San Francisco Controller Ben Rosenfield's Budget Update

San Francisco Controller Ben Rosenfield. Image retrieved here.

Your BOMA San Francisco Advocacy Team attended a presentation by San Francisco Controller Ben Rosenfield today for an update on the City's local economy and FY 2009-2010 budget. The following are the highlights:


Local Economy

• The commercial real estate (CRE) market needs to recover quickly as San Francisco receives 1/3rd of its property tax revenue from the industry.
  
• Job losses in San Francisco are less extreme than the early 2000's dot.com downturn.
• The unemployment rate in the San Francisco is trending upward, although our rate is better than peer cities in the rest of California.
• Per capita income in the City is projected to increase over the next three years.
• Current median home sale prices may reflect the bottom of the residential market, but it will be years before the market reflects the home prices of just two or three years ago.

San Francisco's Budget

• There have been local revenue losses: sales and hotel taxes are trending downward; property taxes are holding steady for now.
• It is estimated that city employee wages and pension costs will increase this fiscal year by $160 million.
• State and Federal revenues account for over 20% of the City's general revenues.
• The end result for the City and County of San Francisco: there is a projected $440 million shortfall for FY 2009-2010 with the expectation of a slow recovery and deficits recurring in future years.
• Mr. Rosenfield said it was gratifying to see the Mayor and the Board of Supervisors work together so closely this year on creating the City's budget.

One Major Consistency: The Impact of the State Budget (Now and in the Future)

• California's budget deficit's have impacted San Francisco's budget projections, and will continue to impact the City's ability to balance its budget. Rosenfield predicted that state lawmakers will be back in Sacramento re-adjusting the State budget this fall, and that will have consequences for San Francisco.
  
• The State balanced its budget in part by 'borrowing' future local property taxes from its 58 counties. This will mean a hit of over $120 million in local property tax revenues to San Francisco. For more details on how the State is balancing its budget by taking funds from local governments, click here to view Mr. Rosenfield's letter to Mayor and the Board of Supervisors on the subject as it impacts San Francisco.
  

Planning for Future Budgets

• Preparing future budgets may be easier if the San Francisco electorate approves a Charter Amendment on the November 2009 ballot which will allow for a 2-year budget cycle, require the adoption of a 5-year financial plan, provide for the adoption of binding financial policies, and require that all city union negotiations be completed before budgets are finalized.
  
• The Controller said that both Mayor Newsom and Supervisor David Chiu were interested in eliminating the City's payroll tax as it is an impediment to job growth. He said they are looking at substituting it with some other type of revenue such as gross receipts tax, etc.
  
• Future budget planning will also need to take into consideration the City's growing pension and benefit liability costs for its employees and retirees.

Other Issues

• Currently, the City's pension fund is well funded and has a lower employer contribution rate compared to peer cities. The growth rate of the employer contribution, however, will have to be addressed in the near-term as it may be unsustainable, and is already much more generous when compared to the private sector.
  
• In response to a question about a possible future budget set aside for the City's road repair and maintenance work, Rosenfield said budget set-asides are bad financial planning. In fact, he mentioned that voter-approved set-asides have increased from $350 million 10 years ago, to $1 billion (of a $6.5 billion budget) today.
  

To review the PowerPoint presentation by the Controller in more detail, click here.