>> city of san francisco >> >> good afternoon, everyone, thank you for joining us today. this is the regular meeting for the

budget and finance committee. my name is supervisor malia cohen:. to my left is >>supervisor katy tang: and >>supervisor jane kim: and we'll be joined by supervisor yee. >> ms. wong, any comments? >> yes, please silence all of your electronic devices. item no. 1. >> hearing on the proposed 5-year financial plan and the mayor's office to report. >> supervisor malia cohen: we'll be hearing from the mayor's office and

the legislative analyst report. with that, i would like to turn to the mayor's budget office to kickoff the hearing. thank you. >> sf govtv please turn the mic on. >> thank you members of the budget and finance committee. i'm the budget director and we have the controllers office. and dan from the budget and legislative analyst office and all three of us are available to take any questions that you may have on this presentation. as you all know, we put out the 5-year financial plan in december, the draft and now we are writing an update to that report. and, we actually just presented a few weeks ago the report from this december. we have a little update for you today. this presentation will cover the march report update, specifically the deficit projection,

the drivers. risks, recession scenario and federal and state funding and end our presentation with a note about our upcoming budget and the budget office. this is an update from the fall report. all three financial offices, the mayor's office, board of supervisors and controller get together and put together these numbers and they stand for projections. if we make no policies changes and we project them forward with reasonable financial sound for inflation, what would our revenue and expenditures be and our deficits and surpluses. our report is projecting deficits. we'll explain why. the budget that we will be balancing and submitting to you all on june 1st, the deficits have gone down and in the 3 years

they have gone up slightly and we'll go into why that is because that is something we are paying close attention to. the cumulative define assist is not 288. this deficit assumes the midyear rebalancing plan as well as changes to the free city college program and the public defenders office that we have discussed with the board of supervisors. there are no loses from the state or federal government assumed here. and as a reminder from the federal select committee, 20% of the city's revenues are from state and federal sources. we think there is too much uncertainty at this time to make any clear conclusions on what type of funding might be lost and we will continue to work with the federal committee on that. here is a table showing the very high level numbers which i'm going to spend a couple minutes on. the first line shows you revenue projected from the current year 16-17 budget through fiscal year

21-22. we are showing projecting growth $541 million from where our budget is today and this is all general fund revenues. on the expenditure side, expenditures will go up by $1.4 billion. >> i'm sorry, one more time and a little bit slower. going back, baseline reserve is that fiscal year is 54.1. >> yes, let me go through each. the high level is the sources and the uses line. the sources line is showing you a positive number is good, a positive number of growing revenue, a negative number is parenthesis is bad. if you take all the uses together that would get you to 144.847. if you add that $1.4 billion in expenditure growth to the

positive 100 million revenue growth that would give you the projective growth. these are cumulative numbers. this is assuming that all cost grow in cumulative way so, for example in salaries and benefits that city employees have a cost increase or wage increase every year at the cost of either a negotiated contractor inflation. that negotiate contract is 2 years with the extension that you heard about which is about 3% in each year and out years we assume inflation. one of the years is inflation is projected to increase.. that's one change. and then for your question on baseline and reserves, this is for 15-16 to $100 million today about 15% of expenditure growth of

projected $1.4 billion. salary is expected to grow $1.2 million. citywide cost is projected to grow by $450 million. and departmental cost about $52 million. >> any questions on any of that? >> no. thank you. >> just a note now on what are the big highlights are this compared to december. the most important thing is we started with a projected deficit for the upcoming 2 years about $402 million. then the 6-month report came out one time savings in departmental and revenues about $54 million. that brought up our updated projected shortfall to 48. this brings it down by 60 million. the biggest

things are one time revenue on the fund balance and the capital draft when we put out this report and we didn't know what the debt schedule would be and the new debt schedule on the capital plan put back specifically the jail replacement project. instead of hitting the next 2 years for that project, it's now been pushed out and put on hold as the city figures out what are the next steps on that project. that means basically the next 2 years there is less cost depending on whether or not the city moves forward would be out on the out years. that is one big change on the first 2 years. we also thought it was important to call out your five because your financial offices are very concerned about the long-term structural picture. it went down in the fifth year and the same amount in the first two.

a large part because of some debt service cost are pushed out and a lot are one time thing. one time fund balance, one time savings and things that help us right now but are not on going. that's part of what's going on here and in the out years, some of our cost went up with inflation projected to be about 3% in the out years and now projected to be close to 3.5% in the out years. also because of the uncertainty in the affordable care act, the house is telling us because of the percent in growth for 7% for retirees, we should project 8% for active and 9% for retirees. we are projecting a significant increase around employees for their healthcare benefits. those are the things that push the out years number up even though the next two budget years went down. any questions on any of that?

>> no. >> i'm going to hand it over to michelle. >> good afternoon, michelle, controllers office. so this is a 5-year financial plan that we have produced. and this table is just showing you that in the year that that plan was produced, that the tale year of the projection, the deficits have been coming down and in our most recent report which is the darker green bar our deficit projection has increased for a number of reasons. the first is where we are in the economic cycle. we kind of reached a period of slow growth of plateauing slow growth and we are seeing decline in some of our revenues such as parking tax, sales tax is quite flat, etc.

so that's the thing on the revenue side. at the same time, health and pension cost are growing much more than rapid inflation. instead of increasing interest rates, a lot of macro economic reasons for that. another reason that i will get to in a second as well is the growth in spending a voter mandated through baseline and set aside through ballot and approved by voters that constrain future choices and increase our cost. as mentioned a use of one time fund balance not available in subsequent years. so, i think this chart is worth spending a little bit of time on. what we are trying to show here is the thin black line at the top of the chart at the nominal value of

projected revenue growth. an we are saying, let's look at the things that are soaking up that revenue growth because we are not projecting a recession because we don't do that and we wouldn't do that. but we do project modest revenue growth and there is a couple of large cost types that are absorbing most of that growth in revenue. the dark shaded area at the bottom, those are cost increases that are the result of voter approved measures. the value of those, by the fifth year of the projection taking up about 45% of the revenue growth. the next sort of the middle blue section is growth in employee benefit cost. so pension and health especially health increasing several times at the rate of inflation, not only for

current employees but retirees as well. the portion of that left over for any other type of expense includes employees or cbo colas or investments in technology or other things the board might choose, new programs or expanded services. the amount of revenue growth available beyond that is that very light blue section. it's very limited, about 9% of the growth, but that fifth year is available for all other uses aside from these two kind. and i did mention that our report, we don't predict a recession because nobody can. it's not something any economist would do even. i think we've shown this chart before. what it says if we look at whenever -- where we are in the economic cycle, are we going to get out of

the 5-year period without a recession. we don't think that's really likely if we look at the past 100 years of history. each one these blue bars is the economic recovery. we started in june 2009. it's actually a little bit longer because this chart is maybe about 5 months old. what it's showing is we have already passed the average. if we don't have a recession in this time period, it would be the longest recovery that we've measured and the question is whether you think it's likely or not. but nobody can time it, but our experience says we should be cautious but nobody can predict it with certainty. so, to give a framework for

what that could mean, we looked at, we did a recession scenario where if we did have a recession to begin at the end of the fiscal year and the loses in revenue were similar to the loses in the last two recessions if the rates have declined like the last two just for economic, that we would estimate a revenue shortfall about $960 million. the city has taken steps is to build the economic stabilization to

help -- cushion this. as there is a lot of uncertainty at this time especially with the federal proposals and we discussed last week at the committee of how little detail there is available. really in the president's skinny budget is what we can attach a number to is the limitation of cdbg home grants which is about $21 million to the city if they come true. and we'll have more information in may when his updated budget is proposed and of course that will go through congress and be approved back to refer possibly although they don't have a very timely process often. we do know a little bit more about state proposals and we talked about this at our

morning hearing this morning. the governor proposed in this january budget the elimination of issf maintenance effort which next year will be worth about $40 million and probably 60 in this period. county is in negotiations with the governor about this and we'll have more information about what agreement can be reached around may 10 when the may revise comes out and it's something that county has been working on very diligently with the governor's office and a voting on ab 1, a proposal increase for taxes to pay for resurfacing and for transit projects. right now the city pays for a lot of it's road resurfacing and san

francisco is subsidized by the general fund and will be by $21 million and 20-30 for transit projects as well. that will be a great resource for the city if it were to pass. our next update will be probably around may 9 or 10. we'll be looking at the current year revenues and expenditures and updating those for you. after that we'll be doing budget balancing with the mayor's office. >> thanks michelle. just to end the presentation with this last slide for contact with the upcoming budget. we are waiting for the controllers report because that is the last big piece for us around balance to tell us if there is any additional savings from current

revenue or departmental savings that will augment our balance further. that will be in early may. we are waiting for that and i want you to know some of the bigger picture things we are talking about. several weeks with the mayor we are having meetings around the budget and we are reviewing and many of the departments did meet our target reduction of 3%. we are reviewing all of those. we are definitely preferring or giving preference to things that are relevant solutions, efficient proposals, we don't want this to be a reduction year and working hard with the departments. some departments also submitted lots of request for new things and we are working on those. the big thing we need to focus on this year is this larger uncertainty in mind is we are in a very weird point right now. we

don't want people to be unnecessarily worried or panic but there is so much uncertainty with state and federal and particularly in our own economy. we are starting to see signs of slowing, not a recession, not seeing anything terrible on the horizon but a very odd point in time. what we are thinking at this point in budget are several things because the situation is uncertain with the federal government and whether we need more reserves as a result of that. when chair cohen asked about the ihhs and the city had a reserve years ago. we need to talk about meeting a lot of our fund investments with capital and technology. this is a very different fiscal picture. we can lower that without reduction. and also all of those things when you spend the money, they save in

the long-term. trying to prioritize those. as i said to you all before, we've grown a lot in the last 5 years in the f te's and to the budget, but we are really mindful of where we might be for now. and any new investments that we are going to be seeing in this budget is very small and not huge because we want to be careful of starting anything new this year and also ask departments not to submit any fte requests to us. right now the mayor is concerned about affordable housing and homeless. and that's kind of the preview for june 1st. of i will come back to you once the budget has been submitted with all the details included in the budget. if you have any

questions, please let me know. >> thank you very much for the sobering reality. let me check with my colleagues to see if there is any questions. supervisor tang? >>supervisor katy tang: thank you, going back to slide four, the summary of the increase over 5 years with salary and benefits and the the cola adjustments for the next 4 years. does this assume there is no fte growth over this period? >> it does. >> okay, i have spent a lot of time thinking about base lines and reserves and how that has pretty much tied our hands this terms of future budgets and salary and benefits and it's percentage of growth. it's just so much more, 51% growth over the 5-year period. so, i know it's always hard to talk about cutting staff or not growing staff as well,

not increasing fte's, and we don't have to get into a full conversation here but at the next hearing, it's important for us to have a deeper discussion around what we might want to see around fte reform and so forth. >> it's a good plan. the fte's are what's driving up this cost of inflation. that's a good report. >> thank you, supervisor yee? >>supervisor norman yee: thank you for the presentation. when you talk about not increasing the fte, one program comes in mind where it's the maintenance of the trees. so, i mean, what we want to do, we need to increase the fte's, this seems to be a contradiction. >> great question. when we

say no new s te's, no new to the plan. you will see growth in the public works and homeless department to near the bound. yes, there definitely is going to be large e growth. >> thank you for the clarification. >> thank you. anyone else, colleagues? all right, thank you very much for your presentation. we'll see you soon. any members of the public that would like to come up and speak on this item, please come on. welcome. public speaker: this process, good evening, supervisors, and a couple of you i haven't met before. let me cutoff my stuff here. i'm sorry. it's quite a pleasure to be here in the beginning of a process that i'm going to be here until my voice is heard. as you see i'm ace on the case, but i'm here as the czar about

migration. but i'm also here to check on ed lee and the controllers and this budget. i hear you talking about this and what about the black folks, i hear about cuts here and all that, what about the black folks? i'm here to find out about ed lee and the controllers and where on the budget line does it mention anything about black, african american or negros? where in the budget does it say there is going to be money set aside for the migration. that hasn't happened for 5 years. unless somebody do something this year, i'm going to protest against this budget to say neglect of african americans purposely. ch now, if ed lee doesn't want to do that, i'm traveling you can to sacramento first. and actually gave in, you know the institution that you put on

migration? not a dime. we were in the $500 million deficit. we are in a big budget now. there is no money to spend on african american blacks. it's been hidden on under privileged people. but it's said on asians, mexicans and migration. you spent millions of dollars protecting these people. i'm tired. whoever is watching and the mayor is watching. >> all right. thank you. okay. thank you. for the folks that are listening at home, today's purpose is a 5-year financial plan update. any other member of the public that would like

to speak. seeing none, thank you. >> all right. may i have a motion, please? >> i will make a motion to continue this hearing to the call of the chair. >> second by supervisor kim. without objection it passes unanimously. all right, is there any other business before this body? >> there is no other business. >> thank you, this meeting is adjourned. [ meeting is adjourned ] >> >>

>> (clapping.) >> one of things that makes me the happiest to introduce the mayor if makes me happy they inspires me a lot of my career can we make a dent if homelessness our mayor is a mayor for all people didn't just say that but acts it everyday he's looking each one of us having value mayor ed lee thank you for standing with san franciscans and a leader for all of us. >> (clapping.) >> well, thank you carr are good morning, everyone. >> good morning you know they started singing i was wondering in if i have the

energy and i remembered hamilton it had in town everyone has the infection everyone is here for project homeless connect the 67 times 67 times. >> (clapping.) >> we've brought people together in our wonderful city and you know many of us i saw the hands go up the first time i know how it would have in your minds you're walking through the streets and neighborhood corridors and see that you hear it can sometimes you smell and interact and see the needles you see people and ask ourselves how can this city of riches and you know all kind of the development going on allow this to happen and we say to ourselves if so

gotten more complicated than one sees with the naked icy know that's why you're here many of you are in addition to wanting the help you also want to understand what really is going on and for me as the mayor now in any 6 year having followed the work of gavin newsom who began those private right of action private right of action connects and began with programs like the carry no cash and making sure we try to direct our compassion but begins with compassion all of you are not here you think that you can help to solve homelessness you don't know as i did years ago what really has to happen because as you find out where people are from and how chronically for years they been

on the streets you'll release how for those days are a day when finally maybe you can get somebody to help with our hair cut, lava maze maybe a shower not for weeks or not be able to see a dentist and the pain in their mouth prevents them from thinking lonely and food and support maybe a counseling session with someone all of this in fact, one and 50 different services come through one roof for a day of private right of action project homeless connect it is an expression of your compassion we couldn't do that without the volunteers that come from every sector i understand that today, many people are coming from the cloud from companies that are working

you're coming from the clouds and dropping in the best city from the world san francisco to help people. >> (clapping.) >> this is what you're doing today, i want to say thank you. i want to say thank you because as you may know as well as i do those days across the country people are talking about things that divide us we in san francisco we bring people together to solve people's problems and we'll continue to do that and solis so long as i'm mayor, i want to make sure that everything when it comes to people that are hopeless begin with compassion and as we learn how to do things better that compassion guides us around permanent solutions that's why we opened up the first naebts when i said the shelter are not doing that for any of us in and out of shelters not doing that

the idea of a 2345ek9 24/7 services save places dignity for people and then guide them in once they got all their benefits and support serves we love them as human beings and veterans and people with families as woman who have not survived do know and many of the challenges we embrace them with our san francisco compassion that's what i love about the city that's what i love about the city and the companies that work for us the employees some of them are out through we're trying to draw the employees to do the right thing and adopt san francisco values if they're going to be here it begins with all of you how you'll express it by your you touch and attitude and your smile because that is how people

feel welcomed and belonging and from the services and now i've gotten department to really understand their mission and their role is that we may not solve homelessness as a concept as a phenomena but every person we touch we ought to have solved homelessness for him or her that's our commitment in san francisco so since 2011, we've done just that for over 10 thousand people isn't that an accomplishment for san francisco. >> (clapping.) >> so i want you to know you're in a contest in a rolling contest when we touch people and getting them ready i'm working my rear off with jeff and public utilities commission and the mayor's office of housing all of the developers in the city to provide a permanent supportive

of housing we need to house people heroes and hearts in addition of people to be ready to accept that in order for us to help them off the streets while their on the streets yeah, we'll clean up the needle and have encampment recess luxury people and less violence it is a violent sidewalks you law u allow people to live on the streets we've 2k3w089 to get more people off the street not moving them from corner to corner and shelter to shepherded on a permanent basis that's why i need a city that is strong and clibt in the economics a strong city that is going to be a city that helps people long term i'm committed for the thousands of units of housing we have to have in order to bring people along

this evolution of personal change whatever is bothering them there is a lot of things bothering people on the streets we'll get them there to the programs we have first, it becomes temporary than more permanency but along the way they know that san francisco knows how to do this right and well and do that it begins with today with all of you and thank you for singing along they beginning but every person you touch no matter their attitude your smiles and offer of service and support it the beginning that is the most important thing from thereon the discipline happens and we lie people to really get back to what we would call a little bit more normal lives with shelter of permanent housing and supportive services along the way we're figuring out

things but not only agencies not only your tax dollars but a lot of companies and a lot of foundations have committed to us our vision their support us all the way rule see in the next few months some great announcement we're already started with announcements we end veterans homelessness by the end of this year in san francisco. >> (clapping.) >> our emotion and support for families we'd like do something about that in a big way i'm not going to ruin that announcement by prematurely announcing it but a lot of friends thinking and planning and organizing around family homelessness and youth that need our help transitional age youth and the individuals that you see everyday that are faced with drug addiction and

34g9s and answers for them as well everybody is working hard you're part of team now thank you, thank you, thank you i'm so proud of san francisco and just coming back from countries like china and hong kong and environment commission you're in the greatest city in the wormed they love our value of diversities they love our stance on immigrant they love our compassion for people this is what defines us this is what project homeless connect does and thank you for representing the best in our city thank