two. so unlike capital where you can kind of see year over year, how deferred maintenance may you know build and eventually you won't need to replace a building, it systems and projecting out it is much more complex and departments have a much more challenging doing that. and the first three projects, these three that we are building out. as you know they are hitting substantially the request are hitting koit in the year two of the budget and that's one of the things that we will have to evaluate if potentially sequencing these projects so the general fund can afford paying for them as well as looking for other sources to fund them. so i think what i'm trying to say that we see the project request going down in years 3-5, but historically what we found 2 years from now the request are

higher. so we've been trying to get a grasp of what those will be years 3-5 but we have been told from city departments cio's that it's very challenging to do that. >> okay. colleagues, any further questions at this point in time? >> mr., mr. rhodes, can we go to your report, please. >> member: $20 a month, just $0.65 -- >> mr. chairman, members of the committee, we know that communication estimated $100 million in general fund and after that total revenue an allocation for 91 $91 million for major projects. and we show on table

2 which shows major fund revenues for specific projects. we do recommended that you approve this legislation and i will be glad to respond to any questions. >> thank you very much, mr. rhodes. colleagues any questions? is there any additional public comment? seeing none public comment is closed.. i want to thank you for all of your hard work in putting this together. i know i mentioned to you questions about some of the process for some of the items for the clerk of our supervisor board. i would like to thank you for your hard work and all the issues that my colleagues touched upon today and it's at the heart of getting

these done. note that you are going to have our commitment for pushing these items forward. >> colleagues, we have item no. 3. excuse me, mr. chairman, i believe there is a minor change. >> can i have a motion to amend the item as suggested. it's only to approve one number. >> through the chair i would like to withdraw my motion and amend the legislation as stated previously on the record and forwarded out with a positive recommends to the board. >> okay, great, can i have a second, without objection. madam clerk, please call item 4. city clerk: item no. 4, controllers 6-month budget status report.

item no. 5, financial plan fiscal years 2015-2016 through 2019-2020. >> you have this. >> good afternoon, kate howard. the mayor's budget director. thank you for inviting us to talk about the 6-month budget update and michelle from the controllers office is going to update you on the city's current financial outlook and i will dive into the city's 5-year financial plan. >> good afternoon, supervisors, this will be brief in the 6 months report because it will be updated in the next few weeks. a few highlights from the report that feed into the 5-year financial plan that kate is going to talk about. essentially between

the report $16.7 million additional. with the current tax and prior tax year. and because of the changes in revenue particularly transfer attack we are projecting an additional $16.7 million deposit in the current year to stabilization year for another $36 million. >> this is as of december 31st? >> largely but if we have information passed december 30th, we are using that. >> okay. >> so this is a summary table from our report. just some highlights from section b on this table. you are seeing almost $97 million in revenue improvement. it's about $32

million in property transfer tax, about $23 million in business tax and $19 million in tax. we give part of that to our baseline. that's $10 million. departmental operations and net of -- the human services agency did lower than expected case load and we have litigation in the city, some positive decisions received by the city's end of the year. the free up reserves that were held to pay litigation, about $11 million as well as better than expected revenues at the dph affordable care act more coverage, more primary care revenue largely.

so leading to total current year changes of almost $120 million. we have some changes to $23 million in reserve deposits that we didn't budget mostly for transfer tax going into reserve and from the incentive fund. and so the net impact of all of these things, the bottom line is $21 million in the financial plan update that howard is going to talk about. this $17.9 million in section d. this is the general reserve that we hadn't projected earlier in the year. it's $14.5 million that we have to use to back fill development revenue and not projected to be released in the --

realized in the current year and that number is going to come down in our 9 months projection. at this point i will point it out to kate howard unless you have any questions. >> thank you very much. >> great. so thank you again for letting us talk about the 5-year financial plan. i just want to give my appreciation to harvey rhodes and budget analyst office and drew moral and lisa sandler in the controllers budget office. this is a shared effort between the three of our offices. a result of the financial team that was made through charter through prop a by the voters. what i have for you today is an update of the document that i

presented to you about a month 1/2 ago. the major updates to the financial plan include the controllers plan views and the adoption of capital and ict plans that you heard about earlier today and then because of changes in inflationary cost you will see those updates reflected here as well as potential impacts of the governor's proposed state budget. so the next slide just shows you high level, what's happening with sources and uses. so you can see significant revenue growth over the next 5 years. strongest in the first year and then moderating in the subsequent 4 years and then our major categories of uses, salaries and benefits representing about half of our overall budget and then everything else. you can see that at the

bottom line shortfall in the first year is about $21.2 million and in the second year $66.5 million. this is an improvement of about $16 million from the time that the three offices issued the 5-year financial plan. so what's changed since we made our initial projection? really the things that i spoke about before and they are highlighted here. improvement to revenues leading to deposits to our baseline. modest changes on the salary and benefit side largely driven by two things one changes in cti and for the retirement board making a change in their pension return assumptions. the citywide operating cost

increasing in early years and then flowing a little bit in the later years as a result of the adoption of new capital plan funding levels and the ict plan. then finally modest changes on the departmental side. the next few slides just go into a little more detail into what's changing. we talked already about changes on the revenue and fund balance side. we did the controllers office did hold their in fact economic briefing several months ago and that conversation with economist as well as other folks in san francisco experts in the issues that affect our city's revenues, those predictions and assessment are included in our revenue side. we've assumed particularly in the early years very strong growth in our most economically sensitive

revenues, business, hotel and property transfer taxes. with reserves we continue to make more deposits to those things and significant fundings to mta in this coming year and the library and the public enrichment fund. i mentioned the changes and salaries in benefits when we talked about that table a moem -- moment ago and this gives you the details about what changes there and outline of major changes on the citywide operating side. the largest change on the state budget impacts, i know that was a question that i was asked a few weeks ago. we have a one time repayment from the state government. so when the governor talks about paying the wall of debt, one of the entities the state

owes money is the county and we are the beneficiary there and we are seeing reductions in our highway users tax, the gas tax as well as the new cost associated with workers' compensation. a couple of potential factors that could affect the forecast. so two big things. one if our retirement returns are less than what we have assumed. we have assumed in this document that the pension fund, the returns in the pension fund investment are what the pension fund expect. if those returns comen and a lower rate we would see the impact of our employer cost in terms of how much we need to put into the the pension fund. the second and we've talked about this before as we walked through in greater detail in the economic scenario and financial plan,

we don't project a recession in this scenario, we don't know when it will happen, what we assume is that revenue will be growing at a pace faster than the early year and slower with consistent with inflationary years, so this projection will also change. the 5-year financial plan is required to include fiscal strategies to balance the gap between revenues and expenditures. these are the same strategies that i presented to you several weeks ago. really focusing on the major categories of spending. the major change compared to when we last spoke is that the scenario reflects the adoption of the capital plan which itself incorporated a reducing level of spending or reducing level of inflation. so previously we assumed 10

percent growth every year and now 10% growth. we rely heavily on that as an additional strategy to balance. that's a quick summary. you heard today the major changes and the big things that are changing are completed improvement in our revenue the capital plan and ict plan. as mentioned the controllers office will be releasing their 9-month report in the next couple of weeks and we'll be able to talk to you about where our current year is and the budget. happy to answer any questions. >> thank you, ms. howard. colleagues, any questions at this point, for items 4 and 5? okay, thank you very much. we'll open to public comment. is there any additional public comment? seeing none, public comment is

closed.. so colleagues item 4 is a hearing request that i'm going to ask that we file and item 5 is a resolution to pass to the full board. could i have a motion to file item no. 4 and then as part of that motion to send item no. 5 to the full board with a recommendation. >> second. >> we have a motion by supervisor mar and second by supervisor wiener. we'll take that without objection. madam clerk, do we have any further business? >> no mr. chair. >> all right. thank you very much. with that, we are adjourned. [ meeting is adjourned ] >> >>

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