transferred from the state prison, but as people get arrested, rather than going to the state prison, they come to the county jail. those numbers have been less than what was anticipated. also, if you recall the census, it has come way down. in prior periods, we had 21,000 inmates, and it went down to a little under 1500. they made significant overtime -- they have been able to live with than that. we are not certain they will have a surplus, -- within that. we are not certain they will have a surplus, but we are anticipating the year and balance. the loan fund before the committee, we included that as a future expenditure in the

current year. public health 6.5 million, the city attorney $3.2 million. these costs might be absorbed through other savings. we are also expecting every appropriation ordnance for police and fire to move around some of their overtime and salary dollars. if you recall the board of supervisors, last year they passed an ordinance that requires every appropriation ordnaninance in the event they e spending more so that it would be a conscious decision on the part of the department, mayor, and the board to increase the overtime budget. police and fire is likely given the trend that they will be the real appropriation. we won't be spending any more money, but we would be spending it in different buckets. this slide is a little bit hard

to see because there is a lot of information, but what it provides is the projected fund balance for those funds not in the general fund. this part of the chart identifies the building inspection that you have seen a is a healthy balance of almost $19 million. that is good news. if you recall, three years ago, the building inspection department had to lay off a significant number of inspectors and so forth. the permits have come back, the revenue has come back, and the building inspection department is rebuilding the staff. supervisor avalos: is that part of dpi as well? the commercials -sideside? >> i don't have those figures, but i can get them for you. the convention facilities, $18 million. the library preservation fund, $19 million. those special funds have

balances that they can use to fund next year's budget or they can keep for other purposes in future years. the traditional enterprise funds are in the lower part of that chart with the operating fund having nearly and $80 million fund balance. the npa was $44 million, and they will be using some of that to balance next year's budget. an thd the port and puc. the bottom line is that there was significant improvement in the first six months of this fiscal year. the majority of the $129 million general fund surplusage, we will update the estimates -- surplus, we will update the estimates in the subsequent three fiscal years. we will issue with the mayor's budget office and with the budget analyst. additional uncertainty remains

as the state and federal budgets are not balanced. i will be happy to answer any additional questions or turn it over to kate. supervisor chu: if there are no questions at this time? supervisor avalos: the airport operating fund is $80 million. how does that get programmed? >> what the airport generally does is it uses a portion of that as a beginning fund balance for the next fiscal year. it is less money that they need to charge the airlines for the landing fees. they also need to maintain a fund balance so that in the event of emergency or unexpected expense -- so i would imagine they would use up to $20 million or more of this fund balance has a revenue source for next year. in the last couple of years, the airport has done so well that they did not need to use some of their fund balance.

the budget did it, but they did not require it because of additional revenue. -- they budgeted it, but they did not require it because of additional revenue. it took a lot of the market share away from those regional airports and has maintained and sustained its passenger load compared to other airports during the downturn. the economy is picking up at the airport continues to grow. they have not needed to cut back a tremendous amount like the other airlines have. terminal 2 with revenue has also assisted the airport quite a bit. and assisting the general fund because we got a portion of their concession revenue. supervisor chu: think you for the presentation. -- thank you for the presentation.

>> good afternoon members of the committee. kate howard, mayor's budget director. thank you for asking me here today. what the six-month report means for the budget balancing -- you have a more detailed presentation, but i will hit the high points. if you have questions, i will be happy to answer those. the 11-12 budget was about half in the general fund and half in the 11 -- enterprise department. public health, social services, the airport ,mta, mta, puc, and others. this is a new year and we have a slightly different context than before. it is the first time the city will be balancing a two-year

budget. we also have policies that require us to generate a general fund reserve as well as placing limits on the use of one-time revenues. last year, you adopted a five- year financial plan that set forth goals on how we can approach creating structural balance in the city's budget. we have labor contracts expiring this year, so the city will be negotiating with all of the police and fire unions on wage is. supervisor chu: nurses, too? >> nurseess, too. the big picture, the shortfall for 2012 and 2013, the local tax revenues are improving. but that is offset by the loss of local -- and some federal and state revenue. our personnel costs continue to increase, and we are losing some

one-time savings we had last year that we used to balance. when the mayor issued his budget instructions in september, we projected a shortfall of $263 million in the first year and $375 million in the second year. those shortfall numbers assume current staffing levels. they assume five-year financial plan assumptions around our costs related to personnel. they reflect the passage of the pension reform measure that saved the city nearly $40 million in the first year and nearly $60 million in the second year. we assume that we will lead to fund the $30 million in state and federal budget reserve that we would not be eligible for rainy day withdrawal because the revenues are increasing. the next slide shows you what the assumptions were in december on the major revenues.

those will be updated at the joint report. in the next several weeks. you can sete the high point i would draw your eye to is the revenues. improved revenues in the first year, $265 million of growth from the current year in year two. we have smaller but not insignificant projected losses, mostly on the federal and state side on the revenue. what expenditures, -- on expenditures, i wanted to point out $112 million of new costs projected for 12-13 at $205 million for 13-14 on personnel expenditures. the salary line does include the expiration of the furlough days that employees are giving this year that is worth $45 million

to the city. that is included as well as anticipated mlu negotiated salary increases. supervisor chu: a question on page eight, you went to the revenues quickly. i want to make sure i understand. the projected deficit that was over $200 million in year one and over $300 million a year to, it assumes revenue growth of the 166 and 265? >> the deficit projections included assumption of $165 million of growth in the first year at $265 million in the second year. supervisor chu: these will be adjusted based on the new information from the six-month report? >> that is right. slide 11 shows you some of the other things that contribute to our shortfall and are part of how we make our projection. you can see that we include fully funding the capital

budget, that is something that the mayor and previous boards have chosen not to do. it assumes inflation on contracts, materials, and supplies. both of those things are things that are five-year financial plan offers a solution to solving. so you can see, when you take all of those increased expenditure costs and changes in the revenue, we come up with a projected shortfall of $263,000,000.370 $5 million. -- $263 million and $375 million. they took action a month ago to change the rate of return on the pension fund. what that means to the city's general fund is in the second year, a $31 million in new cost new cost.

the second change is that the six-month news that the deputy comptroller reported on a few minutes ago, we assumed in the budget deficit reductiprojectioa starting balance of $49 million, so we have $80 billion better than expected in fund balance. when you take into consideration the changes of retirement, we can have an estimated shortfall of about $229 million in year one and $366 million in year two. in the second year, retirement assumptions offset tehe six-month news. on the mayor's budget instructions, you may remember that the mayor issued a budget instructions requiring

departments to submit proposals for 5% reductions for each of the next two years. in addition, he requested a 1% reduction in positions. 5% savings equates to $58 million in general fund support. you can see the impact of receiving end accepting all of those department of targets on the shortfall. leaving us with still a significant gap to fill of $171 million in year one at $250 million in year two. after receiving a 5% target as well as the good news of the six-month mark. supervisor chu: that is coming this week? >> apartments are submitting this week to the comptroller and the comptroller will submit to the mayor's office next week. supervisor chu: it looks like you are requesting 5% ongoing

reduction that will carry through to 2014 as well as an additional 5% in the second year? >> that's correct. we have already spoken about these uncertainties that exist, so the economic recovery continues to be an uncertainty. what happens with the state and federal budget with realignment and other reductions that are proposed. as well as our pension and health benefit costs. as i mentioned, we are negotiating with 27 of the 29 labour unions. that will be an uncertainty for us. supervisor chu: on the health side, typically we have had health rates set for the entire year. this year, we had a short years so we had the negotiations? >> we will have certainty with the first six months of the year, but for the second half, we will be making our best assumption of what the cost will look like.

as i mentioned, the 27 labor agreements are up for negotiation and we will be negotiating with employees of the redevelopment agency. the furloughs that were part of a previous negotiated agreement with our unions are expiring. that is in effect, 4.62 salary increase and $45 million cost to the city. the benefit costs continue to increase and we have a new requirement that all labor agreements come to this body by the fifteenth of may. those negotiations will lead to be concluded by that point. supervisor chu: the nurses, i thought they were up last year? did they only do on a one-year contract? >> i believe that is correct, but i will make sure i have the right information for you. we talked about the calendar

already, but you remember the have -- we have the joint report coming up. the community process comes out marched through the end of may. -- up march through the end of may. i will be happy to take questions you may have a supervisor chu:. colleagues, this item as an informational -- you may have. supervisor chu: colleagues, this is an informational peace. i believe the mayor's office is working with different supervisors to figure out town halls that will be happening. you folks should definitely reach out on that issue. aside from that, we have the committee hearings and meetings that are on linline on the website. why don't we open this item up for public comment? are there any members of the public that wish to speak on item number three?

they have switchover. >> good afternoon, supervisors. i have lived in san francisco for 60 years. i found two presentations of informative and i would like to mention a few concerns the price -- i think should be addressed today or in the future. the first is i would like to have some specific information regarding how many payouts and how much money the city anticipates to pay out in the next two years to settle major lawsuits against such units like the muni, department of public health, and so on. also i would like to have a specific breakdown on how many city employees, especially appointed administrators, have a

base salary of $100,000 or more and whether that number has been going up or down recently. another item, i think it is very good that this committee has kept a close eye on the department of public health which is the biggest user of general fund money. hopefully, that audit this year is going to be very interesting. also, i think it would be prudent to have public discussion and hearings in regard to the 49ers' leaving. i have a feeling they are on their way out. we might be ready to discuss the pros and cons. since the president is not willing to discuss it, san francisco should discuss the impact on the poor of $5 a

gallon of gas. supervisor chu: are there other items who wished -- members whos wish to speak? >> i was curious to know if the mayor as a housing trust is included in the budget and what is the story on the finances their backs thank you. supervisor chu: thank you. are there other members of the public who wish to comment on item number three? seeing none, public comment is closed. i do not believe the housing trust or any of those items are necessarily included at this moment. i believe that is something that is in discussion. given there are no questions, can we entertain a motion to continue to the call the chair? we have a motion to continue. we will do that without objection. thank you. items 4 and 5. >> resolution adopting

california environmental quality act findings, a statement of overriding considerations, and a mitigating monitoring and reporting program for the 34th america's cup events and approving the project, waving termination rights but the city and a the compost and the new agreement, approving the development and disposition agreement between the city, through its port commission and the america's cup event authority which also amends the host agreement, approving a memorandum of agreement regarding the city and the event authorities respective obligations for certain litigation measures in the mmrp and other activities. number five, resolution of intention to establish infrastructure financing district no. 2 for the city and county of san francisco at the port. >> we continued these items. we had a long and fruitful

conversation around the areas that are concerning to us. when winter the budget analyst report and their recommendations. -- we went through the budget and analysis report -- budget analyst report and their recommendations. we have the staff from the port, and we have from our city attorney. just so folks know who is here. we do have a number of supervisors who are here with us today. we have president david chiu and the supervisor from district two, supervisor mark farrell. we have a limit of five members who can be here at any one time, we may see people come and go in terms of supervisors to allow for other members to my want to participate in that meeting to be here.

in terms of public comment, we will have public comment today but just know that if we do hear this at a committee, at the board there will be an opportunity to speak there. i wanted to make sure people know that. to-hope we will be able to address the outstanding issues and colleagues, we have many of those issues that are outstanding. what i would propose in terms of how we do this is we will open the item up for any members of the board who would like to share in the opening comments. after that i would like to invite monique up from the port to speak about the financial situation. i would like to speak to the fund-raising issues and concerns we had with ecod -- ecoc. i would like to review the economic items on a point by

point basis. we have raised issues with regards to workforce issues. i would like to address that issue. and any other items the committee feels that are not included in that, please feel free to bring these up. why don't we go toward opening comments. i cannot tell who that is, that might be supervisor chiu. supervisor chiu: thank you. there have been an awful lot of meetings over presidents with day weekend. i know this has not been easy. this is the legislative process and what we need to go to to get to an agreement that will reflect what we believe and hope will be the wonderful potential of the america's cup. i am looking forward to a

presentation on where the language is. i appreciate progress that has been made. i will call out one issue around pier 29. i appreciate the fact that is off the table and i want to thank the event authority and others for that. because we have gotten a lot of this language over the last few hours my colleagues and i are reviewing it. we will have a number of questions and i want to state at the outset just so folks know, the questions i will have will focus on the 1% sales issue, exactly what we're talking about by the cap we know is in this agreement. questions around fund-raising and in particular come around the condition of the certainty bond. other colleagues have other issues. i want to say i do think we have made good progress. through the course of the conversation we will have more questions. i hope folks understand the questions are meant in the spirit of trying to finalize and

hone in on what the remaining issues are that we need to tackle. if we can resolve this today, that would be great and i hope we can do that and i look forward to that conversation. supervisor farrell: links to my colleague for having me on the committee today. i'm here not as a member of the committee but a large part of the america's cup is going to affect district to -- two. i have been active on the america's cup organizing committee so want to lend that perspective in terms of what we have been doing, to my colleagues and intimately involved in the financial aspects of this deal. i want to make sure i'm here to lend a voice to these proceedings. i only have 30 minutes to be here due to other conflicts but look forward to the discussion. supervisor chu: thank you. let's go to the presentations. we will start off with the

court. -- the port. >> thanks to you for your guidelines. i would like to thank all of you because you have worked just as hard as has the mayor. this has been a true citywide effort. in the times we've been what -- talking with you the america's cup has continued to move forward. there has been a plethora of attention on it worldwide and that attention is very steadily and consistently turning towards san francisco. we're excited about that. we look forward to bringing the events here just shy of six months. i attended the hearing last week i did not get the opportunity to talk to you. i am pleased to do so today. i wanted to take a step back and

reiterate the big picture of what is happening at the port and why this event and the development transaction are so critical for us. first, it is in maritime of them. it has been a long time since the port of san francisco has had so much maritime attention focused on it, on the integrity of its portfolio. we're grateful for the opportunity to have that. along with that we have had an opportunity route to work closely with all of you. i would like to say that the board of supervisors and this finance committee is probably the most engaged with the porch in the 43 years we have been under city governments -- governance. it is critical we not lose sight of the investments that are made. they are maritime investments. these are significant investments that have been beyond the financial reach of the porch.

it is still very much a partnership with our maritime partners and tenants. the arbour services that are occurring for our partners, the dockworker looking forward to having with our partners, the ferry services and our partners at the masters pilots and our partners in the cruise ship industry. the attention we're receiving for the cruise industry with respect to the america's cup is beyond what we had anticipated. we're grateful for that. equally grateful as the attention we're getting from the u.s. coast guard. the increased assets that are being designated to the san francisco bay as well as the opportunity to host their historical kotter, the coast guard eagle. these are the great maritime aspects were looking forward to celebrating. -- we are looking forward to celebrating. the development transaction is equally important to the port of

san francisco. we came back in governance to the city of san francisco 43 years ago. we came back within a tremendous amount of deferred maintenance. in 1969, it was assumed the poor would develop its properties. the city issued the debt to facilitate that. that is finally repaid in the last half decade. we have been continuing to move forward. in 1990, it became clear the city and the port needed a more strategic plan for how it went forward in fixing in maintaining our portfolio. the portfolio is astounding. it is 7 + miles of sea wall which protects some of the city's best wealth in several of the district. it is 39 peers and 80 some structures, almost entirely over water. that creates challenge