand if we do not

do this, we will continue to see structural budget deficits for years to come. supervisor chu: thank you. we have two combine motions that would reflect multiple changes that would add additional reporting to update the plan and keep it a relevant plan. we would ask the controller's office to provide additional policies, and also of knowledge that there is variability in what we see in the economy compared to what we see in the plan. can we take these without objection? ok, we will do that without objection. we have items four and five before us. can we entertain a motion to file item four, which is a hearing? ok, we have a motion for that. and to send item 5 forward with recommendations as amended? we can do both without objection. thank you. ok, do we have any other items before us? >> that completes the agenda for today. supervisor chu: thank you. we are adjourned.

>> hello. 9 judge terri l. jackson. the court is now recruiting prospective civil grand jurors. our goal is to develop a pool of candidates that is inclusive of all segments of our city's population. >> the jury conducts investigations and publishes findings and recommendations. these reports them become a key part of the civic dialog on how we can make san francisco a

better place to live and work. >> i want to encourage anyone that is on the fence, is considering participating as a grand jury member, to do so. >> so if you are interested in our local city government and would like to work with 18 other enthusiastic citizens committed to improving its operations, i encourage you to consider applying for service on the civil grand jury. >> for more information, visit the civil grand jury website at sfgov.org/courts or call i'm the president of friends of mclaren park. it is one of the oldest neighborhood community park groups in san francisco. i give a lot of tours through the park. during those tours, a lot of the folks in the group will think of the park as very scary. it has a lot of hills, there's a lot of dense groves. once you get towards the center

of the park you really lose your orientation. you are very much in a remote area. there are a lot of trees that shield your view from the urban setting. you would simply see different groves that gives you a sense of freedom, of being outdoors, not being burdened by the worries of city life. john mclaren had said that golden gate park was too far away. he proposed that we have a park in the south end of the city. the campaign slogan was, people need this open space. one of the things that had to open is there were a lot of people who did a homestead here, about 25 different families. their property had to be bought up. so it took from 1928 to 1957 to buy up all the parcels of land that ended up in this 317 acres. the park, as a general rule, is heavily used in the mornings

and the evenings. one of the favorite places is up by the upper reservoir because dogs get to go swim. it's extremely popular. many fights in the city, as you know, about dogs in parks. we have 317 acres and god knows there's plenty of room for both of us. man and his best friend. early in the morning people before they go to work will walk their dogs or go on a jog themselves with their dogs. joggers love the park, there's 7 miles of hiking trails and there's off trail paths that hikers can take. all the recreational areas are heavily used on weekends. we have the group picnic area which should accommodate 200 people, tennis courts are full. it also has 3 playground areas.

the ampitheater was built in 1972. it was the home of the first blues festival. given the fact that jerry garcia used to play in this park, he was from this neighborhood, everybody knows his reputation. we thought what a great thing it would be to have an ampitheater named after jerry garcia. that is a name that has panache. it brings people from all over the bay area to the ampitheater. the calls that come in, we'd like to do a concert at the jerry garcia ampitheater and we do everything we can to accommodate them and help them because it gets people into the park. people like a lot of color and that's what they call a park. other people don't. you have to try to reconcile all those different points of view. what should a park look like and what should it have? should it be manicured, should it be nice little cobblestones around all of the paths and

like that. the biggest objective of course is getting people into the park to appreciate open space. whatever that's going to take to make them happy, to get them there, that's the main goal. if it takes a planter with flowers and stuff like that, fine. you know, so what? people need to get away from that urban rush and noise and this is a perfect place to do it. feedback is always amazement. they don't believe that it's in san francisco. we have visitors who will say, i never knew this was here and i'm a native san franciscoan. they wonder how long it's been here. when i tell them next year we'll get to celebrate the 80th anniversary of the park,