supervisor chu good m: good morning. our court today is victory young. -- clerk today is victor young. >> please turn off all cell phones. if you wish to speak today, please fill out a speaker card and turn it into myself.

items discussed today will appear on the november 1 ballot, unless otherwise stated. supervisor chu: item number two, will entertain a possible motion to entertain that motion. would you call item no. 1. >> resolution authorizing the issuance from time to time, in one or more series, of not to exceed $1,355,991 to under 19 aggregate principal amount of the city and county of san francisco general obligation refunding bonds series 2011-are one to refund certain outstanding general obligation bonds are approving this form in terms of such bonds. -- $1,355,991,219.

supervisor chu: made the amendments at the full bonds and sent it back to committee for additional comments. is there any comments on this item? if not, why don't we open this up for public comment? any members of the public wishing to speak to item number one? >> my name is francisco acosta, and this did come before the soup oe board of supervisors, a hile you were reviewing, someone did not pay attention and forgot to mention about the bonds linked to the library.

for the people at home it is very interesting how our library system works. most people think the city has direct control or influence over who ever hits the library. at every meeting mr. scheffey will remind you that the people that control the library are friends of the library. we have supervisors and others who pay attention to what he says, but really did not do anything about it. my point is very simple -- when we deal with the friends of the library and whatever type of bonds are initiated by them, we have to be very leery. that is all i am saying. times have changed, and i know

that with money comes a lot of power and corruption, but these days with what is happening all over the world, and what is happening in our nation, our city has to be very careful not to entertain the issuing bonds with entities like the friends of the library who have not done do justice to the constituents of san francisco. the jury much. supervisor chu: thank you. -- thank you much. public comment is closed. >> motion to except. supervisor chu: the motion by supervisor mirkarimi. second prize supervisby supervi. >> item #2, resolution

authorizing an amendment to the state francis yacht club at least allowing the recreation and parks department to offer rent credit for the west harbor marina seawall repair. supervisor chu: i want to bring this open for public comment, but we will bring this item back. does anyone from the public want to speak to this item? we will bring this item back again, and you will have time for additional public comment at that time. anyone from the public wishing to comment on this? seeing none, motion is closed. we of a motion to continue this. we do that without objection. >> item number three, ongoing hearings to receive updates on anticipated budget shortfalls for 2011-2012, and receive updates from various

departments. >> thinsupervisor chu: we have k wilson from the mayor's office. >> thank you for inviting me to give you a brief update on where we are in the current year. we're just starting the planning process for 2012, 13, and 14. i think it is a good idea to keep in mind where we are, and i know we're not having an official three-month report this year. we will of the six-month report in february. -- we will have a six-month report in february. is afford to keep in mind where we art in the bigger picture. i am going to give an update on the current year, and the budget. i will review the five-year financial outlook as context for the planning for 13, 14. i will go through a preview of

the next year, and then just review key dates and time lines we have coming up as we move forward. of course, feel free to ask questions as i go. in the current year, we are one- third of the year into 2011-12, we just result a deficit -- three for $6 million deficit. the main thing we're looking at right now on the upside that were the 're thinking about is e know we have tax revenues improving. -- we just closed a $3.6. this is due to the economy recovering. we have moved out of the recession. we had a good reserve set aside. 15 million reserve. $2.6 million reserve in the

children's fund for child care cuts, so in those ways we are well-positioned to handle the risks we have in the current year, but we do have significant risks. the downside items we are looking at our state and federal impacts that i will talk more about in a minute. it is somewhat disconcerting, despite the economic recovery, that unemployment remains weak. then we have a lot of uncertainty. the pace of economic uncertainty, whether it will continue. the november ballot, there are three or four items for prop b. it that does not pass, we will have to think about whether we want to do anything in the current year to address street paving and sidewalk repair item. we did not include a great deal of funding in the budget, almost no funding in the budget to maintain the street program and the bond does not pass.

we want to make sure we keep up on the ada compliance program. prop c and d, these did not impact the current year so much. we did not make any assumptions about pension and benefit reform. this was a big impact in future years, so we want -- we're very interested in that measure. prop g, we put on the ballot a measure to restore. we put have set restoration back to the fund, have tlf going to public safety and the rest going to social services. it would bring in $50 million for the current year that we

could use to the extent that we have a more severe state impacts, a federal impacts, or we can -- and i think i would like us to consider keeping it in holding onto it knowing that we have an ongoing problem in 2013, 14, and 15. president chu: did you say the pension ballot reform was worth? take a there i>> there is no es not so much for the current year, but for next year. supervisor chu: and what was the amount? to go about 43 million. -->> about 43 million. supervisor chu: thank you. >> the most serious risk to the

current year budget is the impact from federal and state budgets. we have a $50 billion general fund reserve, but as we all know, we have in excess of $50 million in potential impacts to us that we need to think about before we start tapping into that budget. the mayor has already introduced legislation to use some of that reserve. i will talk about that in a second. we do have some serious impacts that we're monitoring and are concerned about. the biggest one would be the redevelopment, the state's decision to eliminate redevelopment agencies, and they subsequently allowed continuing redevelopment if we make a payment to the state. we did get good news, relatively speaking good news, the projected payment was going to be 25 million in the current year. we just got news it is going to

be 15 million if we are required to make the pavement. there is a court case pending, and the court has issued a stay until january 15, so we will know more in the next few months whether or not it to make the payment. i think the resolution has been passed. the mayor has been supportive of continuing redevelopment. if we are not successful in court, we are expected to make the payment. whether or not we have to make the entire payment out of this reserved for state impact or we have been talking to the redevelopment agency about what they can do to help make that payment, so i am sure once we have clarification from the courts, we will come back to you with the plan to make that payment, but obviously that is a big concern for us. public safety realignment. that was just implemented october 1. we came forward with the supplemental the board adopted to allocate $5.8 million the state gave us to fund additional

staff and programs at the sheriff's department, district attorney. i think we all know the potential cost of that program, of the decision by the state, could outweigh and exceed the 5 million in revenue. we are carefully monitoring the jail population to see the impact on the sheriff's department, and also, just want to make sure we are not -- that we are adequately funding those departments for this impact. we of a number of things going on at the department of public -- have a number of things going on at the department of public health. if you want to go into more details about all of these, i can't come up but depending on timing and specific action the state takes, there is a wide range this could potentially impact us. we're hopeful these will either be delayed or the state will not take action we are concerned about, but it could be $3

million, and i think we're pretty sure we're not going to see the worst case scenario, but it is out there that we are monitoring, and the department of public health is monitoring closely. are thessupervisor chu: are thed the state trigger cuts? take a yes. that brings us to the state trigger cuts. -- >> yes. december 13 was the deadline. we heard a few weeks ago the state looks like they're $7 million short of the revenue target for the cuts to take effect. it is unclear -- the adopted a budget that included the trigger cuts, but it was unclear if it would let them spend. obviously there are representatives in sacramento and the legislature is concerned about the cuts. the impact would be to ihss,

additional cuts to child care above and beyond what we are reducing, and the severe impact would be on education, which does not impact the city, but something we are concerned about. in the next two months we will have more information about that, and we are curious to see whether we will let the trigger cuts stand. we just introduced yesterday a supplemental appropriation of $3.4 million to back fill a portion of the funding the state was providing for centers that provide social services and medical centers to seniors who are vulnerable and are risk of having to go to a nursing home, which would obviously be a lot more expensive. for policy reasons we bought it did not make sense to let these centers cease to exist on december 1, which is what the state had done. they have cut funding as of

december 1 to these programs, and these individuals would have to figure out some other place to go during the day, and potentially end up in a nursing home. we did a supplemental to backfill possibly 75 percent signe. %. to continue lobbying the state to reverse the cut to figure out some other way to provide the services, because we all acknowledge we are not in the position to be expanding in taking on new programs that we have not provided before, but this was something we felt strongly about, that it was worth tapping into the state reserves to fund this program at this time. similarly, the state did cut funding for child care, and you will hear a supplemental appropriation today to use $1.9 million from the reserve we have set aside in the children's fund.

it was a $2.6 million reserve included in the budget in the children's reserve. it would use 1.9 million of that tobacco approximately 200 child- care slots -- of that to backfill approximately 200 child-care slots. human services realignment -- we're not sure there will be much of an impact this year, but we want to monitor it closely. the state has issua few differet programs for the change the way it will provide funding up until now. . they have shifted this so they are no longer guaranteeing it a share of cross, but they are guaranteeing a percentage of sales tax revenue. to the extent it comes in under budget or under target, there could be impact where we will

not see the level of revenue we had assumed in the budget for those programs. again, there will be another round of additional programs that will be realigned at starting next year, and that is probably where we will see the bigger impact, not so much this year but moving forward. finally, we have the budget deficit reduction committee. they have until thanksgiving to come up with 1.5 trillion dollars in cuts over the next 10 years. those are not clear it would have an immediate or direct impact on the general fund to the operation, but it will likely impact the redevelopment lot rep pending. housing programs and transportation. again, at this point we have obviously no clarity on what the cuts would be, but it is clear it will largely fall on these kinds of sectors of our services.

before i go into the 12, 13, 14 preview, i thought i would review the five-year financial outlook, because obviously that will guide in shape are discussions going forward and how we craft the budget for the next two years. the five-year financial plan was required by proposition a, passed by the voters in 2009, by the mayor. it projected increase in general fund shortfalls, starting with $458 million in 2012-13 growing to 839 million in 15 and 16. it is not necessarily a revenue problem. the problem is expenditures are expected to grow faster than revenue. over the next five years the revenues are projected by growth -- to grow by 423 million, but employee costs alone are

projected to grow by 647 million, not counting other non-personnel costs. the biggest use of the employe costs are the employee benefit costs are projected to grow by 62% over the next five years, $352 million. the plan did not just include projections, but recommended strategies for addressing the long-term problems we're seeing and strategies the board has adopted. and supervisor chu: for this number growing from $450 million deficit to 829 million, this assumes we are not undertaking any ongoing changes to our expenditures? to go right. this is the base case projection. -- >> right. this is just literally the between the gagap of revenue and

expenditures. this shows a little more detail how we are projected to change over the next five years and general operations. -- in general operations. the following slide is further demonstrating the gap in our wage and benefit costs alone, how those are by themselves stripping revenues in the next five years. this plan was produced several months ago, and things are changing. we are in the process of updating our revenue projections, but i think you are likely to see the general trend is not going to change all that much. the strategy is that the plan recommended and the board and they are have now signed on to-- and tehe mayor and board have now signed onto is capping spending while we are coming out

of recession and slowly building back up and so we're at the capital plan recommended level and initiating savings through restructuring debt with the help of the comptroller's office and office of public finance. controlling wage and benefit costs is a big piece of the long-term strategies. that obviously, pension benefit reform on the ballot would be a big part of that. as i said, we also have 27 labor agreements expiring, so we can look for savings through collective bargaining. and controlling health and dental benefits costs. additional revenue is a balanced approach. this is also on the revenue side. the biggest component would be the sales tax measure on the ballot next month. it that does not pass, it will be difficult for us to achieve the $100 million target oracle we have set for 12-13. we will have to think of some other way to grow revenue, but

it probably means it will put pressure and force us to make additional cuts if that does not pass. a dashing -- adjusting baseline and revenue allocation, we have not given them $50 million of their 60 million total annual contribution, so the plan recommends, and we have now adopted a strategy of pulling the trigger, and we want to repay that or prop h is up for renewal in a couple of years, so that remains to be seen how it will be addressed. there are hotel allocations that are in the code, and the strategy would be to cap the hotel tax allocation at its current level and assumed the hotel tax growth goes to the general fund. we have adopted the strategies, but they are not binding to future boards and mayors.

this will be part of the budget deliberations, but the intent was to serve as a guide and layout plan for how we're going to bring this city back to the long-term structural fiscal balance. supervisor chu: i know each one of these wines have a number of things rolled up into it, but let's say we take the wage control and cost benefit analysis alone, we expect in the next budget year we would have $100 million of solutions in that category, of which if prop c it would be worth 45 million. if it does not pass, we would be short 45 million. have you started to think about how we would close that gap? even if it passed and got the 45 million, 55 is still very large. >> we have labor contracts expiring. working with health services and trying to limit debt expenses we're seeing and into devising employees to use more cost-

effective options and their healthcare behavior and utilization, as well as -- even if it does not pass, i think our assumption is we will likely see some phasing in the retirement costs, because it is unclear what the impact of the good returns in the investments means for our contribution rates for next year. it is possible that will be offset by increasing health and dental costs beyond what we assumed in our five-year financial plan. i think it will be difficult, and obviously it at the end of the day we cannot achieve these controlling wage and benefit costs through reducing the unit cost of labor through wages and benefits, we have to think about contracting the city's work force. at the end of the day we have to balance the budget, and if we're not able to achieve revenue through prop c, or d, then it

means we would have to do more ongoing service cuts or program cuts or layoffs or other options that none of us want to take, but we have to to balance our budget. i think the bottom line of this is -- without going into more details on this is the matter what, even if we implement all of these strategies, we will have the last line, ongoing department toll revenue and savings. we will go to our departments with budget reduction targets to support reduction targets in any event, even if it passes, even of all of the ballot measures passe. we're still going to be going after departments with targets

in a month and a half or so. so just to keep that in mind as we are thinking about the current year and possibly tapping further into the reserve and other programs that come up, keeping in mind we do have a long-term ongoing problem. just a very preliminary preview of 2012-2013. these estimates are based on what we knew of the time that we adopted the budget, and we not updated our revenue projections. the comptroller's office is working on that. we're coming up with their best guess is as far as labor costs go, but from what we knew at the time when we adopted the budget, knowing what we know with savings that were implemented in the budget, our preliminary general fund deficit reduction would be $350 million, and that is largely due to the loss of one-time revenues.

with furlough days, those are expiring at the end of the fiscal year, and our base case default assumption is we see those cost increases take effect starting july 1st. obviously we know the employee benefit costs are going up. that is the projection that would assume we did fund the capital budget that the full plan that level recommended, and it seems we're facing some inflationary cost increases on non-personnel costs measures. $350 million. in the five-year plan that was 458 million, and that is less because of encored revenue improvement we saw as we were going to the budget process that carried into the current year. depending on the november election, it could decrease