Transcripts For SFGTV BOS Budget And Finance Committee 20221120

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 well 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 4156550001. Again, thats 456550001. 4156520001. Enter the meeting id24995579925. Press pound twice. Youll 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 youre 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 email they to the budget and finance clerk at bretn dot jai if you submit Public Comment comment my email, 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. Its 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 4156550001. 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 youre 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 were 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 were 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 were 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 thats 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 were really able to get the terms that we think we need for success. The second piece of the request is to extend past a tenyear 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 tenyear support contract as well as to fiveyear 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. Were fortunate to have such a Skilled Workforce that we think well get a better quality of service if thats a partnership rather than trying to replace our current staff, which would be more of a european model. So with that, im 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 youre 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 were 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 its 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 thats going to take us eight years to implement. Once its implemented, we want to get as much out of this asset as possible, so were not going to decide ten or 12 years from now, were going to go to a different vendor, were going to make a commitment upfront to keep this product uptodate and meeting the needs of the city and county of San Francisco. We currently have had a 30year 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 . Its 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 were talking about actual physical construction type work, thats all going to be done inhouse with mta labor . Is that correct . The daytoday 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, weve had these conversations before but any type of physical work construction related work, weve had conversation about project labor agreements and i want to make sure were already thinking about that in advance. We are, thank you. Its 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 youre going to put it out to bid. Well 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 cant dictate those terms but we can know the terms once they are. We vote up or down so its best to know the terms as they go, so i feel a lot better about this today than i did two weeks ago. If youre able to negotiate strong terms on behalf of the agency, so that were not stuck with a massive change order thats one way in negotiations and i think thats what youve 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 youve 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, well open this item up. I have one other quick question, im sorry. Sure, sure, go ahead. As you negotiated the terms and its a longer term negotiation, does that then lock in the prices in terms of the type of work thats going to happen to the extent of the tenyear 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. Thats what i wanted to understand because if were its great for us but it might be harder to get someone to do the work in seven, eight years if we negotiated a price thats 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 4156520001. 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 havent heard an answer, has there been an rfi or rfq. I hope theres a level of interest for more than one potential vendor and this is not headed to a sole source procurement. Next, this project shouldnt facilitate forced transfers of church and market or west portal or allow threecar 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. Ill 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 doesnt 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. Vicechair. On that motion to forward this ordinance to the full board to the positive recommendation, vicechair 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. Thats 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 20year 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 7month 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 ill 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 thats noted in the bla report. We dont 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 wasnt 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 thats 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. Thats 50 increase on maintenance. Response time, making sure things are clean in the streets and so hopefully well see that after this is approved. Well 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 thats 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 weve done is we are currently conducting a Condition Assessment of the shelters across the city. Thats 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. Were hoping to get that done by the end of the fiscal year so thats 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, were going to be adding the digital shelters across the city in additional locations, thats 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, weve 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. Thats 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 were not the physical owners of the shelters. Clear channel has agreed to give ownership to the mta at the end of the contract so thats 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. Thats assumed in our fiveyear 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 im happy to take any questions. Okay, thanks. Well 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 mtas 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 thats 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 its 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 its not, theres 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 theres a backlog of shelters that need to be maintained. We never got a record of that maintenance even though i know its required to be reported to the city, so i cant really opine on that. So i think because theres 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 wasnt the record provided and how do we make sure we have those records before we move forward . Im sorry, i was walking up. I didnt 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. Weve 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. Weve responded to 311 when we took the contract over. We invested 56 million to put in brandnew 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 didnt see that i would note a point of clarification, actually in addition from going from two times per week cleaning to three times, were increasing the workweek from five days a week, so were going to work monday through saturday as opposed to monday through friday. So that is kind of a clarification of whats 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 theres a contract with the airport and theres 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. Ill 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. Im saying its 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 thats 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 its going to run its course but its like a threelegged 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 its rather large amount of reduced payments while over 50, i understand its for the next few years. I think because they mentioned this is a policy matter for the board to decide, im 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 thats where im at and i hope thats okay that if we can continue this until we receive the records and i will im not sure, honestly, im not sure the records that hes referring to. I dont know what records hes referring to. Do you want to clarify . Mr. Manard. Theres 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 thats tracked within a data base. Thats in the existing contract thats 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 dont have i dont 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. Thats okay. I think thats understandable and i dont think thats really on Clear Channel. Its 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 youre 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 dont think theres 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 were trying to increase it to three days a week. Why were 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, thats 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 thats prepandemic, 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. Im not, i think in the sense that us too, i wanted to have a verification from bla since they didnt get a chance to take a second look at the record and thats 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 were so deep in the trench in the conversation, well 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 dont think were trying to negotiate the terms and conditions. Were asking the bla to help us as terms and conditions. Its 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 were 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 whats 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 its turnaround one business day, next week, i dont think we have a committee, maybe so its perhaps a week after in the event, chair ronen is in agreement for continuance but thats kind of what im leaning toward, thank you, chair ronen. Thank you. We can get well get that information to the bla this week. Im 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 im glad you brought it up, the flexibility that doesnt 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 were doing thats 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 im 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 thats specified if they dont make the revenues, is that correct . No. As an example, this is what occurred during pandemic. So lets 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, im confused between what the budget and legislative analyst said and what bob said. Im sorry i didnt get your last name . Sorry. My name is bob smite. Bob smite. And what you said, so the bla said theres a reduction in platform maintenance from daily to five days a week but youre saying theres an increase . The length of the workweek is going to increase from five days so were going to have people working on the streets of San Francisco monday through saturday. Opposed to monday through friday. Thats an increase and thats for cleaning, you know, all over. Thats for Street Furniture and low and high rise platforms. Were going to have people out there. Were adding in addition to the increased frequency, theres greater coverage. But theres a reduction in the days of week that the platform no, no. That was always, we always had a fiveday workweek. We always cleaned them five days a week. Were going to continue with that. Thats 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. Were 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 wasnt 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 thats appreciated because to me whats 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 thats 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 dont love is the increase from 15 days to 45 days and fixing the destroyed shelters and im wondering why we why we increased that time . Yeah. Thank you. Thats a good question. Again, i think thats just operationalizing the actual again, after 15 years. Theres 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. Thats 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 brandnew one from scratch or do major renovations. On the cleaning, removing graffiti, the daytoday experience of the rider, thats where were 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. Were talking about destroyed shelters. To jonathans point, when a vehicle crashes and takes it out, that happens about 10 to 11 times a year. So its a very small number, right, in terms of what happens with it. I dont want to go too far into the weeds but we have a lot of inventory. Theres 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 dont have them, then weve got to manufacturer them and a nuance because of the hills of San Francisco in the incline, they cant they have to be custom built for that incline when they go in when you think about the lower side style and upper so theres manufacturing time and permitting time and were 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 cant preorder because you dont [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 were attempting to get ahead of it. A month and a half is a long time to have a destroyed bus shelter and again, im very sensitive to street conditions at the moment and so, thats what is on the top of my mind and having a destroyed bus shelter for a month and a half, you know, it doesnt 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 arent 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 thats why that particular clause is was modified. Okay. Okay. A related question because as you can see, im stuck on street conditions. Uhhuh. The related contract or not related contract but another contract for the city for the newspaper stands, you know, the newspaper business isnt 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 its 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 dont 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. Weve taken out whole hosts and we continue to be ready and we know that they are going to come out in 2024. Okay. Thats good to hear. I just if we need sooner, you know, sooner action in certain areas whether particularly damaged, its good to hear youre 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 hes 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 youre 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 youre responsible for and what kind of flexibility you have, particularly because youre increasing, seems like youre increasing the workforce and the number of people that are going to actually to be doing the work with you im supportive of and excited to see this happening but i want to understand what were getting in terms of the maintenance because like supervisor ronen, im 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 im wrong but its our contract. I dont want your definition, jonathan. I dont 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 thats etching on the glass, graffiti, dirt, and cleanliness of the shelters themselves so those are maintenance. Thats what were increasing three days a week. Its 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 thats construction elements where were adding power or adding our new Customer Information System signs or fixing them or as weve talked about with the 45days of having to completely reconstruct a shelter. Theres 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 theres 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. Thats [multiple voices] i understand from bob that, you say you do it a lot faster but i really like to understand what were giving you the flexibility to do. Yeah. And if its full replacement, does it say that in the contract . Theres 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 lets 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, its to inspect, its to clean up a fivefoot area around the shelter. Its to go and its 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 isnt able to do like they cant replace a destroyed glass panel or box panel or Something Like that. They need help to put new seats on, theres things of that nature, if glass has been etched which is a huge problem and lisa can talk about it. The graffiti, weve got Pretty Amazing chemicals and the teamworks through that. But acid etching is something that requires a complete replacement of the acid etching. Thats 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 well 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 were 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 dont want to go too far in the weeds but over the course over the last 15 years, weve 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 youre whats a benefit to your company . The benefit to the company is preservation of the contract so we dont 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 its in. This is our community. Were 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 were going to lose another 20 million for this. Every dollar we take in at mag, we get [multiple voices] again, thats what im asking, like, what are you guys doing im 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. Were trying to [multiple voices] thank you. Were trying to make lemonades out of lemons. [laughter] all right. Thats 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 theres 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 its a pretty Diverse Workforce. Its 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. Were proud of what we do. Okay, thank you. Thank you, chair. Thank you. Lets open this up for Public Comment. And then well 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 4156550001. 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 its your signal to begin your comments. Go ahead and start and ill start your time. Good afternoon, supervisors. Mark, im here speaking on behalf of the executive weissmanward 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. Were 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. Im going to make my comments now Going Forward. Specifically from the trade union movement. Within recent hours, we have been informed and were 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. Id 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 its very important. They use the Public Transportation so the streets of San Francisco is getting tougher to work and its 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 citys 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 youre actually if you have questions . I do. I do. I do want to clarify one thing. It is my understanding unless im 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 its 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 its really one business day, i think the question is, mr. Roer, why wasnt it turned over if its 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 alltime because if youre short on time, you know, as this contract is expiring december 6th, do the work up front so we dont have to have to do this, you know, conversation of like, yes, well get records back to you later so in good faith, turn it over. Thats just my piece and this is not on Clear Channel. Its on sf mta to turn over the record even if youre the socalled neutral party. Please turn over that record so we have an honest analysis about what is required and whats the gap but to have an independent agency that could verify whether this is a terms and conditions and if its really in the work of 58 million upward for this extension. And i think thats critical. I think that no one is going to ask any company, i would say the city is not in a place where, im sure that supervisor safai who is a good negotiator like to continue to see a company, giving us, giving back 50 million over a tenyear 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 im asking is that for the Services Provided by Clear Channel through sf mta that we are saying reduction of this payment, sotospeak, you know, that we could it is really worth the service. Maybe more, more less but lets be happy to do that analysis. Ill make the motion to move this legislation forward without recommendation and please were 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. Vicechair 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 4156550001. 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, thats your signal to begin your comments. Madam chair. Thank you so much and we have ms. Gorman here from the department of realestate. Good afternoon. Good afternoon, thank you chair ronen, supervisor chan. On behalf of the San Francisco municipal transportation agency, were 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 mtas realtime command and control functions from several locations into one with uptodate 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 tenyear 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. Im 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 citys lease with hudson 1455 market llc, for the city to lease 38,000 square feet of space at that site. Its the second tenyear extension approved by the board in 2011. This site houses functions for mt the mta and appraisal wasnt required because the cost is less than 40 per square feet. Which ill note, we did look at the real he is state comp that were provided by realestate 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 tenyear 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 weve had come in front of us in a long time. Its over 23 less than fox plaza, so im one thousand percent in support of this renewal. [laughter] i couldnt 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 4156550001. And meeting id is 24995579925. And press pound twice and press three to speak. Those waiting in the queue, wait until unmuted. No inperson 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, im sure theres 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 thats 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. Its not capital money. Its operating budget funds so, what were doing is leasing space across the street at considerable cost even if its less than market rate in the neighborhood, instead of providing more service on Mission Street or on the westside of the city or elsewhere. Its 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 dont 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, vicechair 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 4156550001 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, thats 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. Im peter. Director beck has been held up in another meeting so ill be taking his place. It will be you representing its 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 navys 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 im happy to answer questions at this time. Thank you. Any questions, colleagues . Okay. Theres no bla reports so well 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 4156550001. Meeting id is 24995579925. Then press pound twice. Youll need to press three to enter the speaker line and those in the queue, wait until the system indicates you have been unmuted and thats 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, vicechair safai . Vicechair safai . Member chan . Aye. Chair ronen . Aye. Just checking vicechair safai, absent. We have two ayes with vicechair 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 4156550001 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. Were 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 im the managing attorney for the Economic Crime unit at the das 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. Were 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 muchneeded 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 boards time and your consideration and this resolution for us so we can accept this money and spend it. And im 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 cant 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 4156550001 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, vicechair 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 4156550001. 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, im 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 im here in an expanded role im here to respectfully request to retroactive authorize to accept and extend saving Community Corrections. Its 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, were awarded this grant on july 26th and we worked to develop the legislative packet with a Controllers Office which was forwarded to the Mayors Office on september 30th. Im 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. Its a 6 million grant. 3. 1 million is in matching funds. Its 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. Its 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 were 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 weve 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. Whats 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. Its also a faithbased organization and focus on a 12model. 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, weve 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 were 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 were 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 weve 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 onestopshop that i know youre 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 weve worked to decentralize and take process as youve just saw in making sure were being as flexible and nimble as possible to reach as many people to enter these treatment beds and treatment services. Of note, theres 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. Thats 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 medical 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 thats 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 werent able to bring new participants into the program. With that being said, while it has been a slower recovery, im happy to report in the last four months, we had a 50 occupancy from withdraw management beds and 75 for residential treatment beds and thats increasing over time. What im 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. Im happy to answer any questions. Thank you. Well 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. Its a prop 47 grant. Its a threeyear grant for 6 million. And its 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 ill 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 theyve 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. Thats 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, its not im here to be sole sourced. Were 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 were 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 thats 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. Thats okay. Its 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 dont 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 theres overlap of funding. Youre paying forecast grant and paying for five probation department, full time equivalent and fulltime equivalence and 12. 9 can you explain to me because its a little bit confusing how this the sustainability of this program will maintain itself if theres a decrease in funding, if maybe im reading that wrong and then and how the money is broken out. I want to say im a fan of Salvation Army, the Harbor Lights program. Im 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 im 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 thats 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 dont 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 its 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. Well 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 were working with Salvation Army which has been a priority for them as well to look at other Funding Options including drawing down drug medcal 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. Thats good to know. Thats 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 were 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 its important if were trying to reduce recidivism that we have it, im not trying to be overly centralized but i think its important that were 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 were taking someone off the street and putting them in there, we might not have the same level of success. Hopefully thats a small portion of the referrals because its not that many beds. If were talking about the universe of need, its a small number and make good referrals for success. Im happy were decentralizing. Im happy to have as much referral as possible but just because i work with adult probation, if were referring, we might not set people up for the success we need. I definitely understand your point and i definitely appreciate it because its 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 whats happening there. But what bothers me in our system of care which is improved by the fact youre decentralizing referral into these programs is that theres 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 wasnt happening before and therefore we werent filling the beds, et cetera. So no, no, for sure. I would say again, i think the purpose of this grant is purely, its about reducing recidivism. Its formally im sure thats 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 realestate. 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. Lets analyze the success of this program and then lets have further conversations about strengthening and expanding those opportunities. Ill 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 dont want the jail to be an entry point into services so wherever we can prevent someone from going to jail who may have had a history of contact and greater risk, its an opportunity to do that so its great to have that flexibility. The other piece i neglected to say but will share, all of 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 thats 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. Postcovid, 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 weve cracked, weve cracked the code here. Weve got the workforce. Weve got, you know, multiple entry points and wed like to see all 40 beds maintained and utilized and so, you know, im wondering if youre 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 . Were always happy to come back and provide an update and ill 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 weve seen a lot of significant improvement over time. Thats 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 4156550001. 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 thats your signal to begin comments. No inperson speakers in the chamber, and madam chair, no speakers in queue. Public comment is now closed. [gavel] id 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, vicechair 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 4156550011 press star three to enter the speaker line. The system prompt will indicate you have raised your hand and you have been unmuted, thats your signal to begin your comments. Madam chair. I want to note were joined by supervisor stefani and i wanted to give supervisor stefani and supervisor safai, i dont know which order, if mr. Safai can start to make opening comments. Thank you. Were going to do this together and ill hand it over to supervisor stefani after this. Thank you, colleagues and attendees if there are any left. No, im kidding. [laughter] the purpose of this hearing is extremely important. Its 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 breeds office to discuss the challenges that are once vibrant Downtown Core. It faces in this post post pandemic climate. Weve over the course of the past year or so, ive 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 fulltime or part time in person and how our Tourism Industry is recovering a lot more. Were 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 its clear to me and many of us that fulltime inperson work that our economic core is counting on will not be returning to the same level that weve 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 thats related to retail occupancy but tourism. In our hearing today, well hear from, i think, benn rose enfield, his Controllers 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, vicechair 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 franciscos 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 prepandemic 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 were talking about in downtown, somo it was responsible for generating more than 45 of the citys 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 years 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 well 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 its 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, im 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. Ill 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. Ill just mention based on your comments, supervisor safai that well provide an update of the information we have asked for in later hearings. We will be responding to supervisor stefanis question and sharing information for the first time on what some of these downturns and downtown offices mean for the citys property tax revenue. Its something weve been aware of for a long time and have been working on for the past several months so were 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 theres a way to make it bigger because its exactly the size it looks like on the screen. [laughter] which means we cant read it. Yes. For mr. Egan, to the vicechair, were 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 email. I dont 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 didnt feel that way and didnt expect. If we can go to the previous slide, actually. Thats 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 theres 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, thats 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 citys economy. Lets go to the next slide this. Shows Office Occupancy. The increase, im sorry, the previous slide, please. I havent 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 were at 41 . But even the most returned place, austin, texas is 62 of normal. So there really is no widespread return to office. Theres some places thats 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 theres 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 thats 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, were starring to see that change starting to see the change and elect vacancies are the majority. Thats 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. Thats not the only factor thats affecting Property Income. Ill speak about that in a moment. If we could go to the next slide. Weve 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 bestCase 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. Thats the bestCase 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 dont 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. Were 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 Franciscos property tax. If we can go to the next slide. Theres one other factor thats not related to work from home. Thats likely to affect the citys property taxes and were just talking about offices today and thats rising Interest Rates. When Interest Rates rise, the rate of return that investors are going to require for owning realestate 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, youre going to need to get more than four and a half percent to take a risk from owning a San Francisco Office Building and thats going to affect given what a propertys income is, what youre going to bid for it. Really, if Interest Rates rise in whats called Capitalization Rate which is the required rate of return on San Francisco offices, if those rise in turn, Property Values fall and its 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 doesnt seem like a big jump. Its the denominator of a number that affects the Property Value and so its a significant decline to Property Values. So really, over our fiveyear forecast period that were 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 youll hear this more from the Assessors Office later but just to set a little context. The Office Sector is not the majority of the property tax in San Francisco. Its 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 were entering a world where you dont have to be in San Francisco to earn the high wages, than San Francisco housing drops. Right now were focused on offices, so just to reiterate what i have said, if vacancy rises, and Property Income drops. Thats 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 thats where the citys 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 longterm 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 citys property tax risk Going Forward. Just to speak very briefly about the model and im not going to get technical about it on the next slide, we are relying on jlls 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 doesnt sell and the model keeps track where the assessed value is over the market value and thats where the city experiences the revenue loss. So, just to provide a sense what that looks like on the next slide, weve turned the three jll Market Forecast into property tax loss scenarios. Jlls scenario yes. Im sorry. Supervisor supervisor chan has a question. I want to make sure jjl is. It used to stand for joanne there a broker. Thats who they are. I want to understand the context before you move forward. Its not an acronym. I dont think. So their optimistic scenario, if that what that implies for our property tax revenue is fairly limited in the 2021 period which were working through appeals through now. But it could go up to 100 million by the end of our forecast period. And were really looking forward five years for the 23 to 28 period. Theres 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. Its between 15 and 35 of the total 25 of the total thats lost there. And then how does that impact our budget . Well, these numbers would be budget impacts. I dont 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, its 2. 1 billion . No. Its 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. Its blowing a hole in our budget from one to two hundred million. Yes. Sometimes it doesnt correlate. Thats 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 whats interesting to me and im curious just in terms of how long these impacts would take because so many of the services that were providing in San Francisco and subsidies have to do with our huge cost of housing so if youre 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 im just curious, like, the longterm 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 im wondering if its this route, if office rates are down, federal Interest Rates are up, therefore Housing Prices go down. Im wondering what the impact on the need for our services are that we spend that one hundred to 200 million on. In general, thats 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. Were still down about ten percent, notwithstanding all the inflation we have had. Were 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 citys population change as a result of this . I think theres two things weve seen and im 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 . Its clear many of the workers in that industry moved out of San Francisco and whether, and its 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 im worried about that sector longterm because in many ways, once you move out of San Francisco, its expensive to move back in. The other major demographic change thats clear from the census data is we have seen highly skilled workers move out of San Francisco despite the fact theres 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. Its 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, theres 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 havent 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 dont have an opportunity for more affordable housing. Its 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 dont know the 2022 numbers yet. Okay. So, and do you have projections about whats going to happen to our population . I wouldnt call them projections. Guesses. [laughter] i mean, in the nearterm, the state of the Macro Economy is going to drive things. Were seeing layoffs in the tech sector for the First Time Since the start of the pandemic. Im 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. Theres a range of opinions on whats going to happen to the u. S. Economy over the next year but i think the majority opinion is were going to have a mild recession and it could be worse than that, so i think in San Francisco, were 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 youre asking for. I want you to finish your thought. Thats 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, thats one of the things you highlighted and on the next slide, theres ranges from one hundred to two hundred million. Can you summarize the forecast but a couple of the things you didnt 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, ill 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 youre right that other Revenue Streams are also affected. In terms of business tax, whether we just look at the business tax base, its 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 havent done this today so i want to highlight the four categories so youre talking about property tax. It says potentially a loss of 100 to 200 million by next year. But theres the business tax. Taxes, theres gross receipts tax which i know falls under business tax but thats just one i wanted to highlight. Theres 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, ill conclude with the answer to your question, supervisor safai. To summarize, were looking at 180 to 150 million loss. If things dont improve, that could widen to one hundred to two hundred million by 2028. Thats annually . Yes. As of that year. Its 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 theres 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 thats why it was important for us to build our model thats connected to an outside forecast, if the outside forecast change, we can quickly change our model. We think its prudent given the data ive shared with you to assume were going to see a less than norm am Office Demand in our fiveyear 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 fiveyear forecast of all major Revenue Streams. Weve been working with them on all of them and they will reflect all of the things youve talked about across Revenue Streams. I dont know if michelle hes asking to stay tuned. Michelle, come on. Im kidding. No. Probably this is what the controller is telling you as well, were preparing our forecast and it will be issued in the first half of december and it sits underneath, it advises the mayors budget to the departments and shell instruct departments based on a number of revenue but the revenue we are expected to spend. When you say middecember, 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. Thats right. I think were targeting december 10th orrish. Maybe we can get a draft. Its 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 dont 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 weve 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 im 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 dont expect it to happen. As ive mentioned Office Demand drives Housing Demand and if you look at San Francisco Housing Prices in context, they are theyve 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 40year high and they are seeing falling revenues and uncertain revenues. So, unless Office Properties can be picked up very cheaply and that doesnt seem to be happening in the Office Market, then theres no incentive for a developer to do that at this time. Over the five or six years were 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 dont 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 couldnt 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 dont 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 were at the bottom of recovery compared to other cities like ive mentioned in my opening remarks, is there anyone one examining why . And i know that might not fall within your domain but im sure youre working with other departments or the Mayors Office in terms of why is San Francisco and i dont think its just tech. I dont think its just the fact that were so reliant on our tech workers. Are there reasons why people arent 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 ive 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 thats another place where its a lot of tech workers, only about 40 of normal of Office Occupancy but the Office Market down there is much hotter. Youre not seeing companies walk away from office space. Youre seeing companies kind of positioning themselves for future demand for office space down there. Of course, thats the Traditional Home of the Tech Industry and the most blue chip office space for the Tech Industry. You know, were 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 thats how i read those particular trends and i dont really think were 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 im 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 . Thats. Thats really helpful. I dont 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 were supposed to build in the upcoming years. Im 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 wont have much change to the population in the upcoming year. Do you think through this requirement to build 82,000 units is overstated . Its 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 dont 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 . Thats the way we plan for housing and its 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. Thats 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 whats the right target for that . Thats tricky and were in a situation where you suggest where numeric targets dont seem aligned with where we are at the moment. Thank you, thats 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, im assuming what youre 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, its not the only factor. Its the factor that the city controls. I see. Thats a good point. Because i also have a question then, i mean, now that were, i didnt think were going to talk about housing but supervisor safai is like, no, were 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 were 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 thats 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, its quite significant. In fact, i dont have the chart right now on my hand but they were almost opposite of parallel. And so, that is the part where i think im not challenging what you just said but its also im just trying to solidify the association of job loss and housing decrease but then anyway. But you did state it in the beginning that its a fair and complicated situation with Housing Prices. I think my point is i just want to make sure that, i there theres 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, its okay. We still have two more presenters and i wanted to get one more point on the record. This is something that weve talked about in our working group and i dont need a long explanation but its something important to emphasize and i know benn presented this to us in our working group. Whats the percentage of our workforce is professional and technical . I dont have that number. Do you remember, mr. Controller . Because i think its to supervisor stefanis and supervisor ronens question, its important to put that on the record. Ben, controller, good afternoon, supervisors. The fact youre referring, supervisor safai is the rough proportion of our gdp thats 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 wasnt 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 20year trend and mr. Ying can speak to this more eloquently than i, but if you look at the 20year 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 dont think thats accurate. The trends youre talking about one in which high Wage Industries can thrive in an expensive city. Industries that pay medium or low wages cannot and theyve been shrinking as a share for at least 20 years. What weve seen since the pandemic is the highway industry continue to grow. Theyve grown even more because they can save on rent. They can save on Housing Prices if there workers dont have to be here but the lower Wage Industries that rely on them, the restaurants and the local retailers, the personal services, they dont 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 citys economy. Right. Thats what i was trying to emphasize. Theres a misconception although its 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 dont 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, weve 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 weve 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 theres 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 havent had for a while, so i dont want to sort of preempt that Actual Research with guesses on my part if you dont mind, supervisor. All right. I guess thats okay but thats what we want you to do. Thats what economist do, they make forecast and projections. I try to make informed ones and i havent been informed. I understand but i guess what i would say is im not asking you to guess but broad stroke, its helpful to hear ill mention one that people have talked about that i think is a good target and thats 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. Its still about the tenth size of Information Technology in San Francisco so its not going to replace it but its 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, theres a number of things well come back. Ill 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 realestate and our taxes, our policies and others that we need to have a conversation about and that would be helpful for you look at. Thats 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 were that much more competitive, its 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 were happy to assist in any way you would like us to. Okay. Supervisor chan . Thank you, vicechair safai. Sorry, my apologies. I think i found my connection of what i was trying to say is that [laughter] sometimes im hungry. And then i forget. I was actually about that theres obviously job growth, not recently the last two weeks but theres 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 thats 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 were seeing that they decrease not because of loss of employment or at least during the last two years but its the loss of use of the space. So and that kind of brought to some of the thought around housing. Of course, theres 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 its not, should that be something that the citys contemplate in the future if we start to see, like, to encourage some type of activity in the events we see. Maybe its 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 midmarket tax incentive of ten plus years ago. They can be effective where theres 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 dont know how to characterize the behavior. If theres a demand and it doesnt matter what were 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 thats a part of the conversation weve had. Thats the major reason we have vacancies. Not because landlords are being unreasonable. If youre imposing a tax on a landlord who isnt 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 theres bad behavior and minimize the consequence where youre encouraging people not to invest in the city. The mayor consistently and vicechair safai have said that, its the mandating of people coming back to work in person, perhaps thats a cure of the downtown i dont ive 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 doesnt 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 thats a question, like, maybe its 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 im posing this to this conversation, so are we suggesting at this moment in juncture of this what were 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 were heading or the direction were heading is mandating people coming back to work in person . I dont i can tell you right now, i dont believe there would be anything we can do as a city to mandate. Theres a lot of things we can do to encourage and incentivize. I think those are some of the things that were talking about today. Some of the things were talking about in our working group but certainly, there are some policy decisions that weve 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. Youve said theres a handful thats currently paying the growth im sorry, im sorry, go ahead. I get excited. Thus far we havent seen a connection between businesses facing a higher tax rate post 2018 and systematically reducing their time spent in the office. You know, as youre right, supervisor safai, thats incentive. We havent seen that materialize yet. From the last reports, we do know theres a significant number whose gross receipts have reduced below. We dont know if that has to do with office, so theres still tbd . It has certainly happened. Its certainly true that people are not coming into office and that affects our gross receipts. Im using that as one example. Im 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 doesnt dictate the ability to convert even if they wanted to and the value the property have dropped and the return of invest doesnt 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, theres a six percent Immediate Tax on the gross of the sale and then theres the inclusionary if youre changing it, so all of those inputs make any of those conversions today impossible. No one would do that today. Theres 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 youre talking about hundreds of millions of dollars, it doesnt happen. I, if i could just, through the chair, to vicechair 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 midmarket. I dont think that it really materialize. I think its sort of, like, blew up and backfire and in so many ways that we see the displacements that the city suffer. I think that theres 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, im 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, vicechair safai. Im 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. Its 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 employees back, we have to do our part and they say they dont feel safe. Theres a lot of reasons why people dont want to be downtown. Theres a lot of restaurants that arent there any more. Theres not a lot to do. There are many different reasons. Theres not the transportation they once had. Were bringing it back slowly. They dont want to ride bart. They dont feel bart safe much theres reasons that play into that thats different from, thats 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 cant giveaway some of these retail space give away Building Space. A Building Owner said they were going to bring in a restaurant and said well give it to a dollar a month. They said no way. Im 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 thats 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 janitors union, we were part of the debate about the midmarket 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. Egans 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 were talking about, right now, based on his projections and just one of the inputs that talks about the property tax, when were 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. Im not saying theres no Silver Bullet in anything were talking about. And i know we could debate about some of the tax either incentives or decisions that weve 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. Theres no question about that. I agree with all of those arguments as well. Im only saying that what were 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 thats why we had, i think we had that presentation at the end of the budget season and were 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 . Thats 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, were not getting any tax. Were not getting any return. There is a Significant Impact on that to, were 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. Its the reason why i know you do. Ive been conservative about even a cannabis tax. I knew you were going to bring it up. All im saying is i know. And i said that i agree that we that was a good one. Thats all im going to say. Im 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 dont. 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 were going to the next presenter which is our assessor recorder walking. Are you on the phone or online, mr. Torres, assessor . Supervisor safai, im 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 im happy to go through what we have prepared for you and answer questions but in the interest of time, ill move quickly through these. Cool. Next slide, please. So just, i wanted to provide a quick overview of our office in terms what were 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 youve been having, as well as in terms of the revenue on the fiveyear average for us, about 372 million. In addition to an audit program, it ensures were 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 weve seen over the past five years, just another perspective, that youve 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 thats 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 were defending this value as appeals move it forward in the process. Next slide, please. Its a diverse property tax base. Distributed across areas of the city and many times the property. For the fiscal year were in, Residential Property accounts, residential Real Property accounts with the single largest property type by value, 66 of the total value. Thats 211 billion in assessed value. Commercial Real Property account for a 30 of a total roll value at approximately 96 billion. Again, were 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. Thats 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 hasnt 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 thats on the roll. Under california proposition 13, as you all know a property assessed value may grow only at a at a rate thats no more than 2 per year unless theres a change in ownership and unless theres 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. Lets 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 were value and getting all that your on the roll based on our annual valley on our roll based on annual youll hear from the assessor a peels board and working through the appeals in a timely manner based on the information thats 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 years appeals in the fall currently. And then once again, well start hearing those items that you see here for the current fiscal year of 2 2223. 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 im happy to answer any questions in regard to the numbers i presented thus far. Thank you, assessor recorder. I dont 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. Im 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 were looking at, those actuals will play out over time as we move through this appeals process. Again, theres 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 well 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 well 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 youll do this anyway just to keep us updated, i know were going to keep these hearings open but im curious to see how that all transpires but thank you again for such a thorough response to the letter of inquiry. Its 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. Vicechair 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. Im 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 1920, 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, im sorry. So youve already answered that question. I wont ask it again. Huh . You did, okay. So, as those vacants increase, were anticipating there will be a surge in assessment appeals, are you hearing or feeling or seeing anything to that effect. If youre talking about the fall, we wont feel the affect until the fall and period. It is already closed . This year has, yes. Okay. I guess were going to have to wait and see what the impact is next year. Thank you. I dont have anything else. I have some closing statements. I dont know if supervisor stefani has any closing statements but i mean, i think its 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 4156550001 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 thats your queue to begin comments. If you begin speaking, ill start your time. Okay. One quick question, ive 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 theres ideally, organic evolution of the economy and obviously thats not typically what we see because its routinely disrupted by all manor of politics you cannot successfully legislator dictate market demand. Broccoli is good for you but i wouldnt 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 dont think we should want to accomplish that here where our commercial corridors are concerned to prevent the character that that currently exist because its not too well right now. The galleria mall for example has a about two occupants i believe and theres a dozen vacancies on each of the floors. Is that it . 30 seconds keep going on. Okay, great. Sorry. Ive recently had the opportunity to visit in other cities and countries and their economy is doing better by comparison of San Francisco and i dont know how many other American Cities like they have been hit by indiscernible . At least here youve got bodies, like, literately in the streets. Youve got people that look like refugees. You have the speakers time has elapsed. Pardon. Speakers 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 yall. And as youll 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. Youre 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 yall talk a lot of garbage. Yall 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 . Dont waive your hand, i can see it. Thats 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 citys 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, thats what we have right now on the books in terms of what people are looking for in reassessments but that could worsen and theres 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 were 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. Its 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 theres going to be some hard decisions we have to make in the next six months. Whether were on the committee or not on the committee, these are hard decisions we have to make collectively and theres going to be some serious tradeoffs. You know, were 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 havent 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, its a neverending cycle that impacts us. Were at a real Inflection Point and assessment will increase. We touched on one Revenue Source today which was property tax. Were going to get that information in the coming months but i still am encouraged because if were open to thoughtful ideas, it doesnt 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 cochairing 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, were going to work with the Mayors Office, were going to present some solutions to this body, many of which can be done legislatively at the board and well see what ultimately we do that i think is in the best direction of the city but im still hopeful. I know its 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, im concerned about the citys 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, thats one of the things were 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 were 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, wed like to come back to the Committee Early next year to present solutions that were working on with the working group and just so everyone knows, were 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 vicechair safai. One or both of these hearings, mr. Vicechair. Both. Is that okay . Yes. Both hearings will be continued to call of the chair. Vicechair 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] go. Shop and dine the 49 promotes local businesses and changes san franciscans to do their shopping and dooipg within the 49 square miles by supporting local Services Within the neighborhood we help San Francisco remain unique, successful and vibrant so where will you shop and dine the 49 hi in my mind a ms. Medina 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 im the executive Vice President the development at bridge. For northern california. I will also be our mc today. On behalf of