cell phones and electronic cell phones and board are convening hybrid meetings that allows in person a ternd znswer and public comment and providing remote access. public access is essential. and will be taking public comment as follows, first public comment will be taken on each item on this agenda. those attending in person will be allowed to speak first and then we'll take those wait ongoing the telephone line. those watching channels 26, 28, 78, 499 and sfgovtv dot org, call in number is streaming across the screen and the number is 415-655-0001. again, that's 45-655-0001. -- 415-652-0001. enter the meeting id24995579925. press pound twice. you'll be listening mode only. when your item comes up and public comment is called, those joining in person should line up to speak and those on the telephone should dial star three, to be added to the speaker line. if you're on your telephone, remember to turn down your tv and listening devices you may be using. each speaker willing be allowed up to two minutes to speak unless stated. you may submit public comment and e-mail they to the budget and finance clerk at bretn dot jai -- if you submit public comment comment my e-mail, it will be forwarded to the supervisors and be included as a part of the file. you may send your written comments via us postal service to our office in city hall, 1 dr. carlton be good let place, room 244, san francisco, california, 94012. the agenda will be on the -- >> can you read item no. one. >> yes, item no. one. it's an ordinance for the thanes pour ation agency to issue a request for proposals for a communications based train condition system awarded with a contract exceeding ten years, a washing the administrative code prohibition and issuing contract for general or professional services for a term longer than ten years and procurement procedures stating that the award of the contract will be subject to the approval of the board of supervisors pursuant to the charter and adopting findings under ceqa. members joining remotely and wish to comment, call 415-655-0001. enter the meeting id24995579925. and press pound twice. when the system indicates you have been unmuted, it will be your signal to begin your comments. madam chair. >> thank you, we have julia here to present, hello or to answer additional questions since this is the second hearing. >> i try to keep opening remarks very brief and really focused on the issues that you raised last time. as you know, the train control system that we have is very much on borrowed time and fixing it is a huge priority but i also really respect all the time that you're taking on this ask because how we setup this contract will very much dictate how successful we are as we go through this shared process as a city. next slide. the technology that we're looking to procure is the latest and greatest. it is a modern train control system. it is also very highly specialized software led by national, multinational firms that we need to work hard with upfront to make sure that we're going to have a partnership that is productive and that is successful. next slide. if done correctly, the train control program will have significant improvements for our customers. most notably that we will continue the excellent safety record that the current system has without being bogged down with the reliability challenges that we have that lead to gaps in service and people being stuck between stations, which is a very low quality customer experience and can detract from our overall city and regions, climate goals of getting people out of their cars. the ask that we have today is to setup the contract so that we can have a negotiated procurement with the suppliers and really ask for the things that we think we need to be successful but maybe pushing the industry a little bit during the competitive procurement process. they focus primarily on the terms we're going to be requesting for the support contract, specifically to try to make sure that we get regular software upgrades, that they are willing to commit to a vendor manage their parts inventory that rewards not breaking rather than what we have today where the more things that break, the more we pay for parks and makes the performance of the system a shared partnership. in some cases, we are trying to replicate what other systems have and is considered best practice and in other cases, we are trying to push the industry and that's true for the software updates, which for many, many industries is now standard practice but not something that some of our partner agencies were able to build into their contracts and we would remain to communicating often with this board as those discussions happen to make sure that we're really able to get the terms that we think we need for success. the second piece of the request is to extend past a ten-year contract. this is something we are modeling after bart. i know getting more examples of contracts was something you all asked in the last contract. the bart contract is structured this way. they have negotiated upfront for a ten-year support contract as well as to five-year options. there are not a lot of other domestic examples of train control projects at all, let alone how their contracts are structured. the european systems take this actually a step further. they are negotiating not just the support but the direct maintenance. we're fortunate to have such a skilled workforce that we think we'll get a better quality of service if that's a partnership rather than trying to replace our current staff, which would be more of a european model. so with that, i'm happy to answer any questions you have and we do appreciate you considering this item. >> thank you so much. supervisor safai. >> thank you, chair ronen. thank you, director kirshbom. you gave the example of bart, one of the concerns i have and i just want you to talk about this, technology changes so quickly and i understand that part of the reason why you're asking for this longer term contract is because you want to have the ability to get one person, excuse me, one entity, one group that not only has control over their proprietary software but responsible for the upgrades and not necessarily the maintenance but the changing out of the software, the upgrades, all of the things you would be coming back to us in later years and then having to do a sole source contract for, so can you talk about that a little bit because my main reluctance of giving approval for a longer term contract is it takes away our ability to negotiate. but it seems we're negotiating upfront and demanding concessions as a part of the larger contract so that would be the main reason why i would be supportive of giving a longer term contract, so can you talk about the proprietary nature of the software and then the ongoing ability to get the chosen contractor once it's put out to bid to agree to ongoing upgrades as a part of this deal. >> yeah. thank you for that question. so, because this is such a large investment, this is, you know, hundreds of millions of dollars that's going to take us eight years to implement. once it's implemented, we want to get as much out of this asset as possible, so we're not going to decide ten or 12 years from now, we're going to go to a different vendor, we're going to make a commitment upfront to keep this product up-to-date and meeting the needs of the city and county of san francisco. we currently have had a 30-year relationship with a technology vendor but the terms of those conditions have been very unfavorable to the agency because once we did the initial installation, any additional improvements or changes that we wanted to make had to be done as a sole source contract because they already own the product. >> got it! let me interject for a second. remind me what you anticipate the size of this contract to be? >> it's about -- the overall project budget is $600 million. >> and -- [multiple voices] >> the supplier contract is only about 50% of that. >> some of the work would be done by existing mta, right? so, if we're talking about actual physical construction type work, that's all going to be done in-house with mta labor? is that correct? >> the day-to-day preventive maintenance and first level repairs will be done by mta staff. the actual construction work, detailed electrical construction will be done by a separately procured outside vendor. >> got it. [multiple voices] >> that would come to you as well. >> that will come to us ultimately. i want to flag for you because, i see my friend jonathan here in the audience, we've had these conversations before but any type of physical work construction related work, we've had conversation about project labor agreements and i want to make sure we're already thinking about that in advance. >> we are, thank you. >> it's not the internal maintenance work done by your employees so just to flag that in advance. so, i mean, i would just say, i think this gives us a competitive advantage. we would like to see this once you actually have negotiated the -- you're going to put it out to bid. we'll bring that back to us for contract, please keep us informed as the negotiations go once a vendor is selected, so we can see the terms of your agreement. we can't dictate those terms but we can know the terms once they are. we vote up or down so it's best to know the terms as they go, so i feel a lot better about this today than i did two weeks ago. if you're able to negotiate strong terms on behalf of the agency, so that we're not stuck with a massive change order that's one way in negotiations and i think that's what you've expressed to us today. thank you! madam chair. >> thank you. and i just wanted to appreciate you for taking some additional time with this item. it is, the length of the contract is unusual for this committee and you've done a great job explaining the thinking about behind and the reasoning which has made sense to me the whole time, so i appreciate it. seeing no other comments, we'll open this item up. >> i have one other quick question, i'm sorry. >> sure, sure, go ahead. >> as you negotiated the terms and it's a longer term negotiation, does that then lock in the prices in terms of the type of work that's going to happen to the extent of the ten-year construction project are we negotiating a price today that is then, we know there are -- >> it would have an inflation or some sort of index link to it. >> got it. that's what i wanted to understand because if we're -- it's great for us but it might be harder to get someone to do the work in seven, eight years if we negotiated a price that's based on today. because they said nobody can do that. >> so, the index can help protect both party from that responsibility. >> got it. that was my last question, thank you. >> thank you so much. we will now open this item up for public comment. >> thank you, madam chair. members of the public who wish to speak and joining in person should line up to speak. for those listening remotely, call 415-652-0001. id code, 24995579925. then press pound and pound again. once connected press star three to enter the speaker line and for those in the queue, please continue to wait until the system indicates you have been unmuted and it will be a signal to begin your comments. seeing no in person speakers in the chamber, mr. lamb, can you unmute our caller, please? >> can you hear me now? >> please begin. >> great. david pill pell. good afternoon, so i just wanted to repeat very briefly my comments from the last hearing a month ago. i believe there may be some benefits from the train control upgrade project but it does not replace transit planning or the rail service plan that has been promised. i asked last time and haven't heard an answer, has there been an rfi or rfq. i hope there's a level of interest for more than one potential vendor and this is not headed to a sole source procurement. next, this project shouldn't facilitate forced transfers of church and market or west portal or allow three-car trains on the indudo and elsewhere on the street. i have no concerns on the procurement approach here. i do note that the world is more integrated now between facilities, vehicles and technologies which had been separate ideas in the past or much more integrated now and are very inter dependent. i can follow up with that with comments or questions i have. i'll add very briefly that i tried to interact with the shawn kennedy yesterday following the mta board meeting and he apparently did not take kindly to some of my comments and doesn't want to communicate further so i may have to follow up with julie and see what else we can do to establish better lines of communication between the public and mta staff. thanks for listening. >> mr. lamb, do we have anymore speakers in the queue? madam chair, that completes our queue. >> public comment is now closed. [gavel] i would like to make a motion to send this item to the full board with positive recommendation. >> yeah, okay. cosponsorship noted, mr. vice-chair. on that motion to forward this ordinance to the full board to the positive recommendation, vice-chair safai? >> aye. >> member chan? >> aye. >> chair ronen? >> aye. >> we have three ayes. >> that motion passes unanimously. [gavel] thank you. >> mr. clerk, can you read item no. two. [clerk reading item two] >> members of the public who ginning us remotely and -- join us remotely and wish to comment, please call 415655001 tell. and meeting id, 24 the 95579925. press pound twice and press three to enter the speaker line. a prompt will indicate you have raised your hand and unmuted. that's your signal to begin your comments. madam chair. >> thank you so much. good morning or good afternoon. jonathan, chief strategy officer with the mta. so today, we are going to talk about our transit shelter program and the second amendment to a 20-year contract with clear channel outdoor for the advertising revenue and maintenance of the program. what i do want to make sure to cover with the committee, this was a 7-month negotiation process. it has been a critical priority for the agency to focus on the maintenance component and the experience of the rider out in the street especially as we try to reopen the system. so some key elements were looking at the minimum annual guarantee, so the revenues that come to the mta via advertising on the transit shelters through the history of this contract, the city and county of san francisco has made the profit. clear channel made no money. the city made all the profit on the contract and i'll talk about that a little. as part of the contract, the maintenance and transit shelter is included and we have shipped to a management approach and get additional advertising as a part of the program and ultimately the city and county will be owners of the county shelter at the end of the contract. you can see here, this is the proposed minimum annual guarantee as part of this update. it is reduced from the original contract and that's noted in the bla report. we don't dispute that in any way. however, advertising revenues have never hit those levels. in fact, if we tried to maintain the average over the course of this contract, we would have to increase advertising revenues by 60, 70, 80% which we felt wasn't achievable, so this proposed map keeps us in line with the average which is 10.of million over five years and that matches the average over the life of the contract. this includes the period of the pandemic and you will see that it increases over the period of time, so that's a total of $56.4 million for the agency. in addition, what we did was in exchange for reducing the requirement for the mag which is focused on cash, again, cash that has never been received through this contract, we did ask clear channel to increase the maintenance. so this includes taking care of graffiti, making sure things get cleaned up and the current contract is the maintenance occurs on every shelter two days per week. this will change as a result of the approval of this amendment to three days a week. that's 50% increase on maintenance. response time, making sure things are clean in the streets and so hopefully we'll see that after this is approved. we'll focus on the platforms exclusively five days a week, so those are the high platforms along our muni metro system. the other thing is equity was a key component of trying to kind of fix this contract over 15 years and especially the service, so two things that we did was the prior contract was managed by contracted administrator and that was largely focused on revenue. you know, gaining dollars for the agency but again we really want to take a maintenance approach to this program, so lisa who is joining me here today is our superintendent of platform and shelter maintenance. she has 20 years of experience in field maintenance. and that's what we want. we want someone at the agency level focusing on the street being responsive to concerns from your offices, 311, and the public, and actually being out in the field. so, what we've done is we are currently conducting a condition assessment of the shelters across the city. that's to be done by an independent contractor, not by clean channels. this is a score criteria associated with that and if shelters do not meet a minimum standard, they need to be cured through repair or full replacement. we're hoping to get that done by the end of the fiscal year so that's very aggressive but we want to welcome people back to muni so this is the time we want to get that done. so we estimate that refresh will be at least $3 million of capital improvements and then in addition, we're going to be adding the digital shelters across the city in additional locations, that's another $3 million capital investment not a part of the contract. we talked about advertising. we are trying to welcome people back to the muni system so we want to send positive messages and tell them about the opportunities and places that they can get to in san francisco using our system. we did a pilot campaign around that. we actually shown that it has been effective. in the past, we've been able to get advertising as it became available. this will now allow us to have advertising when we need it and where we need it at an amount of $1 million annually during five years. that's partnerships with other city departments and at the end of the contract, the current contract requires there to be an appraisal at the end of the contract period by which the agency would have to purchase the shelter, so we're not the physical owners of the shelters. clear channel has agreed to give ownership to the mta at the end of the contract so that's about a book value of $6 million of assets coming to the agency at the end. period. so, the proposed amendment would guarantee $56 million in revenue. that's assumed in our five-year financial plan. a 50% increase in maintenance. of million in -- 6 million in capital investment and $5 million in advertising and city is the owner of the shelters at the end of the contract. so that is quick, quick as i can make it and i'm happy to take any questions. >> okay, thanks. we'll get to questions after hearing from the budget and legislative analyst. >> thank you, chair ronen. nick from the budget legislative analyst office. item two is a resolution that approves a second amendment to mta's agreement with clear channel, the amendment generally exercises the existing information to extend the agreement five years through december 2027. decreases revenues to mta for those final five years relative to the existing agreement and changes clear channels maintenance responsibilities. you can see on page 5 of our report, the fiscal impact of these changes so the total revenue change is $64 million less than what is actually in the contract now. and that's offset by the free advertising, the transfer of ownership of the shelters to the city and increase in maintenance, scheduled two to three times a week and digital advertising capital investment to fortify about 50 digital displays in transit shelters. i have someone to put a finer point on the changes in the maintenance responsibilities here, so it's true that the cleaning frequency goes up from two to three times a week and the shelters but decreases daily from five times a week on the platforms and extends the period 15 days to 45 days to replace destroyed shelters so it's not, there's an overall change in maintenance responsibility relative to existing agreement and in addition to that, the amendment reduces the security deposits of the performance bond and the letter of credit that is required to carry. right now, they have a $10 million performance bond that would be issued if they fail to meet performance on the agreement. one final thing i would note is that you know, my read of these amendments is that there have been problems with clear channel performance. and i know there's a backlog of shelters that need to be maintained. we never got a record of that maintenance even though i know it's required to be reported to the city, so i can't really opine on that. so i think because there's a revenue decrease, you know, we consider it to be (indiscernible) for the board. >> okay. thank you. do you have questions? >> yeah, is clear channel here or -- and just kind of wanted to understand the backlog of the shelter and why wasn't the record provided and how do we make sure we have those records before we move forward? >> i'm sorry, i was walking up. i didn't hear about the records. >> no problem. i wanted to understand, i think that what the public legislative analyst mentioned about the backlog for the shelter maintenance and trying to understand but understands the partnership that we have with clear channel in terms of shelter, bus shelter maintenance, could you just talk about that and how can we get those records? >> yeah, we can get those records. we have them, so i would say that we are in full compliance with the current contract requirements, so as jonathan explained, twice a week cleaning, we have done more. we've put bar codes on the shelters and scans. we have before and after photos and they are timestamped so we have met all of those things. we've responded to 311 when we took the contract over. we invested $56 million to put in brand-new shelters throughout. we do capital along with that, so i think that staff would let you know that we are complying and we can provide the backlog. i didn't see that i would note a point of clarification, actually in addition from going from two times per week cleaning to three times, we're increasing the workweek from five days a week, so we're going to work monday through saturday as opposed to monday through friday. so that is kind of a clarification of what's going on there. and in terms of the cleaning on the platforms, those were always five days a week, so that stays the same. i wanted to clarify that. >> sure. and you know, i think we, as a city have been in partnership with clear channel for a long time and we have many different contracts with clear channel and this is just actually one of them. what are the contracts we have with clear channel? >> we have a contract for the entire city. so there's a contract with the airport and there's a contract with the news wrecks. >> sorry, what was the second one. >> news racks. >> what is the news racks contract? >> the news racks contract is with dpw. i'll try to explain it. it was a result of judicial (indiscernible) publishers sued the city for the rights to distribute their newspapers. the city issued an rfp for a company to come in, put the capital, so there would be a uniform stand and different things for, so wind and things would not blow them over the street so we won that rfp and add menstruating that. >> i'm saying -- it's telling me here though both -- this contract and it sounds like the news rack contract are both expiring. >> this amendment would take it through 2027, so that's this one and the news rack contract will expire in october of 2024. >> understood. >> but so -- i suspect that will not get renewed based on what happened with technology and how media is consumed so it's going to run its course but it's like a three-legged stool. the dpw and publisher and clear channel have a stake in the contract. >> i think, chair ronen, i think because this is a reduced payment and it's rather large amount of reduced payments while over $50, i understand it's for the next few years. i think because they mentioned this is a policy matter for the board to decide, i'm more comfortable with that in the event -- having more records of maintenance records that allow us to and having the budget and legislation office to look at this maintenance record to determine just sort of in exchange of this reduced payment and help us better understand and analyze the situation, whether this reduce payment makes sense in the best interest of the city to just verify what you have negotiated. i think that's where i'm at and i hope that's okay that if we can continue this until we receive the records and i will -- >> i'm not sure, honestly, i'm not sure the records that he's referring to. i don't know what records he's referring to. >> do you want to clarify? >> mr. manard. >> there's in the agreement the contractor is supposed to, you know, review the shelters over a certain period and respond to their condition or request for maintenance within a certain time periods and that's tracked within a data base. that's in the existing contract that's maintained by contractor, so and you think reviewed by mta. i think, we spoke about it. i asked for the records. you know, this was -- we put together the report in a short turnaround as a part of the legislative process so i don't have -- i don't know, like, what the -- >> to be clear on that, we meet with -- we meet with staff monthly and provide them monthly updates on the scans, which verify the cleaning so that has been an ongoing part what we have done. >> that's okay. i think that's understandable and i don't think that's really on clear channel. it's sf mta need to provide that record that was requested and so i think today is more really just to sf mta that in order for me to support a reduction of payment while over $50 million in the interest of the city, i think it is our job to verify that record with budget and legislative analyst and i think that we will, i will ask to continue but i would look to sf mta not so much of clear channel but sf mta since you're in charge of the database, that how much time will it take to turn over the record but make sure we do actually have the time to evaluate the records before we move forward and i think the second question i have, in the event that we decide we need a little bit more time, what is our timeframe that is not to jeopardize the, this agreement? >> thank you. i agree. i don't think there's any issue and i think we can provide the maintenance records within one business day, so clear channel can give us the scan and we can send that to the bla. since mta is the neutral party and clear channel and supervisor want to negotiate. we want to talk about response time. bob is correct, the response time and the contract compliance is correct but whether or not that sufficient service for what the system requires, i think is a fair question which is why we're trying to increase it to three days a week. why we're asking for the follow up. we did not change the liquidated damages requirement at all in the contract and so we will follow through on those. on the payment side, i do want to be clear because the bla is framing it in the form of reduced revenue. clear channel receives all the money from the advertising that occurs on the shelters and then that advertising pace for the maintenance of the shelters, you know, that's part of the service component of the agreement and they make a payment to the mta. based on the estimates of the actual revenues, clear channel will make $0. they will pay us, pay the city and county of san francisco for participating, so i do want to -- being the neutral party between the city and mta and clear channel, i want to make clear for the record between the period of the contract, 2008 to 2019, so that's pre-pandemic, the average amount of revenue for advertising on all shelters across the city was 11.68 million a year. well below what the mag would be required at this point in time which is $21 million per year, so that would be an 81 percent increase in the mag. in the period, you know, if we include the pandemic, which no one participants so those were lower periods, lower years for advertising. the average was 10.56 revenue. i looked at it, the best years, if you take the absolute best years of advertising revenue and just exclusively look at those, the revenue generated was $12.8 million a year. so when we negotiate on behalf of the city, asking for an mag payment of $21 million a year, when the revenue generated is roughly 12 million in the best year is where we were trying to balance maintenance, service to the community but also getting revenues for the city and for the mta. just wanted to make sure to make that clear. >> thank you. i'm not, i think in the sense that us too, i wanted to have a verification from bla since they didn't get a chance to take a second look at the record and that's exactly the process, right. the process is, you present this and then we help, with the budget and legislative analyst offices help, we evaluate and make a determination so a second opinion and perhaps that ensure -- we're so deep in the trench in the conversation, we'll give a fresh eye to the record provided and and as you have been through this process more, the budget and legislative analyst will agree with you and recommend or say it still remains to be a policy matter for the board and we can determine whether this is a good value or not for the city. i don't think we're trying to negotiate the terms and conditions. we're asking the bla to help us as terms and conditions. it's the best interest of the city. you suffered some loss and this is a way to make sure that all parties in this contract get what they deserve and in this case we're saying, what was actually interesting to me though, what you just said, kind of fly for me based on what you said is that this contract and this condition and terms and condition may not still meet the demands of the services that we need as a city. because you have flack under me, what is the demand -- flack for me, what is the demand that the city requires and what's the gap between that and all the more reason i look forward to seeing the records, looking forward to seeing some assistance and analysis from bla and help us determine this further. if you say it's turnaround one business day, next week, i don't think we have a committee, maybe so it's perhaps a week after -- in the event, chair ronen is in agreement for continuance but that's kind of what i'm leaning toward, thank you, chair ronen. >> thank you. we can get -- we'll get that information to the bla this week. i'm sure we can get it within a business day because we have it and i do appreciate the due diligence. one thing i like to add about this amend and i'm glad you brought it up, the flexibility that doesn't exist but true contract compliance, we added that in this amendment so if we need to go to four or five days we have the ability within this agreement to do that. and i think the condition assessment we're doing that's required in this amendment but doing it in advance before approved, will answer those questions. thank you very much. >> a few questions. i think and i'm getting how this works through the condition but i want to make sure i understand. for the mag payments, clear channel only pays to the city what they received from advertising revenues. so they are not required to make the payment that's specified if they don't make the revenues, is that correct? >> no. as an example, this is what occurred during pandemic. so let's say as an example, they make $6 million in advertising revenue but the mag payment is $11 million. they have to pay five million more than they made and through much of this contract, clear channel has actually paid more to the city than they have collected in advertising revenue, so in the form of this contract through the life of it and even with this amendment, the city and county of san francisco will be making the profit. >> got it. >> second question, i'm confused between what the budget and legislative analyst said and what bob said. i'm sorry i didn't get your last name? >> sorry. >> my name is bob smite. >> bob smite. and what you said, so the bla said there's a reduction in platform maintenance from daily to five days a week but you're saying there's an increase? >> the length of the workweek is going to increase from five days so we're going to have people working on the streets of san francisco monday through saturday. opposed to monday through friday. that's an increase and -- >> that's for cleaning, you know, all over. >> that's for street -- furniture and low and high rise platforms. we're going to have people out there. we're adding -- in addition to the increased frequency, there's greater coverage. >> but there's a reduction in the days of week that the platform -- >> no, no. that was always, we always had a five-day workweek. we always cleaned them five days a week. we're going to continue with that. that's just -- >> i would say again, the contract was written now 16 years ago, daily was meant to think about our daily operations when the contract was written but the actuality of maintenance and shift work, it has been five days a week. we're going to go to six as part of this additional staff and additional people. that includes the raised platforms but also includes the shelter in the street. to me it was right sizing what was occurring operationally. it wasn't a reduction. from day one of the contract when it started throughout it has been that through normal operations. >> i will say for me, there are parts of this renegotiated contract that's appreciated because to me what's most important is we have working maintain nice bus shelters and the streets -- the shelter in san francisco is not good. certainly in the neighborhoods i represent and you know, the more we could do to improve those street conditions which includes bus shelters, the better and that's the most important part of this contract to me, so you know, the reduction bothers me less than the, the reduction of the mag than if there is any reduction in services and so, the other piece of this that i don't love is the increase from 15 days to 45 days and fixing the destroyed shelters and i'm wondering why we -- why we increased that time? >> yeah. thank you. that's a good question. again, i think that's just operationalizing the actual again, after 15 years. there's a couple of components and bob can add to that, one is just the supply and demand of getting glass, getting the materials, getting the people and contractors together. that's on the clear channel side. the other component has to do with our operation in transit. we have to get a clearance and work with the tmc. there could be disruption when fixing the shelters in real time and services continuing so that needs to be scheduled on normal contractor work in the city and city projects that occur when we do shelter work that occurs so between the lead time of getting materials and the amount of materials required getting the contractor and staff together and also following up, that is more of -- it takes 45 business days to get that done and get it complete but i do want to say that is for shelters where we have the whole things destroyed and we pretty much need to build a brand-new one from scratch or do major renovations. on the cleaning, removing graffiti, the day-to-day experience of the rider, that's where we're pushing to increase the service and supervisor chan, your question, once we know in realtime like certain lines or certain parts of the city need more, we have the flexibility and the contract -- in the contract to increase the maintenance required in those areas of the city. >> i would add on. >> go ahead. >> i want to put it in context. we're talking about destroyed shelters. to jonathan's point, when a vehicle crashes and takes it out, that happens about 10 to 11 times a year. so it's a very small number, right, in terms of what happens with it. i don't want to go too far into the weeds but we have a lot of inventory. there's eight different types of shelters out there. so, if we have those at the ready, we do turn it around in a very quick period of time but if we don't have them, then we've got to manufacturer them and a nuance because of the hills of san francisco in the incline, they can't -- they have to be custom built for that incline when they go in when you think about the lower side style and upper so there's manufacturing time and permitting time and we're just correcting what actually happens and when you think of 1100 shelters in the system and then you know, a couple of hundred high and low rise platforms, 11 is a very small, small part of this contract. >> and you can't preorder because -- >> you don't -- [multiple voices] they all have different dimensions. we did this year knowing we wanted to do the fresh campaign across the city. we worked with clear channel to prepurchase, i want to say 800 bottles of glass, bob. so we can stock up to try ask be more responsive and quicker so we're attempting to get ahead of it. >> a month and a half is a long time to have a destroyed bus shelter and again, i'm very sensitive to street conditions at the moment and so, that's what is on the top of my mind and having a destroyed bus shelter for a month and a half, you know, it doesn't make us look very good. >> to be clear, we removed it immediately. we respond to it immediately. we make the situation safe. we get all of the equipment offsite, make sure there aren't any bolts or anything coming up, so we make the site safe immediately and then we go. there are times when we turned it around very quickly. there have been some occasion and so that's why that particular clause is -- was modified. >> okay. okay. a related question because as you can see, i'm stuck on street conditions. >> uh-huh. >> the related contract or not related contract but another contract for the city for the newspaper stands, you know, the newspaper business isn't what it used to be and so, we have a bunch, you know, often times empty stands with graffiti all over them that are destroyed and i just am wondering if at the request of dpw or the supervisor, you would be willing to remove those stands that are just blight in neighborhoods? >> we have on a number of cases. we removed about 240 this year. >> will you be willing to remove more in the future upon the request of a supervisor or dpw? >> yes, i think it's a function of that and so, when i mentioned the publishers and i mentioned dpw and i mentioned us, where the publishers have publications in there, we don't control that, that part of it, that piece of it, and so it just has to work through the process but yeah. we have worked with a number of your peers. we've taken out whole hosts and we continue to be ready and we know that they are going to come out in 2024. >> okay. that's good to hear. i just -- if we need sooner, you know, sooner action in certain areas whether particularly damaged, it's good to hear you're willing to do that. thank you. okay. i wanted to ask supervisor safai who had to run and pick up his child and is on his way to pick up his child and come back, whether he's on the line and have questions? >> i am, thank you, chair ronen. i do have a couple of points of clarification. one is, in terms of the turnaround and maintenance and the definition of maintenance. how are you defining the terms. we see trash or dumping immediately adjacent or leaning against the facility, so how is maintenance defined in terms of the work that you're doing? i understand graffiti and etching and replacing glass but i also like to ask you about that because we get a lot of complaints about the conditions of the shelters and i want to make sure that we understand actually what you're responsible for and what kind of flexibility you have, particularly because you're increasing, seems like you're increasing the workforce and the number of people that are going to actually to be doing the work with you i'm supportive of and excited to see this happening but i want to understand what we're getting in terms of the maintenance because like supervisor ronen, i'm very concerned about the street conditions of these facilities in san francisco and these shelters. >> thank you. and again, on that, so my definition of maintenance and bob can correct me if i'm wrong but it's our contract. >> i don't want your definition, jonathan. i don't mean to cut you off. how is it defined in the contract? >> yeah. bob can feel free, the components you named are the maintenance so that's etching on the glass, graffiti, dirt, and cleanliness of the shelters themselves so those are maintenance. that's what we're increasing three days a week. it's very important to the agency that we create a good experience all the way when you started the shelter to get on the bus. i think the capital improvement part is different and that's construction elements where we're adding power or adding our new customer information system signs or fixing them or as we've talked about with the 45-days of having to completely reconstruct a shelter. there's the project level but the maintenance is cleaning, removing of graffiti, removing of things and power washing the shelters three days a week, dealing with safety issues as bob talked about, if there's broken glass, removing that immediately, making the shelter at least functional until we can come back with that second layer which is full capital improvements where they should be. >> i would add on -- >> do thank you defined in your contract -- do you have it defined in your contract and what specifically is allowed to fit for 45 days because that was the first thing like the rest of the folks on the committee that jumped out at me going from 45 to 15 days. >> that's -- [multiple voices] >> i understand from bob that, you say you do it a lot faster but i really like to understand what we're giving you the flexibility to do. >> yeah. >> and if it's full replacement, does it say that in the contract? >> there's a lot of terms and a lot of misinformation going on right now. the increase from 15 days to 45 is specific to destroyed shelters and there are about 11 of those a year. so let's be clear about what that is. relatively significant to what the overall program is, so the overall program, we have a list of ten things that the cleaners are supposed to do every time they go and as jonathan said, it's to inspect, it's to clean up a five-foot area around the shelter. it's to go and -- it's to skweegy and check the seats to make sure they are safe and check the glass on the back and we can get stickers, most of those things power washed and we can do those on a regular course of business. there are things that an individual person isn't able to do like they can't replace a destroyed glass panel or box panel or something like that. they need help to put new seats on, there's things of that nature, if glass has been etched which is a huge problem and lisa can talk about it. the graffiti, we've got pretty amazing chemicals and the teamworks through that. but acid etching is something that requires a complete replacement of the acid etching. that's asity etching that goes on but we have maintenance and repair crews coming to do the larger projects and we have that scheduled out. i like to take time and where we are since the sf mta board meeting. they said they want this independent auditor to come in. we hired that auditor. the auditor has completed 900 of the 1200 inspections already, we developed an app so staff ranked them in order and we'll go to the full board relative to the equity equation on it, as jonathan mentioned, we purchased $1 million orders for the roofs, for the glass and add panels and they are set to arrive in december. we have subcontractor we're going to give a timeline so this refresh program in terms of putting all on the new roofs and add panels that should be finished by the end of the first quarter so we did that and then when the auditor went out with this app, it allows us to do, to write work order for everything in the plan so all of those work orders are getting assigned to our maintenance people and we track that and share it with lisa on a monthly basis, so we are in flight. our intention is to make this better. we are partnered invested in making this better. this has been a really lopsided contract in favor of the city and i don't want to go too far in the weeds but over the course over the last 15 years, we've lost $115 million on this contract. and some of the revenues -- >> bob, that was going to be my next question to you so that was a good segue. if you lost 100 plus million dollars because of the minimum guaranteed payment, what is in it for, you know, what is in it for your company? even though under these current terms, what is it that you're -- what's a benefit to your company? >> the benefit to the company is preservation of the contract so we don't go down a path that hurts the city, that hurts the sf mta, that discontinues services. we want to keep our people employed and be partnered and help the city out of the problem it's in. this is our community. we're a part of that and as jonathan said, the add revenues they fund the mag payments but fund the cash to do the maintenance. they fund the capital equipment that do all these things and as jonathan said, we anticipate generating about $78 million in revenue over the course of the next five years. we anticipate spending about $100 millions and we're going to lose another $20 million for this. every dollar we take in at mag, we get -- [multiple voices] >> again, that's what i'm asking, like, what are you guys doing -- i'm not mad but you guys are losing at $30 million, then -- great, i guess we need more companies to do business with the city like you. >> we're trying to -- [multiple voices] thank you. we're trying to make lemonades out of lemons. [laughter] >> all right. that's the extent -- i do want to say just for the record one of the things i do notice in this contract is the commitment to a local workforce, the commitment to ensuring that there's an expanded workforce that this could work and i think that that is phenomenal nam commitment. this is a true public/private partnership, so i would like you to just end with speaking about where the majority of your workforce lives and comes from because i would imagine based on the description that you have a good number that comes from san francisco that live in our local communities and it's a pretty diverse workforce. >> it's a pretty diverse workforce. you know, probably 60% of the people live in the city of san francisco. the people that do the work are members of the teamsters 853 and we pay a good wage and pay pension and healthcare. we're proud of what we do. >> okay, thank you. thank you, chair. >> thank you. let's open this up for public comment. and then we'll hear from supervisor chan. >> thank you, madam chair. members of the public who wish to speak on this item or joining live, line up to speak. call 415652000 -- 415-655-0001. press pound twice. once connected press star three. to enter the speaker line and for those in the queue, wait until the system indicates you have been unmuted and it's your signal to begin your comments. go ahead and start and i'll start your time. >> good afternoon, supervisors. mark, i'm here speaking on behalf of the executive weissman-ward of 655 teamster 655. it represents the workers at clear channel and some have been there for over 20 years. as a quick aside, the workers at 853 within recent months in anticipation of this contract and this amendment being adhered to soon enough approved their contract. their labor contract. we have labor piece for many years to come. we're here today asking for the amendment to also be approved today. this is a good amendment, it expands the workforce. it takes care of a lot of the questions that san franciscans have about the conditions of the bus shelters. i'm going to make my comments now going forward. specifically from the trade union movement. within recent hours, we have been informed and we're speaking just for the unions here, one of the workers this morning was assaulted while trying to perform their work in cleaning these bus shelters. this is not the first time. and indeed, because of behavior, street behavior in san francisco, both public sector as we know, first responders, paramedics and others, women and men who are going to work are going to working conditions that are reflective of these shelters that are being repaired. i'd like that to be considered today. this is a good amendment and perhaps if the agency and the budget analyst have some kind of miscommunication, then that could be addressed. you we are asking that today that this amendment be approved so our workers can continue to do their work, expand the workforce and serve the citizens of [timer] >> thank you for your comments. >> seeing no further in person speakers in the chamber. mr. lamb, unmute our caller, please. >> good afternoon. can you hear me >> yes, we can. please begin. >> okay. hey, how is it going? my name is ramario and with clear channel since 2019 and our work includes cleaning and maintaining the bus shelters. and it's very important. they use the public transportation so the streets of san francisco is getting tougher to work and it's tougher everyday. teamsters, martinez and myself have had to deal with these issues which is homelessness, furniture, drugs, feces, broken glass, acid, etched (indiscernible), boxes and for them to access the power so they break into them and the head of mta staff and clear channel and the teamsters recognize that the contract needs to be reworked to address these tough issues and working conditions. these amendment -- this a menltment will make things better for the people of san francisco and the city. we appreciate your consideration and support of the amendment before you. thank you. >> thank you very much, ramiro gonzalez for your comments. mr. lamb, next speaker, please. >> can you hear me okay >> yes, we can, please begin. >> great. david pill pell again. so, on this item, contrast to the previous one, i support this strongly. i believe these were good terms negotiated on behalf of the city and benefit both parties on the city's side. thanks to jonathan, lisa, robin, and others, mta and probably elsewhere. i had a great conversation with lisa last week regarding transit shelters, maintenance and other matters. also there was a cleanup item at the mta board on november 1st regarding the agreement from remaining language that needed to be struck. it was hard to tell from all the packet material if that was considered by the bla in their report on the transfer the shelters to the city at the end of the agreement in whatever condition. anyway. if this committee sees fit to continue the matter for additional time, so be it. if you forward it to the full board today, even better. i support my old friend mark and am in support of the proposed resolution, thanks for listening. >> mr. lamb, do we have anymore speakers in the queue? madam chair, that completes our telephone queue. >> public comment is closed. [gavel] supervisor, chan. >> madam chair? oh, sorry. go ahead, go ahead. >> oh, thank you, chair ronen. i can speak after you, supervisor safai if you're actually -- if you have questions? >> i do. i do. i do want to clarify one thing. it is my understanding unless i'm wrong, if this contract expires on december 6th, is that right from mta? because i think that, i guess the only thing i would say is a friendly response to supervisor chan is if this contract is going to expire and it needs to be sent from the board to the mayor for ultimate signature, since it's a quick turnaround, maybe we could send it out of committee without recommendation and pending the information on the maintenance record. >> yes, i think we all got the same message. so, i hear you. [laughter] i think that actually it is critical to the integrity of both this contract but really, like, owe it to our constituents for the conditions of our streets to really have an honest data driven conversation about what really requires to keep, to upkeep our streets and our bus shelter so i think that it is to actually our benefit to turn over the records to budget and legislative analyst and if it's really one business day, i think the question is, mr. roer, why wasn't it turned over if it's easy to turn over a while ago. we may have a short turnaround, we should provide the records. could we move forward, like, whether we move forward, in moving forward not just with this contract but all other contracts and all the conversation, please turn the records to bla so we can save us all-time because if you're short on time, you know, as this contract is expiring december 6th, do the work up front so we don't have to have to do this, you know, conversation of like, yes, we'll get records back to you later so in good faith, turn it over. that's just my piece and this is not on clear channel. it's on sf mta to turn over the record even if you're the so-called neutral party. please turn over that record so we have an honest analysis about what is required and what's the gap but to have an independent agency that could verify whether this is a terms and conditions and if it's really in the work of $58 million upward for this extension. and i think that's critical. i think that no one is going to ask any company, i would say the city is not in a place where, i'm sure that supervisor safai who is a good negotiator like to continue to see a company, giving us, giving back $50 million over a ten-year period of time but in all seriousness, i think the city is in a position of, hey, if this is a service you provide, we intend to ensure this is the money being spent and with that, i think is all i'm asking is that for the services provided by clear channel through sf mta that we are saying reduction of this payment, so-to-speak, you know, that we could -- it is really worth the service. maybe more, more less but let's be happy to do that analysis. i'll make the motion to move this legislation forward without recommendation and please we're coming back because next week is thanksgiving so the board is not meeting tuesday but the week after, we would love to make sure we have either updated bla report on this or at least some information from the sfmat to make sure that at the full board that our colleagues have that information to make their own decision on this contract discussion. thank you. >> thank you. can we have a roll call vote on that motion. >> motion by chan that is forwarded without a recommendation. vice-chair safai? >> aye. >> member chan? >> aye. >> chair ronen? >> aye. >> we have three ayes. >> that motion passes unanimously. [gavel] thank you so much to everyone who came out. mr. clerk, can you read item no. three. >> yes, item no. three. [reading item 3] >> members of the public joining remotely and wish to comment, call 415-655-0001. meeting id, 2499557925. press pound twice and star three to enter the speaker line. a prompt will indicate you have raised your hand. once unmuted, that's your signal to begin your comments. madam chair. >> thank you so much and we have ms. gorman here from the department of real-estate. good afternoon. >> good afternoon, thank you chair ronen, supervisor chan. on behalf of the san francisco municipal transportation agency, we're asking for a positive recommendation for the lease renewal via first amendment of ten years for approximately 39,000 square feet of office locker room and bike space at 1455 market street used for a 24/7 operation, transit center. in june of 2011 the board approved the original lease to consolidate mta's realtime command and control functions from several locations into one with up-to-date systems and create both a primary and secondary or backup transit certainty. after a site assessment study, 1455 market was ranked as the best and the improvements were created and the trans center was created and the lease term was ten years with two further options to extend by ten years each. this is the first of the ten-year extension options to be exercised, commencing in september 2023. on all of the same terms and conditions set forth in the original lease except base rent. base rent set forth in the original lease commences at a five percent increase or the then current base rent amount or in this case approximately $43 per square foot which is still below market rate. annual rent adjustments therefore continue at 3% annually for the term as per the original lease. i'm here to answer any questions you have about the agreement. we have representatives from mta if you have any use questions, thank you. >> thank you so much. we have a report from the bla. >> thank you. item 3 is a resolution approving an amendment to the city's lease with hudson 1455 market llc, for the city to lease 38,000 square feet of space at that site. it's the second ten-year extension approved by the board in 2011. this site houses functions for mt -- the mta and appraisal wasn't required because the cost is less than $40 per square feet. which i'll note, we did look at the real he is state comp that were provided by real-estate division and this is below the fox plaza list. so, we believe this item, this lease is below market and you can see the cost of the lease on page 8 which is $26.8 million over the ten-year extension. we recommend approval. >> thank you so much. any questions, colleagues? supervisor safai? >> yeah, i just want to say, i think this is one of the best lease we've had come in front of us in a long time. it's over $23 less than fox plaza, so i'm one thousand percent in support of this renewal. [laughter] >> i couldn't agree more. thanks for that. we can open this item up for public comment. >> thank you, madam chair. members of the public who wish to speak on this item and joining in person, should line up now. listening remotely, please call 415652000 -- 415-655-0001. and meeting id is 24995579925. and press pound twice and press three to speak. those waiting in the queue, wait until unmuted. no in-person speakers in the chambers. mr. lamb, kindly unmute our caller. >> can you hear me now? >> we can hear you. >> great. david pill pell. last time today, i'm sure there's much happiness in the room. on this item, the mta has considerable space on the third, sixth floor and south van ness. half of the building space. why not have the tmc on the 8th floor as was originally thought of. i believe that less building space will be needed by mta with work from home and increased use of hoteling in the future. that could save up to the $26.8 million that's projected here over ten years less the amount to move and relocate and tentative improvements and all of that but that $26.8 million is scarce operating budget funds. it's not capital money. it's operating budget funds so, what we're doing is leasing space across the street at considerable cost even if it's less than market rate in the neighborhood, instead of providing more service on mission street or on the westside of the city or elsewhere. it's operating budget funds. i believe we can reduce our leased space by not renewing this or transitioning to moving the function to one south and i would note that the 2011 lease approval was controversial. it was approved at the full board only on a 7 to 4 vote and i would encourage this committee and if you report this out today to the full board to consider this item carefully. i don't think this should be the slam dunk lease renewal that staff is proposing. thanks for listening. >> mr. lamb, do we have anymore callers? madam chair, that completes our queue. >> public comment is now closed. [gavel] i would like to make a motion to send this item to the full board with positive recommendation. >> on that motion to forward this resolution to the full board with positive recommendation, vice-chair safai? >> aye. >> member chan? >> aye. >> chair ronen? >> aye. >> we have three ayes. >> that motion passes unanimously. [gavel] mr. clerk, please read item no. four. >> item no. four is and structures] resolution approving amendment no. 47 to the treasure island land and structures master lease between the treasure island development authority and the united states navy to extend the term for one year to commence december 1, 2022, for a total term of november 19, 1998, through november 30, 2023; and to authorize the treasure island director to execute and enter into amendments to the lease that do not materially increase the obligations or liabilities to the city and are necessary to effectuate the purposes and intent of this resolution. members of the public who are joining us remotely and wish to comment, please call 4156520001 tell -- 415-655-0001 and enter meeting id24995579925. press pound twice and press three to enter the speaking line. a prompt will indicate you have raised your hand and once unmuted, that's your queue to begin your comments. member chan? >> thank you mr. clerk and hear today we have for presenter bob beck, that is the director from treasure island development authority, is that correct. >> i'm peter. director beck has been held up in another meeting so i'll be taking his place. >> it will be you representing -- >> it's just me. >> no problem. good to see you. >> thank you. nice to see you. good afternoon, supervisors, peter summerville with tides of staff in front of you today is an amendment to the us navy's master lease with the authority for land and structures on treasure island. there are no material changes to the lease in the amendment say for the extension of the term by one year commencing december 1, 2022, through november 30, 2023. we request consideration of approval and forwarding to the full board and i'm happy to answer questions at this time. >> thank you. any questions, colleagues? okay. there's no bla reports so we'll open this up for public comment. >> members of the public who wish to speak on this item or joining in person should line up now. for those listening remotely, call 415-655-0001. meeting id is 24995579925. then press pound twice. you'll need to press three to enter the speaker line and those in the queue, wait until the system indicates you have been unmuted and that's your signal to begin speaking. seeing no in person speakers in the chamber, madam chair, we have no speakers in the queue. >> public comment is now closed. [gavel] like to make a motion to send this item to the full board with positive recommendation. >> forward this resolution to the full board with the positive recommendation, vice-chair safai? vice-chair safai? member chan? >> aye. >> chair ronen? >> aye. >> just checking vice-chair safai, absent. we have two ayes with vice-chair safai absent. >> motion -- >> aye. >> safai aye. i strike that. we have three ayes. >> motion passes unanimously. [gavel] mr. clerk, can you read items five and six together. >> yes, items five and six, sponsor: mayor resolution retroactively authorizing the office of the district attorney to accept and expend a grant in the amount of $314,180 from the california department of insurance for the automobile insurance fraud program, for the grant period of july 1, 2022, through june 30, 2023. item five is the -- members of the public joining remotely and wish to comment on the resolution, call 415-655-0001 and meeting it number, 24 the 5579925 and press pound twice. once connected press star three to enter the speaker line. a prompt will indicated you have raised your hand. >> we have tina nunez here or online? i think. to present on this item. >> thank you, madam chair person. hi name is tina. good afternoon. >> we're having a hard time hearing you. >> let me see if i can -- can you hear me now? >> we can hear you better, maybe just speak loudly. >> okay. i can to that. >> there we go. >> my name is -- oh okay. thank you madam chair person. my name is tina nunez and i'm the managing attorney for the economic crime unit at the da's office. along with me is laura who works for our office on the finance side of our grant. the economic crimes unit of our office prosecutes insurance fraud and annually we apply for and we received two department of insurance grants to prosecute insurance fraud, part of our grant process is that we seek this resolution from our board. the larger grant which is the workers compensation fraud grant assist our office in funding salaries for two da investigators and partial salaries for -- three attorneys to prosecute fraud. many of these cases are quite complex and require intensive resources and the grants are needed to help fund staff who handle these important cases and just to let the board know and the committee know, our goal in these cases are multiple. we're seeking accountability for these offenders. we want restitution to the victims. we want to protect injured workers for whom the system is brought to assist. we want to deter future fraud and we want to level the playing field for all of our businesses in san francisco. the auto insurance fraud grant funds one da investigator and partially funds three da attorneys salaries. our goals for that grant are deter ant, accountability, consumer protection, restitution to the victims as well as public safety. insurance fraud as we know is a huge problem that impacts all californians and fraud causes losses of billions of dollars annually. the department of insurance grants allows us to place experienced staff in these critical positions and to handle insure action fraud case was a high level of expertise and experience. these grants also allow us to have much-needed on going training because as -- the board probably knows, the people who commit these types of crimes are learning new ways to cheat the new system so we have to keep up with them. we appreciate the board's time and your consideration and this resolution for us so we can accept this money and spend it. and i'm happy to take any questions if you have any questions on the finance side, ms. greto can answer those. i went to law school so i can't do math so thank you all for your time. >> thank you. any questions, colleagues. seeing none, we can open this up for public comment. >> yes, members of the public who wish to speak on this item and joining in person should line up. listening remotely, call 415-655-0001 and enter the meeting id24995579925. press pound twice. and press three to unmute. no speakers in the chambers. mr. lamb. no speakers in the queue. >> public comment is closed. [gavel] i make a motion to send items five and six to the full board with positive recommendation. >> on that motion, to forward both items five and six, to the full board to the positive recommendation, vice-chair safai? >> aye. >> member chan? >> aye. >> member, sorry, chair ronen? >> aye. >> we have three ayes. >> the motion passes unanimously. [gavel] mr. clerk, please read item no. 7. [clerk reading item 7] members of the public who are joining remotely and wish to comment, please call 415-655-0001. meeting meeting it of 24 the 5579925. and press pound twice. one connected, press star three to enter the speaker line. a prompt will indicate you have raised your hand. once indicated you have been unmuted, you may begin your comments. madam chair? >> oh, i'm sorry. >> angelica is back with us from maternity leave after giving birth to an adorable, adorable daughter. >> thank you. i agree, of course. >> please begin. >> thank you so much. and good afternoon, supervisors, dr. angelica with behavioral health services and i'm here in an expanded role -- i'm here to respectfully request to retroactive authorize to accept and extend saving community corrections. it's a $6 million grant of $5.5 million informs to community based -- million goes to community based organizations and this grant is through the board and state corrections through prop 47 which is designed to support individuals who have mental health needs, substance use disorder treatment needs and diversion programs and specifically for individuals who have had contact with the criminal justice system. as a note, we're awarded this grant on july 26th and we worked to develop the legislative packet with a controllers office which was forwarded to the mayor's office on september 30th. i'm excited to be here and be back to be able to tell you about the program. this grant, we have named the supporting treatment and reducing recidivism grant. it's a $6 million grant. $3.1 million is in matching funds. it's no new positions but matching funds for positions that are assessing individuals and referring into this treatment program. this grant supports residential treatment program, beds, low threshold management and wraparound support services. it's unique because it offers capacity for individuals who have konl tacked the criminal justice system and they focus on jail diverse and recovery and community reentry and improving the health and housing -- we're fortunate enough we have been participants through the community board of corrections and the first beginning july of 2017 through june 2021. second round 2019 which will end in february 2023. and now this new grant. next slide, please. so, this grant will continue to fund community based organizations that we've worked with since 2017 to provide care management and treatment services. we have contracted with salvation army, harvey life center to have treatment beds for individuals to stay up to two weeks and 18 residential sud treatment beds for individuals to stay for six to nine months. what's unique about partnering with salvation army and this was a new contract for us in 2017, was really to diversify our substance use disorder portfolio. it's also a faith-based organization and focus on a 12-model. these are things we heard clearly from our community justice, criminal justice partners and our community providers as a missing need and so this was an opportunity for us to diversify that portfolio. in addition, we've worked with (indiscernible) institutes and this will provide one hundred low thresholds for the grants to serve 150 individuals. institute throughout this program has a diverse workforce that reflects the communities that we're serving and particularly with individuals with lived experience in the behavior health and criminal justice systems. as much smaller portion of the grant goes to additional funds through the public health foundation, which offers engagement items including opportunities to buy work clothes or to pay for dui classes, as an example, really to meet the needs of the population and to make it as low barrier as possible so individuals are able to successfully reenter the community. salvation army has a strong history of working with individuals to transition into permanent housing and to reenter the workforce so it has been a great partner in that and we're happy to support that with these flexibility funds and this grant funds one staff member through the public of health. it will assess individuals and collect data. next slide, please. this slide provides a visual of our referral pathway and services provided which we've spoken about. i just add some additional context, throughout the course of these grants since 2017, the adult probation department has been a very close partner with the tent of public health to provide these services. we also intend to work closely with our law enforcement partners to ensure this is an opportunity to refer individuals into treatment. one thing to highlight regarding withdraw management beds is these are beds where we are able to do intakes until 10:00 p.m. at night. it provides a lot of opportunity to support individuals who have contact with law enforcement during that time period or exiting the jail. we also work with adult probation department to triage individuals who are going to the community assessment and services center which is a one-stop-shop that i know you're familiar with through the adult probation department. we accept people walking in. and we also utilize and leverage resources through the department of public health including making sure that our outreach teams make referrals to this program, hospitals and crisis services including our street crisis response team that leverages these beds. next slide, please. just some things to note, regarding changes in this cohort from the two previous cohorts. this second round of funding hits right before covid. so covid drastically impacted our program design and really required us to reorient our work. that included the community assessment services center which we, for our second round of the grant had everyone funnel through that center because of covid, that center had been closed for a year during covid and so we've worked to decentralize and take process as you've just saw in making sure we're being as flexible and nimble as possible to reach as many people to enter these treatment beds and treatment services. of note, there's also a reduction in the grant funded beds at salvation army from 40 to 18. this is because there was a significant overlap of two plus years between our first and second round of funding for the grants. we were able to leverage dollars from both grants at the same time. that's not the case with this round of the grant and so, we are only able to fund 18 beds for the residential treatment beds. with that being said, we are using cost savings that are already in the existing operating budget to be able to continue these beds through this fiscal year, so we are not having a loss of treatment beds. and then are looking at other funding opportunities to continue the beds at salvation army including leveraging drug medi-cal dollars. next slide, please. okay. and finally just to speak to some improvements that we made in this round of the grant. as you know, there is a very important cbo staff and wage analysis that's being done by the controllers office and we look forward to seeing how that can, the recommendations from that report to impact this work. particularly in cohort one of the grants, we had a hard time getting things up and running because of difficulties but hiring and retaining staff. this is noted in the bla report. but there has been some challenges in the beds being filled. as i noted, this is highly impacted by covid. salvation army because it has a dormitory style housing, it was impacted by several outbreaks during the course, and tragic outbreaks during the course of this grant. and so there were several months where we weren't able to bring new participants into the program. with that being said, while it has been a slower recovery, i'm happy to report in the last four months, we had a 50% occupancy from withdraw management beds and 75% for residential treatment beds and that's increasing over time. what i'm happy to report, we had a lot of support with this program. the first cohort, we had significant reductions in arrests. and thus far in our second round of the grant, none of our programs participants have been arrested or gone to jail in san francisco. so we are excited to report that and look forward to continued success for this program. that is all i have in terms of the presentation. i'm happy to answer any questions. >> thank you. we'll first hear from the budget and legislative analyst and then ask questions, thanks. >> thank you. item seven is a resolution approving an acceptance of a $6 million grant from the california state board, excuse me, california board of state and community corrections. it's a prop 47 grant. it's a three-year grant for $6 million. and it's the third round of funding that the city received from the state for this program which will continue to fund detox and residential treatment beds and case management as discussed by the department. we show the program design on page 14 of our report. and you can see the providers in the different services they are offering. and then on page 15 and 16, we show the grant budget, so the incoming grant at $6 million, that will be matched by the cost of city, existing city positions so no new positions. those will be funded by the general fund. we did have considerations on the report that are -- some have been addressed by the department already but i'll say them again now, number one, before covid, the program, i think did not meet its intend occupancy targets for these beds and there were delays with hiring providers and covid hit so i think they've struggled -- according to their report, to meet their occupancy target. that improved and we have seen that improvement in the data shared by the department. and in the first eight months of this year, this calendar year, those occupancy targets were 50 and 75% as discussed. we did also note that the number of beds funded by the grant on the residential side is going down from 40 to 18 funded by this grant. that's less than the 28 people on average per month that are using those beds. at the time of our report, the department said the salvation army was going to do private fundraising for the beds but they found general fund money to cover the cost of the remaining beds and the final issue is that the underlining agreement, it's not -- i'm here to be sole sourced. we're not here about the details of those procurements and whether they needed to comply with chapter 21g and you all know, it requires gen -- for all these reasons that we're recommending a report back by may 2023 on the occupancy of the beds and the program and then the kind of funding for the beds that will no longer be funded and that's -- it gives the department six months to address these outstanding questions and the board an opportunity to address any remaining issues a part of the budget process next year. thank you. >> thank you. colleagues, questions? supervisor safai? >> yeah. you went really fast. that's okay. it's a lot of information to cover. but what i -- and i appreciate it. what i want to understand on our report and i know you said you had previous funding that you were able to group together or i don't remember the exact phrase you used but back in 2017 through 2021, it says use the matching funds along with the grant, there was about 18 dph full time employees and five probation employees and cash grant. in 2019 through 2023, i guess that money is -- there's overlap of funding. you're paying forecast grant and paying for five probation department, full time equivalent and full-time equivalence and 12.9 -- can you explain to me because it's a little bit confusing how this the sustainability of this program will maintain itself if there's a decrease in funding, if maybe i'm reading that wrong and then and how the money is broken out. i want to say i'm a fan of salvation army, the harbor lights program. i'm familiar with it and i think they have a lot of success there and they do a lot of work with recovery and abstinence programming which is phenomenal and i'm grad to see more dph funding going into that. but if you can give us more detail about that, that will be helpful. >> absolutely. our first round the grant was from july 2017 to june 2021. the second round of the grant was from september 2019 and will be ending february 15, 2023. so, these grants overlap by two years which is why we were able to lever an the $6 million we were awarded. >> two separate grants. >> they were both prop 47 grants through the community corrections and the cohort elapsed from the board of -- >> did we get two separate grants? >> yes. >> i want to make sure i understand that, got it. the cohorts overlaps. >> yes. >> a good chunk of the money is going for detox beds and -- tell me how we make up for the lost beds or are their lost beds. >> i appreciate that. this is a priority for the department and requirement from the board and state corrections that the funding goes to community based organizations. for us we have 3.7 going to salvation army. 1.5 to felton over the course of the grant period. and 13,000 for public health foundation. and again the only money that's going to city department is to the department of public health for operating cost and also for the one position to do assessments and triage to support getting people into those treatment beds. in terms, please. >> sorry. >> please go ahead. >> so the 3.7 and the 1.7, is that out of one of the $6 million grants? >> yes. this current round for $6 million. >> from the previous 6 million, how did that break out, similarly? >> it was very similar. i would be happy to follow up with specific details. i don't have those numbers but similar. >> a big chunk goes to salvation army. >> most for salvation army. >> 1.7 is to -- got it. and felton and some money for the foundation and dph staff. >> correct. >> okay, got it. are we losing any beds? are we losing funding for any beds because it says here ten and 40, now it's 10 and 18. >> we have ten and 18 funded by the grants. >> by this grant. >> by this grant. the remaining 22 beds are being funded in this, so the second round of the grant in seven 15 of 2023. we'll have 40 beds funded by a prop 47 grant until february 15, 2023. and then it will change from the ten beds to the 18 beds that are funded by this cohort of the grant. so the remaining 22 beds are salvation army will be funded by cost savings and general funds for the remainder of this fiscal year and then we're working with salvation army which has been a priority for them as well to look at other funding options including drawing down drug med-cal dollars. >> got it because this is one of the questions we had for dr. donings when we were asking, is dph funding any pure absence based programming and salvation army is one. that's good to know. that's an important program. my second thing is, if you can go back to the slide on the referrals because again, that was -- you did that quickly. i know when we did our therapeutic community program, our trp with positive directions equals change and adult probation, majority of the referrals were coming straight from adele probation. people on probation, reduced recidivism. can you talk about more, just a little more detail about how the referrals were made because it seems to me that they are not just coming from adult probation. >> that is correct. they are not just coming from adult probation. our second round of the grant, referrals were centralized through the an assessment for those entering jail. >> through the (indiscernible). >> the probation works closely with cask. >> yes and they have been a major partner. >> the majority of the referrals are coming through cuss being. >> they were focused on the cask. we have decentralized that because of the impact of covid and we want that make sure we're leveraging the beds as much as possible. the adult probation department and the cast is a partner with referrals. we work closely with the jail for individuals who are exiting the jail to make referrals to this program as well as other community partners, our street based teams, for examples stay ongoing the street who had contact with the criminal justice and hospitals and street crisis response team. >> i would say i think it's important if we're trying to reduce recidivism that we have it, i'm not trying to be overly centralized but i think it's important that we're working through the existing channels that shown success rather than directing someone into a program without the proper support system along the way so i mean, i just, i know a little -- cask is great and adult probation and coming from the jails but if we're taking someone off the street and putting them in there, we might not have the same level of success. hopefully that's a small portion of the referrals because it's not that many beds. if we're talking about the universe of need, it's a small number and make good referrals for success. >> i'm happy we're decentralizing. >> i'm happy to have as much referral as possible but just because i work with adult probation, if we're referring, we might not set people up for the success we need. >> i definitely understand your point and i definitely appreciate it because it's not true of all the service providers that this program does have proven success and you know, i want to be evaluating all the other residential treatment to see what's happening there. but what bothers me in our system of care which is improved by the fact you're decentralizing referral into these programs is that -- there's no place for people to go when the street outreach team repeatedly works with the same person over and over again. and this provides an opportunity for them to gain entry into a very successful program. and -- >> no, for sure. >> that wasn't happening before and therefore we weren't filling the beds, et cetera. so -- >> no, no, for sure. i would say again, i think the purpose of this grant is purely, it's about reducing recidivism. it's formally -- i'm sure that's the high level of the number of people that are on the street. so anyway. we can talk about this all day. i wanted to double check that. it makes me happy, i want to hear more -- i would like to say for the record, having the department of public health have a stronger relationship with the salvation army, given the fact that they are going through a major expansion and model of doing and expanding residential beds, they have a lot of real-estate. some in your district and south of market and they have talked and we have worked with them closely about expanding their footprint and being able to deliver. let's analyze the success of this program and then let's have further conversations about strengthening and expanding those opportunities. >> i'll just add and i appreciate both perspectives and i think both are incredibly valid. i think one. things i appreciate about this program is the ability to be flexibility and meet the needs of the population and also wherever we can prevent somebody having contact, we don't want the jail to be an entry pointto services so wherever we can prevent someone from going to jail who may have had a history of contact and greater risk, it's an opportunity to do that so it's great to have that flexibility. the other piece i neglected to say but will share, l these cohorts have required us to work with external evaluator to assess the success of the program. including things like the metric that i mentioned of having statistically significant reductions and arrest for the population. so that's something we agree is important for us to evaluate and something we are happy to have included as a part of the grant. >> great. thank you, chair. >> thank you. the other, so given the history of underutilization of these beds and just drawing from what you explained prior to covid, the primary reasoning was it was hard to hire the workforce necessary to run the beds. post-covid, it was difficult because all entry went through the cask which was closed down. both situations are resolved so going forward, it would be -- i appreciated the budget and legislative analyst recommendation to get reports on bed utilization at the program because hopefully we've cracked, we've cracked the code here. we've got the workforce. we've got, you know, multiple entry points and we'd like to see all 40 beds maintained and utilized and so, you know, i'm wondering if you're amenable to the recommendation, the second recommendation of the budget and legislative analyst to provide a report? i can see a funding status of the 22 treatment beds no later than may, 2023? >> we're always happy to come back and provide an update and i'll say again, we have seen a positive trend already in this fiscal year of the referrals and individuals going into the treatment beds increasing and in this calendar year, the referrals were double already what we saw last calendar year, so we've seen a lot of significant improvement over time. >> that's great. and so, we want all 40 beds to be maintained and a priority for this coming budget year, message the mayor and budget director who is not here today, so i hope she gets that message. [laughter] and if there is no other questions or comments we can open this item up for public comment. >> yes, members of the public who wish to speak on this item or joining in person should line up now. listening remotely, call 415-655-0001. enter meeting id24995579925. press pound twice and press three to end the speaker line. those in the queue, continue to wait until the system indicates you have been unmuted. and that's your signal to begin comments. no in-person speakers in the chamber, and madam chair, no speakers in queue. >> public comment is now closed. [gavel] i'd like to make a motion to amend the item to adopt the secretary recommendation of the budget and legislative -- second recommendation of the budget and legislative and send it to the full board. >> on the motion by chair ronen -- sorry. the reporting by the department of public health and to forward that resolution to full board with positive recommendation as amended, vice-chair safai? >> aye. >> member chan? >> aye. >> chair ronen? >> aye. >> we have three ayes. >> the motion passes unanimously. >> thank you so much. [gavel] >> mr. clerk, please read items 8 and 9 together. >> yes, items 8 and 9 are hearings. [clerk reading item 8 and 9] members of the public joining us remotely and wish to comment on the hearings, call 415-655-0011 -- press star three to enter the speaker line. the system prompt will indicate you have raised your hand and you have been unmuted, that's your signal to begin your comments. madam chair. >> i want to note we're joined by supervisor stefani and i wanted to give supervisor stefani and supervisor safai, i don't know which order, if mr. safai can start to make opening comments. >> thank you. we're going to do this together and i'll hand it over to supervisor stefani after this. thank you, colleagues and attendees if there are any left. no, i'm kidding. [laughter] the purpose of this hearing is extremely important. it's to examine the impacts of office vacancies in our reduced daytime population in the downtown core. and how that will impact our city budget. supervisor stefani and i have been working together in convening a downtown working group along in collaboration with mayor breed's office to discuss the challenges that are once vibrant downtown core. it faces in this post -- post pandemic climate. we've -- over the course of the past year or so, i've held two hearings regarding this subject both in 2021 and earlier this year to examine the state of our commercial vacancy numbers, the number of employees that are actually going back to work full-time or part time in person and how our tourism industry is recovering a lot more. we're joined by ted egan who will go into the details. in the previous hearings, we had optimism that once covid winged, work will return to normal volume and tourism to that matter. today it's clear to me and many of us that full-time in-person work that our economic core is counting on will not be returning to the same level that we've had in the past without (indiscernible) sensitives or policy changes we can create at the -- without incentive changes or policies we can create at the board. we have a clear picture of the office vacancy cliff that our city is facing and i want to be clear, we are facing a significant iceberg coming toward us here in the city and county of san francisco. our gross receipts tax, our property transfer tax, our business tax, our tourism, our hotel, our sales tax, all of those things rely on a vibrant economic downtown core that's related to retail occupancy but tourism. in our hearing today, we'll hear from, i think, benn rose enfield, his controller's office and ted egan, assessor controller, joaquin and alice gibson. before we get into it, i want to turn it over to supervisor stefani to say a few words before we start with our controller. >> thank you, vice-chair safai. i actually think we might have hit that iceberg not to be -- not to start on the negative note but i think the situation is dire and i started getting nervous early on about our mt offices downtown after coming out of the pandemic and realizing nobody was really coming back to work, so in july, i issued a letter of inquiry to assessor torres, controller rosenfeld, chief economist egan who is here today. trying to ask them to assess the impact of reduced demand for commercial space in san francisco especially in our downtown and what that would -- what that impact would be on our local tax revenue. san francisco's downtown core as we know in the financial district have been devastated by the pandemic. i read a research brief, u.c. berkeley called the death of downtown and it looked at 62 downtowns similar in size to san francisco and we were dead last. we had a recovery quotient of 31% of our pre-pandemic economic activity whereas new york is at 78%. columbus at 112% and salt lake city is at 155%. so, you know, unfortunately, san francisco on a lot of these determinations is dead last in many different methods of deciding whether or not we are on the road to recovery. and i do believe the situation is dire for several different reasons, prior to the pandemic, the area that we're talking about in downtown, somo it was responsible for generating more than 45% of the city's sales tax and since then, the neighborhood has seen of the largest declines in sales tax revenue with some zip codes experiencing more than a 50% drop between 2019 and 2021. we of course know that san francisco has a heavy concentration of tech employers that of course is particularly haas hospitable to remote work. we have seen close to 20,000 layoffs bringing this year's total to 33,000. no one could have predicted what elon musk done to twitter and the fact that we have these large layoffs is not helping. as we'll hear today from our chief economist and i think the assessor is going to be online, the impact on local tax revenue is likely to be severe. and likely to be sustained over the next few years at least. i think it's absolutely imperative today we have the tough conversations around what this means for our city, we need to define the problem and we need to understand what levers we have, what levers we can pull to try to solve them. so, i'm looking forward to hearing the presentations and then of course having future discussion s what we can do at later dates so thank you. >> thank you, supervisor stefani. on behalf of the controllers office first, mr. egan. okay. i'll have mr. egan present first, thank you. >> good afternoon, supervisors. ted egan with the controllers office. i would like ask brent if he has our slides ready to go? i have a paper backup if they are not ready. i'll just mention based on your comments, supervisor safai that we'll provide an update of the information we have asked for in later hearings. we will be responding to supervisor stefani's question and sharing information for the first time on what some of these downturns and downtown offices mean for the city's property tax revenue. it's something we've been aware of for a long time and have been working on for the past several months so we're in a position to share some of those numbers today. >> thank you, please proceed. >> could we go to the next slide, please. for us in the controllers office, the worry about commercial offices really -- >> if there's a way to make it bigger because it's exactly the size it looks like on the screen. [laughter] which means we can't read it. >> yes. for mr. egan, to the vice-chair, we're working on it. >> if anyone would like paper copies, we have some. >> for the record, it would be good. what did you say? >> yeah, we have it in our e-mail. i don't know, whatever. >> the concern for commercial offices, it starts during the pandemic most office workers were working at home and i think there was an expectation by many afterwards that the end of the pandemic would lead to return to the office. however, most office employees didn't feel that way and didn't expect. if we can go to the previous slide, actually. that's the one i was referring to. a research group led by a sanford economist nick bloom have been doing national surveys of workers and employers regarding their work at home preferences. monthly since the pandemic began. and in 2020, early in the pandemic, office workers generally or people who were able to work at home generally enjoyed working at home and wanted to work at home around three days a week or two and a half to three days a week. employers on the other hand had a different view and expected when the pandemic was over, work from home would be greatly reduced in the neighborhood of maybe one and a half to two days a week. over time, as the pandemic progressed, those expectations began to narrow. and so, their latest survey results were by mid 2022, suggested that employers and employees were more less agreeing in a range between two and a quarter and two and three quarters days a week working from home. before the pandemic, the average office worker across the country was working at home on average about half a day a week. so, if there's a move and again this is a national trend from half a day a week to two and a half days a week on average, that's a major change in how offices were used in the u.s. economy. san francisco is vulnerable to this because office space industries contribute 22% of our gdp. if anything happens through the office sector, it ripples through the city's economy. let's go to the next slide this. shows office occupancy. the increase, i'm sorry, the previous slide, please. i haven't spoken about that one yet. great. thank you. work from home is obviously reduced the amount of time people spend in the offices, castel system an office security system that tracks this across the metro area across the country. nationally, all ten metro areas they track range between 40 and 60% of normal which is to say people are spending 40 to 60% of the time in the office they were doing in 2019. san francisco is quite slow in its return to office. the last week i checked which was yesterday, we were second only to san jose, san jose is maybe 39% and we're at 41%. but even the most returned place, austin, texas is 62% of normal. so there really is no widespread return to office. there's some places that's doing it more than others. we are leading this trend of people working remotely. and it had has implications for the office market. if we can go to the next slide. every major office market in the country has seen a significant increase in vacant space since the start of the pandemic. but there's no place has seen this more than san francisco where we had about a five percent office vacancy rate in 2019 and in the third quarter of this year, it was 24%. so that turnaround is something that is stronger in san francisco than anywhere else in the country. next slide, please. initially, the vacant office space was primarily sublease space and that's the story from 2020 and 2021. and that means that the previous tenants, large tech companies in most cases were still paying rent to the property owner but no longer needed the space. as of the middle of this year, we're starring to see that change -- starting to see the change and elect vacancies are the majority. that's significant for property taxes because it means for the first time, most of the vacant spaces is reducing the property income. the owners of those buildings are making less money and i believe the market would say these buildings are less than they were before when they were earning higher income. that's not the only factor that's affecting property income. i'll speak about that in a moment. if we could go to the next slide. we've reviewed office forecast from a number of sources and the national brokerage firm jal produced a forecast of office vacancy and office rent for a number of metro areas and this is their forecast for san francisco, where those lines diverge is where we are at the end of the third quarter this year. in their best-case scenario by 2026, we basically get our office vacancy rate down to where it was at the worst of the dot com crash 20 years ago. if you remember san francisco at that time was a major, major economic shock to this city. that's the best-case scenario. the worst case scenario they have presented shows the office vacancy rate going up from where it is now around 24% to 40% before it starts to decline. but under no scenario are we anywhere back to normal by 2026. next slide, please. the office forecast they have is not as dire but it points to either a very slow recovery in office rents. we have seen a decline of 15%. or below trend growth throughout the forecast period. so, in the worst case scenario, we don't see rents get back to normal by 2026. and the best case scenario, we do but the growth in that period is lower than it normally is. i say these are just forecast but they are important for us. we're not watching the office market dynamics on a daily basis like these people are and so what we really did was draw on these forecast to build our own model of how this might affect san francisco's property tax. if we can go to the next slide. there's one other factor that's not related to work from home. that's likely to affect the city's property taxes and we're just talking about offices today and that's rising interest rates. when interest rates rise, the rate of return that investors are going to require for owning real-estate including san francisco office buildings are going to have to rise as well. if you can get four and a half percent from the federal government, you're going to need to get more than four and a half percent to take a risk from owning a san francisco office building and that's going to affect given what a property's income is, what you're going to bid for it. really, if interest rates rise in what's called capitalization rate which is the required rate of return on san francisco offices, if those rise in turn, property values fall and it's just a matter of math. in the previous decade, we were seeing capitalization rates in the five to six percent range based on forecast we have seen from national economist. we could be looking at 7 to 8% capitalization rates throughout this decade. that doesn't seem like a big jump. it's the denominator of a number that affects the property value and so it's a significant decline to property values. so really, over our five-year forecast period that we're thinking about, we have two major shocks to property values. one is reduced property income, office vacancy, reduced rents from work from home and rising interest rates which are to rise than of the last decade. next slide, please. so, and i think you'll hear this more from the assessor's office later but just to set a little context. the office sector is not the majority of the property tax in san francisco. it's about 18% of the total. but economically speaking, offices really drive demand for a lot of other types of read estate in san francisco. one of the major reasons that san francisco housing is so expensive is because it gives people access to jobs in san francisco that pay very well. if we're entering a world where you don't have to be in san francisco to earn the high wages, than san francisco housing drops. right now we're focused on offices, so just to reiterate what i have said, if vacancy rises, and property income drops. that's part of property values. if property rates -- the important thing for property tax though is the assessed value of a property can never be higher than its market value. if they believe the market value fallen so much they are assessed for more than what the property is worth, they can appeal that assessment either to the assessor or the aab. the assessment appeals board. and that's where the city's property tax risk comes from. there are certain mitigating factors and they will show up in our forecast. proposition 13 which limits how much assessed value can rise. it has meant in san francisco most properties unless they sold quite recently are assessed below their market value which means they can basically accept some reduction in their market value before their property tax payment would go down. another mitigating factor is long-term leases. many of the office buildings in downtown have leases that have fixed rent payments, you know, until the end of the decade or longer and that is going to lock in some aspect of the -- some part of the properties income until that time. so those will be limiting factors of the city's property tax risk going forward. just to speak very briefly about the model and i'm not going to get technical about it on the next slide, we are relying on jll's market scenarios, the ones i talked about earlier to drive our property tax forecast, if we can go to the next slide. thank you. for every property in our sample of 200 downtown office buildings, we estimate the market value under assumptions about what happens with property income and what happens with capitalization rates from 2021 until 2028. we also forecast the assessed value of that property assuming it doesn't sell and the model keeps track where the assessed value is over the market value and that's where the city experiences the revenue loss. so, just to provide a sense what that looks like on the next slide, we've turned the three jll market forecast into property tax loss scenarios. jll's scenario -- yes. >> i'm sorry. supervisor -- supervisor chan has a question. >> i want to make sure jjl is. >> it used to stand for joanne -- there a broker. >> that's who they are. >> i want to understand the context before you move forward. >> it's not an acronym. i don't think. so their optimistic scenario, if that -- what that implies for our property tax revenue is fairly limited in the 2021 period which we're working through appeals through now. but it could go up to $100 million by the end of our forecast period. and we're really looking forward five years for the '23 to '28 period. there's more pessimistic scenarios and it will take that loss up to $200 million by 2028. this is just for declines in the office sector. >> can you put that into context what a loss of 100 to $200 million in property tax would mean to our budget? >> well, i can put it in the context of over property tax which is $165 million a year. it's between 15 and 35% of the total -- 25% of the total that's lost there. >> and then how does that impact our budget? >> well, these numbers would be budget impacts. i don't know if my colleague michelle has anything further to add. >> so, in the current, michelle, controls office. in the current fiscal year, i think excluding access eraf which has its own set of inputs and property tax in the general fund is $2.1 billion. >> billion? >> yeah. >> in terms of our overall budget, so out of the 16 billion budget, it's $2.1 billion? >> no. it's more than that because we have set aside for parks, open space, children, total for those as well would probably be closer to $2.5 billion. >> in terms of the direct impact to our budget losing 100 to $200, is it a dollar for dollar loss? >> yes. >> it's blowing a hole in our budget from one to two hundred million. >> yes. >> sometimes it doesn't correlate. >> that's a revenue number. >> yes. chair ronen? [laughter] >> if the question was assessed value, how does that flow through and become revenue, dr. egan is talking about revenue dollars. >> right. >> for budget impact. >> so what's interesting to me and i'm curious just in terms of how long these impacts would take because so many of the services that we're providing in san francisco and subsidies have to do with our huge cost of housing so if you're saying property value was going to come down, so housing cost are going to come down and this is not going to be a one for one but i'm just curious, like, the long-term goal, you know, the nimbus would say, build as much market rate as possible and housing cost could come down. i have always questioned that assumption but i'm wondering if it's this route, if office rates are down, federal interest rates are up, therefore housing prices go down. i'm wondering what the impact on the need for our services are that we spend that one hundred to $200 million on. >> in general, that's a complicated question because -- >> of course it is. i love your thoughts on it. >> well, i think the first thing i would note is that san francisco has seen a decline in apartment rents since the start of the pandemic. we're still down about ten percent, notwithstanding all the inflation we have had. we're unique among large cities in seeing rents lower than they were before the pandemic. we had the biggest population drop of any city in the united states from 2020 to 2021. so, that 7% of the people we served in 2020 are no longer here. i think the rest of your question is, how does the composition of the city's population change as a result of this? i think there's two things we've seen and i'm talking about the census data i looked at from 2019 to 2021. over 50% of the food service workers who lived in san francisco in 2019 were not living in san francisco in 2021. this was a sector where the job losses were over 50% during that per, i think our arts and leisure overall, lost 75% of their jobs and down 71%. it's clear many of the workers in that industry moved out of san francisco and whether, and it's also true that that sector has been slow to add jobs despite recovering in tourism and labor shortage has been part of that. so, this is a little bit of a tangent but i'm worried about that sector long-term because in many ways, once you move out of san francisco, it's expensive to move back in. the other major demographic change that's clear from the census data is we have seen highly skilled workers move out of san francisco despite the fact there's companies until recently have been hiring lots of people. this is older manager level people in the tech sector and other use sectors so the first group moved out because of economic distress hitting their sector and the second group moved out because they could remote work. it's clear that san francisco housing prices, at least rents are lower. housing prices for condos and things like that are up but lower than they are nationally. but i say to answer your other question, there's a big difference and you have to keep in mind in housing prices and affordability. if rent are down ten percent but you got laid off, housing is not more affordable. i would say if you are, have stable income and you haven't lost your job, your wages have been steady or rising and you would like to move and find someplace bigger in city, you have an opportunity to get more affordable housing. people who used to work in restaurants in 2019 and want to move back because they are trying to grow, they don't have an opportunity for more affordable housing. >> it's a help of context. can i ask one other question. how much, remind me how much the population of san francisco has declined. >> about 7% between 2020 and 2021. we don't know the 2022 numbers yet. >> okay. so, and do you have projections about what's going to happen to our population? >> i wouldn't call them projections. >> guesses. [laughter] >> i mean, in the near-term, the state of the macro economy is going to drive things. we're seeing layoffs in the tech sector for the first time since the start of the pandemic. i'm not surprised by that. i think the tech sector is libel to be hit harder during this recession and therefore the city will be hit harder in this recession than rest of the country. there's a range of opinions on what's going to happen to the u.s. economy over the next year but i think the majority opinion is we're going to have a mild recession and it could be worse than that, so i think in san francisco, we're likely to have a slightly worse than -- than mild recession. >> mr. egan? >> yeah. >> go ahead. a few more things on this point that i will help feed what you're asking for. >> i want you to finish your thought. >> that's going to limit the number of people who want to move to san francisco. and so i think if i was to say what the 2022 numbers will most likely show, it will show fewer people leaving and very people moving in. >> thank you. >> no, no, thank you. i think those are great questions. i wanted him to the property tax loss, that's one of the things you highlighted and on the next slide, there's ranges from one hundred to two hundred million. can you summarize the forecast but a couple of the things you didn't talk about was the potential of business tax laws and then also prop i which is property tax law which feeds into vacancy, inflation, rates, interest rates and property value. so, if you could also just speak on that for a moment, that would be helpful. >> sure. and then after i answer your question, supervisor safai, i'll talk about my last slide. >> sure. >> we have built this model to try and understand the sources of affecting office and what it does to property tax but you're right that other revenue streams are also affected. in terms of business tax, whether we just look at the business tax base, it's reduced when people are not coming into offices in san francisco, the amount of gross receipts that businesses a portion to san francisco has declined unless those people live in san francisco. so, we have lost revenue. for that reason, we have seen a mist, i think the uncertainties in the local office market, large commercial transactions are much lower than they were before. and so, we are not seeing the revenues from transferred tax that we would have seen in more normal times. -- >> is there any way and you haven't done this today so i want to highlight the four categories so you're talking about property tax. it says potentially a loss of 100 to $200 million by next year. but there's the business tax. taxes, there's gross receipts tax which i know falls under business tax but that's just one i wanted to highlight. there's prop i which over the last couple of years because of the economy and the property valuations and the sells, that set a significant amount of money and then what you highlighted here today, so it would be good to see the overall potential loss in the upcoming '23, '24 because that will help inform this committee but inform the decisions that we make going forward that both supervisor stefani and i are working on but highlighted today. >> if we can go to the final slide, i'll conclude with the answer to your question, supervisor safai. >> to summarize, we're looking at 180 to $150 million loss. if things don't improve, that could widen to one hundred to two hundred million by 2028. >> that's annually? >> yes. as of that year. it's not next year but by 2028. that would be the amount we would lose. there are of course, caveats to this and i think the first is that there's an unusual level of volatility and uncertainty in the office market right now. employers may have a renewed desire and leverage to encourage workers to come back to the office. we may see office attendance go back up. in a recession, people suggested that might happen. if that turns into increased office demand, some of these things may reverse themselves, so that's why it was important for us to build our model that's connected to an outside forecast, if the outside forecast change, we can quickly change our model. we think it's prudent given the data i've shared with you to assume we're going to see a less than norm am office demand in our five-year forecast period. i also mentioned the mitigating factors which will mean these are immediate major financial risk for the city but they are inevitable unless we see a major return to the office. we do expect they will happen if office demand is permanently reduced by this remote work. to finally answer your question, supervisor safai, my colleagues in the controllers office will in december rollout full updated five-year forecast of all major revenue streams. we've been working with them on all of them and they will reflect all of the things you've talked about across revenue streams. i don't know if michelle -- he's asking to stay tuned. >> michelle, come on. i'm kidding. >> no. probably this is what the controller is telling you as well, we're preparing our forecast and it will be issued in the first half of december and it sits underneath, it advises the mayor's budget to the departments and she'll instruct departments based on a number of revenue but the revenue we are expected to spend. >> when you say mid-december, hopefully before we break for the holidays? >> absolutely. >> hopefully before our last budget committee hearing meeting. >> quite likely, yes. what is your last budget committee hearing? >> december 2nd. oh, yeah. that's right. >> i think we're targeting december 10th orrish. >> maybe we can get a draft. it's the first thing we do when we come back on that report. >> anyway. thank you, so we can talk about that further. did you have anything else? supervisor stefani, ronen or chan, do you have anything to say? >> supervisor stefani and then i have another question. >> thank you. i just wanted to thank you so much for this thorough presentation. whether we do letters of inquiry, we don't get this level of information and i know more will come as you build out the model so thank you for that. i wanted -- one point we've been talking about a lot is office to residential or office to other types of conversions which we know is not easy to do and i'm wondering if you think whether or not that might help mitigate some of the property tax losses and of course, the general fund impacts. >> as a general principle, i think it would not because i don't expect it to happen. as i've mentioned office demand drives housing demand and if you look at san francisco housing prices in context, they are -- they've seen much less growth than virtually everywhere else in the united states and what that means for a developer is they are facing rising construction cost with inflation being at a 40-year high and they are seeing falling revenues and uncertain revenues. so, unless office properties can be picked up very cheaply and that doesn't seem to be happening in the office market, then there's no incentive for a developer to do that at this time. over the five or six years we're talking about, i think the office market will adjust. it may very well be that we see vacancy come down faster because we see rents come down faster and people want their buildings full and we have clarity there and if that results with office buildings being worth less, there may be cases in which a housing developer may be able to secure an office property to do that. i don't expect that to happen for the vast majority of the office space in the city. i think, the office market is going to adjust to reduce demand and you may have more flex space and hoteling space and businesses that couldn't afford to be in san francisco before occupying downtown and we may have more people loosely connected to our office space but not coming in everyday, so i can see a lot of things happening but a wholesale conversion from office to residential, i just don't think is in the cards. >> thank you for that very often honest perspective. i think that is the most honest i have heard yet so i do appreciate that. when you look at san francisco and we're at the bottom of recovery compared to other cities like i've mentioned in my opening remarks, is there anyone one examining why? and i know that might not fall within your domain but i'm sure you're working with other departments or the mayor's office in terms of why is san francisco -- and i don't think it's just tech. i don't think it's just the fact that we're so reliant on our tech workers. are there reasons why people aren't coming back to the office that anyone is discussing, that are different from other cities? >> what i have tried to look at is ways in which san francisco stand out from other places. as i've mentioned, this is a national phenomenon and the most active places in terms of return to office is 65% than normal much the comparison to the south bay is the most interesting one because that's another place where it's a lot of tech workers, only about 40% of normal of office occupancy but the office market down there is much hotter. you're not seeing companies walk away from office space. you're seeing companies kind of positioning themselves for future demand for office space down there. of course, that's the traditional home of the tech industry and the most blue chip office space for the tech industry. you know, we're not really used to thinking this about downtown san francisco but i think industry is looking as a somewhat more risky place to expand than the south bay at least that's how i read those particular trends and i don't really think we're a good comparison with texas or miami or any of the other places but i think a lot about how we relate to the rest of the bay area and you know, i do think that the uncertainty that office tenants feel about expanding in san francisco seems to be real from the data i'm looking at and anything we can do to sort of convey that the business climate here will stabilize will make us more in line with what the rest of the bay area is experiencing? >> that's. that's really helpful. i don't have any other questions at this time. >> thank you, supervisor stefani. supervisor ronen, do you have another question? >> yes. i agree supervisor stefani. thank you for calling this hearing. this is very interesting. i wish you had been there last night in our discussion about the housing element and the 82,000 units that we're supposed to build in the upcoming years. i'm curious thoughts on that. my understanding as we have 60,000 vacant units in this city, we have a 7% reduction of our population. we -- at least your guess is that we won't have much change to the population in the upcoming year. do you think through this requirement to build 82,000 units is overstated? it's too much? >> well, i would look at it in two ways. the first is, you know, does the city have an interest in seeing housing prices come down? and does the city enact policies that prevent housing prices from going down? i think -- i don't have -- the first question is purely one for the elected officials but as annie economist, the planning -- as an economist, they keep the housing prices going down. does it make sense for the state to have targets that are set at a regional level and every eight years you have to hit them? that's the way we plan for housing and it's probably not a perfect system. i mean, as of 2021 over the past 20 years, the city has a net gain of 30,000 people. in other words, after the loss, the 7% loss, we have 30,000 more people than we had in 2021 if we built 60,000 units. that's a fairly long perspective. why 82,000 more if we -- if we build 65 for the 30 we have added? it depends how you want to look at it. do we want to change policy for housing being expensive? if you want to say what's the right target for that? that's tricky and we're in a situation where you suggest where numeric targets don't seem aligned with where we are at the moment. >> thank you, that's helpful. >> supervisor chan? >> okay, go ahead, supervisor chan, go ahead. no, no, go ahead. >> i want to add to that though, so you attributed that planning code is, i'm assuming what you're saying or suggesting that planning code is one of the factors that prevents housing prices coming down or are you saying that planning code is the factor preventing housing prices coming down? >> no, it's not the only factor. it's the factor that the city controls. >> i see. that's a good point. because i also have a question then, i mean, now that we're, i didn't think we're going to talk about housing but -- >> supervisor safai is like, no, we're not. because the answer was planning code, therefore i need to just kind of draw down a little bit because your premise of your projection or analysis is that you know, what we're seeing is job loss, job loss contributes to housing price coming down because the demand has decreased and so far we see 7% of population loss and therefore we see 10% of housing cost or housing cost decrease by 10%. sounds, you know, there seems to be a correlation. however though, when you talk about also job losses, there were also job increases, right, in the last two years? >> there have been some. the sector that's added the most jobs in the tech sector by tar. they are not coming into offices. i believe healthcare and social assistance added a couple of thousand, maybe three thousand jobs. >> because according to your own report in october, you said that, you know, in the last two years that significant job loss is hospitality like restaurant and food but there were in the same time period, significant increases of information, which is technology information? >> yeah. >> and in fact, it's quite significant. in fact, i don't have the chart right now on my hand but they were almost opposite of parallel. and so, that is the part where i think i'm not challenging what you just said but it's also -- i'm just trying to solidify the association of job loss and housing decrease but then anyway. but you did state it in the beginning that it's a fair and complicated situation with housing prices. i think my point is i just want to make sure that, i there there's other things that the city can do besides planning code change to make sure that the housing prices can come down. anyway. sorry. i think i lost my point now. >> no, it's okay. we still have two more presenters and i wanted to get one more point on the record. this is something that we've talked about in our working group and i don't need a long explanation but it's something important to emphasize and i know benn presented this to us in our working group. what's the percentage of our workforce is professional and technical? >> i don't have that number. >> do you remember, mr. controller? because i think it's to supervisor stefani's and supervisor ronen's question, it's important to put that on the record. >> ben, controller, good afternoon, supervisors. the fact you're referring, supervisor safai is the rough proportion of our gdp that's generated in office industries and i think, as i recall the answer there is 67 to 70 percent of our gdp is for sectors out of office. >> technical and -- >> the single component for that. >> one of the things you showed us in our report, over the last 20 years for other committees that wasn't always the case but we shifted to that professional and technical portion of our sector which also made us that much more valuable to remote work and the change in office occupancy pattern, is that correct? mr. controller? >> i think if you look at the 20-year trend and mr. ying can speak to this more eloquently than i, but if you look at the 20-year trend growth and things that grew that, professional services and tech, it left us susceptible to the pressure that ted is talking about, so yes. >> right. if i could offer one -- >> no. absolutely. >> a lot of people suggested that the pandemic represents how the economy evolved and i don't think that's accurate. the trends you're talking about one in which high wage industries can thrive in an expensive city. industries that pay medium or low wages cannot and they've been shrinking as a share for at least 20 years. what we've seen since the pandemic is the highway industry continue to grow. they've grown even more because they can save on rent. they can save on housing prices if there workers don't have to be here but the lower wage industries that rely on them, the restaurants and the local retailers, the personal services, they don't have customers. they have a 7% drop in their customer base, so they shrink even more, so it continues the divide between the highway to the low wage sector in the city's economy. >> right. that's what i was trying to emphasize. there's a misconception although it's a significant portion of our gdp, tourism is smaller than the gdp created over the last number of years from our professional services information, technology, is that correct? >> yes, it is. i mean, i don't remember the exact number but i think leisure and hospitality is less than 20% of the gdp. >> right. okay. and then just -- to end on the note in terms of, we've talked about the impact to our budget in terms of some of the loss in revenue and property tax and others, some of that has to definitely correlates with office occupancy in our downtown revitalization. just to end on another note, are there any particular industries or types because we've been so overly reliant on professional services and agencies. are there other agencies you would recommend that our city pursue or look into? >> well, the office of economic and workforce development is beginning a piece of research with outside consultants to look at this question. what are potential growth years? industries are doing well in the bay area and in san francisco can get a larger share of. i mentioned earlier there's probably going to be an office market readjustment that may make san francisco offices more affordable in the future and that may create economic development opportunities we haven't had for a while, so i don't want to sort of pre-empt that actual research with guesses on my part if you don't mind, supervisor. >> all right. i guess that's okay but that's what we want you to do. that's what economist do, they make forecast and projections. >> i try to make informed ones and i haven't been informed. >> i understand but i guess what i would say is i'm not asking you to guess but broad stroke, it's helpful to hear -- >> i'll mention one that people have talked about that i think is a good target and that's biotech. >> right. >> biotech employment in san francisco has doubled in the last five years. it builds on obvious strengths, locally. the bay area is the leading biotech cluster in the country and it makes sense for san francisco to pursue that. it's still about the tenth size of information technology in san francisco so it's not going to replace it but it's certainly a good target. >> also south san francisco has done a significant amount of work. >> sure. >> to attract and make them receives much more -- i guess i would end with this and before calling on supervisor chan, there's a number of things we'll come back. i'll ask the chair to continue so we can come back with an update. this is the third one. we need to have a conversation to some of the points that were made here if the south bay, which is similar to us is more robust, is more attractive, then that are are certain factors we have control over with regard to our real-estate and our taxes, our policies and others that we need to have a conversation about and that would be helpful for you -- look at. that's why i ended with prop i and gross receipts because as we talk to people in the industry when they are making their financial decision in this rough economy, they are thinking what is the cost of doing business in san francisco just over the border or just south, in the south bay and all of those things matter. in our economy when it is thriving and we're that much more competitive, it's easier to have these additional inputs that they have to factor in. but at this point, it becomes disincentives and we need to have that honest conversation. do you have any response to that >> we're happy to assist in any way you would like us to. >> okay. supervisor chan? >> thank you, vice-chair safai. sorry, my apologies. i think i found my connection of what i was trying to say is that -- [laughter] sometimes i'm hungry. and then i forget. i was actually about that there's obviously job growth, not recently the last two weeks but there's been job growth in the technology sector and tech space. downtown has been sitting empty. what we see is a significant loss of tourism and food and restaurant workers and that's a job loss and then when we come to think about office space or in this case in this context of office space, tax revenue and we're seeing that they decrease not because of loss of employment or at least during the last two years but it's the loss of use of the space. so and that kind of brought to some of the thought around housing. of course, there's 60,000 units sitting empty according to the most recent bla report. i will say some of the ways that the city has thought as a policy to help price housing price to come down or certain pricing to come down and to feed our economy is to tax vacant spaces. and we agree before the pandemic that commercial tax vacancy should be taxed and so we implemented that and now we also identify empty homes units and therefore the voters just approved that. a question to you and posed to one, want to see commercial vacancy tax apply applicable to office and in the event it's not, should that be something that the city's contemplate in the future if we start to see, like, to encourage some type of activity in the events we see. maybe it's temporary layoff and pauses but what if we want to see a more robust use of the spaces. >> thank you, supervisor. our office did economic report on the vacancy tax and the recently passed residential vacancy tax. and to answer your first question, the offices are not covered under the commercial vacancy tax for ground floor, only if i recall. those vacancy taxes and actually we had first suggested that supervisors consider that in the context of the mid-market tax incentive of ten plus years ago. they can be effective where there's evidence that landlords are behaving strategically and keeping rents, asking rent abnormally high for some reason. if the vacancy is not for that reason, but because of a lack of demand that inen can make it worse. i would suggest that people considering any vacancy tax that they think about whether there is evidence of that kind of -- i don't know how to characterize the behavior. if there's a demand and it doesn't matter what we're asking. as we said in our report on the commercial vacancy tax, you know, retail demand for space in san francisco has been declining for 20 years and that's a part of the conversation we've had. that's the major reason we have vacancies. not because landlords are being unreasonable. if you're imposing a tax on a landlord who isn't unreasonable, you have given them another reason to disinvest in the property which is not going to promote economic development. so those are the considerations and how do you tailor it to focus on where you know there's bad behavior and minimize the consequence where you're encouraging people not to invest in the city. >> the mayor consistently and vice-chair safai have said that, it's the mandating of people coming back to work in person, perhaps that's a cure of the downtown -- >> i don't i've said mandate. >> oh, okay. my name is not elon. >> you strongly encourage in person activity in downtown as a way to boost the economy. >> i said we need to be more considerate of that and how it impacts the economy and the service, absolutely. i definitely think -- it doesn't need to be five days a week or mandated but certainly some form of return to work would have a significant impact. as you have seen today, it will have a significant impact on our economy. >> so then i think that's a question, like, maybe it's a chicken and egg question but what does that mean if that culture of sort of like work from home is to stay or are we and i'm posing this to this conversation, so are we suggesting at this moment in juncture of this -- what we're looking at downtown is that perhaps because you mentioned biotech because while that may be different but you know, different industry, i think that the question is, will that change of use of office space in san francisco, is it the direction we're heading or the direction we're heading is mandating people coming back to work in person? >> i don't -- i can tell you right now, i don't believe there would be anything we can do as a city to mandate. there's a lot of things we can do to encourage and incentivize. i think those are some of the things that we're talking about today. some of the things we're talking about in our working group but certainly, there are some policy decisions that we've made over the course of last year with very good intentions that have now, we have to take a look at and see are those disincentives for people coming back into the office. >> like what? >> like the gross receipts. in some ways and i think the city economist will tell you, part of the calculation for a company to pay gross receipts has to do with the amount of time employees are physically in the office. so, if an employer says, sure, work remotely from home, that impacts their gross receipts liability, is that correct? if employees are not in the office physically? >> it does result in savings in their gross receipts tax. has the companies that have seen the biggest increases in tax rates -- >> i know. you've said there's a handful that's currently paying the growth -- i'm sorry, i'm sorry, go ahead. i get excited. >> thus far we haven't seen a connection between businesses facing a higher tax rate post 2018 and systematically reducing their time spent in the office. you know, as you're right, supervisor safai, that's incentive. we haven't seen that materialize yet. >> from the last reports, we do know there's a significant number whose gross receipts have reduced below. we don't know if that has to do with office, so there's still tbd? >> it has certainly happened. it's certainly true that people are not coming into office and that affects our gross receipts. >> i'm using that as one example. i'm only using that as one example. another example would be property sales. you asked about office conversion. the value of properties today given the current market in the lending rate doesn't dictate the ability to convert even if they wanted to and the value the property have dropped and the return of invest doesn't equal the amount it takes to convert that office from office to living space. some inputs, as supervisor stefani noted, the space fee and the prop i, if you transfer the property, and it changes in hand, there's a six percent immediate tax on the gross of the sale and then there's the inclusionary if you're changing it, so all of those inputs make any of those conversions today impossible. no one would do that today. there's no ability for that to happen given the -- unless the person owned the property already and then was going to sell finance converse which is, when you're talking about hundreds of millions of dollars, it doesn't happen. >> i, if i could just, through the chair, to vice-chair safai. i think i just want to -- my observation and i just want to respond to this. i do not think that the few years back we had the really, what known as the twitter tax break as a way that we thought was a good strategy to incentivize tech companies to come in and then really help us revitalize mid-market. i don't think that it really materialize. i think it's sort of, like, blew up and backfire and in so many ways that we see the displacements that the city suffer. i think that there's going to be -- there needs to be a conversation and lessons learned and really -- think things through about in the event that we think having providing any type of tax break to any industry as an incentive to boost our economy, i'm happy to -- happy to have those conversations and see mr. egan feedback on those and others but i want to put it out there. >> i want to hand it over to supervisor stefani. i can respond to that a little bit too but we have two more people in the queue to present. >> thank you, vice-chair safai. >> i'm not saying that to you. >> i wanted to say something really quick because i want to get to the other presentations but just in terms of, why i place a lot of emphasis on san francisco being last and what is the difference, i have actually spoken with many employers and i have spoken with many employees downtown who are not coming back and who have decided to stay home and you know, when you ask them why. it's two basic things. is downtown clean, is downtown safe? and we, as a city, have to provide the incentives for them to want to come back to work. and just saying, you have to come back to work or at thing the employers, you have to get your employee's back, we have to do our part and they say they don't feel safe. there's a lot of reasons why people don't want to be downtown. there's a lot of restaurants that aren't there any more. there's not a lot to do. there are many different reasons. there's not the transportation they once had. we're bringing it back slowly. they don't want to ride bart. they don't feel bart safe much there's reasons that play into that that's different from, that's different from different cities that san francisco might be unique but and also with regard to building owners, i have convened many building owners. they can't giveaway some of these retail space -- give away building space. a building owner said they were going to bring in a restaurant and said we'll give it to a dollar a month. they said no way. i'm not taking a risk to operate downtown. so, you know, we as a city have to do our part and figure out how we provide those incentives, how we do the basics, the baseline that cities should do which is make people feel like when they come into downtown that they are safe, that they are coming to a clean city and a thriving city and that's us to figure that out. so i just wanted to add that. >> thank you. supervisor chan, i want to give you one real case study, so when i work with the janitor's union, we were part of the debate about the mid-market tax break and there were a lot of hard feelings on both sides and strong feelings on both sides. but the former furniture mart building, that actually switched hands, so there was a transfer of ownership to shorenstene and they put in over a billion dollars into that property. so that was all union work going through that. a billion dollars to rehab that property to make space for twitter which ended up being multiple companies and the janitors that went to work in that building and they were a multitude of them, they have all -- to mr. egan's point, they have all been laid off because people have not come back into the office. and so, there was a significant multiplier affect. there was the transfer tax. there was the creation of the union jobs, there was the permanent jobs that were created. there was a grocery store for example that serves people. there were put approximately commercial spaces this there and so, when we're talking about, right now, based on his projections and just one of the inputs that talks about the property tax, when we're thinking about that loss of one hundred to $200 million because of the, some of our tax structure, some of the decisions that we have made that are potentially a disincentive. some is what supervisor stefani said which is clean and safe. i'm not saying there's no silver bullet in anything we're talking about. and i know we could debate about some of the tax either incentives or decisions that we've made. i just wanted to point out that that one example, that was just one building. it was a significant input and had significant results but a lot of that was driven by at the time the, and yes, you could say the amount of employees that were there, drive up housing cost, they added to some of the economic divide in the city. there's no question about that. i agree with all of those arguments as well. i'm only saying that what we're faced with now and i said iceberg, supervisor stefani said it has already hit. it is going to be a significant information that this committee is going to have to make in the upcoming year where $100 million hole and that's why we had, i think we had that presentation at the end of the budget season and we're starting to have the same conversation, how much money we actually have on reserve, how much of that money can be utilized? and how long this potential downturn is going to be? that's only reason i bring it up because i think we have to have an honest conversation about it and try and find a way collectively as a body to make the best decision for san francisco because nothing from nothing is nothing. so, we're not getting any tax. we're not getting any return. there is a significant impact on that to, we're not able to do a significant amount of the work that we try to do with all of the good things that we did whether it was math support, whether it was paras, whether it was all the nonprofits. all of that is about what? how much is that, chair ronen, that we had at the end of the day in our negotiations, 30, 40 million that was flexible money. so, i just think we have a lot to consider on this committee coming up. supervisor chan? >> i concur. it's the reason why -- >> i know you do. >> i've been conservative about even a cannabis tax. >> i knew you were going to bring it up. >> all i'm saying is i know. and i said that i agree that we -- >> that was a good one. >> that's all i'm going to say. i'm going to leave it like that. >> that was a good one. good job. mr. egan do, have anything else you want to add? >> no, i don't. >> thank you. this was a very straightforward and clear presentation. thank you to the controller who floated in and out but thank you for being here. i think we're going to the next presenter which is our assessor recorder walking. are you on the phone or online, mr. torres, assessor? >> supervisor safai, i'm right here, sir. i think that -- >> hold on, we want to see your face. okay. oh! are you down in stanford today, good job today. i like it. go ahead. [laughter] >> thank you everyone for having me, chair ronen and supervisor safai and stefani for this presentation. mr. egan went through the most salient point in relation to your considerations in future committee meeting but i'm happy to go through what we have prepared for you and answer questions but in the interest of time, i'll move quickly through these. >> cool. >> next slide, please. so just, i wanted to provide a quick overview of our office in terms what we're looking at on an annual basis. the two sides of our office, the assessor and recorders side. the number of parcels that we have, that we placed on the roll, over 211,000 and consistent value or a value most recently for the most recent fiscal year of $300 billion which correlate wd 3 -- of course in the recorder side, some of the transferred tax consideration you've been having, as well as in terms of the revenue on the five-year average for us, about $372 million. in addition to an audit program, it ensures we're not letting people slip through cracks and it has brought $172 million over the past five years. next slide please. so, in terms of the overall roll growth we've seen over the past five years, just another perspective, that you've seen a steady growth over the those years. from fiscal year 2018, by $235 billion in assessed value increasing over time, ranging between four and seven percent. the latest number that you see at the top of that slide. this represents the most recent one, about an increase about 5.5% increase over the prior year. and that's about an additional $17 billion in assessed value. so, while we also work to ensure we capture this value on the roll, we also work very, very hard to ensure we're defending this value as appeals move it forward in the process. next slide, please. it's a diverse property tax base. distributed across areas of the city and many times the property. for the fiscal year we're in, residential property accounts, residential real property accounts with the single largest property type by value, 66% of the total value. that's $211 billion in assessed value. commercial real property account for a 30% of a total roll value at approximately $96 billion. again, we're including office, retail, hotel and other commercial properties and you can see those highlighted back here. the downtown commercial accounts for 22% of the overall roll. that's about $69 billion in assessed value. next slide, please. just to proximate the value of downtown properties, downtown is defined by assessor value as you see circled. that covers the financial district, union square, embarcadero and soma neighborhood. the downtown commercial properties account for about 22% of our total roll value at $69 billion. as i provided in previous slide, with downtown office buildings accounting for 14% of the total roll value at 47 billion and that percentage amount hasn't changed over the past several years. i want to be clear that the assessed values do not reflect the properties market value but rather the value that's on the roll. under california proposition 13, as you all know a property assessed value may grow only at a -- at a rate that's no more than 2% per year unless there's a change in ownership and unless there's a sale or other assessor events including new construction that may trigger that, that will trigger that new reassessment market rate. in san francisco for several decades, the average value market most properties increased by much more than two percent annually. so i think that goes without saying when you look at the most recent transactions to date. let's go ahead and move to the next slide. so, just in terms of the assessment appeals that are moving forward, this is where our office is focused as we continue to ensure that we're value and getting all that your on the roll based on our annual -- valley on our roll based on annual -- you'll hear from the assessor a peels board and working through the appeals in a timely manner based on the information that's provided to us as we move to that process at the aab, the assessments appeals board. you can see here that yes, you saw an increase in the number of appeals that were moving forward in 2021 with a consistent increase in appeals year over year. although by about ten percent or so from the previous years. and that is going to be main focus for us as we start moving through last year's appeals in the fall currently. and then once again, we'll start hearing those items that you see here for the current fiscal year of 2 -- 22-23. the 257 in fiscal year '23 and '24. i just want to leave it there. i think ted covered the most salient question that you had but i'm happy to answer any questions in regard to the numbers i presented thus far. >> thank you, assessor recorder. i don't have questions. i think it was very straightforward. the one thing we did hear was potentially in the future years, the loss of anywhere between one -- between 100, and $200 million. >> i'm sorry. >> no, no, go ahead. >> if i may, certainly, you mean, the projection side really does rest with the controllers office. the focus of our work in terms of the actuals we're looking at, those actuals will play out over time as we move through this appeals process. again, there's value that has been placed on the books of how that value is con testified is up to the property owner and the appellant. and then we'll start seeing over time as we move through these appeals what the factors are that may result in a reduction in value for those properties. in what manner it moves in the direction is what we'll see in the appeals. >> great. any other committee members have questions? supervisor stefani? >> yes, thank you. i wanted to thank our assessor for that thorough and helpful letter and request that as the appeal starts moving through the process and i know you'll do this anyway just to keep us updated, i know we're going to keep these hearings open but i'm curious to see how that all transpires but thank you again for such a thorough response to the letter of inquiry. >> it's our pleasure, supervisor stefani. and yes, our staff is in the process right now of determining what those perimeters will be when we have, how do determine what the sample size will be as these appeals move forward for commercial buildings so we can provide those examples in consultation with the controllers office before we bring those to you. >> thank you. thank you, assessor recorder torres. i appreciate it. okay. so, the next and final presenter today is we have alastair gibson from the assessors appeals board. are you there? >> i am. good afternoon, chair ronen. vice-chair safai, supervisor chan and supervisor stefani. thank you very much forgiving me the opportunity to demonstrate and -- for giving me the opportunity to demonstrate and describe the applications for all appeals that were received by the assessment appeals board considering the financial district, soma and the embarcadero. i'm going to share my screen to show you my presentation. the appears filing period is between july 2nd through september 2nd of each year and majority of our applications are received during this period. focusing on all types of property received during, from the (indiscernible) district, soma and the embare dark -- embarcadero. we received 480 applications for these considered areas. the total assessed value for the areas was about 37 billion 300 $4 million. the total opinion of value was nearly 21 billion 800 $78 million. the difference between the two as you can see is about $15 billion as a potential tax impact would be $182 million. this is if the potential tax impact would be if every single assessment was, that was filed by the tax bill or the agent was lowered to their requested value as their opinion of value. the financial district soma and the embashg dare owe account for 35% of the appeal application received by the ab. as september 30th of 2022, we did receive two thousand five hundred 77 new applications and again, financial district soma and the embarcadero is for -- analysis was conducted comparing and determine then crease in the number of appeals for september 30th of each year as well as previous fiscal year ends to september 30th, 2022. as of 2019 and prior to the pandemic, we received 248 new appeals in these areas and the number of appeals gradually increased over the years with the most significant increase in considering september 2019 to september 30th of 2022. comparing september 2019 to september 2022. there are a number of applications increased by 260%. but i also did compare the fiscal year to september 30th as you can see on my prop one slide, fiscal year 19-20, entire year and entire fiscal year to september 30th, the first quarter of this fiscal year increased 174% and so forth. with that, i do appreciate your time and thank you. i do welcome your questions if you have any. >> sorry. supervisor safai had stepped out for a minute. colleagues, did you have any questions? okay. thank you so much for -- supervisor safai is back. did you have any questions? >> no. i did have one question. so, you might have hit on this part, i apologize. is there, are you seeing an increase in the number of applications for reassessments? >> from last year to this year or from 2019 to now? >> we understand that a lot of the leases are coming up this fall so as those leases come up and vacancies start to increase, is this what you just said? okay, i'm sorry. so you've already answered that question. i won't ask it again. huh? you did, okay. so, as those vacants increase, we're anticipating there will be a surge in assessment appeals, are you hearing or feeling or seeing anything to that effect. >> if you're talking about the fall, we won't feel the affect until the fall and period. >> it is already closed? >> this year has, yes. >> okay. i guess we're going to have to wait and see what the impact is next year. thank you. i don't have anything else. i have some closing statements. i don't know if supervisor stefani has any closing statements but i mean, i think it's pretty clear, i really appreciate -- what, oh, all right. is there any public comment? >> so weird. i got it. members of the public who wish to speak on both hearing or joining in person should line up. those listening remotely call, call 415-655-0001 and enter meeting code 24995579925. and press pound twice and press three to enter the speaker line. wait until the system indicates you have been unmuted and that's your queue to begin comments. if you begin speaking, i'll start your time. >> okay. one quick question, i've heard a lot of percent arranges like 15% decline in average commercial rent and i was wondering are these inflation dollars or -- are these constant dollars because it leaves me at a loss. and i wanted to say there's ideally, organic evolution of the economy and obviously that's not typically what we see because it's routinely disrupted by all manor of politics you cannot successfully legislator dictate market demand. broccoli is good for you but i wouldn't force you to eat it. it seems kind of snobbish to exclude popular food chains and retailers, and working class neighborhoods and i heard it was done in (indiscernible) but to preserve the french culture of the neighborhood but i don't think we should want to accomplish that here where our commercial corridors are concerned to prevent the character that -- that currently exist because it's not too well right now. the galleria mall for example has a -- about two occupants i believe and there's a dozen vacancies on each of the floors. is that it? >> 30 seconds >> keep going on. >> okay, great. sorry. i've recently had the opportunity to visit in other cities and countries and their economy is doing better by comparison of san francisco and i don't know how many other american cities like -- they have been hit by (indiscernible). at least here you've got bodies, like, literately in the streets. you've got people that look like refugees. you have -- >> the speaker's time has elapsed. >> pardon. >> speaker's time has elapsed. sorry to cut you off but each speaker has two minutes. no further speakers in the chambers. mr. lamb, can you unmute our caller, please. >> supervisors, i heard ted give a presentation on a small business and i heard him give one to y'all. and as you'll hear, the board of supervisors is not paying attention to our dirty streets and walgreens closing and cvs is closing, drive by 7th and market ask trinity market, and whole foods being impacted by thieves. you're giving $40 million to some urban practitioners. this discussion that they are having is just a waste of time. much like the one we had with the housing element. there give us one minute. here, they give us two minutes while y'all talk a lot of garbage. y'all show your ignorance because you know little about economics. and what about the stimulus money. i want to know how many millions of dollars are wasted? how many millions of dollars are wasted? don't waive your hand, i can see it. >> that's it for that commenter. mr. lamb, do we have further speakers? >> hello, supervisors. excuse me. i have a code. this is sharky, president of the san francisco small business commission speaking here today on my own behalf not on the behalf of the commission. i wanted to thank you, chair safai for chairing this hearing and supervisor ronen and chan, thank you for your involvement as well. and supervisor stefani, thank you for bringing this to our collective attention. i just wanted to say while supervisor safai was out, we saw a slide there was an increase in appeals of 260% from the prior year which was a doubling from the year before. i suspect that doubling will continue for a while and so, i am deeply concerned about the city's economic situation here with respect to, we have an analysis from ted that says, one potential outcome is $181 million deficit to our budget. of course, that's what we have right now on the books in terms of what people are looking for in reassessments but that could worsen and there's all sorts of second order, third order impacts, so i just want to alert everybody to the fact that this is a very significant and serious issue that will impact the budget of countless nonprofits and various organizations that count on that money in the budget and so we really need to listen very carefully to the businesses that pay those taxes and do everything we can to help ride this ship and thank you for calling this hearing and enabling all of us to see where we're at right now, thank you. >> thank you, sharky for your comments. okay. and that does complete our telephonic queue. >> okay. great. thank you. i do appreciate the presentation from the controller and the economist today along with the assessor and assessor a peel -- assessor a peels board. thank you to my colleagues and thank you for levelling this now. it's our job to think about the impact this is going to have on our city. the one thing i will say and i really appreciate supervisor ronen, supervisor chan and supervisor stefani being engaged on this is that we all have to be on the same page and there's going to be some hard decisions we have to make in the next six months. whether we're on the committee or not on the committee, these are hard decisions we have to make collectively and there's going to be some serious trade-offs. you know, we're at an influction point and the great recession and the dot com bus, this exceeds that and the level of recovery will be slower and paced in a different way because of the nature of work. that might change, employers might begin to have a more demand put on workers or definitely be a lot more creative in their work patterns and that ultimately could impact our overall impact. we haven't talked about how it impacts our public transportation and all the other services because -- because if the demand of the services decrease and then the remember knew decreases and if the revenue decreases, it's a never-ending cycle that impacts us. we're at a real inflection point and assessment will increase. we touched on one revenue source today which was property tax. we're going to get that information in the coming months but i still am encouraged because if we're open to thoughtful ideas, it doesn't mean we have to agree with everything presented to us but that we have to make some tough decisions, i think we can begin to get our city back on track and so, i appreciate, thank you supervisor stefani for co-chairing the working group with me, thank you for all engagement involvement that you have already shown. thank you supervisor chan for thinking about this, supervisor ronen for thinking about this. and i think that at the end of the day, we're going to work with the mayor's office, we're going to present some solutions to this body, many of which can be done legislatively at the board and we'll see what ultimately we do that i think is in the best direction of the city but i'm still hopeful. i know it's going to be some hard years and some hard times. but i think collectively if we come together, we can make right decisions that are good for our city. supervisor stefani? >> thank you, yes. i want to thank chair ronen for accommodating my hearing request. and thank you to you supervisor safai for your hear and thank you to our chief economist ted and assessor and reporting and al star gibson for the presentation. they are informative and as mr. laguna stated in public comment, i'm concerned about the city's economic outlook and the purpose for this hearing was to do a deep dive on one level of income that is very important to our general fund and our budgeting acts and the idea of losing $200 million or $2 million reduction in our general fund over the coming years is something we want to avoid. for me to really understand the landscape here, what are we looking at? what are the problems and to get to the why? and that of course, i think will, that's one of the things we're doing with the working group to understand what are the levers we can pull here at city hall to make sure that you know, as we look at our economy and we know we're in trouble in some areas that we know what we need to do to fix it so i want to thank everyone for the hearing and i look forward to continuing the discussion. >> thank you supervisor stefani. so, madam chair, we'd like to come back to the committee early next year to present solutions that we're working on with the working group and just so everyone knows, we're meeting with a whole host of folks that are property owners, business owners, business community, but we are engaging with organized labor and others. so, we will like to come back to this committee soon in the beginning of the year, so we would like to continue this item to the call of the chair. >> that sounds great. and did you make that motion? >> yes, i would like to make that motion. >> can we have a roll call vote. >> yes, on that motion offered by vice-chair safai. one or both of these hearings, mr. -- vice-chair. >> both. >> is that okay? >> yes. >> both hearings will be continued to call of the chair. vice-chair safai? >> aye. >> member chan? >> aye. >> -- chair ronen? >> we have three ayes. >> the motion passes unanimously. >> do we have any other business on the calendar? >> that concludes our business. >> the meeting is adjourned. [gavel] >> van ness avenue runs from market street to bay street in san francisco. south vanness runs from south of market to cesar chavez street. originally residential after the 1906 earthquake it was used as a fire break. many car dealerships and businesses exist on vanness today with expansion of bus lanes. originally marlet street was named after james vanness, seventh mayor of san francisco from 1855 to 1856. vanness heavy are streets in santa cruz, los angeles and fresno in his honor. in 1915 streetcars started the opening of the expo. in 1950s it was removed and replaced by a tree-lined median. it was part of the central freeway from bayshore to hayes valley. it is part of uses 101. it was damaged during the 1989 earthquake. in 1992 the elevator part of the roadway was removed. it was developed into a surface boulevard. today the vanness bus rapid transit project is to have designated bus lanes service from mission. it will display the history of the city. van ness avenue. >> goovend, everybody. >> how is everyone doing today? >> awe some. great weather we were dreading it would rain today and look at the sky behind me. gorgeous. this was meant to be. my name is natasha i'm the executive vice president the development at bridge. for northern california. i will also be our mc today. on beh

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