Supervisors agenda for september 27, 2016. Supervisor aaron peskin great. Please read items 1 and 2. Clerk [hearing civil grand jury maintenance budgeting and accounting challenges for general Fund Departments maintenance economics versus maintenance politics pay now or pay more later] sf 11234 2. 160614 [board response civil grand jury maintenance budgeting and accounting challenges for general Fund Departments maintenance economics versus maintenance politics pay now sf 21234 supervisor aaron peskin thank you. These items are reports to the civil grand jury. The first item is a hearing civil grand jury maintenance budgeting accounting challenges for general Fund Departments maintenance economics versus maintenance politics. Please come forward. My name is James Cunningham with the civil grand jury. Thank you, mr. Hopkins, good morning. Good morning. That was quite a deep dive. Thank you for acknowledging that. It was fun to prepare. In fact that report has 19 sets of fingerprints all over it. My fellow grand jury. Typically my colleagues. If you can put that microphone a little closer to you. Is that better . Great. Who spoke before you 2 weeks ago is a federal auditor and he wrote the section on accounting for deferred maintenance, and hes a man who really knows what hes talking about. Also, i got much help from libby dodd who helped me get the big picture. Annie who is the researcher, shannon baca who pulled together the appendix information in usable form, Richard Baker who was again on all the rewrites, betty, who was an editor. Shes a great editor and she says here is the problem and how to fix it. And david stein, the backbone of our jury. And steven who had so many practical suggestions about how to proceed. I think it is symptomatic of a problem of maintenance budgeting for general Fund Department that im competing for your attention with two other reports which have a lot more pizza zaz. And that was officer involved shootings and homeless. Its like im the Brussel Sprouts on the menu competing with ice cream and candy. The issue of maintenance budgeting for general Fund Departments. Its important and needs attention from the top and needs adequate resources. The challenge that i face this morning is condensing a 75 page report with 50 pages of appendices, 73 findings, 73 recommendations into a very short period of time. Its a challenge that cant be successfully done. The advantage of having impossible assignment is nobody expects you to succeed. Thats very liberating. In order to catch your attention and the problem is keep your attention over the many months before you will actually get to look at the next budget. I have put in some memory pegs that i hope you will remember. If you flip to tab 2, the first of those memory tabs. I just have these by page number. Do you have the page number . Oh, im sorry. I gotcha. Yes, i have two. Its a photograph of a pretty lady. This ladys name is zra zra gab or. Shes from hungary. She came in just as the germans rolled in. She and her family were the kardashians of the day sort of famous for being famous. One of the reasons she was famous was she was married nine times. Husband no. 5, confided to his best man on the wedding day, a problem that in a way i face this morning, which is, he said, i know what im supposed to do tonight. The challenge is to make it interesting. How do you make talking about maintenance budgeting interesting . The next picture that i hope will be a memory peg, also at tab two is of an event that occurred in this building. This photograph is on permanent display in this building down in the light court. Of course it is the wedding of marily monroe and local baseball hero joe demaggio. That marriage didnt last, but marilyn married a playwright, he wrote death of a sales man the plot gives it away. The salesman is like maintenance for keeping the wheels of commerce, wheels of government functioning supposedly. After his funeral, one of his grown sons was complaining to his mother that dad never amounted to much. And she rose up and said, in regard to her husband but i think it also applies to maintenance. Attention must be paid. It is so easy to ignore the need for maintenance when everything is working properly. I wanted to update our report which was issued in june with some recent developments. The bridge at page 75 has been fixed. Thats good. The beach street Charter Amendment is on the ballot. Thats good. There was an article in the New York Times about a criminal verdict against pg e arising in the 2010 gas pipeline explosion. Two things in that story caught my attention the pg e cut their maintenance budget a year before the explosion. The second thing that caught my attention in that story, the mayor of san bruno was quoted as saying when this happened, i thought it was a terrible terrible accident, and now i know that it could have been prevented. So, im hopeful that in this city we dont face those questions because one other incident that has happened, and supervisor peskin, i know you are very much aware of this one. In Washington Square park, a young mother was watching her two Children Play when suddenly a tree limb fell and caused serious serious injury. So, whether that was related to deferred maintenance in this particular case, i dont know. But i think it is symptomatic of the problem. I would like to ask you to visualize this hypothetical situation. It is a baseball field in a city park. The young pitcher is at the mound looking in. At home plate you have the batter, the catcher, and behind them is the backstop made out of metal post and wire mesh. Behind them on the hillside, a tree is falling directly towards home plate and it will crush that backstop. I will come back to that hypothetical in my closing statement. Okay. Very briefly. What did we do . What did we learn . What did we find . We did the standard that all grand jury panels do, lots of reading, lots of investigation. We interviewed about 30 people in the city and wrote and rewrote. What did we find . Probably our most important finding which isnt in the report is we found the high caliber level of the City Employees we talked to. They were smart, they knew what they were talking about and they are trying their best to do the right thing. That was very gratifying. We also learned that when it comes to budgeting, and we heard this from a colleague of yours, the mayor basically holds all the cards and that it will be 9 or 10 months before you next get to consider budget issues including maintenance budgeting. Thats a long day and the lay is easy to forget. Another comment that was made over and over by the people we interviewed was one of the reasons they can come up as to why maintenance budgeting wasnt getting much attention and getting cut much of the time is it has no sex appeal. It is not sexy. Which is in part why those memory peg pictures of those pretty ladies i hope will counteract to some extent. And, so, i would ask that when you see a pretty lady and in particular when you see these brides here in city hall everyday, all decked out in their finery, when you look at those brides, you will think, maintenance. When we did our research, we first looked, okay, this is the city and county of San Francisco. Lets see what other cities and counties are spending on maintenance. In california, the closest we could find was the city of honolulu. Pretty close in size and population. Based on their public records, they budget a lot more for maintenance than San Francisco does. But as we researched further, we found thats not really the best standard. If you will turn to tab 3 in the yellow handout there, the first page is the pie chart that appears every year in the budget, the mayors budget book, that blue budget book. In this particular page is all of the uses of funds for general Fund Departments, and the amount that is budgeted for Facilities Maintenance is 0. 2 . A very very tiny amount of the overall budget that we are talking about. Another reason why i dont think it gets much attention. One of the things we learned that i had no knowledge of, had not paid any attention to before serving on the jury was the distinction between the Enterprise Funds and general fund between departments. Enterprise get to decide how to spend it whereas general Fund Departments acquire monies doled out to them from the departments. The consequence is that enterprise departments spend tend times more than their general Fund Departments. Talking to that, when we talked to general Fund Departments like the airport, we say how far is your maintenance backlog . Zero. They have no maintenance backlog. General fund accounts, how big is your backlog of deferred maintenance. You get various answers. I put one together, a tab 4, going through the 10year capital plan. My numbers for the general Fund Departments and they can be quibbled with. There is 1. 9 billion of deferred maintenance. Going back to tab 3, figure 2, which is that graphic comparison year by year of the growth in the enterprise departments budget for Facilities Maintenance, goes up up up, triples over a 10year period versus that same Facilities Maintenance budget for general Fund Departments which trended down over a 10year period. A period of time which the overall city budget was increased by 3 billion, but Facilities Maintenance was dropping. Its approving a little bit in the current budget, but still a significant problem. The most important surprise to me at any rate is the next page there in tab 3. Its a chart or graph that was produced in response to a document request to the Capital Planning committee, and it shows the need of each of the general Fund Departments as a percentage of their crv. Crv is current replacement value or sometimes calculated replacement value. That is the one thing about if this board can do nothing else about maintenance budgeting, it would be urged, request, mandate that the city adopt this percent of crv standard to start as where you begin when you start negotiating the Facilities Maintenance budget. We didnt pluck this system out of thin air. Its based upon a recommendation from the National Research council which is the arm of the National Academy of science. It is very similar to what industry does through buna and i ma. Industries management associations followed by many cities across the country including the cities of san jose, sacramento and other cities. Its not a new idea. I digress for a morning. Here this morning is dick morton, most of our ideas were stolen from dicks article. I thank him for that. But getting back to this standard. When i entered the fifth grade we had a brand new teacher just out of teachers college. I walked into her classroom the first day and she had a big banner on the front wall above the blackboard which said, set your standards high and strive to reach them. And i looked at that motto everyday during the fifth grade and 60 plus years later, i still remember it. I think it would be good advice for the city when it comes to maintenance budgeting. Set your standards high. Take this best practice standard of 4 of current replacement value and that should be where you start. Do we need to cut . Okay, we cut. We cant make that this year, but we want to come close. Supervisor breed, i understand you are an ex officio member of the planning committee. I would hope that you could use all of your influence on that committee to get them to take this information which they have in their computer system. The frrn. The system and make it public. Show it to the board, and show it to your constituents. To make maintenance budgeting less abstract, i think if you can show them this information, what is the best practice standard of what maintenance budgeting should be versus whats in the budget . What is that gap . Right now its a huge gap. And then how that plays out in terms of the facilities of the various departments that are in your individual districts. And then, the deferred maintenance backlog broken down by district. And i think you will get a lot more Public Interest in adequate maintenance. Im running out of time on my opening statement. I hope i have some time for my closing statement. And i look forward to what the administrative departments have in response. Thank you for your time. Supervisor aaron peskin thank you, mr. Hoskins. Let me say before we bring up brian strong from the Capital Planning function of the city that many of the things in this report are i think wellknown to city officials and are things that we have been grappling for some time. The report from the civil grand jury is very timely in so far as this is the 10th anniversary of this citys effort to have comprehensive Capital Planning. We now know what deferred maintenance backlogs in the department are. There is no question that there is an endless amount of need and a limited amount of resource, unless you are the airport. Because the airport can always increase its amount of receive revenue by increasing landing fees on an annual basis. We cant do that as a general Fund Department. So we must choose upon our children. You have the Police Department and the homeless crisis and housing crisis. Each year we have to struggle with that in the budget. No question there is a huge general Fund Maintenance department backlog. And not all agencies have this Deferred Maintenance Fund either. The port doesnt have that either as well. As we want to pay for as much as we go as we can, the reality is that weve had a very robust Bond Obligation fund through the generosity of voters of San Francisco that have allowed us to chip away at that backlog and there is a sense from the Governments Office and the Controllers Office that we need to do more. Thank you for your contribution. There will be an opportunity for closing statements. We appreciate your matrimonial and baseball analogies. With that, we have mr. Strike strat from the Capital Planning committee. Good morning, members of the committee. Brian strong director of Capital Planning. As the son of a hungarian immigrant i have to wholly agree with the civil grand jurys findings that its not as effective as z aza gab or. There were a lot of issues that the grand jury raised that we feel very strongly about and agree with in fact with 33 of the findings and 32 of the recommendations have actually been implemented, some of them were mentioned at the start of the presentation here. I also just want to mention that we have several staff on hand that can answer questions, that participated in the report and that includes anthony with the Mayors Office, john from real estate, tonya, and Mark Delarosa from the Controllers Office and hilda from human resources, and from parks and city planning and from public works. I think i would also say i have been doing the capital plan for 10 years and what the civil grand jury was talking about an their focus is something that is very near and dear to my heart and something we track and work on. We appreciate their effort they made to bring light to this issue and also to give us an opportunity to talk about the things that we have done that we managed to be successful with. First some transparency tools and what we are doing. Foremost, i use his reference as well. That the same report put together is what led to the capital plan and a lot of that report has been incorporated into the plan for the last couple of years and one of the founding documents that pushed supervisors push to push the legislation to create a capital plan. We have a fiscal 10year capital plan. We always state what we are funding and what we are not funding. We do track backlogs so we can tell you what the citys backlog is and how we are addressing it. The effects of the capital policy on that backlog. We have an annual proposed budget process. And when we get to the City Planning Committee we are very clear in what we are funding and what we are not funding. I should mention that along with some of the questions around the trees, the discretionary budget. The decisions that are made there have to be weighed against all the other needs across the city operating as well as infrastructure. We have a facilities resource renewal model something we implemented in the first year after the capital plan. When maintenance is not done in these facilities, it does show up on that model. Basically it tracks all the systems and infrastructure. And we have the general Obligation Oversight Committee and Capital Planning committee which is open to the public where we discuss these issues, we discuss the idea of using current replacement value. Thats the forum where these discussions really take place. We are also developing, you know, a number of tools, one of them is a little bit more City Asset Management system that is called in for real estate and public works has really implemented this. This will be the primar