Health and dental benefits continued growth there. We are as i mentioned hopeful that through the good work of the Health Service system they will be able to negotiate more favorable rates with kaiser and with blue shield. And then our retirement cost continuing to grow through the next fiscal year to account for the loses that we experience in the pension fund during the last economic recession. This number, the 42 million im expecting based on the rates that retiree, retirement board just adopted to be less by 11 million. So instead of a negative 4 million cost to the general fund, we learned last week that it will be closer to 31. All of these assumptions are detailed in much greater detail in the report itself. Other departmental cost citywide. The projection in front of you assumes that Capital Equipment and technology are funded at the level they were funned funded in the budget adopted last year and in the plan recommended level in the subsequent year. The most significant thing thats changing from the current year to the next two 2 years is that we are losing the funding for our streets from the streets bond. These projections assume that the general fund picks up the full cost of paying for the paving of our streets. I mentioned before we mentioned inflation on nonsalary items and Police Station and multifiring plans for the next 4 years assuming we hire one fire class and three police class each year for the next 4 years. As i mentioned some cases. Ms. Howard, i know we have a highering plan for police and fire and based on the challenges that weve had with over time and other issues of that nature. Do you have any projections off potential savings that the city may have as a result of hiring additional staff or will there not be any cost savings for us . Thats a good question. I have, there will be savings in the fire department. So when, as you know well, we currently have made a choice operationally to staff on over time instead of on straight time. Instead of hiring new firefighters because we believe and in many cases that is cheaper due to the cost of our benefits. Over the next year, we will be able to hire additional firefighters and that will not cost, there will be savings to the general fund. So what we assume in the projection itself is that well hire 42 new firefighters and as a result will almost go down about 5 million next year and less for the year after that. Only about 400,000 in 1516. In the early years of the projections there is savings due to reductions in over time, but in the later years as you bring on more full time firefighters, you have more people you are paying for salaries. On the police side, we are essentially hiring back behind Police Officers that have retired and we are beginning to climb out of that valley that i think the police chief has showed many of you over the last couple of years where we that had drop program at the tail end of the drop and most of the Police Officers have retired or will retire this year. We are beginning to get that back up but that will cost new dollars to the city. And weve already talked a little bit about San Francisco general and weve talked a little bit about supervisor london breed im sorry, ms. Howard. For clarity, the Police Officers that have already retired and collecting a pension, they are coming back to the department and working and receiving a salary and a pension . The drop program was a program that the city implemented a number of years ago in 2005, i think which was to encourage Police Officers to stay in the Police Department for a longer period of time. So they didnt retire . They didnt retirement. They conferred their retired and that program is closed to new participants and most of the participants in that program are now actually retired. Got it. Thank you. So, San Francisco general will have some significant new cost both for staffing as well as one time cost like furnishings, fixtures and equipment. This projection assumes those cost. Then finally the annualization of the supplemental appropriation that the board adopted a week ago. I want to highlight for you some of the things i think where we have uncertainties and not accounted for in this projection. We talked about previously how we are negotiating with 27 labor unions right now. And while we have assumed some cost increase in the second year, we havent assumed anything in the second year. We wont know the results of those negotiations until probably the early to midmay. I think thats uncertain. The Affordable Care act implementation, for me the biggest uncertainty there is that the Health Department is really just now beginning to fully implement the Affordable Care act and so we dont know yet what the, how the patient revenue will flow. Thats an item we have to watch closely. I think some of you may have heard about this issue and others will certainly hear about it. The puc is experiencing on the heche power side some challenges related to the sustainability of that enterprise. Thats largely due to really two things one, a significant new cost related to the Capital Project which is called the mountain tunnel project. Thats a project that, its a tunnel that benefits both the power side of the heche enterprise and as well as the water side of the heche side. We thought it would primarily a Water Project and now based on new work done by the puc, the need to repair that tunnel and improve that tunnel is much greater and due to risk of collapse. Thats a 600700 million project they didnt plan on. The other thing at hetch hetchy power about negotiations about transmission and negotiations with pg e. That is on going. I think the way to think about this is the general fund and mta received power that is significantly discounted in how much it cost compared to the pg e rate. And even compared to the cost that it takes to produce that power. Weve been working with the puc to ensure that heche is sustainable. A half percent at kilo watt power. A half percent is about 900,000. They have identified a need to grow to about 0. 12. It could be significant. Five department exclusive operating. Hold on one second supervisor wiener had a question . Supervisor scott weiner subject to the puc, i know weve had discussions on that in the past. I think that the puc, the Power Enterprises financial problems go much deeper than that one significant Capital Outlay as well as the potential need to raise rates for the municipal customers. I think the power enterprise from what i can tell is not particularly viable. I think because they need more customers. I know its always very controversial in this building when their efforts to provide them with new customers. They did just get the transit terminal which was terrific. I think it behoves all of us to be sure that the enterprise has enough customers to be viable. That matters not just for the big mega Capital Project we know about but i know we discussed in our shortterm plan to really address the embarrassing state of our puc street lights. They are old and they have huge deferred Capital Needs and im glad we reached the agreement to spend 5 million in the next fiscal year which is not enough but better than the 250,000 that they had been spending and we are working to put together a longer plan. But making the power enterprise viable and robust is going to have huge benefits for street lights and other Capital Needs. I think thats certainly a good point. The puc needs to develop a plan in conjunction with the overall municipal rates. Their Capital Program as well as their customer base. My understanding is that they are working on all of those issues. Okay. I hope we can Work Together to get more customers. You dont to have respond to that. I have another question about a different enterprise about the port in terms of the possible uncertainty and i know there is a catch all here in ballot measures. If development on the port is shutdown and i dont know that it will be, we have obviously a ballot measure in june that doesnt prohibit development, but could have potential impact on the development. We know the port is we dont give them money from the general fund that has huge Capital Needs around the piers and elsewhere. If development is either reduced or delayed or shutdown entirely, do you see that eventually having impacts on the general fund or are we going to start letting the pier just slide into bay. How do you see that playing out you know its a good question. I think there is a couple of things to think about. The port has some different deferred Capital Needs and they fund those Capital Investments through rent paying tennis on Port Properties and they are benefited by that development and by the ability to have new tennants. So i think thats important to think about. In terms of the overall general fund picture, the way i would think about it is, the loss of that development, how does that relate to any revenue outlook that the citys general fund might have. To the degree that there is less commercial activity plan or less commercial activity happens in a proposed development because its down sized or eliminated altogether. That could have an impact on a revenue picture. Those are not, the effect of that development is not reflected here in this projection. Its not, it more of a, im just trying to play out. If we see a significant reduction or elimination of the developments to port has been contemplating because apart from revenue, these Development Agreements require developers to do capital work on port assets. Im just trying to gauge what the possibility is of us having no choice except to start putting general fund money and have the port deal with these problems if they are not able to generate revenue on their own. I know its a complicated question. It is a complicated question. Its certainly not something that weve had. We havent had a historical pattern in investing general fund dollars into our enterprises particularly for Capital Needs. The port would certainly like that. They have, one of the things weve been talking about at the Capital Planning committee is how we address things like sea level rise. Thats a question beyond one that you are asking. What happens if the port doesnt have the benefit of that development to strengthen the infrastructure and the assets it already has. I dont think we have a good answer to that question. We dont have hundreds of millions of dollars to retrofit piers that are crumbling into the bay. Just had another prospective and speaks to the report itself as ms. Howard noted we are speaking to the general fund here and not Early Enterprises and secondly any tax revenue implication or other potential loses of revenue that could arguably be associated with the ballot measures and development likely will affect the revenue picture in times after the 4year horizon we are talking about here. So they are considerations certainly but likely not as powerful on the shorter term of window we are looking in. Seems like it might be longer term risk are what you just mentioned in terms of tax revenue and there is possibility that we might have to strongly consider putting general fund money into Capital Needs of the poor. Im not saying it wouldnt happen but it could be a risk. It would be a policy to the board whether you want to provide more money. Ms. Howard is correct. That hasnt occurred in the board for 20 years. It is true that the city did provide general fund support to its operations for a number of years. Thank you. So just a couple of other highlights in terms of uncertainties. We talked about the fire staffing thats assumed here. This does not assume that the city provides additional staffing or equipment necessary to fund the issue around the exclusive operating area with the fire department. Thats about a 9 million cost and we are working closely with the fire chief as well as the department of Emergency Management to understand what are the options there. And expect to be able to talk with you more about what kind of where we are going on that issue within the next month. We also dont assume the outcome of any battle measure. This projection doesnt assume that there is a minimum wage increase proposed and if it would pass. It doesnt assume that the city puts on the ballot a vehicle license increase fee and that would pass. It doesnt assume that the Childrens Fund would grow it doesnt assume the effect of any bonds and the repayment of funds we may have spent that can be eligible for bond use. So it doesnt assume any ballot measures in this projection. And to the degree that for example, if the Childrens Fund were to grow, that would cost 30 million more potentially a year. So, we also dont assume any additional over spending or supplemental appropriations. So to the degree that those are proposed or that there are departments that have Financial Difficulties that were unaware of that results the outcomes and finally that we spend a lot of time thinking about is what is the pay in the direction of the recovery. I think the controller will talk about that just to quickly close with a Historical Perspective and a bit of a reflection of where we are on the Economic Cycle which drives this picture and projections. Since the year 1900 there have been 22 reassesses in recessions in the United States. This is now in the recovery. It seems like just yesterday to me but we are now 57 months removed from the end of the recession, so almost 5 years since it began in 2008. Thats places us in the last area of the economic recovery. We would not would now be in a recession again. Looking at the projection cycle. We are expecting Economic Growth to continue in the country and in the city. Thats sitting under all of the revenue projections that we put together. If we actually go all the way to june 2018 as we projected in our assumptions without a recession occurring we would be 108 months since the recession occurred and if that forecast holds true. It would be the second largest Economic Growth in the u. S. Since the year 1900, only the second time since that has occurred. As we get further out in projection, we feel much comfortable with our numbers. As we get further away its much more difficult to project. Its worth some reflection about the next down turn which likely will occur at some point. So, mr. Rosen field as we talk about the numbers of these items, how does it influence thinking is it a general thinking to make sure you dont go crazy on future projections or how else can we plan on it as a city. Because you never plan for a dip in a recession, but as time goes on, chances are it is going to happen and we want to make sure that we have a reserve for this. How do we truly implement thinking about this . Its a big question so i will offer some of my own thoughts on it. It speaks to i think how to city wants to position its overall Balance Sheet and financials looking ahead. The city and mayor and the board have done a good job in this period of recovery of doing so. So weve adopted as a city a number of measures that improve our ability to take a longer view of our finances that is 5year Financial Plan forecasting emphasizing the adoption of 2year budgets. The citys reserve position is improving and having adequate reserves that you enter into recession helps buffer reductions and Public Services and speaks to spending plans, one time uses of funds that are easier to pull back when booms bust. Things like capital allocations for City Infrastructure or Affordable Housing or other one time uses that dont occur where you can make an easier choice to pull back funding at a bad time and certainly in the citys discussion with our labor discussion in terms of what term of contract should the city be pursuing. The longer term of a contract, the greater risk you have for something going as you would hope and the level of wage increases we offer. I think its some mix of those things. Taking a long view focusing on one time to the extent that its feasible building reverse that reserves that they will be available when you need them. Supervisor wiener . Thank you. To mr. Rosenfeld about the economic expansion. One of the things about San Francisco right now and over the last number of years is at least it feels like we came out of the recession or certainly into full throttle growth maybe first in the country certainly far head in the country and state as a whole and our Unemployment Rate as we know is very low. Im just wondering how that plays into the art or the science of what it is that is trying predict when expansion is going to end. It seems like the rest of the country has just been so much slower coming out and the growth is sort of spotty at best. So, i know because you dont fully collaborate the recession you can slide back into one. How does that affect thinking, the fact that we had a longer period of robust growth than other places . Its a good question. You are correct. San francisco really has out performed the bay area and california and the u. S. For recovery. Job growth in the county of San Francisco has been faster than any other county in the United States with a population. You have seen that grown in our reports. This is not as deep as the. Com bust. Our last recession were less extreme than they were in the early 2000 which was different from the rest of the country. How does that feel looking forward . I think our forecast suggest, we confer with in these projection and in our local field here that the rate of growth in San Francisco is going to continue to out pace the country in the shorter term. That rate of growth will likely slow. We simply kaent cant see the level of growth, but it will continue to be very strong. We never at the control officers, financial Controllers Office will rarely predict a recession. We would not try to, that really gets to art and not science. So we would never do that. But the fact that, i think our shorter Term Forecast shows fewer, it doesnt show huge shortterm risk. There are some, but we dont see signs of a bubble forming for example in our local Technology Scene although we are now more supposed to technology as an industry than we were in the dot com boom and bust. I think our prognosis is good and thats what you hear from the u. S. Economy and forecasters. No one is predicting a down turn or a recession in a shorter term period. That doesnt mean a risk doesnt exist because none of us have predicted those down turns either in looking forward in 4 years. So with the end of our slides, colleagues, any questions for ms. Howard or mr. Rosenfeld . Thank you very much for being here. At this point well open this up to Public Comment if there are any members of the public who wish to comment on this item. Is there any additional Public Comment . Seeing none, Public Comment is closed. So colleagues, this hearing has now been held. We are obviously going to mr. Rosenfeld, if you have any comments, you are welcome to. Thank you, mr. Chairman, we have no further comments. Okay. Supervisor breed . Supervisor london breed thank you. I just wanted to ask a question about the Fire Departments exclusive operating agreement. We know that there are some uncertainties and there are some challenges with the paramedics of the departments and the ability to increase our resources, Staffing Resources and equipment resources in trying to be able to maintain our exclusive operating agreement. So i was just wondering because its not been made clear to me that there are plans to make changes. I know this chief is providing some information of whats necessary and im assuming we are just waiting for that or are we, do we know if we are going to make appropriate suggestions in the mayors budget this coming fiscal year . Thank you for the question, supervisor. So the
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