over $100 million, significantly over 100 million dollars in the stabilization reserve today. there will likely be an additional deposit into the budget stabilization reserve in the coming year. >> okay. >> ms. howard, can i ask through the chair, what's the percentage of our general re serve of our total budget? >> so, we have adopted financial policies. this board has adopted those policies which are aiming to grow the reserve to 2%. i believe not by this year but by the subsequent year going to a 1-1/2%, but i can confirm it and circle back with you. the next one is highlighting for you major changes on the city-wide cost side. clearly the largest impact from

a financial perspective is the cost of our salaries and fringe benefits growing about $100 million -- $100 million this year and next year the same staff that we have today. our capital budget growing by 26 million and then 36 million, city-wide order include things like the cost of power that the puc provide, cost of water, those sorts of things. i do want to delve a bit more into the specifics of our labor costs. this slide gives you some greater detail about what's happening both on the salary side as well as benefits. the first two lines are showing you the impact of additional positions that were added in the budget last year. the second line is showing you the impact prior year colas.

so, you will remember that this year in the current year the mass majority of employees are receive the equivalent of a 1.75% raise spread into three payments of 1%, 1%, and 1%. that annualizes to 3%. so, the gaff you're seeing 2% the second year. the impact is retirement and health and dental increases. these are fringe benefits. you can see more than $50 million next year just for those health and dental benefits and the retirement contributions. we are claiming to that final peak year on our retirement contributions and, so, you can see in 15-16 that number begins to decline. and, so, we will be seeing,

though the rates will continue to be high, we'll see gradually decreasing rates as we couped our losses from 2008 and 2009. other mentions of outcomes of our labor negotiations aren't reflected here. for rule of thumb, a 1% increase in salary costs -- a 1% raise would cost the employer about $20 million on the general fund side both wage and benefit. >> and to be clear, none of these projections are baked in? >> that's not included here. to the degree the city comes to agreement with our unions that do include raises, that would make the shortfall worse. this next slide is really just highlighting some major departmental changes these are, i think, items that you've seen

before and i won't spend a lot of time detailing them. but i will note that -- ~ a some of our major capital investments are coming to the conclusion in the construction phase, we're starting to see some of the costs associated with staffing as providing services at them. this is a summary again of what we talked about. i mentioned at the beginning some of the uncertainties that i think remain. certainly economic uncertainty. none of us know when the economy is going to change or if it will change benefit costs continue to create some uncertainty. we had last year a number of conversations at this committee about the impact of health rates and those conversations will continue i think this year. the results of our labor contract negotiations and then

any additional state or federal policy changes or financial changes that could affect us including the implementation is most significant obviously what happens at the implementation of obamacare, the affordable care act. finally, any current year over spending by supplemental appropriations will have an affect on the bottom line because they're our variable fund balance. this one is really just a slide that highlights for all of us the relationship between our economic cycles and the way that the city has chosen to staff services. you can see we hit our peak employment by the city ask county back in 2001 at a little over 20,000 employees. that was the height of the .com cycle of our economy. you can see the decline of

employees as we entered into the recession. then the increase in employees leading up to 2008, 2009, [speaker not understood], and some significant deficits many of us experience together over the last several years, reducing our number of funded employees to about 26,000. and, you know, when i look at it, i think well, we're back, we're essentially to our prior peak. we're nearly at 20,000 employees again. so, i think for the mayor, we both feel cautious about adding significant numbers of new employees, given we are at that peak level employment that we've seen, and we see our ability to fund employees is tied with the economic cycle. this is just a history of kind of deficit projections and the targets that were associated

with them. i won't spend time on that. the mayor did issue instructions in november to departments asking that all general fund departments reduce their fund 2% the next two years, 1-1/2 the first year and an additional 1% the second year. he also asked that departments propose a contingency reduction in the second year 1%. for context, that first 1-1/2% that he directed them to reduce would generate around $21-1/2 on an annual basis. the mayor doesn't believe in across the board cuts. this is a way of developing ideas that could move forward as they are needed. on the policy side, we're

encouraging departments to focus on their core functions and minimize direct service impacts to the public. the mayor is also particularly interested in asking them to review all their fees, to determine if the fees are relevant i necessary and to determine if they are tell at those this year and then this year, government efficiency, the affordability of our sever says to the public, as well as government innovation. and certainly to -- encouraging all departments to conduct outreach with their stakeholders through their commissions or through other community -- community meetings that they may conduct. finally, just a reminder about kind of key dates in the budget process. the dotted line kind of gives you a sense of where we are. so, the mayor has issued his budget instructionses, the

mayor has released his budget proposal. they submitted their i-t plans and budget requests. next you'll hear about the current year performance at the six mark. february 21st, all departments are required to submit their budgets to the controller's office and the mayor. we also will see the joint report being published, the shared work of the budget analyst, our office, and the controller's office. in may you will begin to see departments coming forward with their budget proposals here to this committee. the controller's office will issue their 9-month report which gives us our sort of last look at our current year performance before we put the budget to bed. and the governor will issue his may revise.

the first working day of june, the mayor proposes a proposal may of this year. [speaker not understood] and your review. that is my presentation. i'm happy to answer any questions either now or one on one later if that's preferable. >> colleagues, any questions at this time? okay, thank you very much, ms. howard. we'll open this item up to public comment now if there is anybody in the public who wishes to comment on item number 3. please step forward. good afternoon, supervisors. debby lerman from the san francisco human services network. i wasn't intending to speak, but i just feel compelled to note that the mayor's budget instructions at this point do

not include any cost of doing business increase for nonprofit service providers. we spent this morning in a very educational set of presentation about the homeless services in this city and the city's nonprofit partners are on the front line of every aspect of those services, yet we have a 15 -- 6 or 7 years we had no ip crease, although we do appreciate the increases we've received, lower than the annual cti. so, our service providers are facing a myriad of pressures. [speaker not understood] raising the minimum wage, [speaker not understood], affect our health care costs. the next thing is going to be how our rents are going up and we cannot simply continue to provide services as they are now unless something is done

about the cost of living increase. we asked the mayor to fund the cpi this year. we would prefer to take it out of the annual politicized process and have it be something that the city would ultimately institutional eyes through some mechanism so those increases could happen in a rational way through multi-year contracts and automatic escalators. that is something done in every other kind of contract the city has, whether it's city leases or supply contracts or for-profit contracts erg. there's no reason why nonprofits should be treated differently and we hope the mayor's office come to you before the budget comes to you. we hope to have your support there. >> thank you very much. anybody else wish to comment? thank you, supervisor. my name is richard heasley, i'm on the steering committee on the human services network, executive director of conard

house, a nonprofit provider to the city and county of san francisco since 1960. so, i just want to underscore what debby norman just said. nobody here really wants to hear nonprofit contractors come with hat in hand talking about cost of doing business, but that's what we have to do, that's what we've done, we'll continue to do until this issue is politicized and treated in an automatic way. debby mentioned the three ways to do this. the cpi indexing approach. there are some counties in california that actually tie their contractor cost of doing business to labor negotiation outcomes. we are also capable of submitting five-year budgets with responses to our rfps, which we're always ready to do, but nobody asks us for that. so, you need to consider this in the light of the issues of what you're expecting us to do,

particularly with affordable care act implementation. we're prepared to do as we have always done, extraordinary things to make systems of care work as efficiently and effectively as possible. that when organizations like mine take a 52% turn over among my key billers from federal medi-cal, it affects not just the quality of service, but affects our bottom line and our ability to deliver those serve is he. now is the time when you actually need us. you need us to be helpful. you need us to be healthy. you need our strength and wisdom and experience. so, we would like to see this cost of doing business issue go away. put it in the instructionses and we would be very pleased. >> thank you very much. any other speakers, please, on item number 3? okay, seeing none, public comment is closed. [gavel]

>> thank you very much, ms. howard, and we'll continue these discussions. can i have a motion to table item number 3? >> so moved. >> we can take that without opposition. [gavel] >> okay, like to note i have been joined by board president david chiu and supervisor jane kim. at this point, mr. clerk, will you call item number 4? >> item number 4, ordinance appropriating $2,515,000 to the mayor's office of housing for fiscal year 2013-2014, establishing the nonprofit rent stabilization program. >> okay, thank you very much. this item was sponsored by president chiu and supervisor kim. i will turn it over to first president chiu to speak. >> thank you, colleagues. and appreciate all the work you are doing today. i know today is a long meeting. so, today, colleagues, i am asking along with supervisor kim for your support for a supplemental appropriation before us to assist nonprofits that have been impacted by the rising commercial rents in the mid-market tax exclusion zone. we have all heard the many stories of the challenges

facing the nonprofits that are responsible for our social safety net and this is a supplemental that would be funded directly by the tax increases in our city would be receiving in the zone during -- it is based on revenue growth so it is likely to get bigger as additional construction projects in the area are completed and assessed. this supplemental is one larger piece of a collaborative effort to protect nonprofit organizations that are providing vital services to our residents from displacement. the mayor's office of housing and community development along with supervisor kim have convened a working group to assess and recommend policy solutions and my office has been closely involved with that process. this supplemental will be directed to mohcd to confirm the group's recommendations, [speaker not understood] displacement assistance and tap tal improvements as well as real property acquisition. now, since the working group

will not give its recommendations at least a few months, in agreement with the budget analyst recommendation that we place these funds on reserve and release it after the working group finalizes its report. but i do ask that the budget committee recommend approval of this today so that the working group can be assured of the funding of availability when they deliberate how to use its [speaker not understood] problematickally. there isn't precise and specific data that identifies the need of nonprofit organizationseses in mid-market area. we all know there is very much indeed a very intense need for assistance as the study from october that the budget analyst had put out has documented. and we also know that the working group has been conducting its own surveys to obtain more data on this issue. too many tenants, whether tenants in commercial buildings in affordable rent control housing have been impacted by

affordability rent crisis and that is why i ask for your support. i'd like to turn it over to supervisor kim. >> thank you. thank you, president chiu, and also to the members of the budget committee. i just wanted to take a moment to thank president chiu and his office for working on this budget supplemental along with our budget office and the controller's office. and i'm happy to see this move forward potentially as one solution to support our nonprofit organizations that are facing rising commercial rents. as many of you know that have been working with our offices on this issue, we had set a fielding, called nonprofit organizationseses back in the summer when leases were starting to come up for renewal. and there was an urgent realization that many of our commercial rents were rising by up to 30%, particularly the

mid-market. we were committed not just to the positive outcomes of this legislation, but to control what negative side outcomes might be. one is of course while the city is doing well and creating a lot of jobs and seeing more revenue coming into the city that are funding these services, we are seeing very critical nonprofit services our facing aloe vicktion and faced because the commercial rents are rising so quickly. i want to recognize the budget analyst and legislative office for the report several months ago talking about what this looks like in our data. this is one of the city's response to address the impact fueling the need for more office space. as i said in the past, we cannot leave our nonprofit sector behind as the city continues to thrive as they provide essential services that are needed to continue to stabilize our communities. just a little bit about what we've done before.

this isn't the first time you've seen that, the board of supervisors then approved and appropriated $3 million from general fund reserve to support subsidies and property acquisition. this property acquisition fund was allocated to partnership for affordable nonprofit space and administer that in northern california loan fund. of the 15 organizations that receive funding, 14 still continue to operate and contribute to the cultural and economic value of the city. this is a good investment in the city over ten years ago and many of these organizations that received funding in 2000 are important institutions that contribute to our district. whether it is the presidio, the filipino-american development foundation and 9th street media consortium. or in other development center, [speaker not understood], portola family connections,

wafao house and more. so, this effort is really to be able to support and fund some of these solutions that are coming out of this working group with our nonprofit executive directors, and of course, at the mayor's office of housing. again, looking forward to seeing in. colleagues, again, i ask for your support. i know we have brian here to talk about the activities of the work group. so, through the chair, if we can have mr. zew come up. i thought this item would come up earlier. i had a meeting waiting in my office, but i'll try to come back if i can. thank you. >> thank you, supervisor kim. so, mr. zew. >> good afternoon, supervisors, brian chu [speaker not understood]. as supervisor chiu and kim mentioned, our office has been convening a working group composed of representatives at city departments as well as

members of the community, but not only through our office, it includes the mayor's office of public policy and finance, oewd, hsa, dpr, dcyf real estate division, planning department, controller's office, and about 11 or 12 community based organizations. we've had two formal meetings so far, one in december and the second one in january. we plan to have two more meetings. one in february and one more in march. our hope is to deliver the final report beginning in april to comply with requirements put forth in the working group sponsored by supervisors mar, kim, and cohen. you'll see in the budget analyst report that we did not give a full recommendation as to how the 2.515 will be allocated so far. in speaking with the budget office and members of other

city departments, we feel like -- we feel as if we would like to wail until the final report has been finally vetted before we determine what portions of funds could go to what solutions as acquisition and rehab, subdifficulties. we talked about many different solutions. as you'll see in the report, these looked at public private partnerships in conversations with private philanthropy i. we're in conversations with the tech industry. we're in conversations with the real estate to look at vacant or surplus city property. we're looking at vacant store fronts in commercial corridors, store front that might be available in the housing developments. we're also looking at, as i mentioned, the possibility of perhaps short-term rental subsidies. we're in the process of analyzing the data that we are receiving from all the different city nonprofits.

it looks as if when we did our survey in conjunction with the controller's office, over the past three years, the approximately at least $25,000 from us on a regular basis. so, we hope to come up with some innovative solutions. it's a very challenging problem. we've also been looking at some solutions that may involve issues that may come before this board. you will note that in the bla report they talked about the potctionv of examining impact fees, other commercial incentives, even the possibility of creating some sort of inclusionary zoning requirement. ~ possibility we're discussing with the planning department and the [speaker not understood]. we imagine they'll be short-term solutions and long-term solutions. what we support is the recommendation that they have given in the budget analyst report which is to hold this

money in reserve until the beginning of april. at that time we'll be prepared to come to you with a final report and at that time we feel that it makes the most sense for the board hopefully if you're in alignment with the report to release the fund and at that point we'll be able to give you a much better picture of how we'd like this funding to be apply to our partners. >> thank you. president chiu. >> i want to thank mr. zew for the work you put in with the working group. i look forward as that process comes to a close figuring out the allocation of fund here. clearly there is a need and we've got to figure out both where the revenues are going to help us meet this need as well as where the monies can be best used. thank you, thank you. >> supervisor mar. >> thank you, mr. zew, especially for the work that pulled that working group together. i did have a question from harvey rose and the budget analyst report.

in 2000 there was 1.5 million supplemental from the general fund reserve for art organizations and a $3 million allocation for nonprofits with 500,000 for rent subsidies. and i'm just wondering why there's no mention about the arts organizations, california lawyers for the arts, 500 million, and $500,000 of the 3 million for the rent subsidies. why is there no information on that? >> well, in terms of the $500,000 to the rental subsidy n 5,000, before i joined the department. but in terms of examining the use of that fund, as far as i can determine, our department decided to not go forward with the $500,000 for the rental subsidy program. first, i don't know the reason for that, if it was determined that it wasn't going to be as

useful as the acquisition and rehab dollars, but it doesn't appeal if that particular program -- that was for all nonprofits. hob honest, the 2.5 for rehabing the section was fully expended. the art commission, as far as i can determine, that was before the current commission was in place. it looks as if perhaps up to $500,000 was allocated in one-time grants ranging from about 7 or $8,000 up to the maximum of $80,000. it appears to have been under utilized. again, i'm not sure of the reasoning behind it, but it doesn't look as if that program came close to expending the full amount of those dollars. >> i just hope as the working group comes up with its recommendations we have full accountability for money and that every penny is spent because the community based nonprofits really need ti know

supervisor avalos is already thinking of how we support not just generally arts or nonprofits, but also maybe specifically for arts organizations, especially from communities. i also just wanted to say, too, that as the nonprofit organizations in the city, the 1,425 contracts, has the number of nonprofits gone down since that crisis after the dot-com organizations merging and even others folding during the economic crisis time, do we have many fewer nonprofits now than we did? >> 13 years ago. >> we did, and we examined that list of 1,425. if you look at it over a three-year period, we did a filter and eliminated those that were only funded for like one of those three years.

and many of those groups were one-time funds of as little as maybe $100 or $300. many of them were trade associations. so, the number of partners that received $25,000 or more for ongoing social services has actually remained fairly constant over the last three years. so, i would say while there has been a decrease in the overall number of nonprofits, which i think has been rather significant, i think the number of providers that we rely on has decreased in the slightly smaller percentage. so, yes, there's been a decrease, but not quite as significant a decrease in terms of we rely on significantly. and >> and i'll wait for the working group recommendations. seem that rent subsidies is or capital improvement fund are important, but also multi-year grants just coming out of a nonprofit sector for stability over time as opposed to more yearly grants. i'm wondering if those kinds of recommendations are coming out

of the working gluev so far with your first meeting or two. >> you know, we haven't -- nobody has brought up multi-year grants specifically in relationship to this. i know it has been something that has come up in the broader cbo task force that has been convened by the mayor's budget office. but it's a good suggestion and we can look at those kinds of ancillary solutions that can help support this report. >> thank you. >> supervisor avalos. >> thank you, chair farrell. i actually appreciate the work that's been done behind this ordinance, the supplemental appropriation. and i know that we also had a hearing last year that kind of led to the thinking around how we need to be able to support a lot of the providers of service, nonprofit providers in san francisco. and the nonprofit displacement work group has been coming together and doing some planning. and i was also