shortfalls at the time of the report were $170 million and $312 million. for that reason this seem to be an appropriate part of balancing. you will note the budget does on the full transfer of the rainy day fund to the school district. supervisor wiener: i am not expressing an opinion on it because, obviously, $15 million -- unfortunately, is a zero sum game in our budget situation. some folks have asked about that, so it is important for people to understand the rationale. supervisor chu: supervisor avalos? supervisor avalos: i appreciate the question. we are seeing a lot of growth in

departments in better times. we have the rationale for pulling the trigger on the prop age funds because we were seeing difficult times to balance our own budget here. now we are having better times and we are still pulling the trigger. it is important to know that is already happening in the mayor's budget, which is a time which is difficult when racy state cuts to a child care impacting what we can do here at the local level. i know that prop h states this money needs to be provided to the department, to the school district in years to come as well, so that is a position we are happy for prior to the reauthorization of the -- a new authorization would have to state how we pay back those funds or not. supervisor chu: supervisor kim?

supervisor kim: there are valid reason for why we are pulling the trigger. i understand mechanically we can because we projected a deficit of more than $100 million. having a look at the department of budgets, i see some large increases, sometimes up to 152%. while i think a lot of those requests are about in terms of job creation, schools are also a priority. i think we will be hearing a number of valid questions being raised over the course of the next few weeks as to why we are pulling the trigger and whether that can get reduced at all. especially because of the state cuts we are seeing in our public education system, and another reduction of our school year, this year, they are proposing a four additional days that they will shorten the school year by which tremendously impacts our student's ability to learn and

for us to close the achievement gap, which is our cities number one priority. i do think we need to ask questions about the priorities we are putting in our budget this year, seeing that we have more breathing room. supervisor chu: supervisor wiener? supervisor wiener: i appreciate the comments. obviously, once we know how much money we potentially have for making additions to the mayor's proposed budget and changes, we certainly have to park your ties. -- poor guys. we have already had very large requests from our nonprofit partners come forward including additional costs of doing business increases as well as replacement of some federal stimulus one-time funds for

shelters. this will be on the list as well. we will have to figure out how we juggle all of these large requests. i do hope that our public schools are certainly on that list. supervisor chu: thank you, supervisor. the only other thing to add, in terms of context, this is a choice for the board of supervisors and budget. when the talk about the trigger being pulled, 25% reduction, that is not from the current year level. just so folks are aware. the level of funding allocated for public schools under prop. h grows with discretionary revenue. the amount of money in the proposed budget bursa's the amount approved in the current fiscal year is scheduled to increase modestly in the incoming fiscal year. we are talking of a 25%

reduction from the larger amount contained in the ballot measure. that amount was not funded in the current fiscal year. supervisor kim: the trigger does not represent a cut in the allocation year? it is not the growth in the level that we are providing? >> correct. the last baseline is the treatment on demand baseline. this is a voter-approved ordinance, so it is not binding in the same way that others are that affect our charter in terms of its ability to affect the mayor and boards ability to appropriate funds. the part of public health reports at that threshold is not a poet -- met in the proposed budget as well. there is obviously a lot more information in the revenue letter, but that law lot -- provides a high-level summary. i would be happy to answer any questions you have. supervisor chu: i do not think we have any question that this

moment. in terms of updates to the budget, anything that the comptroller's office or mayor's office with a to provide? colleague, for this item, we have to take public comment. members of the public, is there anyone from the public that would like to comment on this item? item 4, a hearing on the budget update. we have heard the revenue letter as part of that as well. seeing none, public comment is closed. colleagues, can we continue item for to the call of the chair? without objection. now with that, we will go into our department hearings. we have a number of departments before us today to speak. quickly, they are the office of economic and workers to relman, treasure island development board, planning, assessor recorder, treasurer, controller, general responsibility, city administrator, dept. technology, human rights, borders supervisors, mayor's

office, at the commission, as well as the department of elections. because a number of these departments have a role to play in the redevelopment agency reorganization, i will ask the mayor's budget office to provide for us a general overview of what happened with the redevelopment agency. we will see bits and pieces of the reading of an agency in many of the departments that we see today. >> thank you. kate howard, mayor's budget director. i have a summary of the post redevelopment budget for you today. i am trying to provide an overview of what has happened with the redevelopment agency, where its services and functions have been absorbed in the city, where its staff has been a guard in the city, but the work plan going forward looks like.

i have with me today my colleagues tiffany from the city administrator's office and can draw from the city administrator's office, jennifer from the office of economic and workforce development, angie from the mayor's office of hounding. -- housing. i thought i would do a brief overview of the dissolution. most of you are aware of the broad strokes of that. talk about staffing changes and staffing loss. walk through the budget with you had an overview level, talk about tax increment, the gsa budget impacts and the general fund impact. finally, talking about the general fund supported activities that will be and absorbed into the general fund in this budget, rather than in

the redevelopment agency's budget. as you remember, earlier this year, the state legislature passed and the governor signed ab 26 and 27. 26 was found to be constitutional and dissolved the redevelopment agency throughout the state. in our case, the city and county became the successor agency to the redevelopment agency. the assets of the agency were transferred to the mayor's office of housing, port, and city a minister's office. you will recall also each successor agency is required to have an oversight board. our oversight board oversees the fighting to management of certain real development agency assets. at the highest level, the three major approved development projects and the house and work that was done by the former

agency will continue. the oversight board has adopted what is called a recognized obligation payment schedule. that details all of the eligible, enforceable obligations. you may have also heard that there was a piece of budget legislation that may affect redevelopment agency, and we are looking at the potential impact of that on the city. i think this line gives you a healthy overview of what has happened with staffing at the redevelopment agency, and also gives a helpful said the were the bulk of the work that remains continues. the redevelopment agency in fiscal 11-12 had 112 budgeted full-time positions.

58 of those positions were eliminated as a result of the dissolution of redevelopment. 54 were retained. of those were retained, 10 were transferred to the mayor's office of housing to continue to enforce a work related to housing. 35 were transferred to this id minister's office to continue work on those three major approve development projects, mission bay, transbay, and hunters point shipyard, as well as to manage the responsibilities associated with those projects. nine were transferred to the port. to manage the south beach harbor. supervisor chu: supervisor kim? supervisor kim: i noticed a few of the departments that are not listed on the slide have requested positions related to redevelopment duties. could you address that? i know the city attorney wanted to absorber one attorney and a

legislative policy analyst. i think economic development wanted to absorbable position or two. i was hoping that you could address this as well. are these new positions, or are these of the 58 fte's that were eliminated previously? >> a few different things happening. the city attorney's office, there are -- the city attorney is able to absorb much of the work that was previously done by attorneys at the redevelopment agency but is reorganizing and needs to get several positions to accommodate the full workload related to property management, the complicated land use and housing related deals. those are two additional positions they are requesting in their budget. supervisor kim: will they be

observing the attorneys that were already at redevelopment or are they hiring new individuals to fulfil that absorption? i understand the need for the work. i'm just curious. >> my understanding is they are going through a hiring process. at the office of economic and workforce development, there were certain positions that were previously funded by the redevelopment agency. they were not actually positions -- they are not new positions, per say, but they had received funding through developer reimbursements. supervisor kim: that is for existing individuals but a source of funding has not changed. >> that is correct. those are the primary other things that you are not seeing here. overall, in terms of the fiscal impact on the city, you recall

the redevelopment agency's budget was comprised of a variety of sources, including tax increment on proceeds and other revenues. going forward, these same sources are available to the successor agency, the city, but there are somewhat more restricted uses because of the rules associated with as 26. -- ab 26. over all, the agency tax increment, the successor agency tax increment request is increasing a little bit. that is primarily driven by mission bay and the requirements to transfer all of the increasing tax increment to mission bay. as well as increases to certain required passthroughs back to the state. there have been some changes in the windows are calculated by the state. debt service continues to remain the largest cost in the successor agency budget, and

that is relatively flat. project and staffing costs are lower, both because the agency is no longer allowed to do the same range of things that it did before, and because there is a limit to administrative costs that is permitted by ab 26. this next slide is showing you the tax increment that is allocated to enforceable obligations. tax increment, as you will recall, is basically our general fund property-tax that is dedicated to these projects. the board has made the decision to set those funds aside. to the extent that the tax increment request increases or decreases, that does have an effect on our overall fund, because it is a property tax dollar.

what this table is showing you, at the highest level, you can see the net tax increment that is available in these project areas. in the current year, the $134 million, and it is increasing next year, 135.6, and the following year, $143 million. that is the amount that could be allocated to the agency. you recall the city has the story made choices about how much tax increment to provide to the city and has never fully provided that full tax increment value. down at the bottom, uc the actual tax increment provided in the current fiscal year to the agency, $112 million, increasing to almost one harder 14 in the second year, $123.8 million in the third year. that increase is primarily driven by redevelopment -- by

mission bay pastor's increasing and by this change to the way the pastors are calculated. -- passthroughs increasing in by this change to the way the pass- throughs are calculated. briefly, what is continuing at the successor agency and the city administrator's office in the community reinvestment division. community reinvestment division is continuing the activities that are permited on the rops, debt obligations including paying bonds, continue to implement the major approve development projects i mentioned a minute ago, mission bay, hunters pay shipyard, transbay, managing certain assets and continue to be the responsibility of the agency, and then managing the transfer of certain responsibilities into the rest of the city.

overall, the successor agency 12-30 proposed budget will be $140 million, off following year, decreasing steadily to $127 million. for the mayor's office of housing, you see a significant increase in the or on mayor's budget due to the transfer of these assets and responsibilities. the mayor's office of housing began implementing the responsibilities related to the house and obligations in february of this year and is completing the commitments related to the pre development and affordable housing construction for the enforcement obligations that are on the rops, as well as continuing property management for redevelopment constructed unions, as well as providing staffing to there is funding in the budget for housing, staffing, and program delivery.

the enforceable projects that are included in the mayor's office of housing are the major improvement areas, housing related obligations, related to the shipyard, related to mission bay, transbay. the match and implementation of the alice griffith rebuild. as you recall, we received a federal choice grants of $30.2 million. those funds and the obligation to continue that are viewed as an enforceable obligation. replacement housing obligation. that was the obligation of the redevelopment agency related to housing that was destroyed and is -- the city has made a commitment to replace. you will see the budget forhe mayor's office of housing related to develop and

obligations, about $8 million in each of the next two years. the tax increment request is increasing, and that is primarily due to the mayor's office of housing spending down fund balances as a way of funding the budget in the first year and then requiring an additional tax income and allocation in the second year. i think there has been a significant amount of interest in the work that is not considered obligated and that the successor agency will no longer be able to perform, using the redevelopment tax increment proceeds. the major impacted areas are housing and hope sf, community and neighborhood development. the primary area affected are the main market, bayview, and the visitation valley area. finally, work force readiness is something the agency is not able to continue to provide through

tax increment dollars. in order to continue those import services, there are new costs to the general fund. this chart shows you what the general fund impact of all of this additional -- of the dissolution of the agency and the work that is not enforceable on the general fund. the top line is showing you -- there is some positive. as the property taxes perot, as the agency has tried to contain its cost, there is some small net positive benefit to the general fund. effective that in the first year is $2.8 million, second year,

2.5. that could be considered a source that could be used to fund these of our general fund costs. below you see costs related to housing and community development of $6.8 million. primarily, that is due to the way this city funded our hotel tax allocation related to affordable housing, by allocating additional tax increments to the agency. you can do that anymore. those hotel tax dollar to go directly to the mayor's office of housing. the agency was also a critical partner in the hope sf project and is no longer able to fund a project-related activities, community-related to activities, job training-related activities and associated with the project. the agency also contributed to serve supported housing projects that are part of the

dph, hsa, and mayor's office of housing pipeline. they are no longer able to do that. on the neighborhood-based economic development side -- these are all included in the mayor's budget. on the neighborhood-based economic development side, we included approximately $1.6 million in the first year, $1.5 million in the second year relate to work in the mid market, $3.7 million in the second year related to bayview, one in the second year. that difference is due to early funding of the southeast community health facility. approximately $100,000 related to visitation valley. have also included funding for the jobs readiness program. you can see included in the mayor's budget, in the first year, $30 million of general fund support for these programs. second year, $10 million.

that is a significant general fund cost. supervisor chu: just to recap, when you talk about the tax increment allocated to enforce obligations, the redevelopment agency could have asked for a higher version for the redevelopment agency but we did not allocate the entirety of the income in past years to redevelopment agency work. if we look at comparisons year to year and changes, in the current year, we allocated $112 billion to redevelopment agency for the in forcible obligations but we expect those to grow over the next two years, all told about $10 million extra by the time we hit 2013-14? >> that is correct. that is largely due to increased tax increment growth in the mission bay project area.

as that increment grows, part of our agreement with the developer, part of that project is that that growth is passed through to the developer to fund additional work in the development area. >supervisor chu: page 10 shows not enforceable activities. these are all items that were previously going through the redevelopment agency, or they were supporting different work being done in some of these other areas that we can no longer pay for through the state legislation. so the general fund is planning to pick up an additional $10 million for the is not enforceable activities, plus the additional million dollars roughly 40 in forcible obligations in year one, your two, an additional $7 million in general fund expense plus the $10 million in forcible

obligations? >> that is right. supervisor chu: over all, the redevelopment agency dissolution has not been neutral to the general fund, it has cost us more. >> that is correct. supervisor chu: supervisor cohen? supervisor cohen: i am pleased to see jri reflected in the budget. it is not funded at the level of the redevelopment agency had previously committed. i was wondering, what is the mayor's plan for jri overall for the next two years? >> what is included in the mayor's budget is $1 million in the first year, $800,000 in the second year. those funds are intended to complete the initial contract that jri providers had with every development agency through september. additional funds remaining for

the second half of the year, the mayor's intention is that those be incorporated into the overall portfolio of the workforce development department so that as the city takes on these additional job readiness training programs and services, which are clearly needed, they are well integrated into the rest of the offerings of the workforce development division. supervisor cohen: thank you. supervisor chu: i just wanted to point out, doing quick math, in terms of state actions, we talk about what the actions mean to our local government, in terms every development activities alone, we are not talking any additional cuts. impact to the general fund is roughly $32 million over the two years to absorb some of these unenforceable activities or the growth in enforceable activities. i just want to make sure that we

are aware that the state has cost us an additional $32,000,000.40 redevelopment activity work. >> to clarify briefly, i think in the first year you are calculating that number is probably correct. in the second year, that top line on page 10, general fund impact successor were compared to fy11-12, that 2.8 and 2.5, that takes into account the growth in the second year of required tax increment to the agency. i do not think you would want to add the cost of the enforceable obligations in the second year as a state-imposed cost. nonetheless, the point is still a good one. over the two years, nearly $20 million of new costs that are a

result of the state action. supervisor chu: meeting for the forcible one that would have grown anyway? >> correct, and accept that there are some changes that i mentioned in the past route. basically they would have grown anyways. this next slide use to an overview of what is happening in housing and hope sf and what those funds are specifically being allocated to. i walked through this a moment ago. the hotel tax allocation will be provided not to the agency but will flow to the general fund. that hotel tax funding will provide for the development of additional low-income rental housing for elderly and disabled individuals. there is also $200,000 included in the budget for vocational services