>> here we go. good morning, this meeting will come to order. this is june 12th, 2019, special meeting of the budget and finance committee. i am sandra lee a few, chair of the committee. i am joined by catherine stefani , raphael mandelman, hillary ronen and normandy.

i would -- and normandy -- and norman g. we have any announcements? >> signs also phones and electronic devices. complete speaker cars and copies of any documents should be submitted to the clerk. itunes acted upon today will appear on the june 18th board of supervisors agenda unless otherwise stated. >> thank you very much. please call items one through five together. >> item number 1 his proposed is proposed interim budget an appropriation ordinance appropriating all estimated receipts and expenditures for the department and the city and county of san francisco as of june first, 2019 ending june 2020 and june 2021. item two is proposed interim annual salary ordinance enumerating positions in the annual budget and appropriation ordinance for the fiscal years ending june 1st 2020 and june 30th 2021, continuing creating or establishing these positions. item five is resolution approving the interim proposed budget of the office of

community investment in infrastructure operating as a successful agency to the san francisco redevelopment agency. >> thank you very much. we have mr. rosenfield, our city controller 2% on all those three items. >> good morning, members of the committee, very briefly to describe what the interim budget is and why you adopt it. as you know, our charter requires the mayor and the board to come to completion on the budget process by the end of july, which is actually one month after the start of the fiscal year. so to provide authority for us to continue to pay bills, pay employees and continue governmental operations during the month of july, the board adopts an interim budget that covers that one month period, it is a status quo budget for that one month period, but it allows us to continue to operate government while the board board completes his deliberation on the budget. i'm happy to answer any questions, but fundamentally, that's what these items are. >> thank you very much. seeing no questions from my

colleagues, i will take public comment on items one, two, and five. seeing then, public comment is closed. i make a motion to move this to the full board of july 16th board meeting, i'm so sorry, president? >> a little bit of an explanation about why the budget has moved up to 5 million. >> i apologize, i missed the comment. >> i guess this year she appropriation or the budget is $68 million, and next year his $73 million. i want to have explanation as to what is calling the five million-dollar million dollar raise, which is about eight%.

>> i believe you are referring to the controller's office budget which i will be presenting later today and i will be more than happy to answer those questions then. this is simply the interim budget for the city for the month of july. i think madam chair. >> oh, okay. >> yes, what we are doing. >> sorry, wrong item. >> i believe how this was explained to me, layperson as i am, it is that this is a gap measure between this chariot before we adopt the regular budget. the city still has to operate, so these are three items that i think we are voting on to fill the gap as a gap measure. >> absolutely correct. i think if it pleases the committee, forwarding that to the next week board meeting would allow the ordinances to be adopted in time to be operative at the start of the fiscal year. >> absolutely. i would like to withdraw that motion and i would like to formally put emotion a motion forward to move this to the next

meeting of the board on june 18 th. could i have a second? and i can take that without objection. thank you very much. please call items three, four, and six together. >> item three is budget and appropriation ordinance giving all estimated receipts and expenditures for the departments of the city for the fiscal years ending june 30th 2020 and june 30th 2021. item four as annual salary ordinance enumerating positions in the annual budget and appropriation of the fiscal years ending june 30th 2020 and june 30th 2021 continually creating and establishing these positions and item number 6 is a resolution approving the fiscal year 2019 budget of the office of community investment in infrastructure operating as this special agency of the san francisco redevelopment agency. >> thank you very much.

so i would first like to say good morning to everyone. before we get started, i wanted to welcome everyone to the beginning of the board of supervisors budget process and share a little bit about today and the next few days and weeks, what they might look like. first of all, everything that i cover now should be available online at the budget information link on the board of supervisors website. the budget committee is doing first-round department of presentations this wednesday, thursday, and friday. these presentations will not get include reports from the budget and legislative analyst. each day will begin at 10:00 a.m. and the committee will recess at approximately 12:30 p.m. for a 30 minute lunch i'm asking the departments to be concise in their presentations and to that end, i have asked the clerk to allot five minutes per department. for large departments, if you like to request additional time, you may request additional time

in increments of five minutes. after each brief, high-level budget presentation, the committee will have the ability to ask questions and engage in discussion but no decisions will be made this week. i do want to remind everyone that we have 20 departments to get through today, so i will be moving us along during the process. there will be public comment today and every day that the committee meets, and at the end of the budget item, which is after the completion of the departmental presentations, which is after the completion of departmental presentations. there is one main public comment day on monday, june 24th beginning at 11:30 a.m. with that, let's start with our first speakers. i would like to call up the mayor's budget director kelly could patrick -- kelly kirkpatrick.

>> good morning, supervisors. i am the mayor's budget director and with this presentation i will be kicking off a high level overview of mayor's proposed budget. i will note you have many days worth of hearings in which the city departments will walk through many of the items that i am going to highlight in much greater detail, so should you have questions or they are department his perspective, i will do my best to answer. with that, i will start with a budget overview, i will do a high level of how we balance the general fund budget, how did we overcome the deficits that were anticipated starting this winter , and then i will go through main highlights of the mayor's proposed budget and then flagged some forward-looking issues and next steps.

budget overview, the city's budget has reached $12 billion each year for fiscal year 19-20 and 2021 approximately. it still maintains that about that 5050 split with 6 billion being nongeneral fund and $6 billion representing the general fund, of that general fund, allocation, about $2.8 billion is what we describe as nondiscretionary, that includes the over billion dollars worth of city voter mandated baselines and set-asides, as well as state and federal funding that is dedicated to very specific allocations, leaving about $3 billion for discretionary general fund uses. key themes of the budget and you will notice alignment with many of the priorities that the board identified through the board hearings as well, first and foremost, addressing a housing affordability is a major

priority of both the mayor, the city, and the board as well, additionally, the mayor's budget makes significant investments in preventing and reducing homelessness, responding to critical health needs in our community, making streets cleaner and safer, improving public safety and accountability and responsiveness, supporting small businesses and workforce are vital to ensure service delivery continues in the city, we have made some key investments and strengthening our social safety net, and focused on creating equitable opportunities and government accountability towards residence so how did we balance the budget you will remember that we had a protected deficit in december of $271 million during the march update. that was reduced to $156 million , since then, we have balanced the budget, as well as make general fund investments and additional

programmatic areas. the revenue side to help us balance the budget, the controller's office identified both one time additional revenue as identified in the nine-month report based on current year departmental savings and revenues better than budgeted. that was over $50 million. additionally, based on current year trends, the controller's office revised forward-looking ongoing revenue, notably related to business tax. the controller's office will speak to those trends in the presentation on the revenue letter. a notable other solution to help us balance the budget was a state cost offset for the in-home support service worker program, which supports 22,000 disabled and senior residents living in san francisco to live independently. you will know that back in 2016 under governor brown, the state made a significant caution to the city to support this program and in an upcoming two-year

budget that increased cost represented $125 million. under governor newsome's proposed budget, we are receiving about a 41 million-dollar offset to that while it is significant, it does not offset the full cost. it did help us balance the budget from the assumed hundred and $25 million. additionally, departments can strengthen growth following budget instructions and reprioritizing with additional resources. absorbing cost increases to preserve discretionary revenue choices and meeting requested target reductions to help close the deficit. with those balancing solutions, we were able to support the negotiated labour increases. i believe those m.o. use will be pending at the full board shortly. there are over 28 pending. this is a significant list and a cost increase will -- did exceed the projection in the five-year pennant -- financial plan but we were able to balance giving

those previous solutions. we are able to make key investments through the general fund and alignment with the key priorities that are also reflected i would describe momentarily how that plays in into the overall landscape of the proposed budget. notably, we were able to make strategic long-term investments including fully funding the capital plan that recommended levels, which is $325 million over the next two years. of which, $130 million is for road repaving to ensure our roads are better equipped to handle the volume of riders and drivers on them. the governor's revise noted the city was not only, is expected to receive three fiscal years ago, fiscal year 16 and 17, as well as we have anticipated in

the upcoming budget and alignment with the ordinance that you all passed yesterday at the full board, 19-20 access, and appropriates just that one year of the upcoming excess. in alignment with that ordinance , the mayor's proposed budget allocates fiscal year 19- 20 perspective, 50%, at least 50% for housing, and no more than 50% of it being ongoing and significantly less than that is supporting ongoing cost. the way that we have proposed this allocation within the mayor 's office include significant investments in affordable housing preservation, production and subsidies in alignment with the board's ordinance allocating 40% for preservation and 60% for production. we make additional investments in homelessness and behavioral health services, this includes notable continuation of fiscal

year 18-19 allocations for homelessness and housing, including navigation centers as well as important master lease units. the budget also make strategic one-time investments in helping to support childcare facilities child care facilities, expand sfusd educator stipends and supporting in fiscal year 19-20, city college through the allocation. there are additional and sent -- enhancements that provide a vision zero support through d.p.w., as well as emergency response equipment for fire safety. among the key enhancements, notably affordable housing, the proposed budget designates a billion dollars in new funding for the production of preservation of affordable housing. this includes the 600 million-dollar proposed geo- bond for affordable housing, which will be heard at this committee tomorrow. as well as allocating discretionary funding, most significantly are passed

allocations and the allocations proposed in the mayor's proposed budget that get us to that $1 billion that is on top of $900 million that was already in the pipeline, as well as the department of homelessness and supportive housing. we are making significant investments in affordable housing and advancing as quickly as we can. that includes a $118 million in new funding for land acquisition , create -- predevelopment and production, notably gap financing in the proposed budget. it is $28 million of acquisition rehab the big fit -- of existing rental housing. the mayor's proposed budget includes 12 quote -- $12.5 million to help honourable residents remain house. this includes shallow subsidies for rent for seniors and families. there's an additional $1.6 million for emergency rental assistance for tenants in danger of eviction and preventing eviction is key to stemming the tide of people

losing their housing. and then funding to assist with the transition of the san francisco housing authority to ensure we stabilize the over 12,000 low-income households in our public housing portfolio and it includes a 5 million-dollar reserve to hedge against future potential vouchers or shortfalls in the proposed budget. in terms of preventing and reducing homelessness, there is over $100 million over the two years of the upcoming budget to support new homelessness services across the continuum, all the way from prevention to permanent supportive housing and making investments along that continuum. this includes ensuring we meet the mayor's goal of increasing our shelter bed capacity by 1,000 beds. we are investing $5 million in new investments or problem-solving interventions to help prevent homelessness, providing flexible grants and solutions to individuals to prevent them from becoming homeless. in addition to meeting the 1,000 bed shelter goal, the proposed

budget also make significant key investments in our shelter system as a whole and includes funding client advocates, shelter transportation to ensure our systems are utilized, as well as a continuation of the horace mann shelter. we are also increasing permanent exits through housing, including over 800 permanent supportive housing units, including master slave -- master lease as well as lot units to make sure people have permanent exits from homelessness, a new funding for the acquisition and rehab of these scattered sights where we can stabilize those housing solutions. responding to community health needs, there's over $50 million over the upcoming two years to support the expansion of behavioral health services and other key health investments for the city, this includes expanding behavioral health beds , notably adding 100 new behavioral health beds. this is across a continuum from the highest level of acuity for

behavioral health beds, all the way to low threshold behavioral health respite. notably there are 100 new beds, about 50 dual diagnosis opened beds for individuals experiencing behavioral health and substance use in an open environment, as well as 50 behavioral health respite beds which are low threshold behavioral health beds that allow hummingbird for those who follow the new -- the nuances of those different types of beds. this is on top of the 100 beds that were started in fiscal year 18-19. they are all along the spectrum to ensure that we have patient flow and conserve people with the right level of services that they need. there's also other investments in the e.m.s. six unit, $1.9 million over the two years. it will significantly increase the service hours available for that. we are increasing intensive behavioral health outreach

through state grants of up to $3 million to provide clinical support on the streets as well as peer navigation, and meeting people where they are at with mobile services. and then of course, ensuring that individuals in the shelter system have access to nurses and clinical care to connect them with the care that they need. making our streets cleaner and safer, the mayor's proposed budget includes almost $12 million to expand our pitstops, increase the hours of existing pitstops, as well as increasing big belly trash cans, and increasing and expanding targeted street cleaning and in highly traffic neighborhoods. this is a key priority among so many residents as well as the mayor, based on your budget hearings, as well and state priority. the mayor's budget continues to add police officers in alignment with the hiring plan that was started last year to improve visibility and increase foot

beats, capitalizing on opportunities for civilians to meet staffing needs, as well as approving public safety and accountability to make sure that our departments can meet the demands of state laws on public safety personnel record. sorry, i was getting ahead of myself there. back to it. other notable investments include funding a 3% call out in the first year of the budget. this is the cost of doing business increase for our nonprofit providers supported by the general fund. this is have a percentage higher than what was seen in the five-year financial plan, recognizing that our nonprofit providers face many of the same cost pressures that the city does to provide healthcare and maintain their facilities and adjust wage needs across employees. the mayor's budget includes support for the m.c.o., the minimum compensation ordinance for ihs workers, as well as

support for nonprofit workers on general fund city contracts at $3.3 million a year to address the direct wage impacts and in alignment with the m.c.o., as well as some wage compaction for city funded contracted workers. as well as making a strong investment to continue to support our nonprofits as well, in the nonprofit sustainability initiative. we have increased that allocation by $2 million in fiscal year 19-20 to ensure their -- that our nonprofits can state stabilized and acquire their spaces to stay in san francisco. not only our nonprofits key and vital to ensuring that the city can deliver services across neighborhoods, our small businesses are key to the city's fatality and the mayor makes a significant investment of over $9 million in new businesses to support including expansion of existing programs to enable businesses to make capital investments and their properties

, as well as façade improvements, in addition, there is a small business fee assistance program proposed that will enable small businesses to receive some fee relief on the ongoing fees that they face. we have made significant investments in our social safety net programs, notably significant expansion in cal fresh, based on a federal law changed that social security recipients would previously have been pacific -- prohibited from receiving those benefits were now eligible. they the estimate that over 12,000 s.s.i. individuals will be newly eligible. we have made a significant investment to ensure we have adequate outreach to reach all of those people, as well as matching the state's cal work increase, which is 23% of the proposed budget that the city will increase our, assistance program commensurately at a cost of over $9 million over the two

years. there is additional investments in various important equity programs and opportunities for all. helping to establish -- establish an office of racial equity in various offices of equity and inclusion in various city departments. ensuring our teachers at potential schools can continue to thrive and supporting free city college and various lgbtq investments. i need to highlight our investment in the capital funds, which is the highest level in the city. $325 million for our key city-owned infrastructure. my last slide, the three key things to monitor, we continue to think about our structural budget deficit and outer years at the budget. we are in alignment with the five-year financial plan proposing to allocate fund balance over a longer horizon of

the budget to ensure we can weather potential economic downturns that are coming. i'm skipping to slide three, bullet three. i will note that based on the timing of the economic cycle, we are officially in the longest economic expansion in modern u.s. history, so we should be cognizant and make choices now that will enable us to better whether those storms going forward. and we continue to monitor state and federal budget. most notably eraf, taking that year by year. we will help hedge against potential changes at the state level and always monitoring changes at the federal level given policy differences that we have between us and the federal government. we will update our final projections in the fall. i'm happy to answer any questions now, or come back to you if i am unable to answer them in this moment. >> supervisor ronen?

>> thank you so much. on that last point you made with monitoring the federal budget, particularly, what are the areas that were nervous about monitoring? >> in particular, given that this city's department of public health is our largest general fund department and receives a significant support through existing affordable care act provisions, we are constantly monitoring either minor changes to the affordable care act, which would affect medi-cal and cover california, and trying to understand how that would impact our hospital's revenues. medi-cal serves as a very significant revenue source for not only the department of public health, but as general and in particular. >> of the top of your head, i don't know if you'd have this number, but do you know how much money we get from that? >> i don't know if the top of my head. i don't want to guess.

>> thank you. >> supervisor madwoman? >> what is the office of economic inclusion? >> that is a new office that would be housed under the department of human resources. there are two offices that will be started, and i forget which one is named exactly which. there will be an office of racial equity started with two positions in the department of the human rights commission, which will address racial disparities and data from a citywide policy perspective. additionally, the department of human resources, we are proposing to add an additional staffing support to ensure that city employees and city employment comes with an equity forward lens. there is additionally staffing proposed in a variety of city departments to ensure that that is a focus of key departments including the department of

public health as well as h.s.h., but it will all be centrally focused and coordinated through the department of human resources. one is a policy lens through h.r.c., if i had to break them down, and the other is city employment and ensuring that city employees that we treat have an equitable lens when we think about city employment. >> thank you. >> can you in regards to the nonprofit sustainability initiative, can you say a little bit about -- i'm pretty sure i have asked before but i don't remember what it is. >> nonprofit sustainability initiative is run out of the office of economic and workforce development. it is budget -- it has budgeted about $3 million a year, and they provide loan support and acquisition support to help

nonprofits by and acquire their spaces to stabilize them and to hedge against ever increasing rent. o. ew d. can speak to the program if you have greater specificity of questions about the implementation of it, but the mayor's proposed budget does increase it by an additional $2 million in fiscal year 19-20. >> so, in the past, this has been $3 million a year, so when you say $8 million, is this the combination of the three and the one? we are increasing it by 1 million? >> sorry, we are increasing it by 2 million over the two years of the budget. it is the base $3,000,000.3 million over the two years, that is six, and we are adding $2 million in fiscal year 19-20 to get to a total of

$8 million. it will be five and three. >> got it. thank you. >> any other questions, comments i have one question. can you please tell us again the mayor's budget directions to departments. >> let me get my sheet in order. i anticipated this question would be coming and i wanted to make sure i had them. the mayor asked departments to reprioritize their operations within existing resources, to identify for the mayor's office potential areas for revenue or operational reduction support, target reductions, the mayor consider them as part of her budget to help balance. we wait potential service reduction or contract reductions as a result of that, and

additionally, the mayor instructed departments to not add new f.t.e. within their proposed budget, such that new positions may be considered in the budget that aligned with the mayor's priorities, really to hedge against overall position growth within the city and ensuring we have targeted position additions that are aligned with the city's priorities, and asking departments to reprioritize staffing needs within existing f.t.e. to help meet their operational needs. >> i wanted to know, there has been a question about whether or not this committee actually can see some of those departmental results, that they actually submitted to the mirror, for example, how they are we appropriating their existing resources to meet their needs. there are areas of reduction that they, themselves have identified. also, that not adding the f.t.e. , how many then are just added by the mayor, and not by

the department themselves, and then also, how they are reprioritizing their funding, i think. are we able to see what we submitted to the mayor from the department? >> alt budget submissions are available through the controller 's office, and the b.l.a. does do an analysis of those changes that are noted. i think one key way that you would see reprioritize asian of positions would be through position substitution through the budget. those are through the analyst's office so you can see those very clearly. and i would just suggest that the departmental ability -- the overall growth within a department budget was a very targeted, so if the department remained flat, that would suggest that they reprioritize within their existing budget. they should be able to address that should you ask specifically at their hearings. if you need any further

information, i can work with the controller's office or the b.l.a. for anything more specific than that. >> okay. just to recap, basically the mayor gave us instructions of curbing overall growth in departments. is that correct? >> correct. >> okay. that's great. that's what i wanted to clarify. do you have another commenter question? -- do you have another comment or question? thank you very much. supervisor mandelman? >> i guess the direction goes out to all of the departments and trying to understand the process a little bit better and what happens within the departments. the direction goes out to hold spending flat to reduce a certain amount, then they have to come up with different ways of doing that. are there, i assume there are may oral instructions about how she wants the departments to think about the reductions that they would make. is there some way that the mayor

's budget office checks to think about whether different departments are thinking about efficacy of programs and outcomes in the way the mayor's office wants them to be doing that? does that question make sense. >> yes, me and my team spend the mayor face of the budget combing over all of those suggested changes, reprioritize asian -- reprioritizing, and revenue or reductions to see what it would mean for service delivery. are you meeting your outcomes with existing funding, and we ensure that we have a lens where we are meeting the needs of the community. i will also say that we are looking to improve our process going forward, to ensure that departments are meeting the performance outcomes and goals. that is a key priority of this mayor. and our first budget, we took a good step forward, but we definitely want to see progress

forward and ensuring that new programs are meeting the existing performance measures and goals as outlined and reestablish new ones. we will be working on some key investment areas for new programming with the controller 's office to develop key metrics and we will look over the next year to see if those enhancements are meeting the intent and goal -- intended goal that we had outlined. >> i would imagine by the time it gets to your office you are sort of most focused in engaging on the areas where there are potential opportunities for reduction, but it would probably be hard for you to look at the revenue and just think about the areas that you didn't touch. >> we try our best to take a comprehensive look at the budget we do rely on departments who help us, but believe me, my team does definitely ask probing questions about the overall budget, not just the changes proposed by the department.

>> okay. thank you. >> supervisor ronen? >> just following up on chair fewer's question about whether or not this committee can have access to those original budget submissions. i want to make sure that what the controller has that, or maybe this is a question for ben , what the controller has is original submissions, or if they are some other type of cleaned up budget. >> the submissions that come in from the departments to our office and the mayor on march 1 st on part -- are public documents. we maintain them electronically and can provide them to committee members or anyone else was interested in viewing them. they are unchanged from what departments proposed on that date. >> thank you. >> mr. controller, i have a question for you. if we requested, if a department comes up and we hear a presentation and so, then we can say, mr. controller, can you please tell us, what is the

difference between what we are seeing the proposed budget following the mayor's guidelines about what they submitted, into what is being presented. you would actually be able to tell us that if it coincides with it or aligns with it. is that correct? >> that is helpful. how quickly i can do that is a question, but if what you are interested in seeing his changes that occurred after departments presented on march 1st and the budget that came forward, yes, that is information we can glean we will think internally about how we can most timely turn that analysis around. >> sure. i think that is a very important tool to have. as you know, chelsea actually has a list of the schedule of departments we will be hearing, so i think if you went by that schedule, you would be able to anticipate some of the questions that departments may be calling upon. >> we will figure out how we can

be responsive. >> thank you very much. anymore questions? seeing non, thank you very much. now i think we will hear from our controller. >> thank you. the charger, as you may know, it requires a controller's office to comment on certain aspects of the proposed budget each year, the revenue assumptions contained therein, the adherents of the mayor's budget with mary's baseline and charter requirements, and a couple other requirements. we call it the revenue letter. we published yesterday, and you have copies of the presentation in front of you. the woman who runs and is our director of budget analysis in the controller's office going through the roof. >> thank you -- the controller his office will run you through the report. >> thank you. >> i am from the controller's office. i think a little bit of this will sound familiar to you about

the discussions that we do about the five-year forecast, and from our six and nine-month reports. we cover some of the same ground hopefully a little bit of this is already familiar to you. as the controller mentioned, we have a charge or obligation to discuss the revenue assumptions and the mayor's budget, and this is the document, the vehicle, in which we do it. a few high-level takeaways are that we believe the tax revenue assumptions that underlie the spending in the budget are reasonable and they are consistent with our projections of continued, but moderating economic growth. all reserve requirements are met a couple new reserves are proposed. one of which, the mayor's budget director mentioned $5 million for the housing authority shortfall in the section eight badger program.

there is also a use of one-time reserves in this budget of just under $90 million, and i will talk about that in a minute. we find that all of the voter mandated spending requirements are met, and many are exceeded, so the budget funds these programs of a level that exceeds what the charter requires, and those are for parts -- parks, the children's baseline, and the housing trust fund that are exceeded beyond requirement in at least one of the two years of budget. the youth -- the use of prior your fund balance to support the budget is consistent with the five-year financial plan that the board has adopted. we do note that we treat this as a one-time source, so the current budget is balanced using $437 million of fund balance over the two years and maintaining about 213 for the third year. that third year, that is the

year 2022, it will be a challenge to balance based on what we see now, using a lot of our one-time resources to get to balance in the two years before you. i think we have gone over this. the budget level of $12.3 billion total declining to $12 billion total. a large part of that is $185 million in one-time exit eraf money in the first budget year, so that goes away and that is a large reason for the decline. i will take a moment to talk about some other general fund tax revenues that are supporting expenses in the general fund. here are three of our key ones that we would like to highlight, and they are changing at different rates. this is what we want to show in this chart. business tax has grown

significantly, and we project underlying private sector wage growth at about 7% in the budget year, and tapering down slightly to 5% the year after. it is continued strong growth. we talked about in the five-year plan, we think there are constraints to growth, there is no physical -- there is housing, transportation, there is the lack of that infrastructure that is hampering our ability to get jobs in house people and bring them into the city for private sector wages. we do also include a total of $30 million over two years in payroll expense tax revenue from initial public offerings. hotel room tax, you will see on this chart, it is flat. we are projecting four-point 5% growth in a hotel room tax.

as you know, voters approved prop after, which takes a portion of hotel tax and dedicates it outside the general fund to arts and cultural purposes, so the general fund feels flat because that dedication the dedication is growing mean size. finally, property transfer tax. we talk about it a lot. it is very volatile, highly unpredictable. we are showing that, as we typically do, we believe we are experiencing a peak in the current year close to $340 million, and we just project we will get down to a long-term historical average of about $250 million, stepping down in the budget year, 342400, to 250 easing down. those are three different revenue stories that we wanted to share. i have already talked a little bit about business tax, and as

well as hotel tax and the dedication of hotel tax. a quick thing about sales tax because we pay a lot of attention to it, it feels relevant in our lives. we are anticipating extremely modest growth in sales tax. the tax base continues to change from -- the tax base is not reflecting the economy the way that it is structured today so people are spending things on nontaxable goods and that is continuing that trend and property tax is another source we will discuss in more detail. the first thing to note is we are projecting continued growth, not double-digit assessed valuation growth, but slightly slower, growth of seven and five or so percentage points in the budget years.

a big change, a big reason that revenue increased really rapidly in the past few years is the sso worked very hard to reduce the items in their cue. they work through them and we realize a lot of one-time revenue from that. it is factored into the underlying role. that one-time revenue goes away because we have now captured that growth in our assessed value. of course, excess eraf is about $185 million in the budget year, so that is included within property tax. another word about excess eraf, i think we have talked a lot about what it is, so i will not go into that too much, but just to note the proposed budget includes two years worth of excess eraf revenue, so the board already appropriated excess eraf of approximately

415 million for fiscal years 18 and 19, that was the supplemental appropriation in the current year. the mayor's proposed budget includes excess eraf for fiscal years 17, which we are anticipating we will receive the very last week of june, so we are working on that with our state colleagues and folks at the school district as well. the mayor's budget proposal includes $149 million of fund balance for the current year from that source, as well as $185 million for excess eraf that we anticipate we -- will be due in 19-20. two fiscal year his worth. it is about 330 min -- $330 million worth of revenue. portion of that is dedicated to baseline under our local code, and a portion is also deposited two reserves under our financial policies. [please stand by]

-- goal in the current year. and according to our policy, once we meet the target, any additional deposits above that then slow into one-time reserves that are intended to be used for one-time purposes. and a parting word about the limit, a reminder, kind of a prop 13 era state constitutional requirement, the idea that was originally to kind of constrict the growth in government, to

kind of like per capita income growth so you did not see large changes in the size of government, sort of a small government measure, and so every year our office calculates and the board adopts a gan limit, spending limit, appropriations limit, and always mindful we need to keep spending below this line. so, how much more could we grow before we hit the limit. and a big drop in the line the current year, so much extra eras money we get close to the line and eases off as we go out in future years. if we were to exceed the limit, and we are not anticipating that, we would either need to go to the voters to get permission to temporarily increase the limit, spend on things that don't count toward the limit like capital or have to rebate

taxes, and we are just mindful in our office, hopefully it's a far away thing, but if all the tax measures under litigation were to be resolved at one point in time and we were able to recognize that revenue, something extraordinary like that could push us up over the limit in that year, because we expect litigation will take probably four years or so. so, we are looking for, we are hopefully don't have to worry about that, but very mindful we need to be careful and looking at that. so -- that is all i have, happy to answer any questions. >> so the last statement you made about the funds under litigation, if it's, let's say, three years worth of tax that we

could have collected, once we win in court, would the three years worth of taxes, i guess, be put into the current years for the gann limit or spread over three years? >> under the state rules, it would all feel like tax revenue earned in that year, i think. that's when we are -- the revenue is hitting our, or recognizing it. how the state would view it. >> so in other words, if we are collecting this year's revenues, that we are collecting it, for instance, prop c, put it in reserves. so this year's collection is counted towards this year? >> no, i think that for purposes of the gann limit, the year in which we kind of in accounting

terms recognized the revenue and shows up in our financial statements. >> oh, ok. >> we are showing it currently as not being earned. >> it's a spending limit is the way to think about gann, so not when the money comes but the year it becomes spendable. we are talking here of a possibility in years four at the earliest, because each of those measures has, as the state constitution permits, has an exemption that exempts any spending for the first four years that the measure is in place. that's the maximum amount of time that a tax revenue increase can be exempted from gann. and so for that four-year period, there's no issue. if the state, if the litigation resolves and all the money becomes spendable in that window, even if it's all at once, it's still in the exemption period and the slide

michelle showed earlier, we have a lot of space under gann. it's when the exemptions expire four years out we have issues. you may have a circumstance where you both have the exemption expiring, the space in the gann limit decreases, and you might then combine that with a moment where you have multiple years of revenue suddenly become spendable. if that occurs, practically what it would mean, the city would, number one, spending on capital is exempted from gann. so, for example, in big prop c, to the extent a lot of money spent on affordable housing and other capital eligible expenses, that would not be an issue. those portions of spending are not exempted. but it would mean we would simply have to go back to the voters to ask for the ability to exceed the gann limit for a period of time. which frankly is something that occurs in a lot of jurisdictions routinely. so, berkeley, for example, has been in the habit of updating

and going back to their voters for permission to exceed the gann limit for many years. so, i think we mentioned here today, not because it affects the budget period but something we should all keep in mind for years 3, 4 and 5 looking ahead. >> thank you. >> colleagues, any more questions for controllers? i have one question. do you think that we can anticipate any new revenue growth in the current fiscal year, i mean, so this month? >> i think it's likely that you will have transfer tax above what we projected in the report on what we see in the current month to date. under our reserve provisions, 75% of that goes, is deposited to reserves. there are other offsetting revenues that we would also want to be mindful of.

i'm trying to think of -- there's a few that kind of, i have my eye on. one is sales tax, one is interest earnings, kind of like a sleeper revenue, but we assumed pretty substantial growth in that, so i don't know where we are going to end the year with that. so, possible news to the good that's easy to know about, and mindful of things that go the other direction. >> thank you. >> the shortest possible answer as always, we do a review of revenue assumptions, the change in may after the revenues that we use to balance, or proposed the balance the mayor's budget and a report the next couple of weeks. >> that's those additional revenues are in consideration for this budgeting of this fiscal year, is that correct? >> we are in the process of reviewing what's changing in june, and we'll have a report

for you on that by the time, before you complete your deliberations. whether there's good news or not there depends on kind of all of this analysis of the next couple of weeks. >> okay. i would like to include that in our deliberations, quite frankly. so, we can hear that report when it's available, that would be great. thank you very much. any other questions for controllers office? if not, thank you very much. appreciate that. let's hear from done, the budget late -- legislative analyst. >> good morning, chair fewer, members of the committee. dan gonesure. harvey rose is the budget analyst, i don't want to take his position away from him. a brief presentation on the budget overview report, with -- released on monday.

we started this report a year ago just to give the board kind of an overview of what we are seeing in the budget. so it's high level, details in the reports next week, growth, the fact that the budget growth overall is faster than the growth in population of the city as well as inflation rates in the local economy. table one, the budget has grown by 37.2% over the last five years, and the average annual growth rate expenditures was 8.2%. that compares to the population growth of 2% over that period. and the consumer price index for the san francisco metropolitan area was 3.4%. similarly, general fund growth is also faster than population

growth and inflation. the annual growth rate and fund budget expenditures, 7.4% per year. position growth in the budget, and the average annual growth rate of positions overall during the five-year period, 1.9%. in the fiscal year 2019-20 proposed budget, positions are proposed to grow by 610.72 full-time equivalent positions that represent 2% growth from the fiscal year 2018-19 budget. and we also looked at not just the number of positions, but the spending on salary and fringe benefits, and saw that budgeted salaries and mandatory fringe benefits have grown at a higher rate than the actual number of positions that have been added. total budgeted salary and

mandatory fringe benefits grown by 25% over the last five years, from 4.5 billion to the 19-20 budget, shown on table three, on page three of the report, and compares to 7.7% growth overall over that period in positions. similarly as shown in table four on page four of our report, general fund salary and fringe benefits have grown at a, 27.9% over five-year period, a bit faster than the 25% overall. and we noted that a large chunk of that i think is faster growth in mandatory fringe for general fund positions versus overall positions in the city. general fund position growth, as i am, the mayor's proposed

budget in 19-20 increases the general fund positions by 300.57 f.t.e.s. largest increases in general fund supported positions in fiscal year 19-20, police, 73 positions. human services agency, 64 positions. and administrative services with 45 new general fund-supported positions. we also reported briefly on salary savings as we have reported previously, city departments spend from 2 to 3% less in general fund salaries and mandatory fringe benefits than budgeted each year. in 17-18, over 30 million, and 45.5 million on table five on the report. the project a