$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. >> i work with the department of environment and we are recycling oil.

thank you. we can go into a refinery and we can use it again. they do oil changes and sell it anyway, so now they know when a ticket to a. hal>> to you have something you want to get rid of? >> why throw it away when you can reuse it? >> it can be filtered out and used for other products. >> [speaking spanish] >> it is going to be a good thing for us to take used motor oil from customers.

we have a 75-gallon tank that we used and we have someone take it from here to recycle. >> so far, we have 35 people. we have collected 78 gallons, if not more. these are other locations that you can go. it is absolutely free. you just need to have the location open. you are set to go.