1616thth Annual Real Estate Annual Real Estate ConferenceConference

The New Reality Of California BudgetsThe New Reality Of California Budgets

San Francisco Assessor-Recorder San Francisco Assessor-Recorder

Phil TingPhil Ting

May 24,May 24, 20112011

Two Things All Voters Agree OnTwo Things All Voters Agree On

No New TaxesNo New Taxes

Don't Cut My ServicesDon't Cut My Services

SF’s Budget Crisis Is Not UniqueSF’s Budget Crisis Is Not Unique National League of Cities reportNational League of Cities report

Personnel Cuts - 79% of citiesPersonnel Cuts - 79% of cities Capital Projects - 69% of cities Capital Projects - 69% of cities

San Francisco's 5-yr plan includes $433M in revenue growthSan Francisco's 5-yr plan includes $433M in revenue growth Still have $829M deficit in the 5Still have $829M deficit in the 5 thth year (FY15-16) year (FY15-16)

SF must define program priorities instead of across the board SF must define program priorities instead of across the board cutscuts

Need measurable outcomes to determine how much funding Need measurable outcomes to determine how much funding required to achieve program objectivesrequired to achieve program objectives

SF's ProjectedSF's ProjectedGeneral Fund Budget GapGeneral Fund Budget Gap

$283M (FY11-12) to $829M (FY15-16$283M (FY11-12) to $829M (FY15-16) )

How Did San Francisco Get Here?How Did San Francisco Get Here? Economic downturn reduced revenuesEconomic downturn reduced revenues

General Fund revenues down $139M (5%) from FY08-09 to General Fund revenues down $139M (5%) from FY08-09 to FY10-11 FY10-11

AAB appeals filed increased 570% over past two yearsAAB appeals filed increased 570% over past two years

9% of SF’s parcels have a temporary (Prop 8) reduction 9% of SF’s parcels have a temporary (Prop 8) reduction compared with 26% statewidecompared with 26% statewide

Increase demand for servicesIncrease demand for services 41% increase in food requests – 30% of demand unmet41% increase in food requests – 30% of demand unmet

61% increase in residents on food stamps over past 2 years61% increase in residents on food stamps over past 2 years

SF established call center to handle food stamp demand – SF established call center to handle food stamp demand – 10,000 questions a month on that subject alone10,000 questions a month on that subject alone

Constraints on both Raising Revenue and Cutting Constraints on both Raising Revenue and Cutting ExpensesExpenses 2/3 vote to pass taxes2/3 vote to pass taxes Wages and benefits governed by contractWages and benefits governed by contract

Personnel costs continue to increasePersonnel costs continue to increase 25% of the $4.48B CCSF currently owes employees in 25% of the $4.48B CCSF currently owes employees in

pensions is unfundedpensions is unfunded

City’s spending on pension costs has tripled in the City’s spending on pension costs has tripled in the past decadepast decade $125M to $357M$125M to $357M

How Did San Francisco Get Here?How Did San Francisco Get Here?

San Francisco Tightening Its BeltSan Francisco Tightening Its Belt

Sample of Cuts Made in FY10-11Sample of Cuts Made in FY10-11 $20M in transportation, street, sewer and $20M in transportation, street, sewer and

sidewalk repair and maintenancesidewalk repair and maintenance

$15M in salaries from SF Sheriff$15M in salaries from SF Sheriff

$7.5M in salaries from SFPD$7.5M in salaries from SFPD

San Francisco Needs $829MSan Francisco Needs $829M

NeedNeed

$829M$829M

What Can San Francisco Do Going What Can San Francisco Do Going Forward?Forward?

Pensions: put retirement payouts on sound financial Pensions: put retirement payouts on sound financial footingfooting

Raise retirement age for new employeesRaise retirement age for new employees Increase contributions for all employees who earn over $50,000 Increase contributions for all employees who earn over $50,000 Stop pension spiking; salary over 3 yearsStop pension spiking; salary over 3 years

Managing health benefits costsManaging health benefits costs Improve employees’ health through preventative careImprove employees’ health through preventative care Increase cost sharing with employees and retireesIncrease cost sharing with employees and retirees Each 5% decrease in health care costs will save $30 millionEach 5% decrease in health care costs will save $30 million

Saves $100M annuallySaves $100M annually

San Francisco Needs $829MSan Francisco Needs $829M

NeedNeed

$829M$829M Reform Pension and HealthReform Pension and Health $100M$100M

What Can San Francisco Do? What Can San Francisco Do? Contain Costs - Active EmployeesContain Costs - Active Employees

Wages & salaries projected to increase 32% Wages & salaries projected to increase 32% over next five years ($647 million total)over next five years ($647 million total)

Existing wage concessions ($230 million over Existing wage concessions ($230 million over two years) expire in FY11-12two years) expire in FY11-12

Each 1% reduction in wage costs saves $12 Each 1% reduction in wage costs saves $12 millionmillion

Concessions save $115M annuallyConcessions save $115M annually

San Francisco Needs $829MSan Francisco Needs $829M

NeedNeed

$829M$829M Reform Pension and HealthReform Pension and Health $100M$100M Wage ConcessionsWage Concessions $115M$115M

What’s The Impact Of Drastic What’s The Impact Of Drastic Cuts?Cuts?

PolicePolice 20% cut = $80M = 960 police officers20% cut = $80M = 960 police officers

FireFire 20% cut = $53M = close 8 of 42 firehouses20% cut = $53M = close 8 of 42 firehouses

Public HealthPublic Health 20% general fund = $109M = less services for mental health, 20% general fund = $109M = less services for mental health,

HIV prevention, H1N1 inoculationsHIV prevention, H1N1 inoculations

Total Savings = $242MTotal Savings = $242M Not an option – no public supportNot an option – no public support Doesn't close 1st year gap!Doesn't close 1st year gap!

San Francisco Needs $829MSan Francisco Needs $829M

NeedNeed

$829M$829M Reform Pension and HealthReform Pension and Health $100M$100M Wage ConcessionsWage Concessions $115M$115M 20% Police, Fire, Health Cuts20% Police, Fire, Health Cuts $242M$242M

Gap With Drastic CutsGap With Drastic Cuts $372M$372M

Additional Budget TricksAdditional Budget Tricks

Restructure Debt/Delay Capital SpendingRestructure Debt/Delay Capital Spending

Limit Inflation AllowancesLimit Inflation Allowances

Miscellaneous Dept SavingsMiscellaneous Dept Savings

Smoke and MirrorsSmoke and Mirrors

San Francisco Needs $829MSan Francisco Needs $829M

NeedNeed $829M$829M Reform Pension and HealthReform Pension and Health $100M$100M Wage ConcessionsWage Concessions $115M$115M Budget CutsBudget Cuts $242M$242M Budget TricksBudget Tricks $218M$218M

Still RemainingStill Remaining $154M$154M

Show Me The Money!Show Me The Money! $433M revenue growth from improved economy $433M revenue growth from improved economy

already in 5-yr planalready in 5-yr plan

New revenue needed in additionNew revenue needed in addition

Revenue increases require voter approval Revenue increases require voter approval (Prop 13 and 26)(Prop 13 and 26)

Rate adjustments for permits, fees and other Rate adjustments for permits, fees and other revenuesrevenues

Give cities local taxing autonomyGive cities local taxing autonomy

Property Taxes Contributed 36% ($985M) Property Taxes Contributed 36% ($985M) Of FY09-10 General Fund RevenuesOf FY09-10 General Fund Revenues

$78.3

$87.9$94.4

$98.8$105.1

$112.1

$120.4

$130.6

$141.9

$150.9

$158.5

$0

$20

$40

$60

$80

$100

$120

$140

$160

FY00-01 FY01-02 FY02-03 FY03-04 FY04-05 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FY10-11

Billions

Transfer Tax Revenue $43M Over Transfer Tax Revenue $43M Over Budget In FY10-11Budget In FY10-11

$0

$20

$40

$60

$80

$100

$120

$140

$160

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Millions

How Can San Francisco Deliver How Can San Francisco Deliver $154M in New Revenue By FY15-16?$154M in New Revenue By FY15-16?

Sales Tax Hotel Tax Parcel Tax Payroll Tax Permit & Fees Local Autonomy

San Francisco Will Come Out AheadSan Francisco Will Come Out Ahead

First ever 5-yr financial plan releasedFirst ever 5-yr financial plan released San Francisco needs to raise revenue - avoid San Francisco needs to raise revenue - avoid

one-time band aidsone-time band aids City must define program priorities instead of City must define program priorities instead of

across the board cuts - structural reformacross the board cuts - structural reform Improve efficiency - use measurable Improve efficiency - use measurable

outcomes to determine funding required to outcomes to determine funding required to achieve the program objectives (SPUR)achieve the program objectives (SPUR)

That’s All FolksThat’s All Folks

2010-11 General Fund Uses2010-11 General Fund Uses

Salaries = 37%Salaries = 37% Benefits = 14%Benefits = 14% Non-Personnel Operating Costs = 17%Non-Personnel Operating Costs = 17%

Transfers Out = 14%Transfers Out = 14% Aid Assistance = 10%Aid Assistance = 10% Grants = 5%Grants = 5%