Please stand by this is may 13th 2020 regular budget and appropriatations committee meeting. Im sandra lee fewer, chair of the budget and appropriatations committee. Im joined by Committee Members [inaudible]. Our clerk is linda wong. Id like to thank sfgovtv for broadcasting this meeting. Any announcements . Yes, madame chair. Due to the covid19 Health Emergency and protect board members, city xwraoeps and the public, the board of supervisors, legislative chamber and Committee Room are closed. However, members will be participating in the meetings remotely in the same extend that they were physically present. Public comments will be available for each item on this agenda. Each speaker will be allowed two minutes to speak. Comments are opportunities to speak during the Public Comment period available via phone call by calling 8882045984. Access code 3501008 and then press pound and then press pound again. When youre connected, dial 1 and then 0 to be added to the queue to speak. Youll be lined up in the system in the order you dialed 1 and 0. While youre waiting the system will be silent. The system will notify you when youre in line and waiting. All callers will remain on commute until their line is open. Everyone must account for the time today and speaking discrepancies between live coverage and streaming. Best practices are to call from a quiet location, speak clearly and slowly and turn down your television or radio, or you may submit Public Comments in either of the following way. Email me at linda. Wong sfgov. Org. If you submit Public Comment via email, it will be included in the legislative file as part of the matter. Written comments may be sent via u. S. Postal service to city hall. To room 244, San Francisco, california, 94102. And madame chair, this concludes my announcements. Madame clerk, please call item number. Yes, related updates for fiscal years 20202021 and 20212022 and requesting the Mayors Office of Public Policy and finance and the budget and legislative analysts to report. Members of public who wish to provide Public Comment on this item should call the 8882045984 and press pound and then 0 to line up to speak. Thank you very much. You may remember that this is the longawaited megareport on the state of our budget. And so today we have kelly from the Budget Office and ben rosenfield. Thank you, madame chair. And members of the committee. Im ben rosenfield, city controller. I can start the presentation, ms. Kirkpatrick, as portions of it as well and where available for the committee, either during the presentation or afterwards. As you psychiatric, madame chair, it was about a month ago, a very long month ago that the three Financial Officers authorized [inaudible] and presented our march projections early in the days of this emergency regarding our expectations for financial impacts on the city. Earlier today, it is now available on the web and each member of the committee has a copy of it. Woe produced updates of those projections. So, our may outline, our may projections. So were here today to summarize some of that information for you. And take questions from you. Very briefly, well walk through the current year shortfall projections and then those for the next four fiscal years. Ms. Kirkpatrick can then talk through projections of covid spending in revenues both for the current year and some preliminary thinking regarding next year and beyond and then ill conclude with some discussion of risks and uncertainty that can continue to be incredibly present at the moment to close the presentation. So with that, to get to the bottom line of it, in march we had project add range of revenue losses that we expect to occur during the current and upcoming two years. That is the period for which youre now plan ago twoyear budget. In march, we had developed both a more limited impact scenario and more extended one. In our update, though, weve set it out by a single number of 1. 7 billion and well walk you through those details. In a nutshell, the 1. 1 billion estimate before and the more limited duration scenario really corresponded to a vshape recovery followed by a quick rebound and given the world as we know it today, in our greater understanding of both the health and Financial Risks ahead of us, that no longer feels like a credible scenario to our offices. So, we have a single projection which we will walk through and a unfortunately its at the lower edge of what we previously expected. Starring with the current year, heres an update on our tax revenue projections for the fiscal year ending in just a couple of months now. You can see here that property tax good news that we anticipated earlier in the fiscal year and continues to be driven by enrollment of prior year bills, supplementals and escapes by the Assessors Office and continues to be strong. Thats been somewhat off set recently given our interpretation that well lose penalties and interests and some other revenues in the current year that will affect property tax. Property tax remains [inaudible]. The other numbers on this page are much worse. Business tax is down approximately 200 million by the close of the fiscal year. That is being driven by both our expectations that businesses will begin to pay their quarterly payment at lower level, give than economic slosz occurring in the private sector as well as deferrals of certain fees and taxes. So, we see the loss here and the business tax numbers that well talk about later assume that we receive those funds in the current per. The single most impacted industry in the city, and that corresponds to our tax revenue loss as welt is hospitality and that translated into a sharp loss of hotel taxes. 150 million on weakness versus the adopted budget. Almost all of that in one quarter. So hotel taxes went from being worth 100 to 140 million a quarter in the assumed budget, we will be lucky to receive 20 million in hotel tax in the current quarter. And most of that will be attributable to the period before shelter in place took place in mid march. Parking taxes and sales taxes are very weak. And then all the other local taxes, some are up and some are down, about 1. 4 million. So, that leaves us with a current year tax revenue loss of 335. 8 million. Our latest projection. Obviously that is only one piece. That is the revenue tax revenue piece of the outlook. And theres obviously much more details in the report itself regarding whats going on with different departments and tax Revenue Streams and baselines and other things and to summarize it here, this is kind of where we expect to end the current year in the general fund overall. We started the year with 294 million in fund balance after the adopted budget, taking our local tax revenues and other tax other revenue losses worth viewing in the current year. We lose about 436 million versus budget baselines with shared in good news and also shared in bad news and that means that general Fund Contributions to baselines that have been adopted dekleined by approximately 308 million. We do see Department Spending savings, which is in the report of 123. 7 million. The majority of that was captured in the sixmonth report. Prior to the pandemic. But there is Additional Savings detailed in the report related, broadly speaking, to slowing spending in the current fiscal year given the obvious challenges and hiring and those sorts of things in the current environment. That means we would expect to end the year with about 85. 5 million in fund balance. Which is about 246. 2 million worse than what we had assumed in january. And so i know the Mayors Office has indicated they intend to submit a rebalancing plan for the incoming weeks. At this point, that is a number theyre solving around and ms. Kirkpatrick can speak to that. So, i will turn it over to ms. Kirkpatrick as we move beyond the current year and then talk about the outlook for the next several. Thank you. As the controller outlined, the our office intends to submit a rebalancing plan for the approximately 250 million of current year shortfall. By the end of next week to the board of supervisors. And just want to highlight and walk through the remaining shortfalls that will have to confront in the upcoming budget process due to, in large part, the revenue losses that the controller outlined. But there are some expenditure changes as well that ill walk you through. But all that to say that, for the upcoming twoyear budget, we now have a 1. 5 billion projected shortfall compared to about a 400 million deficit that we had published in january. The significant cliffs in the final two years of projection grow as a result of a loss of onetime fund balance, that one time money we applied to two budget years are helping to bring those costs down. But those sources arent available and our projections are in the final two years and that is why it grows in the outer years of the projection. Heres a bit of detail. Underlieing that highlevel rollup that i just showed you. Youll see the budget shortfall. The numbers match the previous slides. 215 the current year. About 700 million in each of the two budget years, resulting in 1. 7 billion of which the upcoming budget will have to close at 1. 5 a billion. The general fund sources revenue is the biggest loss cost it feels like and the upcoming projections. Some changes since march include additional revenue losses at the department of Public Health. Which noticeably are driven by slowed revenue from medical patients as well as lexive medical referral due to the pandemic. We assume that loss is one time in the first year of the budget and then resumption of the departments ongoing revenues by various state and federal waivers compared to prior years why those look like losses in the outer years and there is also other small revenue losses projected, notably the a. S. P. To the general fund as well as loss sb1. That is our state gas tax that helps with road repaving so we project revenues by lower revenue down below and theres other departmental revenues. And we assumed some losses there as well. Contributing to the steeper decline than prior projections. Baseline savings. That is to the fund it feels like. Contributions were driven by the slowing revenues, but i do recognize that that means less money for those Service Areas so notably the citys three biggest Service Areas that receive baseline funding include the m. P. A. And childrens services, noticeably decyf and oecd as well as library and rec park. Changes in salary and benefits include both the wage delay that was triggered as of our march 31 report. A savings of almost 43 million. In the first year of the budget. But because its a wage delay and not a wage freeze or cancellation, it just pushes that cost out into the fiscal year 20212022. That savings in the first year is off set by increased cost for projected active and Retiree Health care thats providing Health Insurance will be more expensive in the years Going Forward. And finally, there is increased pension cost over the projection period. We assume current year losses due to the poorly performing stock markets and this is compared to for projection purposes in all years. We assume 7. 4 return. If i could project the stock market, i wouldnt have this job. So, that is our best projection purposes and well feel that loss again in actually the second year of the budget and that is fiscal year 20212022 and salary and benefits feel so steep. Changes in citywide operating costs are related to increases in lease and operating costs for cityowned facilities. Theres holdover issues related to 30 van ness that will droiblt the costs to working with real estate in light of the current economic landscape to see if we can bring down costs by the time budget rolls around. And then we feel the offsetting expenditure savings and that will go road repaving. The departmentstal operating costs, the biggest increase in costs are notably due to changes and this is from march, im noting. Changes in our entitlement programs, including cow works and cap due to increased enrollment as well as the termination of im going to get the terminology wrong, but due to changes at the state level to be responsive and supportive of these lowincome residents, theres no termination period on benefits. People will continue to receive them, which is helpful to residents, but feels like a cost to continue to support that. Theres other assumed minor changes from mosconi, due to reduced Convention Center activity as well as some adjustments to the buffin projections that we made earlier in the year. Next slide. Thank you. The next kind of piece of financial puzle that we spent some time working with departments and the Controllers Office on, just doing our best attempt at projecting. I think uncertainty is definitely a key issue that were confronting but trying our best to provide estimates and bookends just to help give a sense of order of magnitude. So, based on current spending to date, as well as projected spending by departments through the end of this fiscal year, we are estimating about 375 million in direct covid spending by departments. Now i know ive been coming to you weekly with this slide that is that has been highlighting the budget actual, which is checks cut and out the door. This is a projection of that forwardlooking spending. The departments are forecasting based on commitments theyve made, leases theyve signed, contracts theyre pursuing. So that is why this number is over 300 million. The two biggest areas that ill walk through on the next slide for covid spending should come as no surprise but it is Health Care Spending to be responsive to the medical needs and Prevention Needs from the community in the health care lens and alternative house hoing makes them a significant portion of that. We do assume fema reimbursement, which is currently 75 as well as cares act funding. On the next slide,ly walk you through a kind of much more detailed break out of the spending areas and those sources that are known at this time. Based on these estimates, we will largely spend down our cares act allocations by the end of this fiscal year and we really wanted to that a lens, too, as were thinking about the up coming twoyear budget. What are some potential costs for covid spending with various variables around state and federal aid that we should be thinking and planning for. Even if potential additional state or federal resources come to fruition as, you know, there are discussions in washington to that effect. But there is Downside Risks in terms of fema reimbursement, depenting on actions taken by the federal government in terms of the duration of the emergency declaration. I think yep. Go ahead. I think i covered what i intended to. So weve highlighted four main areas of response. As i noted earlier, the Health System costs are projected to be about 1807 million. If we assume fema reimbursement, that would leave about 45 million in local costs remaining. The main spending areas within this category the biggest is personal protective equipment, p. P. E. Ablable disinfect tanl, other cleaning and prevention supplies. These are both purchases to protect our hospital staff as well as frontline workers across the city. Union workers and were working essentially with the City Administrators Office and d. P. H. To procure and distribute p. P. E. Across the city. But this is a significant cost both now and projected to ensure that we can mitigate the spread of the virus in our health care settings. And in our essential work that must continue. There is also significant spending projected and incurd due to medical staffing both planning for an ability to surge our nursing capacity as needed as well as overtime for medical staff. We assume the medical staff costs will be ongoing. But, of course, all of this is really will be shaped by the shape and evolution of the virus over the next year and the shape of the curve. We have Medical Transport testing in these costs. Not included in these costs are a Contact Tracing unit which is definitely under way. We have the department of Public Health leading existing efforts and plans for the next year. The reason theyre not included is they are working through a kind of projection for the next year. But i do want to note that that could be additional cost here as well. Simply, for shelter and housing, the vast majority of those costs, i would say 75 of them, are for all of our alternative housing. This is for 7,000 rooms, but i have in the report we provide the cost of 8250 rooms that would cost as well. And we assume reimbursement levels in alignment with the vulnerable population that fema will reimburse for. And this includes the cost of meals, supplies and staffing at the hotels. Since the last discussion with hotels at the board, h. S. A. Has endeavored to estimate the cost of adding nonprofit staffing in addition to workers that might have changed the nightly room rate from the last reporting. The number is included here. For Emergency Operations and staffing we have included newly incurred staffing cost and overtime expenses for Public Safety employees. Staff at the e. O. C. , our clinics and testing sites as well as the cost of overtime for the department of public works to maintain clean streets. This includes Technology Services as well as Emergency Child Care Centers and providing meals for children of first responders. The reason why this cost is higher is that when there are certain expenses in here that are not fema eligible, our understanding is that the