captioned by the national captioning institute --www.ncicap.org-- supervisor chu: a lowe, of welcome to the expanded budget committee. -- hello, welcome to the expanded budget committee. are there any announcements? >> please silence all cell phones and electronic devices. include documents as submitted to the clerk. ockham to drink it -->> -- supeu very much.

mr. young, would you call items one through three? >> item number one. interim proposed budget and annual appropriation ordinance appropriating all estimated receipts and all estimated expenditures for departments of the city and county of san francisco as of may 1, 2012, for the fys ending june 30, 2013, and june 30, 2014. item number two. interim annual salary ordinance enumerating positions in the annual budget and appropriation ordinance for the fys ending june 30, 2013, and june 30, 2014, continuing, creating or establishing these positions; enumerating and including therein all positions created by charter or state law for which appointments thereto; specifyingcompensations and work schedulespositions and fixing compensations therefore. item #3. resolution approving the interim budget of the treasure island development authority for fy2012-2013 and fy2013-2014. supervisor chu: thank you very much. pour the next two weeks, and we will be deliberating on these

house cleaning items. items one through three. again, these are basically the authorization, the ability for the city to continue authorization during the process carried over the budget for the month of july as we continue forward. generally, there are not too many changes in these items. again, it just allows for the city to continue functioning during the month of july. why not open this item up to mr. rose or the budget office if he would like to say anything. >> madam chair, be only thing i would add besides that which you have already stated is on page 2 of our report. there are exceptions to the interim budget. in this case and the mayor's office is requesting 162 new positions, full-time equivalent.

as you know, if those are approved, they would start on july 1 rather than august or september. so, we will be reviewing these positions in the ensuing two weeks on a department by department basis, making recommendations there. secondly, we point out that regarding the hotel tax allocation, the steinhardt aquarium does not get an application, but that is not shown in the administrative code. the recommendation on page 5 of the report, except for the exceptions to the interim budget, which include the hiring of 162 new positions as of july 1, 2012, positions that i stated we will analyze and make recommendations on in the next

two weeks, we recommend that you do approve the ordinance, the 12-13-14 annual salary ordinance and 12-13-14 honoraria authority budget, and that you amend the business of the tax regulations code to include the annual tax allocation to the annual aquarium, which would be consistent with previous border supervisors policy. supervisor chu: thank you very much to the budget office. is there any item that you would like to speak to? >> good morning, supervisors. in the mayor's budget director. i will be presenting to you in a few moments and more thorough overview of what is in the mayor's proposed budget and how we appreciate the work of mr.

rose's office. his approach at this time is appropriate. thank you. supervisor chu: thank you very much. let's open these items up for public comment. are there members of the public that wish to speak on items one, too, or three? seeing no members of the public, public comment on these items is closed. a question to the city attorney. with regards to the budget analysts recommendation on business tax code, that item is not before us. it may simply need the administration code? >> i think that the budget analyst is referring to provisions in the budget. then correct, the tax code is

not before you. >> if we were to make an amendment on the budget analyst separating it, you would have to introduce that item? >> correct. supervisor chu: given that the item is not before us, i would suggest that we cannot make an amendment at this moment. the budget analyst report recommends that we move forward with these items and that exemptions to the authority will be coming before us department by department. do we have a motion to send these items forward to the full board of supervisors for this coming tuesday? without a motion, can we keep that without objection? kept without objection. thank you very much. please call items four through 12. >> item #4. hearing to include financial update and information on budget instructions and process for fy2012-2013.

item #5. proposed budget and annual appropriation ordinance appropriating all estimated receipts and all estimated expenditures for departments of the city and county of san francisco as of may 1, 2012, for the fys ending june 30, 2013, and june 30, 2014. item no. 6. annual salary ordinance enumerating positions in the annual budget and appropriation ordinance for the fys ending june 30, 2013, and june 30, 2014, continuing, creating or establishing these positions; enumerating and including therein all positions created by charter or state law for which compensations are paid from city and county funds and appropriated in the annual appropriation ordinance; authorizing appointments or continuation of appointments thereto; specifying and fixing the compensations and work schedules thereof; and authorizing appointments to temporary positions and fixing compensations therefore. item #7. resolution approving the budget of the treasure island development authority for fy2012-2013 and fy2013-2014. item #8. resolution concurring with the controller's certification that services previously approved can be performed by private contractor for a lower cost than similar work performed by city and county employees. item #9.

resolution concurring with the controller's certification that services previously approved can be performed by private contractor for a lower cost than similar work performed by city and county employees, for the following service: custodial services. item number 10. resolution approving expenditures from the budget savings incentive fund for one- time purposes in fys 2012-2013 and 2013-2014. item number 11. resolution concurring with the controller's establishment of the consumer price index for 2012, and adjusting the access line tax by the same rate. item number 12. ordinance amending the san francisco administrative code section 2a.22.1 to revise and increase the fees charged to city administered or city funded construction projects for plan review and site inspection by the mayor's office on disability for compliance with

federal disability access laws; and making environmental findings and findings of consistency with the general plan. supervisor chu: thank you very much for reading all of those items. to the members of the public, a quick announcement, items four through 12 deal with the upcoming budget and the budget thereafter for the city and county of san francisco. most of these items will be continued until different dates, because we have to wait for public comment. if you want to speak on these items, we will not want -- we will not be taking public comment on the budget today. we will be consolidating all of the budget to be heard on friday. of course, you are welcome to stay and listen to the proceedings, but the bill not be taken public comment today.

the bill be -- but we will not be taking a public comment today. we will be taking public comment on friday. because it is so lengthy, we will be taking a break at noon. a quick announcement, we will be taking a break at noon. with that, we will head right into the budget deliberations. on item number four, it is generally the ability for the budget office to provide a quick update for us. i would like the comptroller's office to present on the revenue late -- letter. could ms. howard please give a brief introduction to the budget? if we can, right after your brief introduction, we might go right into the revenue letter. after that, we will come back for a quick overview on

redevelopment agency, given that the overview will have bits and pieces of the reconfiguration within. >> thank you. happy to be with you this morning to talk about and provide an overview to you of our first ever two year budget. so, if i could have the overhead, victor? i would briefly walk through what is happening in fiscal 12, 13, and 14, talked a bit about what is driving the growth. share some highlights of our budget with you. and then talk a bit about how we balance. so, at the highest level, our fiscal 1213 budget is for the

whole city $7 billion, of which $3.5 billion is in the general fund. the number of employees in the city is willing to 26,878. we came to agreement with our labor unions and from the general pattern in the first year, the furlough day that had previously been agreed to expired. that was worth about 4.62% of wage. that did contribute significantly to our costs going up. this side is showing you buy service area how we are proposing to spend the city's money this year. you can see a significant amount in public transportation and commerce. public health, 19%.

in fiscal 14, the budget grows slightly from the proposed budget to 7.5 $5 billion, with a general fund up to -- up to $3.6 billion. we offer a couple of other hundred positions growing into 50,000. in the second year, the general pattern was 1.75% increase. reflecting changes in the employee participation only health care. that would increase annual access to 3% in the second year. this slide shows you, again, what is happening by service area in the proposed budget. not significantly different than the prior period i have been

asked a number of times about why our budget is growing. i think that there are a few main drivers i would want to point out to you. the first, as i mentioned a moment ago, is that employee wage costs are increasing due to as well as the increasing costs of our health and pension benefits. secondly, the city is absorbing the entire budget of the redevelopment agency into our own budget. you will see that the majority of the increase, as well as some of the increase in the mayor's budget office, is due to that absorption of that function. we are also increasing the costs related to capital services, related to the implementation of federal health care reform, and

other growth in the enterprise apartment. notably the puc and airport. in general, the city's proposed two year budget has service reductions, which i think you are aware of. it also includes public safety hiring for police and fire. the police department in one class with the fire department in each year, we include the quota for nonprofit organizations in this city, as well as the $95 million in general fund capital for the next few years. i would like to point out that our reserve position is strong and improving in this budget. our general reserve, which has historically been $25 million, annually rose to 32 million in this budget.

in the first year of the budget we have included a state reserve and in the second year we have not included that allowance. finally, the budget stabilization reserve, similar to the rainy day reserve in terms of when it is available, is also growing. up to $45 million in the first year. now, to provide a brief overview to you about how we balance the city's budget this year and next. as you will recall, the joint report projected $170 million a shortfall. subsequently, there were some additional costs that were not assumed. things like a loss of certain public health revenues, which increased the deficit that we were balancing around. on the solution side, this first

chart shows you the revenue and fund balance solutions we have included. a little over 140 million in each year. we have split the current year fund balance equally over the next few years. we have assumed that the growth in the hotel path accrued to the general fund. we have also been fortunate in advocacy of the state level related to realignment, receiving an increased allocation from public safety realignment. finally, we have some one time revenues included in the budget. $90 million for the first year contributed to balancing the budget. on the city-wide savings side,

we have a number of items that will seem familiar to you. they are similar solutions to those prepared in the plan, including controlling the benefit costs, which are a reflection of the negotiations that we did. the only thing we are funding is the nonprofit contractors. we are not fully funding the transfer to the school district. we have also reduced the state reserve. as you will recall, we have a budget incentive savings reserve when the department faces funds in the current year. beguin be used for one time costs going forward.

finally, we have debt restructuring and i.t. spending. those solutions in the first year are about another 90 million. in the second year, about 206 million. on the department will side -- departmental side, the majority of these are regimented with additional revenue. primarily metical belated. there are some small savings proposals with a significant amount of revenue related to the community options. the juvenile probation department has additional revenue. rec and park also have its revenue -- has revenue to keep it little jail clothes.

that will generate savings. then there is a variety of other changes in the departments. those of departmental specific solutions -- those departmental specific solutions are included in this budget, along with funding and restorations. you can see the costs to the right. we have included additional funding for the bayview and central market redevelopment activities in those areas. we have fully restored introductions in the first year. we are moving forward with the mayor is investing neighborhoods approach as well as funding the reviving loan fund.

the budget also includes funding for the annual cost of the program at the human services agency. it implode -- it employs low- income individuals. there's also additional revenue being received on the alignment side, making the investment services primarily for individuals returning from prison. we are also including funding for jobs readiness in the budget. other investments in the budget are spread across many departments, like the fire academy and funding for the -- for certain programs in immigrant affairs and other

important programs. so, this is just finally a high level summary of how we balance. you can see a split between revenues and expenditure savings. more on the revenue side. i am happy to answer any questions that you have. i would like to say thank you to my staff, who has a work hard over the last month. thank you to the budget analyst for their hard work on this as well. i look forward to working with you over the next couple of weeks. supervisor chu: could you please quickly touch upon the [unintelligible] is one of the items before us, items number 10. >> certainly, the bisser is

comprised of funds saved by the department, which allows the department to retain those funds and they can be spent on certain onetime costs. primarily capital i.t. or equipment. i believe that you have before you a letter that describes the uses. primarily, but you will see is that their funding capital expenditures. >> thank you very much. supervisor chu: jig thank you -- supervisor chu: thank you very much. if i can ask, before the comptroller's office turns to the revenue before us, items 8 and 9, prop jay, if you could speak quickly to that, i believe that they are all continuing.

>> madam chair, did you want us to present it at this time? supervisor avalos: -- supervisor chu: perhaps just now, since we are doing the introduction to the budget. waxed so, what is before the committee is the resolution incurring that it is less costly to provide selective services. all of the requests are for services that have been contacted after many years. there are two items.

for this particular service, we have found that there is a particular service saving with a rush to the general fund. there are a number of requests for a number of departments. for the board of supervisors' budget analysts and the voter ballots distribution, the city administrator office security shop the convention facility management within security services at the department of technology mainframe system support. security services at the human security services agency and that the sheriff's department.

in each of these, we have identified the savings as outlined in the resolution. none of these instances have the contracts resulted in service editions. again, many of these have been contracted out for more than one decade. i am available to answer any specific questions the committee may have. supervisor chu: items 8 and 9, these are continuing, they are not new prop j's? >> that is correct. supervisor chu: ok, thank you. let's turn to our controller. >> hello, supervisors. on the reasonable moments in the assumptions proposed to the board each year, it is available

on our website. there are copies, four members of the public who are interested. generally speaking, i will walk you quickly through the report. we find the revenue assumptions in the mayor's proposed budget to be reasonable. for the first time, you have a two year budget before you. we find that that framework is balanced on one time sources. these are unexpected challenges as you work through this process. two notable factors that we will be monitoring through this cycle, the first is the pace of economic recovery. assumed in the budget before you in a way that we can talk about in more detail, lastly the wild card, again, for local

governments in california has to do with state and budget uncertainties. one out of every $5 in the budget, given the ones at other levels of government. that is the most uncertainty in the budget before you. so, first, local tax revenue projections assume healthy growth during this period. a slower, $109 million in the second year. this is largely driven by our economic output and the effect on tax revenues, which we will continue to monitor and issue updates through this cycle. related specifically to state and federal budget uncertainty,

there are unknown reductions contained in the second year. >> just a question? >> supervisor? >>supervisor avalos: in the past we have not taken out of the reserve very much for state and federal issues. in terms of the past and assessing what it is looking like -- >> our office in the mayor's office are reviewing the budget from friday. very little information is available