. >> good morning, ladies and gentlemen. want t welcome you back to the budget and finance committee. i want to thank our friends at sfgov tv who are assisting us with today's broadcast. madam clerk, are there any announcements? >> yes, please silence all cell phones and he trek lonnic

devices. eaker cards and any documents as part of the file should be submitted as part of the file. items for public comment will appear on the june 19 agenda. >> all right. thank you. let's call items one and two together. [agenda item read] upervir cohen: thank you. i'd like to cl mr. ben rosenfield from the office of the controller. >> good morning, madam chair, members of the committee. so items one, two, three, and four today as you're probably aware are interimgetud th the board of supervisors approves to maintain spending authority for the month of july while the full budget is still pending at the board. this is a process in our charter.

these are status quo budgets for that one-month period, and so it's typically been a fairly straigforward action to allow us to move ahead to have that spending authority for that one-month period. >> supervisor co tha: 's it? >> be happy to answer any questions. >> supervisor cohen: okay. colleagues, are there any questions? any questions? supervisor yee, i didn't hear you. [inaudible] >> supervisor cohen: all t. well, thank you. we'll take public com. any public comment on items one and two? seeing no public comment, comment is closed. [ gavel ]. >> supervisor cohen: colleagues, do i have a motion to approve items onetwo? ad motion seconded by supervisor stefani. we'll take that without objection. madam clerk, please read the

next [agenda item read] [agenda item read] >> supervisor cohen: thank you very much. we'll hear, agai from mr. rosenfield, and then we'll hear from miss kelly kirk patrick. >> tse are the city's corpus budget for the month of july, interim budget. and then, items five and six will be the items that'll have here in committee that inco orate the following 11 months here for the coming weeks, but again, items three and four are actions that the tboarof supervisors takes to allow us to continue to pay bills and keep things going in the month of july while the full budget is pending. >> supervisor cohen: supervisors. supervisor yee? >> supervisor yee: so this is the interim.

and why did -- the dates are in june, so can expin that? june 1 through june 30. that doesn't make anyse -- oh, i see. i see these dates. >> supervisor cohen: supervisor yee, can you ask a question? >> supervisor yee: is this for a full year or a month? i don't understand. >> the june budget is a dupli thene in front of you. it is only for july, and then the board by charter approves at the vend of july. i believe the reference to june

2018, in the short title, which i think you're looking at, i k tinat relates to tran mission of the interim budget to the brgss which comes over from the mayor on june 1 of the fiscal year. it is effective as it says late june 30, 201 and june 30, 2019. >> supervisor yee: in your brief presentation, you talked about july 1 through end of july, and that's not part of this title, so i'm not -- maybe it's not important, but i guess reco i just wanto t make sure that we're talking about that month. >> it's absolutely true, what you're doing here is approving appropriations for the one month of july which will then be the subsequent action you'll take on the budget later. in the short title, this is just referencing the date that it was submitted to the weres. so apologize if that is

confusing. >> supervisor yee: okay. thank you. >> supervisor cohen: okay. thank you. miss kelly rkpatrick, welcome. >> apologies for the confusion on my part. kelly kirkpatrick, acting budget director. i'll be giving a high level budget presentation, and i believe it should be for items five and six, and so happy to do that at that time. apologies. >> supervisor cohen: okay. all right. well, let's take public comment on items three and four. anyone? all right. seeing none, public comment is clos . thank you. [ vel ]. >> supervisor cohen: colleagues, i'll make a motion to send this the full board with a positive recommendation. is there a second? seconded by sandy fewer, and we take that motion without objection. [ gavel ]. >> supervisor cohen: okay. thank you. okay. would you please call items five and six together. >> clerk: i numb five,

budget and appropriation ordinance appropriating all estimated receipts and expenditures for the department of the city as of june 1, 201 for the fiscal years ending june 30, 2019 and june 30, 2020. and item six is annual salary ordinance and he enumerating positions in and appropriations for the annual budgets for the fiscal years ending june 30, 2019 and june 30, 2020, creating or establishing these positions. >> supervisor cohen: okay. thank you. we're going to hear from the controller who's going to be presenting a revenue letter, and then we're also going to hear a budget update from kelly kirk patrick. >> good morning, supervisors, mbers of the committee, chair cohen, thank you for having us. today my goal is to walk-through the high level policy proposals. i'll do a high level overview, review how we balance and got to zero for the two-year

budget, go over some other highlights in t mayor's budget as well as something to look forward in terms of the next kind of phase. so high level, the mayor's proposed budget is $11 billion in each fiscal year. that's $900 millionore than 1718. that is attributable half to our enterprise rtmepa. they wlose twyear highlighting their budget, it's largely one time revenues or capital driving that growth, so about half of the budget remains as general fund, we consider about $3.3 million to be nondiscretionary, and what we mean is there are v maed baselines and set asides and voter entitlement

programs that we act as something of a pass through. we consider 2.2 billion to be discretionary, but there's many salaries and allocated costs within that. key things of the mayor's budget think align in strong part with policy hearings that you the board held this spring addressing homelessness and street behavior, committing to clean and vibrant neighborhoods, impving plic safety and emergency response, as well as preparing responsibly for the future. i'll dive into details of those. as a reminder, our four year deficit when we did our last update with the joint controller's office and budget andive anyst, was approximately $137 mil. we have balanced that as

charter mandated, and i'll walk you go how we got to zero in those two years. d four some persistent and tr troubling deficits for the city. we will do another update to our five year financial plan this coming fall. >> supervisor cohen: all right. and what can we anticipate,n i think june 25, i'm not sure if you are presenting or if ben is presenting. >> on june 25? >> supervisor cohen: yeah, june 25. >> yeah. m dachair, we typically, at the very end of june, part of what we'll do as the controller's office is continue to monitor trends what we see going on with tax revenues and other sources, and weypicly complete a study at the end, regarding what news we see.

>> supervisor cohen: thank you. i can't wait for that date. >> so how did we balance the 137 million that was projected in march? on the revenue side, the nine month report had approximately $94 million of currentar either savings, but mostly it was additional revenue, and of that, the vast majority was revenue from the department of health, including two payments for medicare that we received in one year, and also patient revenue from more individuals having insurance, we reflect that revenue in our department as an ongoing solution. additionally, there is projected some ongoing grminally ongoing property tax th. the roles are growing, but it is a finite role pool that we will be pulling from, so that

was a big help in 18-19 finite, so it is notontinuing at that big of a level. and then we were able to constrain growth. f.t.e. growth citywide was about 1% 17-18. more than half of that was from our mta, a third of that was related to public safety as noted in thelanned hiring plans, and then, the rest are for the targeted departmental enhancements, which i'll walk-through, but generally across the city it's about zero across the city for general operating departments. we make projections about inflationary costs and departments were able to absorb those, and then we have some vings due to capital project delays, both set savings and baseline transfers to enterprise departments, and then, additionally departments helped the target.

we did not take anyarget that would have any service impact, and the vast majority of the target that we did recognize was for the department of public health recognizing their ongoing revenue growth as noted in the nine month report. our highlights in terms of targeted invements outes what i talked about previously, and i'llalk-through those in more detail on the next slides. so i do want to addresshe impact of proposition d not passing. so the ballot -- the budget had reserves on three new programs in 18-19 that will not go forward as a result of prop d not passing that includ rapid rehousing, flexible housing subsidy pool, enhancements, as well as a navigation center. 18-19 is balanced as far as

those programs not going forward. however, 19-20 is not rebalanced. i will be in touch over the next week how we can -- >> supervisor cohen: i have a quick question about proposition d and i guess just the thinking of the mayor's office when it comes to budgeting. for what reason would you budget a positive forecast, as opposed to butting it would not pass, therefore, we wouldn't have to be spending time and energy during the rebalancing act? and the reason why i and had is because we did the same thing last year, as well, so why don't we just change that practice and not budget the proposition as if they were guaranteed to pass? >> that's a great question. i think we took -- we did take some lessons learned from j and k. we do not have to do any rebalancing for 18-19, and we made very specific calls out

for programs that will not start after prop d not passing. the mayor's budget makes certain choices, and i think as somebody who had wanted the measure to pass and the funding to come through, we budgeted with that expectation. however we revisit the second year of every budget, so we felt that hg that impact via 19-20 was a process improvement from j and k. >> supervisor cohen: so just so i'm hear, it is a policy choice of the mayor. >> it is a policy choice. >> supervisor cohen: and how much effort does it take to rebalance? >> yeah. i think we have to work collaboratively. i think there's money from the mayor's budget. we hope it won't be as much as work as it was two years ago, so hoping that we have some run

way to help us come up with that programs, but it will definitely be a partnership and i'll be in strong touch with both of you. >> supervisor cohen: tdeto a rebalancing program, does that mean it can get cut, or do you pull from other pots of money to fill the projected revenue that you anticipated having? >> those are all areas that we could look to, so i'll have a better sense in the next week of what we could draw on. we try to avoid using one time reserves to the extent possible, so we'll definitely take that into consideration as we work with you on a rebalancing proposal. >> supervisor cohen: so i guess my question is, more specific, is it a policy decision? i would imagine this is a function of the budget office that is outside of the discretion of the mayor's of whent comes to

rebalancing the budget and where these revenues come from. how do you identify these sources of revenue? >> yeah. so we -- the state money is one that we're looking at that's come to light in the last week or two that we're circling around. >> supervisor cohen: and how much is that? right now, the estimates are about $27 million, but we have to work very closely with the department given there are kind of program attic parameters around the state's perspective as well as the timing of the funding. >> supervisor cohen: but correct me if i am wrong, i think the revenue that was projected for prop d so bring in exceeds the 27 million that we may get from the state. >> prop d was approximately 27 mi ion annually for homelessness. in 18-19 there was 13 -- half of that, about $13 million that will not go forward as a result, and so that leaves a smaller kind of rebalancing for the ongoing programs 18-19 not

having to solve for the fall. >> supervisor cohen: and i'm assuming, because we have an $11 billion budget, that we have resources we can reallocate to fill. >> we are working that. i know it's a project for everyone up and down the hall. >> supervisor cohen: and when will you beportg back to the budget committee and i get to the committee overbout the rebalancing plan. >> my goal is within theweek. >> supervisor cohen:kay. great. thank you. supervisor yee has a few questions, as well. >> supervisor yee: thank you. >> supervisor cohen: yep. >> supervisor yee: it's pretty much along the same lines. i would have asked the same questions, why are we making the same mistake we made last year? and part of it, what's a little moreisturbing for me is as a board, we created sort of a resolution to say these are some of the priorities that we want funded, and i can see that some of it is in the budget,

but the things that wen the budget that were our priority that we stated was based on hopefully prop d passing, rather than reaooing at the budget seriously and saying, you know, something, we need to fund ths, and you know, not take a chance that whether a proposition passes or not to get the funding. so in -- in my mind, if you're looking at rebalancing or if you're looking at -- it's list go hin back and look at the budget itself and say what the heck? you know, where do we get the 3.5 million for the navigation center if that's a priority, and not wait for this rebalancing or hopefully some state money will come through? so i'm really urging, and i'm going to be looking at those budgets to say, you know maybe this doesn't need to be funded because this is not our

priority, and hopefully, we can find some funding for all of these things actually have expressed stro support for. >> supervisor cohen: thank you, supervisor yee. appreciate your thoughts. isorfewer? >> supervisor fewer: yes, thank you, chair cohen. so i have to say that i concur superisor cohen that in the budget, itmsees though prop d, we should not have been depending on prop d as we actually have learned o lesson before. but my question to you is the 27 million that we are trying to negotiate with the state now,hat is going to be -- that will then pay for the rapid rehousing, forhe housing subsidy pool, and the t.a.y. gaf nation center, because these 27 million were earmarked for homeless services, and these are homeless serces that we will not be able to fund because

prop d didn't pass. so i am assuming the 27 million will go to fund these three items that we're unable to fund. >> thank you for the question. we are actively working to under the parameters of the legislation, but we have identified these ases through resolutions as well as working on the budget. this conversation will evolve and evolve quickly over the xt wek. the priorities that have been stated, i'm open to hearing others, but i -- we're digging into the parameters of that state funding, what it can and can't be spend on, and the par a a -- parameters that it l need to be spent. we are evaluating the parameters, and we'll get back to you, but i recognize those have been stated priorities. >> supervisor fewer: okay.

so my specific question to you and to the mayor's budget office is, when the $27 million, when it passes through the budget -- i understand it's not in the phase to be passed, that these three things fit into the categories, and i would assume then that the budget for actually -- i guess it's the -- it would be under jeff kosinsky's team. >> we are working to comup with an allocation plan for that 27 million. i believe there are time constraints that it must be spent, but we are working with the department to develop and respond to the priorities as well as the timing of the funding. >> supervisor fewer: okay. it is just my concern that i don't want that $27 million to

backfill and supplant, it is really to supplement. and so i know a lot of times that we do our budget that we are supplanting continually, and that it doesn't mean that we're growing the program or helping more people. so when you are debating this and looking into it and examining it and evaluating it, i'd like you to keep that in mind. thank you. >> supervisor cohen: thank you. one thing. we spend a lotf conversation about prop d. let's talk about prop c. prop c passed. so did you budget for prop c? go ahead. >> sorry. prop c would -- is all net new programming, so that can be incorporated into the city's budget pending kind of allocation and specific funding plans for that? i would defer to the controller's office if there's any other questions about prop c and any priorities for that, but in terms of procedurally how we move forward on that.

>> supervisor cohen: okay. i'm -- >> supervisor yee: also -- >> supervisor cohen: just one more second. follow up questior. rosenfield. how does the passage of prop c affect fiscal year 18-19 budget and this projected net new venu . will iifesan this year or will it manifest in fiscal year 19-20? >> i would suggest madam chair we have some discussions of c and d in our letters -- >> supervisor cohen: all right. supervisor yee, do you still have a question or on c and d? >> svisor yee: i don't know about c, but it doesn't have to do with d. >> supervisor cohen: you and the voters. >> supervisor yee: first of all, for c, revenues aren't collected until the beginning of 2019, and most likely, you're not going to be able to

utilize much if any of the funding before the fiscal year is my guess. >> supervisor cohen: well, we'll get that confirmed in just a second. supervisor fewer? >> supervisor fewer: yes, mr. controller, how muchevenue is anticipated from prop c for the fiscal year? >> supervisor fewer, our estimate of the value of proposition is tha on an annual basis, is would generate approximately $140 miion. as supervisor yee has noted, though, the tax goes into effect on january 1, 2019. the normal payment date for that tax would be in march of 2020, so it would actually naturally occur in the second year of the two year budget would be the first year that you would see the full annual value of that. the question we're reviewing, and i know has been -- and discussing with both the city attorney and the treasurer's office if there are ways to make estimated quarterly payments towards that estimated

tax bill that would pull some of that revenue forward in the first year of the budget to make some of it payable effectively in march of 2019. so it's worth approximately $140 million in the second year of the budget. there may be revenue available end of the first year of the budget, and we're reviewing that and can report back to you. >> supervisor cohen: all right. thank you. do you want to finish with your presentation? >> be happy to. to the highlights of homelessness that i've put here are the 18-19 ones under our current plan slated to move forward, 200 units of newly constructed affordable housing in 18-19, doubling of the home ward bound budget. we will be opening founew navigation centers. we will be opening two access point, a tay access point and family access point, as well as piloting a shelter at sfusd.

i did also want to note through the d. ph budget, we are adding the street medicine team to augment their great work and also to continue the pilot of the ioi drug buprenorphrine. street cleaning, there's an anticipated large chunk of that is is in 44 new street cleaning staff, and a community corridors program, focusing on commercial corridors to be allocated in consultation with creating inhe budget of soma clean program, which is modelled after the t.l. clean program with targeted cleaning in high impacted neighborhoods in soma? and then in terms of pit stops, we're expanding the hours of

pit stops and creating five new pit stops. and then, additional equipment for d.p.w. as well as piloting of the big bellies and cigarette ash can. >> supervisor cohen: that concludes your presentation? >> no. i just wanted to make sure there weren't any questions. sorry. i can go more quickly, but we -- the police staffing plan to get 250 more officers in the field over the next four fiscal years, as well as reform enhancemen fnd equipment for the fire department, as well as a handful of really important diversion and accountability programs with the d.a., the public defender, department of police accountability as well as through the sheriff's department for the pretrail diversion program as well as enhancements, $8 million over the two years for a 911 call center to ensure that they have the staffing needed to meet the 90% of calls within ten seconds

as well as a new ambulance response plan, fire department? >> supervisor sheehy: can i ask a question? >> supervisor cohen: yeah, supervisor sheehy. >> supervisor sheehy: we're hearing that the pretrial program is not fully funded in the mayor's budget? >> we were able to fund $1.5 million. i believe that they did have an ask that was higher, but we weren't able to -- with the competing priorities and limited sources, able to fund that. >> supervisor sheehy: and so do you know what that delta is? >> i can talk to you offline. i think it's about 600 k, but we'd have to talk to the sheriff's department. supervisor sheehy: okay. great. >> i'm almost done. >> supervisor cohen: we're not rushing you. please continue. >> some other highlights. of course we have a $40 million sta and federal impacts reserve. we did a $10 million state and

federal impact reserve that was pretty much impacted by december. on the horizon for me that gives me the most heartburn and city stakeholders as wells the potential repeal of senate bill 1, the gas tax. from what we're hearing, it is likely that it will make the ballot, and likely that it will pass by california voters in november . if that were to be repealed -- if that tax were to be repealed fore general fund alone, it funds $23 million annually of our road repaving program, so rve the next two years should that be implemented, it would be over $30 million just for the general fund. it doesn't take into account the money that -- >> supervisor sheehy: could i ask a question? >>. >> supervisor cohen: yes, supervisor sheehy. >> supervisor sheehy: we've just gotten what the shortfall

is in the care funds of 380,000. can i anticipate this federal reserve will cover that? >> it will have to be a discussion and have to bee as a supplemental if that were to -- this is unappropriated fund balance? so if it is he not solved in the mon of june -- but the mayor's budget, we do not have the information at the time we submitted the budget in the last couple of weeks, that we areackfilng c.d.c. as well as getting to zero. i believe c.d.c. is almost $1.7 million a year. >> supervisor sheehy: so the board needs to cover that with backfills? what is the plan? is this going to be the first mayor that has not backfilled hiv cuts from the federal budget? >> the -- >> supervisor sheehy: i would just like to know if this mayor is going to make this commitment or not. >> supervisor cohen: well, this mayor is on his way out the door.

we can deal with this committee. let me just give it a little context in terms of background. the board of supervisors has taken action to backfill through our legislative process. supervisor wiener has been a champion. we can position you to be that champion and make that happen because i think that's exactly where our values are. i don't want you to ham kelly too much, and who cares. it's a figment of our imagination, like a bad nightmare. go ahead. >> we're additionally fully funding the capital plan pla. this is the first year we've been able to fully fund it. it's over 300 million in critical infrastructure projects. we are also funding a c.b.o. cola at a parate of 2.5 and 2.. the nonprofit sustainability initiative which provides capital funding for nonprofits, and it's used to help purchase

their properties due to cost increases is going to be funded at a total of $7 million, 4,000,003 million in the budget? 'w the tax funding is anticipated to be over $10 million each year, after baselines, and the mayor's proposed budget allocates that. i'll back into health equity programs? we've also made investments at the department of public health. our investment through d.p.a., as well as department of human resources toddress sexual assault and harassment both from an h.r. side for city employees thrd.h.r. as as nursing and other compliance staff at the department of public health? we're also reserving as we did two years ago for unknown labor impacts in fiscal year 19-20. we have only 26 labor unions that will be open next year and

we'll be negotiating with. and then additionally the budget assumes the continued growth of the dignity fund as well as the children's fund growth which in 18-19 is making its last large kind of growth to go from 3% to 4%. this is the fourth year, and we will finally get to the 4% of every $100 of assessed value? this is my last slide. i wouldn't be aget director if i didn't keep kind of the forward looking warnings of our instruct well deficit, the timing of the economic cycle. we're in one of the longest economic cycles in modern history. as i noted we do have looming deficits over years three and four of the budget. we see lots ste a federal risks. i already outlined s1, and then potentially there's costs allocated to foster use at the state, as well as just a primer for december. we're going to start working this fall on the five year

financial plan with the controller's office and the budget and legislative analyst's office, and of course i'm here to answer any questions. >> supervisor cohen: thank you very much. very good. very, very, very insightful. i appreciate that. i peppered your presentation with my questions. i don't know if there's anyone else that has any questions. supervisor stefani, come on. >> supervisor stefani: just one quick question about the navigation center. how much does that cost approximately? >> once fully implemented, the cost is about $3.5 million perunit. >> and the risk to i.h.s.s. foster yout how muc t iible it's anywhere between 2 and $7 million. it has to do with the state's allocation plan about where andighere they l youth to receive services and then

ensuring across counties that's allocated. san francisco has more going out of the county than coming into tuntyco for the ihss, i'll get the health care cost to you. >> supervisor stefani: thank you. >> supervisor cohen: thank you. colleagues, are there any other questions? no? seeing none, thank you very much for your presentation and your time. >> hello, again, supervisors. ben rosenfield, supervisor's office. the charter requires our avenues each year prepare what we call the revenue letter. we issued it last week. you have copies in front of you, and i'll briefly run

through some of our findings in this document. generally speaking we're reviewing and talking through the revenue assumptions that are in the budget. we're commenting on various other code requirements such as whether baseline requirements that have been approved by the voters have been met. there's a lot of information in the report. i'm happy to talk about any of it here today, but i thought i would hit some highlights given that you have a full day. at a high level, we work closely with the mayor's budget office on preparation of the revenue assumptions in the budget. generally speaking, they're consistent with our projections of continued economic growth here in the city and the country, but of slowi so you'll see that as i talk through the tax revenue assumptions. mostfoart, they're contined growth but with -- at a slower rate. miss kirkpatrick mentioned it. the budget does have a halfy

draw on fund balance, meaning the balance that's available from the current fiscal year. what that means is while the coming two years is balanced using that prior year source, that will create challenges in just beyond the budget view, and i think the last budget estimate that the three financial offices prepared estimated approximately a 500 million structural gap in year through just outside of the two year window, so worth highlighting. reserve requirements are met in the proposed budget. you've established a number of different financial policies, and those are being met, and i'll talk through the stas of some of these reserves a little bit later. as kelly mentioned, there are two new reserves created. one, a $70 million for unknown labor collective next year, and then, $40 million that's been set aside for federal-state impacts. again as miss kirkpatrick mentioned, the potential repeal of sb 1 on the november ballot

being a significant one. voter required baselines are all met, charter measures in the proposed budget, and notably, funding for parks, children and transitional age youth that's appropriat in the budget exceeds those requirements, and i can hiose ghounts in a minute. some of the most challenging aspects, i think looking ahead through this month and through november here relate to the different ballot risks that we have. some that we've just crossed with the june election and some looking ahead to november . obviously, proposition d has not passed. $29.9 million of revenue is assumed in year one of the budget and 60.1 million in year two of the budget. those reserves will remain in place now absent the mayor and

the board modifying the budget to push money around and to develop an alternate plan. i believe the mayor's budget office is envisioning doing that in the coming week and coming to you with this process. there are two local taxes that appear to have passed that aren't in the budget. so we've talked a little bit about proposition c, the commercial rent child care that appears to have passed, again year two approximately $140 million value, and proposition g, which is the $50 million parcel tax for teachalareres and other uses was approved by the voters with about 60% of the vote. that is a city tax, so those funds actually flow through the city on the way to the school district, and so ultimately those funds will need to be appropriated. those funds are not appropriated in the proposed budget at the moment, so

they'll need to be proposed apd at some point. i think the biggest highlight is the constitutional amendment that appears to be headed to the ballot in november . you had this on your agenda yesterda there's a very significant curtailing of the ability of the local government to raise revenue. importantly, one of the provisions in that measure wod invalidate taxes that were adopted in june by less than a two thirds vote, and so there is a risk if that makes the ballot in november , that both c and g would be invalidated gg forward on this november ballot. lastly, the proposed budget in front of you assumes the passage of a dedication of hotel taxes that supervisors peskin and tang have introduced and is pending at the board of supervisors for voters'

consideration in november . it would restore historical linkage between the city's tax. this is an alternative to proposition f that failed to get the two thirds vote a couple of years ago. that's pending at the board. so those are a couple of the highlights. as you know, the budget has grown to over $11 million in front of you, 11.1 billion in the first year of the budget, 11.2 in the second year. when we take a look at some of the key drivers sitting under tax revenues that are assumed in the budget before you, and there's much more discussion of these in the report itself, so i'm happy to answer additional questions, but this shows you kind of the shape of some of the major taxes that we've seen in recent years, and the projections in the future. so business tax, we are anticipating continued strong th in business taxes driven

by both wage and employment in the city. we've seen that consistently through this boom period, and we do not forecast declines or slowing growth in business tax during this period. some other taxes, though, have been more middling, so we are expecting hotel tax, which has been flat and even modestly down in the current fiscal year, we are anticipating that will rebound in the especially with the opening of the moscone center, and then notably transfer tax. we talked about this some months ago. we've seen a significant decline. the budget assumes some moderation and continued decline but as you can in the shape here, basically entering a historical norm

period. if you review the growth rates as percs, ts is showing you some of the highlights on this chart again. i'd suggest that probably the most meaning -- if you're kind of looking for the order of growth, this chart is probably the most helpful. you can see thatose are positive numbers importantly for both property and business taxes, our two largest general fund revenue sources. we've forecast continued strong growth of almost 5% in property tax in the budget year and very strong 5% growth in business taxes in the coming year. some of the other smaller taxes that we have, parking tax, hotel tax, and then, of course transfer tax, as we do expect them to be roughly flat or even in the case of transfer tax, modestly declined from the current year level, and again that's just the continuation of trends that we've seen in the

current year. the abnormal number on this page is the 358 growth in stadium at mission tax in year two, so it's a reminder that the warriors arena is expected to open in the second year of the proposed budget. >> supervisor cohen: do we have hard figures about what these assumptions would be? do we know? >> i don't have them at any fingertips, but we certainly do, and i'm happy to share them with the committee members after the meeting today. >> supervisor cohen: okay. thank you. >> in the report, we comment on whether the budget is compliant with various adopted charter measures. generally speaking, the budget -- well, the budget does fund all mandated charter spending requirements, and in a couple of cases funds

additional revenue or additional expenses above and beyond what the voters have required. the children's baseline is a -- funded at a level that's approximately 5 million more than is mandated in both years of the budget. the transitional age youth baseline, which is a component of prop c the voters adopted a couple of years is funded at a level that's about 7 million mo than what the voters ated ias a minimum expenditure, and then rec and park is mandated at a higher level than what the voters mandated. other than that all other voter mandates are funded at the level that the voters required and not in excess of it. the report does include a lot of information regarding kind of what the statu is and proposed deposits and used of different reserves are, so it's towards the end of the report. this is a summary table that highlights some of that. generally speaking, the budget

continues to fund an increase in general reserve, which is a requirement of the adopted financial policy. there is a moment we're neither making deposits to nor making money from our financial reserves, and then we have a host of other reserves which you can see at the bottom of this table and highlighted below. i'll highlight a couple here. we talked about the state and federal risk reserve, 40 million, the labor cost risk reserve in year two. the board has also authorized the creation of a budget rk reserve. this is to manage some of the volatility in public health revenues that we've talked about in recent years given the affordable care act and others. we have a very large disallowance that we've been notified of by the state of

most $59 million related to funds received in a prior year. it's kind of what this reserve is here to do, and so you c there's a very significant expected drawdown on that reserve in the budget as we make some of these big disallowance payments. and so the good news is we have the reserve to buffer that loss. the bad news is now that reserve will be declining. i think it's always helpful to think about these reserves in the context of what we think a recession is likely to look like, so the left bar here indicat indicates an approximations what a typical recession could do to revenues here in san francisco. so about a $1,100,000,003 year problem is one way to think about the challenge of a

recession. you can see we've filled up about half of that with solutions on the right when you theseereserves that are in place, so it leaves a shortfall that would need to be solved of 517 million in reserves in the case of a recession. the last issue that i wanted to highlight briefly because this is relatively a new one for us, and it doesn't affect thewo t yeget i font of but it is the year after likely. it's the state constitution, there was a voter initiative adopted many years ago called the gann limit that basically created an appropriation limit that local governments could not spend more than a certain amount of money as determined by a complex formula the voters adopted, and if they did, we would have to makeustmes. we'd have t issue tax refunds, shift money to infrastructure, go back to the voters to ask for an override to this somewhat artificial calculated

limit. theuerowth the city's seen in recent years means that the amount of room between our appropriations and what the gann limit sets as our ceiling has been declining, and you can see that here. this is the orange line, how much room we have declining significantly. this includes new voter adopted taxes that have been adopted in recent years. a couple of changes to the transfer tax and others. those includes a temporary override of gann. but all that's permitted under state law is a temporary extension. at that point, it would appear that we'll be in excess of the ga 2 gann limit, which would require the city to go back to ask the voters for an exemption on the gann limit. we'll keep you updated on that.

>> supervisor cohen: how long has the gann limit been around? >> oh, '79 thereabouts. it dates to about proposition 13. jarvis and howard were the two big sponsors of prop 13, and this dates to about that same moment. >> supervisor cohen: thank you. supervisor stefani has a question. >> supervisor stefani: just a qu queson. does the gann number apply differently to san francisco since we are a city and county as compared to other counties, and wave more responsibility? >> i think the calculation finitely looks different for us as a city and a county, but it globally applies to city and counties throughout the state, and it actually applies to the state itself, and the state itself has had conversations

that they are frustrated with the gann level. given the boom we've seen, this is an issue that's going to start rising around the state so it's not unique to us. what's unique to us is probly the level of revenue growth we've seen over the past few years which means that phase is growing quickly. that concludes my presentation. happy to answer any questions or follow ups that the committee might have. >> supervisor cohen: colleagues, any questions for mr. rosenfield? supervisor yee? okay. . so thank you for your presentation from ben and kelly kirkpatrick. i appreciate the information. just want to recognize that the dget legislative analyst has done some thorough analysis, and they will be reporting to us next week.

is that correct? is there anything that you heard that you want to comment on today? no? okay. we'll save it for next week. at this point, i just want to give a brief overview of what the budget process will look ke through the next two weeks. today we'll hear each department present their budget as indicated by mayor farrell. no comment will be taken on the budget today or tomorrow. on monday, june 1, we will hear a full day of public comment on the budget proposal. we will begin at 10:00 a.m. in this chamber. on thursday and fray, that's june 21 and 22, we will appear the proposed revisions to those departments made by the budget and legislative analyst's office. final cuts will be made on june 25. again, that will happen in this chamber, also starting at 10:00 a.m. been in the process of , i have reforming the budget