the other thing -- an additional protection is that we again employed outside law firms to basically died as through the debt issuance process, and they render important debt bonds due authorized -- duly authorized and enforceable against the city. and so, i think there is a large history where investors find comfort in this because they do not know what our processes are , that it would be a valid debt. the other thing the council would do is render an opinion of the tax status of an obligation.

one of the questions we asked is whether we issue bonds for operating an ex benz's -- expenses. those bonds would be treated as taxable debt. we could, but as a matter of policy, we would not. supervisor farrell: as we think about street maintenance and repair? >> typically what council will do is to rid be a discussion with our -- is there would be a discussion with our accountants. we would talk about things like maintenance, street sweeping, which would not finance. because what is the use of sweeping the street? it is not useful. it is maintenance. you could improve the street and the life of that if, you know,

repaving could be 10, 15, 20 years. there is a distinction in kind between street sweeping and street paving and maintenance. and i think counsel is comfortable with that and that has allowed us -- another analogy would be putting a roof on a building. so, again -- supervisor farrell: when someone buys a home or otherwise, they make sure they have enough money not only to pay the rent, but to pay for ongoing maintenance, whether it be roof replacement or what have you. it is the reason you build up reserves accounts. i think the characterization of these as long term -- >> i would distinguish between patching your roof, replacing tiles, and wholesale replacing your roof.

it is a debate. i understand. supervisor farrell: we are going to split hairs and agree to disagree. >> council will rely on some level -- we will have a discussion with our accounts. to the extent we believe is a capital asset with a useful life of longer than a year, it will be recorded. the other thing that you should be aware of is, when we do issue bonds, that the majority of those obligations have to match at least the life of the asset. so, we can necessarily issue bonds, let's say for an asset that has only one year of useful life for 20 years. that would be a taxable bond, too. that would defeat the purpose of issuing the obligations. supervisor farrell: ok. one other thing -- just to clarify.

at a certain point you said the policy is to issue these not to raise taxes. >> not to raise taxes? i mean, i think they are issued for capital purposes and not operating expensive -- operating expenses. supervisor farrell: ok. c.o.p. -- >> c.o.p.'s do not obligate the city to levy taxes. supervisor farrell: to be clear, we are paying additional interest and principal on these obligations going forward. >> that is correct. supervisor farrell: thank you. supervisor campos: supervisor farrell: no farrell: thank you.

i will say this to every department, but thank you for the job you do it. next, we wanted to ask our budget and legislative analyst to come forward. i asked them to do a study on our debt structure, c.o.p. in particular, but to do a comparative analysis to see how we stack up for other jurisdictions. i think prince william in california is what we looked at. thank you. >> good morning, supervisors. i am joined by my colleagues. i will take a couple of minutes to briefly present to you the results of the comparative analysis on the issuance of non- voter approved debt. we were asked to compare the best practices of issuing non-

voter debt to those of other large california jurisdictions. we compared 15 jurisdictions, including san francisco. we focused on debt that provided appropriations. that means we are not providing information on enterprise bonds and other types of debt. finally, these numbers are based on the most recent audited financial reports, which in all but three cases is june 30, 2010. there'll be some slight variation between these numbers because our numbers are slightly older. for compare ability purposes, the numbers represent the principal only since we were not able to identify outstanding interest.

so, the first finding has been discussed, that san francisco is the only jurisdiction we reviewed that requires voter approval for revenue bonds. it is the city's primary vehicle for issuing non-voter debt. as far as we can sell, this dates back to proposition p in 1977, and the pamphlet from that side said the yerba buena as problematic lease financing. we're the only jurisdiction that requires this for revenue bonds. secondly, each of the jurisdictions had outstanding non-voter debt, revenue bonds, c.o.p.'s, or pension bonds.

all of them had a standing c.o.p. debt. i should note when you consider the debt accounted for, only santa fe had no outstanding debt at all. supervisor campos: what were the other dog? >> i have it in the folder if you want me to look at it. c.o.p.'s are considered the most expensive kind of debt, as we already talked about today. we did it to collect the various interest-rate premiums all the jurisdictions pay on their debt. this was not presented uniformly, so we're we're not able to quantify the variance -- so we were not able to quantify

the various periods -- the variants. almost $592 million in outstanding principal. i include the interest so you can get a clear picture of the obligations. please remember, and the slides that follow, interest is not included. supervisor farrell: really quickly come up when you calculate the interest -- how do you arrive at that? >> financial statements. $591 are pulled up a comprehensive schedule. so if we look at outstanding c.o.p. debt alone, san francisco is hired than any of the major

jurisdictions. you can see on the screen. the mean per-capita c.o.p. debt was $112. c.o.p. this is debt. -- this is just c.o.p. debt. all these jurisdictions had lease revenue bonds as well. that is reflected here. supervisor farrell: i think we talked about this the other day, but there were a number of supporting obligations. on an apples to apples basis, have you been able to look and see if it is really apples to apples? our number is really high. >> it is really i. i think it would require

basically interviewing the finances in the jurisdictions, to understand the purposes. supervisor campos: where do we rank in terms of non-voter approved -- >> that is the next chart here. so, if you thrown in the lease revenue bonds, we are still high. we are second highest on a per- capita basis. you'll notice our number stays the same, because c.o.p.'s are our only non-voter approved debt. we are still relatively high, but we're not as off as we are if you just look at the c.o.p.'s.

those are the two main quantitative comparisons we did. supervisor campos: did you get a sense of why it is? is there something unique about the way we are utilizing non- voter approved that? >> why it is still high? supervisor campos: yes. >> we limited ourselves to the financial statements and the debt policies. i think that would require further discussion with the other jurisdictions that we will not really able to come up with other justification beyond that. we did notice that in reviewing the debt policies of other jurisdictions, our that policy is longer and generally more specific. it ranged from the city of long

beach had a debt policy -- part of its larger financial policy, part of a page. it ranged to dozens of pages, like what we have. i think we provide more guidance on the appropriate uses of the various types of debt instruments. beyond that, there was nothing from looking at the debt policy. supervisor campos: we may provide more guidance, but to we have more permissive policies? >> it does not appear so. supervisor farrell: i would actually said it also -- we have a much more restrictive debt policy than any other jurisdiction. >> that is correct. we're the only jurisdiction in the state that requires of vote for least holdings of this --

for leases of this type. we are issuing debt for a city purposes, parks, streets, the like, but also for county purposes. the construction of jails, health services. i think that is important to remember here. even if you were to combine many others in the state and city and county of los angeles, we would still be on a per-capita basis higher than many. frankly, that is a sign of a relatively wealthy community with a relatively well funded budget. we talk about our general obligation bond debt, if you look at that, the capital numbers are higher, but the percentage of the value of the property in the city is very

low and speaks to the value of our property tax base. an important caveat on debt ratios per-capita -- i suggest looking at that and other measures. supervisor campos: 2 we have a sense of where we are in terms of the value -- to we have a sense of where we are in bali -- in terms of the value of our properties? >> this is what reading agencies' comments on. i would assume our that valuation is the highest in the state, if not close to the highest. supervisor campos: i think that information would be helpful. i think we could probably get that information as possible. >> i think so. supervisor chiu: we can follow

up with that for sure, thanks. >> thank you. this is one approach, one way to do the comparison. there are other kinds of comparisons that will be helpful. so, if you would like us to do another comparison on general fund revenues, i can do that as well. supervisor farrell: i would like to suggest we do that as well. we can come back and work with my office as well. we can definitely -- i think it would be appropriate to look at that. thank you. supervisor campos: thank you. supervisor farrell: a slide it talking about principal and interest is different than what we mentioned before. i was wondering if we could clarify --

>> i do have a statement of principle and interest, and in our portfolio, we'd manage ab ductio in may -- 87.1 -- $87.1 million in interest. i have not looked to see why it is $900 million. i just heard katie speak to that. i am showing a marginal number. supervisor farrell: ok. maybe we can clarify that. thank you to the budget and legislative analyst for doing that report. i am looking forward to continuing to review that, the different ratios. i think next -- in terms of

c.o.p.'s overall, wanted to get a sense of future c.o.p.'s in the capital plan, but also understand the issue about the lease revenue bonds. maybe mr. blake can talk about -- we are the only jurisdiction here. maybe a perspective on that? by voter, by initiative? i would love to get your thoughts and general on the implications of what if we were not to have that restriction, not only in terms of ease of operations, but in terms of cost of debt? >> sure. i recall there was a change in

the 1970's or 1980's that changed this restriction in san francisco you do not have elsewhere. i think more tools and the tool kit are always hopeful in this world. i think as the city, over the last 10 years, we have been going forward to the voters with different charter amendments. we have committed ourselves to ability to issue revenue bonds, and the voters are increasing their bonds for most of our government. so, the public utilities commission has the ability to issue bonds without a vote of the people or a series of ballot initiatives over the last 10 years. when the open space fund was reopened for rec and park, that included the ability to issue bonds for that revenue steam --

revenue stream. most recently, the libraries -- prop a, the ability to issue revenue bonds. we have selectively been looking to add these tools back. we're looking at the cost benefit periods in -- were looking at the cost benefit. it will be very modest. they are fairly interchangeable from our way of looking at the world. again, more tools are helpful. we're looking to broaden our ability to use the tools and the way every other jurisdiction and the state does. >> so, because we are a frequent

and sophisticated issuer, we initialize 40 to 60 basis points. san francisco -- if anything, we are on the lower ends. people like, investors like san francisco. we have been fortunate enough that we do not see much differential between credit. it allows us, by not going to the voters, it allows us more flexibility in timing. the market knowing that you have to allow for time to good the voters to get approval -- with c.o.p., q improperly time when it is a good time to enter the market so ultimately, you get a lower bond cost. there is a differential.

in most instances, if it is voter approved, it likely gets a stronger rating. another city has a 3-tier rating structure. c.o.p.'s are non-voter approved. my colleague mentioned the open space fund. it is almost a part of the tax gao bonds. it is higher than lease revenue bonds. if we were to say that lease revenue bonds were able to be issued without the voters, not much of a difference really? >> we do have a process where we

do have voter approval. [unintelligible] in the last instance, it was a 65-71 vote. it was rated differently than the other c.o.p.'s before you. supervisor farrell: thank you. >> i apologize, supervisors. i found an error that will change the analysis. the $590 million is total debt service. that is going to change the analysis. we will revise that. supervisor farrell: ok. supervisor chiu: thank youchiu -- supervisor chiu: thank you. supervisor farrell: i guess next

is the mayor's budget office. i think the two things i wanted to briefly touch upon -- historical practices in city hall, how we approach things. the notion of capital expenditures, not looking to the future in this november. the commitment to stay here. but also, a discussion of how we are approaching. there are a number of big-ticket items. this is real dollars compared to where we have now -- what we have now. how do we evaluate going to the voters when it might not be a popular thing to do, jailhouse or otherwise, versus the issuance of c.o.p.? i would love to hear a little bit more. >> insurer. two good questions.

i am happy to follow up. maintenance versus capital. i think there are a couple of answers to that. there is of course the legal question about which types of expenditures are opprobrious, which types -- are appropriate, which types of stores. i think one of the things that is worth pointing out -- of the last several years, we have gotten much more sophisticated as the city and in our planning about how we approach the interaction between our cash and spending. through the capital plan, we have started to really have a lot more nuanced discussion about the trade-offs and using

cash expenditures. the biggest example, of course, is how we have funded streets over the past couple of years. i would probably not want to make the argument that a long- term financial strategy is to use general fund debt for streets. i think there are instances where it is a reasonable approach. in the capital plan, there is a greater need for the types of products eligible for debt, financing and the types of projects that are really cash on the types of expenditures like facilities maintenance. that need is great enough, that we would probably all like to be in a position with cash, but even our 10-year capital plan,

we are phasing in to meet that goal. we are a ways away from that goal. we're happy to meet those renewal needs with cash in a given a budget year. i think there is a trade-off of how we mix that with inappropriate level of cash spending to maximize the benefits we're getting -- and opprobrious level of cash the need to maximize the benefits for getting from our cash expenditures. i think the biggest question, the elephant in the room, for our capital plan for our budget, capital budget is of course the jail at the hall of justice. we absolutely need to do something.

it is the top priority for years now in the capital plan. it is a significant cost. we've had a lot of discussions in the capital planning commitment -- committee and elsewhere of how we're going to approach that. there is a very good argument to make that the appropriate way to do that is through a gao bond. the reality is, with the voters in san francisco, gao bonds have not done well with jails. we tried it with the san bruno jail. i think there is a question in front of us. how do we approach that? do we try a general obligation bonds? do we move forward given the timeline to get out of the hall of justice?

right now, the capital plan -- we're moving forward with c.o.p.'s. it is a policy question that will have to be closed in the very near future it would be a significant gao bond and a significant debt service payments that would impact us. supervisor farrell: in terms of the hall of justice, just as an example -- we do not want to upgrade the facility randomly. there are reasons why we want to do that. maybe we could articulate that a little bit more. we're going to wrap up. obviously when voters say, we have non-voters approved