Good morning.

The meeting will come to order.

Welcome to the September 17, 2025 meeting of the Budget and Finance Committee.

I'm Supervisor Carney Chen, Chair of the Committee.

I'm joined by Vice Chair, Supervisor Matt Dorsey, and Supervisor Cheyenne Chen, who is filling in for Supervisor Joan Guardio today.

Our clerk is Brent Halipa.

I would like to thank uh Colina Mendoza from Essex Cup TV for broadcasting this meeting.

Mr.

Clark, do you have any announcements?

Thank you, Madam Chair.

Just a friendly reminder to those in attendance to please make sure to silence all cell phones and electronic devices to prevent interruptions to our proceedings.

Should you have any documents to be included as part of the file, they should be submitted to myself, the clerk.

Public comment will be taken on each item on this agenda.

When your item of interest comes up and public comment is called, please line up to speak on the west side of the chamber to your right, my left along those curtains.

And while not required to provide public comment, we do invite you to fill out a comment card and leave them on to trade by the television to your left by the doors if you wish to be accurately recorded for the minutes.

Alternatively, you may submit public comment in writing in either of the following ways.

Email them to myself, the budget and finance committee clerk at B R E N T.j.

P A at SFGO V.org.

If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file.

You may also send your written comments via U.S.

Postal Service to our office in City Hall at 1.

Dr.

Carlton Big of the Place.

Room 244, San Francisco, California, 94102.

And finally, due to our observance of Rosh Hashanah, items acted upon today are expected to appear on the Board of Supervisors' agenda of September 30th, unless otherwise stated.

Madam Chair.

Thank you, Mr.

Clark.

And before we call uh item number one on the agenda, we will need to excuse Supervisor Engardio.

I move to excuse him in a roll call, please.

And on that motion, excuse Supervisor Engardio from attending today's meeting.

Vice Chair Dorsey.

Hi.

Dorsey, I.

Member Chen?

Chen.

Aye.

Chair Chan.

I.

Chan I.

We have three eyes.

The motion passes.

Uh also just for general reminder that we uh for items that have budget and legislative analysts report.

Um, we typically go to the department presentation, budget and legislative analysts report, then comments and questions from this body, then we'll go to public comment.

And so with that, Mr.

Clerk, please call item number one.

Yes, item number one is an ordinance amending the administrative code to create a procurement legislative analysis authority for the city administrator.

Revise or create threshold dollar amounts for application of various contract requirements tied to the statutory minimum competitive amount, horse statutory federal single audit standard, reorganized, standardized and narrow.

Chapter 12F, uh relating to the McBride principles concerning Northern Ireland, including sunset of the ordinance in 2035.

Repeal 12J relating to city business with Burma and narrow coverage of and reduced meeting requirements in Chapter 12L, relating to the certain nonprofit organizations receiving funds from the city and amending the labor and employment code to reorganize, standardize, revise exemptions and waivers narrowing coverage, create threshold dollar amount for application tied to the statutorily based minimum competitive amount, and update Article 131 relating to non-discrimination under city contracts, including sunset of the ordinance in 2036, and repeal Article 132 relating to non-discrimination under city property contracts, while incorporating some of its provisions under Article 131, reorganized standardized revised exemptions and waivers, narrowing coverage, create a threshold dollar amount for application tied to the statutorily based minimum competitive amount and update Article 151 relating to city procurement of sweat-free goods, including abolition of the sweat-free procurement advisory group and sunset ordinance, uh sunset ordinance in 2035, and repeal Article 141, relating to salary history and the hiring process of city contractors.

Article 142 relating to criminal history and the hiring and employment process of city contractors and article 161 relating to in earned income credit forms for employees of city contractors.

Madam Chair.

Thank you, Mr.

Clerk.

And um, first I want to thank uh board president uh Raphael Mendelman uh for his um commitment to making sure that we can um continue to work on this legislation.

This is not the duplicated file.

This is the actually file that return from uh the full board and that uh with President Mendelman, and thank you to also the city administrator's office, uh, particularly uh Molly Peterson, our contract reform manager, that we now come to the sets of amendments before you today, colleagues.

Um but first I would like to, if I may, call on uh Malini Metheson, legislative A to President Mendelman.

Thank you.

Good morning, Chair Chan, Vice Chair Dorsey, Member Chen.

My name is Melanie Matthewson, and I'm here on behalf of Supervisor Raphael Mandelman.

While the supervisor couldn't be here today, he accepts these amendments and is excited to see this legislation move forward.

Um just quickly, much of this debate has focused on one small piece, but I want to bring us back to the bigger picture.

That by most standards, this is a modest proposal, but it is the most significant contracting reform that San Francisco has seen in decades.

It'll make small businesses more competitive when bidding for city contracts, free up staff time to focus on larger projects and make it easier to deliver services to San Franciscans.

I just wanted to thank the city administrators' office, especially Sophie Hayward and Molly Peterson, Gus uh G.

Bear in the city attorney's office, and Chair Chan, thank you for your work on these amendments.

Thank you.

Um, so with that, colleagues, I'm gonna quickly um uh go through the amendments that has been agreed upon, um, so that we can then go to public comments on this item.

Um colleagues, uh the amendments are mainly really is to restore sweat-free procurement advisory group, remove the sunset dates of these policies, uh, restore the no property wage provision, and update the legislation enactment date.

Um, and that you will see these amendments from page one lines 20 to 21, and then again page 73, line 24, and page 74, line 10, um, as well as page 78, um, line 17, uh, through um page 80.

Uh, and then again, page 83, lines two to seven, and then also page 147, lines 11 through 14, and um, these are the amendments that uh proposed today for your approval and review for approval.

Um, let's go to public comments on this item.

Oh, my apologies, no, uh Vice Chair Dorsey.

Oh, sure.

I can do either before or after public comment.

I do I wanted to express my appreciation to um President Mandelman and everybody who has worked with uh him on this, especially um Chair Chan and um other colleagues and um the city administrator's office.

I will say I um as we are gonna be working in the next couple of years on addressing some of the structural um issues that are causing San Francisco's persistent deficits.

We have close to six billion dollars in contracting, and I think this is a step in the right direction to make competitive bidding more competitive.

Um, one thing that really I think for me at least uh came up that was influential in my thinking, was when um city administrator Chu reported that in FY 2023 um I think it was 46% of bid solicitations came back with one or zero bidders.

So we're not just minimizing competitive bidding, we're eliminating it in nearly half of cases.

When we're talking about six billion dollars um of contracting.

Any marginal improvement in value is gonna be tens or hundreds of millions of dollars.

So I think there's a lot of opportunity here.

Um I think this is the beginning of a conversation that I will be participating in as well, and hopefully, we we all will, but I I will say at the you know, at the end of the day, we've got six billion on contracts, and we've got 7.2 or 7.3 in city, you know, wages and benefits, and I've always felt strongly about this.

I think taxpayers get more bang for their buck from the people who are dedicating their careers to the city and county of San Francisco.

Um if we're gonna have to make tough decisions in the years ahead, I want to make sure that we're protecting jobs and getting as much value as we can out of our contracts, and that includes making competitive bidding more competitive.

So I'm excited that this is moving forward and I'm happy to support it.

Thank you.

And with that, let's go to public comment on this item.

We are now opening public comment for this item number one.

If we have any members of the uh of the public who wish to address this committee, good morning, committee members, Chair Chan, Russia Shields at the San Francisco Labor Council.

Uh, we urge you to vote yes on this legislation as amended because it protects our advisory group and eliminates the sunset day, and we really believe in centering worker voices on important committees like this, and we look forward to working with you all to strengthen the committee and make sure that uh we have great quorum and that worker voices continue to be at the center of all of these conversations.

So we urge you to vote yes as amended.

Thank you.

And thank you much for addressing this committee.

Next speaker, please.

Hello, Corey Hallman with Teamsters Local A56.

I'm here to speak in support of the amendments and urge you to vote yes on this legislation as well.

Thank you.

And thank you much.

Next speaker.

Morning, supervisors.

Uh, Adam Wood recently retired San Francisco firefighter, and I'm also speaking in favor of the amended legislation, uh, in particular in appreciation for the preservation of the sweat-free procurement advisory group.

I spent my career confident that the uniform I was wearing was produced under fair and equitable conditions.

And it's important to me, I think, important to the city that my brothers and sisters in uniform continue to have that confidence.

And my concern is in the current trade environment with the tariff regime out of Washington, it's going to be harder and harder to find the true source of the material that the city will be providing to its workforce.

There's going to be tremendous pressure for countries with a high tariff to find any way they can to slap a low tariff country's label on their product, and without a dedicated advisory group penetrating the fog of trade, I'm afraid some is some will slip through the cracks.

So I greatly appreciate this amendment and urge you to support it.

And thank you much for your comments.

And seeing no further speakers, Madam Chair, that completes our queue.

Seeing no more public commons, Public Commons now closed.

Colleagues, I would like to first make a um motion to I would like to make the motion to amend uh and to move the amendment amended version to full board with positive recommendation and a roll call, please.

And on that motion to amend the ordinance as so written to the record by the chair, and to forward the ordinance to the full board with a positive recommendation as amended.

Vice Chair Dorsey.

Dorsey, aye.

Member Chen.

Chen I.

Chair Chan.

Aye.

Chan I, we have three ayes.

The motion passes.

Thank you.

And Mr.

Clerk, please call item number two.

Yes, item number two is a hearing to consider the release of reserved funds to the zoo placed on budget and finance committee reserved by this year's annual appropriation ordinance in the amount of three million to fund the general operating needs for the San Francisco Zoological Society.

Madam Chair.

Thank you.

And I believe we have SF Zoo here.

Good morning, supervisors.

Um, I am Jeff Pace.

I'm the chief financial officer of the San Francisco Zoo, and I'm also currently the co-CEO while we're in the search for a new CEO, along with my partner Cassandra Costello, who's the co-CEO and also the Chief Operating Officer.

Um I come here today to petition for a release of the reserve of the 3 million of the $4 million annual contract that we have with the city.

Um as you know, uh back in late late last year, uh you authorized a audit of the zoo, which started in January, and um we cooperated um uh through the first several months of that audit.

But in June, we got a a letter that said that we hadn't cooperated as much as we uh could have.

And uh then in July, the reserve was put on the um on three million dollars of the contract.

Um I would have to say that we've redoubled, retripled, and we re-quadrupled our efforts to be cooperative in responding to the uh inquiries from BLA.

And we continue to do so even up to yesterday and going forward.

So I would um request that you release the reserve of the remaining three million dollars so that we can continue to do all the work that's necessary to do at the zoo.

Um the San Francisco contribution is around 18% of our total revenues last year, so it's a very significant number.

And um thank you for your consideration.

Thank you.

Good morning, Chair Chan, members of the committee, Dan Gonscher with the budget and legislative analysts office.

Um as you can see, starting on page one of our report, uh the San Francisco Zoological Society, which operates the San Francisco Zoo for the city, um, sent a letter on September 10th requesting the release of three million dollars that was put on reserve in June of this year.

As you may recall, and as the CFO of the zoo mentioned, on December 10th of last year, the Board of Supervisors passed a motion directing our office to conduct a comprehensive performance audit of the San Francisco Zoo.

On June 2nd, um, I, as the principal in charge over the performance audit of the San Francisco Zoo, sent a letter to the then executive director of the zoo uh with a copy sent to the chair of budget and finance, uh, the chair of the government audit and oversight, and a CC to the supervisor Melgar who requested the audit uh informing the zoo that they were not meeting our expectations to fully cooperate with the audit.

At that point, uh during that month, subsequent to that letter, the budget and finance committee and the board put the 75% of the annual subsidy on reserve.

Since that time, um I and my audit team have noted a significant um change in the zoo management approach to our audit, and we feel like we are getting the cooperation that would be expected of any entity that would be audited by our office.

And so uh we uh as you will see in our report on uh page one as well as uh page three of our report, we are recommending that the committee approve the requested release of reserves.

We are available for any questions.

Thank you very much.

Um, when do we anticipate this audit will be uh complete?

Our estimate right now is that the audit will be completed in the spring before next budget cycle.

Wonderful.

And uh if I understand it correctly, I think there's additional um consultation that you have provided to uh complete this audit or that that you have hire, I should say.

That's correct.

Um Madam Chair.

Uh we have brought on a subject matter expert from outside of San Francisco.

Uh his name is uh Dennis Pate.

He is the former uh CEO of the Omaha Zoo, and he will be joining us in person in a few weeks to conduct site visits uh at the zoo.

Um he's also been involved remotely working with the audit team and will continue to provide guidance.

He will be heading up our review of animal welfare as part of our audit scope.

Thank you.

And I think this is back to the zoo.

How has it been for the new leadership search going?

And what is gonna what should the board and the public anticipate in terms of the hiring process?

Yeah, so we um retained uh Russell Reynolds associates um as a recruitment firm, and uh uh we've started working with them.

Um there's like an employee survey, there's a job description, um, it's a national search, um so we're looking at uh people with uh deep animal knowledge.

Um that's really one of our focuses.

Um, but we want to get the right person that's gonna fit with the sort of the evolving culture that we have going on, and um which has been quite positive in the last uh month and a half, and so we're really excited to be part of this.

I think we probably won't land somebody until around the same time that the audit gets released, so maybe spring of next year.

Um some people are more hopeful than I am on process.

Understood.

Uh I so how is the board directors managing both the audits simultaneously, trying to uh you know hire a C the new leadership, uh CEO.

So um and will there be an inclination to either wait for the audit or prioritize?

Like what is the what is sort of the approach to to the timing of all that?

You know, there's there's a lot of energy um both from the board and from senior management um in the last six to eight weeks, and um I would say that we have one of the most um operationally involved boards in a good way um uh that that I've been involved with um for the last 25 years or whatever.

Um so we're able to walk and chew gum at the same time, and we're doing that.

Great.

And um, of course, you know, we're gonna probably see you again uh in budget, um, and along with the audit um releasing the spring, so then we can have a further conversation what that actually looked like for the zoo and what it's required for the zoo um for the well-being of both the animals and their caretakers.

Uh, we appreciate you stepping in at this time and to just guiding the zoo through this process and a time period of transition.

So thank you.

Um I don't see any name on the roster.

I don't have further questions.

Uh let's go to public comment on this hearing.

Yes, if we have any members of the public who wish to address this committee regarding this item number two, now is your opportunity.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Um, colleagues, I believe that the motion is to uh file and have this hearing heard and file and release the reserve fund and uh a roll call on that motion, please.

And on that motion to approve the release of three million to the zoo and that this hearing be heard and filed.

Vice Chair Dorsey.

Dorsey, I, Member Chen.

Chen, I chair Chan.

I.

Chan, I.

We have three ayes.

The motion passes.

Thank you.

Mr.

Clark, please call item number three.

Yes, item number three is a resolution levying property taxes at a combined rate of approximately one dollar and eighteen cents on each one hundred dollar valuation of taxable property for the city and county, San Francisco Unified School District, San Francisco County Office of Education, San Francisco Community College District, Bay Area Rapid Transit District, and Bay Area Air Quality Management District, and establishing pass-through rates per 100 of assessed value for residential tenants, and based on tenancy commencement dates pursuant to the administrative code for the fiscal year ending June 30th, 2026.

Madam Chair.

Thank you.

And of course, today we have the controller's office here.

My name is Jamie Whitaker.

I'm the property tax manager in the controller's budget and analysis division.

Uh and the legislation before you is setting the the secured property tax rate for 2025-26.

Uh on the overhead projector.

That might take a little bit.

The uh the main tax rate, the one percent is established by the constitution, California Constitution Prop 13, uh crushed that down to one percent.

And the part that we're really determining is how much is the rate needs to be to raise money to pay our voter-approved bonds, the debt service on those bonds.

Uh, and it's gone up 0.96% this year at one point eighteen uh percent compared to last year, about one point seventeen percent.

So comparing the median taxable value, uh so not the market value, but the the median taxable value from last year, uh fiscal year to this year, uh a property owner will be paying about two hundred and fifty-nine dollars more uh or three percent more this year on the ad velor and property tax.

Uh there's also direct charges that appear on property tax bills, property parcel taxes, and so on.

That's in addition to the the ad velorum uh property tax.

And if you have any questions, I'd be happy to answer them.

Good morning.

Item three is a resolution uh that sets the property tax rate for fiscal year 2526.

The rate is increasing from one point one seven percent to one point one eight percent, as we detail on page seven of the report.

We recommend approval of item three.

Thank you.

Um thank you.

We do this, I think every year, so very routine and technical and but very important work.

Thank you so much.

Uh we'll go to public comment on this item.

We're opening public comment for this item number three.

If we have any members of the public who have joined us today, wish to address this committee.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues have a like to move this item forward with uh recommendation and the roll call, please.

And on the motion to forward to the full board with a positive recommendation, Vice Chair Dorsey, Dorsey, I, Member Chen.

Chen, I, Chair Chan.

I.

Chan I.

We have three eyes.

The motion passes.

Mr.

Clark, please call item number four.

Item number four is a resolution approving modification number 15 to an airport contract, a project management support services for the Terminal Three West modernization project with WCME JV to increase the contract amount by $76 million for a new NATIC seed amount of 126 million and extend the contract for services for an additional five years from December 31st, 2025 for a total term of April 12th, 2016 through December 12th, 2030, pursuant to the charter.

Madam Chair.

Thank you, and we have SFO here.

Good morning, Deanna Voleck with SFO.

The airport requests your approval of modification number 15 to the project management support services contract with WCMEJV for the Terminal 3 West Modernization Project.

This modification increases the contract amount by 76 million for a new not to exceed total of 126 million and extends the contract duration by five years through December twelfth, twenty thirty.

The Terminal Three West modernization project expands and renovates portions of Terminal Three to provide seismic retrofit, replace end of life building systems, install additional swing gates and a new TSA checked baggage inspection system, expand concessions to increase revenue generation, and the security checkpoint to increase the cap capacity to meet forecasted passenger growth, upgrade the facade, and construct the core and shell for a new building in courtyard four that will accommodate operational functions and office and airline lounge space.

WCME has been providing project management oversight, which includes project controls, managing project costs and schedule information, providing project budget analysis and cost estimating services, and preparing monthly project status reports.

The contract is funded by airport revenue bonds under the care airport's capital improvement plan, and though there are no impacts on operating costs.

This contract results from a 2016 competitive request for proposals process, and WCME has met or exceeded expectations in performance evaluations.

There is a local business enterprise subcont consulting participation requirement of 20%, which WCME JV surpasses with 30.7% currently.

The BLA has recommended approval, and I and the project manager are happy to answer any questions.

Thank you.

Item four is a resolution that approves an amendment to the airport's contract with WCME JV, which is a joint venture of PGH Wong and Consor, and a couple other engineering firms as well as other subconsultants.

The amendment extends the agreement through December 12, 2030, and then increases the value of the contract from 50 to 126 million dollars.

The contract provides project management uh support for the terminal three modernization project uh and we detailed the budget for the contract on page 17 of the report.

Although this is a substantial increase in the contract value, the project budget itself has also increased a lot, and so it's still four per four and a half percent of the total project budget.

Uh so it's remains proportional uh to the project budget relative to when the contract started.

We recommend approval of item four.

Thank you.

Is the overall scope of um the construction uh also has increase since the original of the modernization project?

Yeah, it has and I can ask um our project manager Derek Homer just to describe some of those changes since the original project was um approved.

Thank you.

Good morning, supervisors.

Derrick Homer SFO Terminal 3 Project Manager.

So, yes, uh, number of scopes have been added to our project that was already a part of the airport capital program.

Significantly, one of the uh elements was the courtyard for connector building that creates those additional revenue uh capabilities for um future airline lounges.

In addition to that, we also have the addition of the East Edition, um, which was closer to the E-gates compared to the West side.

So we have a west side and a west east side, and that creates another opportunity for a 30,000 square foot uh lounge for an airline as well as uh more convenient location for aircraft gates and more revenue uh retail spaces in a larger concessions area.

With that expansion, it also allows the airport to push back the security checkpoint for a larger expansion, which created a significant chick uh pinch point today from a circulation standpoint.

So these impacts will improve the passenger experience at some of those.

Those are a few of the major elements that were added in addition to a number of infrastructure upgrades.

Um we also included uh prior to the project being suspended for COVID, we are now including the full replacement of the landside facade.

So as you drive up to the building, that exterior curtain wall will be of complete replacement.

In addition to that, we are also doing a significant overhaul of the West pre-security lobby, which renovates the entire check-in function and brings up the internet the uh independent carrier system baggage system all the way directly into the lobby as well.

And so basically the project was as 627 million in 2017, but to date it has increased to 2.8 billion, and you're expecting it to close out in December 2030.

That's correct, yes.

Thank you.

Um, I don't have any other question.

I don't see any other name on the roster.

Thank you so much for your work.

Um, with that, let's go to public comment on this item.

Yes, if we have any members of the public who wish to address this committee regarding this item number four, now is your opportunity.

Madam Chair, we have no speakers.

Seeing no public commons, public comment is now closed.

Colleagues, I would like to move this item with recommendation to full board um and a roll call, please.

And on the motion to forward to the full board with a positive recommendation.

Dorsey, I member Chen.

Chen, aye, Chair Chan.

Aye.

Chan, I.

We have three eyes.

The motion passes.

Thank you so much.

Thank you.

And uh, Mr.

Clark, please call item number five.

Yes, item number five is a resolution authorizing animal care and control to enter into a cooperative agreement with the Presidio Trust to provide animal control and welfare services for an initial term of five years with an option to extend for an additional five years, effective upon approval of this resolution and to authorize the SFACC executive director to enter into amendments or modifications to the cooperative agreement that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the agreement or this resolution.

Madam Chair.

Thank you.

And we have animal care and control here.

Good morning.

Good morning, Chair Chan, Supervisors Chen and Dorsey.

We're here today to ask for approval to enter into a cooperative agreement with the Presidio Trust.

Animal care and control and the Presidio Trust have worked together on animal related issues for many years.

This agreement memorializes our working arrangement.

Under this agreement, animal care and control provides animal control and welfare services within the Presidio's Area B at the request of the trust with Park Police.

We impound dangerous animals or stray dogs, rescue sick or injured wildlife, advise on animal neglect or abuse incidents, and ensure humane care and legal compliance for all animals in custody.

All actions are coordinated to support public safety and animal welfare.

While this is a continuation of the work that ACC has always done on trust property, under this agreement, the city will now be compensated for the time expended and costs incurred in conjunction with the services provided.

Based on last year's activities, we estimate that compensation will be around 6,000 a year.

Happy to answer any questions.

Thank you for your time.

Thank you.

I'm glad that now you're being compensated for the work that you've been providing.

I appreciate that.

Oh, it's a tiny dent.

Little bit, uh, everything counts.

Um, more treats for the animals.

Um, so we will go to public comment on this item.

And thank you so much for your service.

Thank you.

Yes, right now, opening public comment for this item number five.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues, I would like to move this item to full four with recommendation uh and a roll call, please.

And on the motion to forward to the full board to the positive recommendation, Vice Chair Dorsey.

Dorsey, I member Chen.

Chen, I, Chair Chan.

Aye.

Chan, I.

We have three ayes.

The motion passes.

Mr.

Clark, please call item number six.

Item number six is a resolution approving and authorizing the director of property on behalf of the fleet management department or central shops to execute a lease agreement for 1908 to 1950 in S Avenue for a term of six years to commence on October 1st, 2025 through September 30th, 2031, with one five-year option to extend the term within this group LLC, had a base annual rent of 631.8,000 per year with 3% annual increases, and the city will contribute up to an additional $349,000 for tenant improvements and authorizing the director of property to execute any amendments or modifications to the lease, including exercising options to extend the agreement term, make certain modifications, and take certain actions that do not materially increase the obligations nor liabilities to the city, do not materially decrease the benefits and are necessary to effectuate the purposes of the lease or this resolution.

Madam Chair.

Thank you.

And today we have real estate division here.

Good morning, Chair Chan.

Good morning, Supervisor Dorsey, Supervisor Chen.

My name is Jeff Case.

I'm the transaction team's manager for the real estate division, and I'm here to uh bring you a proposal for a lease for 1908 to 1950 in its avenue.

I also have with me uh Don Jones, the director of uh fleet services.

If you have a questions regarding the use of this site, I'll give you a little bit of background here.

Um, provides fleet management services for over 70 city departments with a combined fleet size of approximately 8,000 vehicles and operate six maintenance and repair facilities across the city.

So, question is why do we need this additional space?

The state water control uh state water resources control board has mandated that we replace all single walled tanks, and so we need a temporary refueling station and we need a location for that.

Uh we also need space for commissioning and decommissioning city vehicles.

Currently, the fleet department has to do this very inefficiently.

They actually have to travel out to um client departments and do that work.

This would make it a lot more efficient if we could do it at this location.

This location is one of four properties that's adjacent to 555 Selby, which is the central shops facility.

So it would allow us to labor savings of having travel time for uh mechanics and laborers to go out and bring vehicles in and work on them.

Um it also would allow us to easily meet the state mandate of having a temporary fuel station in place.

We have a deadline on that of having that done by December 31st of this year.

We have oops, sorry.

I'll go through the deal points.

The deal points are that um we have a six-year lease, a little different than our five-year lease.

We've synced it with the other leased facility at 450 tolland so that we have some flexibility when that lease comes up for um expiration.

I'll be bringing you that renewal in uh in probably about 30 to 45 days.

Um, we're paying um a dollar eighty a square foot here.

We've got um, and we have a fixed purchase price that we've negotiated in this deal of twelve million dollars, so uh and that that fixed price lasts for three years.

So it gives us again some additional flexibility in that.

Um, and with that, if you have any questions.

Thank you.

Item six is a resolution that approves a new lease uh with NIST group LLC for use of property at 1908 NS Avenue.

Uh we summarize the deal terms on page 22 of the report.

Uh you'll note that the um rent for this lease starts at $631,000 a year, then escalates by three percent uh per year during the initial six-year term.

And so we estimate that the city will pay $4.1 million in rental costs, and those costs will be funded by charges to city departments through the central shops and real estate division work order funding.

Um, in addition to that, the lease has the landlord constructing tenant improvements at the site to improve the site includes a lot and then uh two buildings, so there are improvements to the buildings and there's charging stations that are being installed.

That amounts to about $350,000, and that will be paid for by certificates of participation debt.

The overall fuel tank replacement project is actually going to cost $20 million and take place over the next several years at two sites that the city owns uh that are used by central shops, and that will also be paid for by certificates of participation.

Um the the final thing I'll say is that the lease cost is based on uh comparable transactions in the area, which we reviewed as part of um this report.

So we recommend approval of item six.

Thank you.

Uh I don't have any other questions.

Um just one quick question.

So with the um 20 million dollars of uh along with the temporary fuel tank, and then but then the actual 20 million dollars of worth of fuel tank renovation, how long is that project gonna take?

So the project at 2323 Caesar's office will be 18 months to two years.

Okay once that's complete, we'll start the project at 950 Bryant Street, which will take the same amount of time another two years.

And because the Caesar shoppers is a temporary fuel tank.

So we're gonna need the temporary fuel tanks while we're doing both stations to make up for the amount of fuel we have to have for all the vehicles in the city.

So it's roughly about 18 months and then plus two more years.

So that again, I'm sorry?

How long?

So help me understand.

How long would it take for the 20 million dollars for the fuel tank renovation?

It's gonna be a total of four years.

Two years for Caesar shoffers and two years after that for the other one.

I can't have both stations down at the same time because we need to fuel vehicles and keep the city moving.

I see.

So 18 months and then two more years, and then we'll be completed.

Understood.

And then it's the 18 months starting soon after we commence this uh lease.

So the goal is to have the tanks out of the ground at Cesar Chavez by December 31st.

So once we get this lease done, then we'll set up the temporary fuel station.

They expect to give the contractor for the Cesar Chavez site notice to proceed hopefully next week.

Wonderful.

Okay, thank you.

Sure.

Um thank you.

I don't have any other questions.

And uh with that, let's go to public comment on this item.

If you have any members of the public, I wish to address this committee regarding this item number six.

That was your opportunity.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Um, colleagues, I would like to move this item to full board with recommendation in the roll call, please.

And on the motion to forward to the full board to the positive recommendation.

Vice Chair Dorsey.

Dorsey, I member Chen.

Chen, I, Chair Chan.

I.

Chan, I we have three ayes.

The motion passes.

Thank you.

And Mr.

Clerk, please call item seven and eight together.

Item number seven and eight.

Item number seven is a resolution approving and authorizing the director of property to acquire certain real property located at 1660 and 1670 Mission Street, approving and authorizing an agreement of purchase and sale for real estate for the acquisition of the property for the purchase price of 18.5 million plus an estimated 30,000 for typical closing costs for a total amount of 18.53 million from 290 division E LLC or EAT LLC.

1660 mission LLC in Skyline Capital, a Wyoming Limited Liability Company, authorizing the director of property to execute the purchase agreement, make certain modifications, and take certain actions in furtherance of this resolution and the purchase agreement.

Effective upon approval of the resolution, affirming planning department's determination under the California Environmental Quality Act and adopting the planning department's findings that the purchase agreement and transaction contemplated is consistent with the general plan and the eight priority policies of the planning code.

And item number eight is a resolution authorizing the Department of Public Health to enter into a grant agreement for a term commencing on execution of the grant agreement through June 30th, 2027 between the city and county hacking by and through its Department of Public Health and the California Department of Health Care Services and its third party administrator advocates for human potential inc.

Uh having anticipated revenue to the city of 10 million, including a permitted and a restricted use, authorizing DPH to accept and expend grant funds, authorizing the grantor to apply for a receiver in the event in the event of the city's default, and authorizing DPH to enter into amendments or modifications to the grant agreement that do not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purpose of the grant, madam chair.

Thank you.

And again, we have Rio Este here.

Good morning, Chair Chan.

Good morning, Supervisor Dorsey, Supervisor Shen.

I'm pleased to present this uh acquisition of 1660.

It's actually 1660 and 1670.

Um mission street.

The two parcels kind of serve each other.

Go ahead.

Yeah, I'm Jeff C is the transaction team manager with the real estate division.

And uh let me give you a little background.

1660 mission is a 75,321 square foot building.

It's six stories tall, has underground parking with 51 spaces, and there's seven surface spaces that are uh that are also part of that, which is the other parcel that was in there.

Um the building was built in 1990, and the city acquired it in 1993.

We then uh sold it in 2017 for 36 million dollars, and we occupied it until 2020 when we reached substantial completion at 49 South Van Nash, where we opened up the permit center and relocated the staff to that facility.

Uh the building has been empty since then, and we are now um have negotiated a price.

Of 18.5 million dollars to acquire the building.

We are expecting closing costs to be about $30,000, and then project delivery costs, which uh we'll address in a minute here, but it is about we're estimating at $56,470,000 right now, but uh not to exceed number of $55 million.

Now to um tell you about what we're going to do in this building.

We have Kelly Kirkpatrick, Director of New Beds and Facilities from the Department of Public Health.

Thank you.

Good morning, supervisors.

I am so pleased to be here today and to have the co-sponsorship of the mayor's office and Supervisor Dorsey on this item, so thank you.

Um we are very excited to share our plans for 1660 Mission, a new health hub for San Francisco, which we're calling our health recovery and connection center.

The Department of Public Health will transform this unused building at 1660 Mission to create a central hub for health care services.

The proposed project will expand access to treatment and recovery and secure a permanent home for City Clinic.

The proposed project creates the opportunity to provide streamlined, coordinated and care with behavioral health services, treatment programs, pharmacy access, and sexual health care co-located in one purpose-designed building.

Many of these programs currently operate in inadequate lease spaces that can't expand to meet demand.

This building will allow SFDPH to connect more people to care and treatment, including serving as an access point for people to start treatment.

The enhanced space will improve access to on-demand medication treatment, medical services, health assessments, caseworker meetings, and pharmacy pickups.

City Clinic.

Voters overwhelmingly supported a new home for City Clinic in the 2024 Healthy Safe and Vibrant San Francisco Bond.

Now, 1660 Mission will be their new home, providing city clinic staff and clients within the expanded and clinically appropriate place for care.

City Clinic desperately needs a new building to continue providing essential services.

It currently operates out of a hundred-year-old firehouse that can no longer meet the need of City Clinic staff and patients.

A better functioning clinic space will improve the health outcomes of patients by expanding lab functions for on-site testing results, processing the same-day diagnosis, strengthening coordinated care and other needed services, ensuring faster, more streamlined services, and providing much needed ADA accessibility.

The new building at 1660 Mission will increase access to treatment and recovery services by securing a permanent home for key behavioral health resources that are currently located at the wholly and adequate 1380 Howard Street.

This secures a permanent home for these services and a lease space that is and gets us out of a lease space that is cramped, outdated, and cannot expand to house new treatment and recovery services.

We will be able to connect more people to care and treatment, including serving as an access point for people to start treatment.

The enhanced space will improve access to on-demand medication treatment, medical services, health assessments, caseworker meetings, and pharmacy pickups.

Specifically, the following programs from 1380 Howard, currently in District 6, will move to 1660 Mission.

This includes our behavioral health access center.

We will be able to expand our BHAC as we call it into a hub where clients can be assessed for behavioral health needs, prescribed medication, and receive access to mental health and start treatment.

Behavioral health pharmacy will also be relocated to help fill prescriptions, including medication assistant treatment for substance use disorder, as well as our Office of buprenorphrin Induction clinic, which is operated by UCSF, a clinic that helps initiate buprenorphering treatment for opiate use disorder via walk-in or appointment.

Consolidating these services will reduce barriers, speed up care, and help more people stabilize and recover.

Additionally, we are actively exploring program models for a center that will serve as a home for a 24-7 center available for law enforcement to safely transfer intoxicated individuals where they can be monitored, stabilized, and connected to appropriate care.

As with all of our new acquisitions, DPH is committed to being a good neighbor, including transparency and accountability and engagement.

The facility will include on-site security, indoor waiting rooms and well-managed services, regular meetings with neighbors and stakeholders to hear feedback.

Additionally, we are bringing over 300 city and UCSF staff to a vacant building and revitalizing that block to help support local services.

As a condition of the grant, DHS requires the city to agree to several terms, including a 30-year use restriction on the portion of 1660 mission dedicated to behavioral health programs.

We must execute this BCIP 5 grant agreement by mid-October or face likely rescindment of the funding from DHCS as we have worked to secure this site after attempts for other sites did not come to fruition.

With that, I will turn it over to the BLA.

I'm here to answer questions and also have many people from BHS and city clinic care.

Should there be any program questions?

Thank you.

Item seven is a resolution that uh approves a purchase and sale agreement with the owners of 1616 mission to acquire that site for the city.

We detailed the tenants on page 27 of the report, but as was noted by uh the DPH staff, the building will co-locate city clinic as well as behavioral health uh client-facing programs and some behavioral health administrative functions in this building.

And we detailed the fiscal impact on page 28 of our report.

There are several fiscal impacts that we know in our report.

One is the purchase of the building, which is 18.5 million dollars.

That value is confirmed by an appraisal and an appraisal review, and will be paid for by homelessness gross receipts tax.

In addition, DPH is estimating that there'll be 56.7 million dollars in renovation work uh to convert the building from an office to a clinical space that will take place over the next several years, and the building will not be open until 2028.

Those costs are funded by capital revenues that have essentially already been appropriated by the board, except for this 10 million dollar grant that's on the budget uh before you today.

In addition, there's seven and a half million dollars for furniture and equipment that DPH is still identifying a funding source for.

Um, and the programs are not expanding either.

The city clinic space is doubling, but DPH reports that they're not expecting to increase the operating cost of that program.

Uh the building will be able to house a new law enforcement drop-off program for people who are intoxicated uh but may not need to go to jail.

That program actually was budgeted in this year's budget as part of the break in the cycle initiative.

Uh, it's funded by the general fund, 1.2 million dollars this year and 3.1 next year, uh, and then we'll annualize after that.

Going forward, the money will be used to fund a temporary program or uh a program at a temporary site while the renovation takes place and then relocate to this new building.

And we recommend approval of item seven.

Thank you.

And uh Vice Chair Dorsey.

Thank you, Chair Chan.

Um, I just wanted to express my support for the acquisition of 1660 Mission Street and more than that to um express my enthusiasm for the focus on drug treatment and sustained recovery that it represents.

Um as we've heard from the presentations, the site will allow us to um co-locate the San Francisco City Clinic with the central behavioral health programs, including the behavioral health access center and pharmacy, which is right now about three or four blocks away.

Um these moves will not only create ADA compliant modern facilities, um, this is gonna save taxpayers an estimated 1.7 million as the BLA mentioned just by moving from leased to um city-owned space.

This project is about delivering care responsibly and prudently, um, saving taxpayer dollars, improving patient care, and advancing Mayor Lurry's breaking the cycle initiative, which I strongly support to better um incentivize treatment and sustained recovery for those struggling with substance use disorder.

So I'm happy to support this.

I want to particularly commend the Department of Public Health and Real Estate Division for their coordination and diligence uh in this process in identifying this property and advancing a plan that expands services in a way that strengthens public health while also respecting the um the needs and the sensitivities of the surrounding neighborhoods.

As we saw through much of the debate around geographic equity for homelessness services, um a small handful of neighborhoods is often called upon to host a disproportionate share of services for those who face some of the most serious um behavioral health challenges our city sees.

In West Soma, this was particularly true during COVID when the siting of several shelter-in-place hotels really changed the neighborhood and lost a lot of confidence among residents in anything that the city does.

I really do appreciate that um city departments are sensitive to that in engaging with the neighbors.

They appreciate why why people may not trust the city, and I think everybody does internalize too that it is our job to win their confidence back.

So I take everybody at their word for that.

I'm committed to it.

I know you are, so I want to thank everybody for that as well.

Um I appreciate the commitment to minimizing potential issues with security services and providing for a wide range of services, as we said, from city clinic to BHC, together with office space for hundreds of workers, which will assure foot traffic, economic activity, and renewed vitality to this area.

I know it will um greatly benefit um staff and patients, and I'm confident the neighborhood as well.

It's the it's it it is a forward-looking investment.

I'm happy to support, and I'm grateful to everybody at DPH real estate, uh Mayor Lurie's staff for their persistence and professionalism in bringing this forward.

Thank you, Vice Chair Dorsey, and um I don't have um many.

I don't have uh additional questions.

I I think that um and but please do um validate if you know with the city clinic and it just throughout the report, you know, there's a discussion about wow there's more space that doesn't necessarily mean that you're increasing the operation um budget for your programming, and my assumption is it just means that you know city clinic isn't in the best space as it currently exists anyways, and so with the new space, the assumption is it's ADA accessible, just more space, overall better environment, but the program is still gonna continue to run as it currently budgeted.

Correct.

That is correct.

We anticipate serving people better in more space, having a safer um better functioning space for our staff.

Um we expect to serve more people, but don't expect to increase the operating budgets with our ability to have more space to serve clients.

Thank you.

And um during the transition, just the moving.

Can you help me understand just kind of how does it work in the timeline of it, like um for just transitioning from city clinic to the new space?

Um, how long and what does that look like?

I might defer to my colleagues in our capital facilities team to answer the kind of timeline of moves.

Um we do anticipate that um our goal is to open um 1660 mission by the end of 2028.

Between now and then, we obviously have to close the transaction, work with DPW on developing the bids and scope for the work undergoing construction, and then there will be a phase kind of move in of services.

If you need anything more specific than that, I will have to defer.

Okay.

No problem.

Just kind of want to just understand approximately the timeline, and we're anticipating.

I mean, it's very exciting time for DPH, not to mention also the public clinic number four in Chinatown, all of it, just bringing a better level of health care all across the city.

It's it's great.

It's a great thing.

So thank you so much for your work on this.

Uh I don't have any other questions.

Let's go to public comment on this two items.

Yes, we are opening public comment for both these items seven and eight.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

Seeing no public, no public comments, public comment is now closed.

Colleagues, I would like to move these two items or actually I should say Vice Chair Dorsey.

What would you what would you like to do with these two items?

Thank you, Chair Chair.

I would like to uh move these items forward to the full board with our positive recommendation.

A roll call, please.

And on that motion by Vice Chair Dorsey that we forward these both these resolutions to the full board with positive recommendation.

Vice Chair Dorsey, aye.

Dorsey, aye.

Member Chen.

Chen, aye, Chair Chan.

Aye.

Chan, I.

We have three ayes.

The motion passes.

Mr.

Clark, please call item number nine.

Yes, item number nine.

Is a resolution approving amendment number two to the agreement between the city acting by and through the Department of Public Health and Edgewood Center for Children and Families to provide hospital diversion and crisis stabilization unit services to extend the term by four years and nine months from September 30th, 2025 for a total term of October 1st, 2023 through June 30th, 2030, and to increase the amount by approximately 22 million for a total not to exceed amount of approximately 31.6 million, and to authorize DPH to enter into amendments or modifications to the agreement had to not materially increase the obligations nor liabilities to the city and are necessary to effectuate the purposes of the agreement or this resolution.

Madam Chair.

Thank you.

And again, we have Department Public Health here.

Thank you, Chair Chan, Vice Chair Dorsey, and Supervisor Chen for taking the time to hear this contract today.

My name is Faranaz Farmont, and I'm the director of the children youth family system of care and behavioral health at the Department of Public Health.

Next slide, please.

I'm here to present a contract for Edgewood Center for Children and Families and programs that are part of our crisis continuum of care, including our 23-hour crisis stabilization unit and 24-7 hospital diversion program, inclusive of a partial hospital program step down.

Together, these programs serve a total of 203 placements per year.

The annual contract amount without contingency is 4.2 million with a not-to-exceed amount of 31,603, 801.

This request will extend the contract term by four years and nine months for a total term of October 1st, 2023 through June 30th, 2030.

Under the proposed contract, Edgewood will continue to provide three programs.

Hospital diversion is an intensive 24-7 program for youth ages 12 to 17 who are at risk for out-of-home placement and/or inpatient psychiatric hospitalization.

This program serves as an alternative to inpatient care and/or acts as a step down from inpatient hospitalization to further assess stabilize and support discharge planning for youth into our services.

We contract for two beds and 35 placements per year, and the average length of stay is approximately three weeks.

For youth in the hospital diversion program who no longer need the 24-7 care but need continued intensive day services before discharging to an outpatient or wraparound provider.

We've budgeted that 14 youth can step down to Edgewood's partial hospital program, which runs Monday through Friday, 10 30 to 5.

The third program is our crisis stabilization unit, which is a 23-hour sort of psych emergency type services, serves youth ages 6 to 17 that are in acute psychiatric crisis.

This program functions as a 5585, which is the youth and voluntary hold receiving center and supports coordination of hospitalizations when indicated.

DPH agrees with the BLA recommendations and respectfully requests approval of this item.

Thank you.

Thank you.

Item 9 is a resolution that approves an amendment to D BH's contract with Edgewood Center for Children and Youth.

The amendment extends the agreement through June 2030, and then increases the value by 22 million dollars to be 31.6 million dollars.

We detailed the services on pages 31 and 32 of our report, and we note that the programs are meeting expectations in the city's contract in terms of the amount of service delivered, and that Edgewood is meeting the city standards for financial management and governance of nonprofits.

This is about a four million dollar a year contract, a quarter of which is funded by Medi-Cal, and then the rest is funded by the general fund.

We recommend approval of item nine.

Thank you.

I mean, I think uh I do want to flag um, could you discuss a little bit about the monitoring plan?

Sure, the most recent monitoring plan for fiscal year 24-25.

Correct.

Yes, there was an allegation in January 2024 of a child abuse allegation against a staff.

It was found to be unsubstantiated, and Edgewood took all of the steps necessary to report.

It was a non-DPH client, another insured uh client, they reported it to the family, the insurance provider, and the state licensing.

However, there was a failure to report the incident uh to DPH and the HSA CPS hotline.

So, because of that failure to report, we put a pause on placements and worked with Edgewood around a root cause analysis to understand Edgewood's failure in making these report and develop recommendations in a monitoring plan.

So that investigation of this failure reported, highlighted a need for policy clarification with DPH for reporting on non-DPH clients, in addition to clarity from HSA and the CPA CPS Hot, the Child Protective Services Hotline in terms of reports that they take and follow up on.

In addition, it resulted in a monitoring plan informed by the root cause analysis to further refine and improve communication and coordination of care in terms of the their reporting practices, training of staff around different protocols.

The monitoring occurred for one year through June 30th, 2025.

It included monthly meetings led by BHS's quality management department in collaboration with our system with me in the system of care.

And at the conclusion of the monitoring, we feel confident that they met all of the requirements and are well positioned to respond correctly, swiftly and appropriately to any future incidents.

I also just want to emphasize that they serve a very vulnerable population and allegations may come up.

This again was investigated thoroughly unsubstantiated, but the concern was really around their failure to report the incident, you know, through our quality of care reporting to DPH.

Yeah.

And was there could you just articulate a little bit more about, you know, I I agree.

There's it's it's concluded.

Um so that's not what I'm focusing on.

Um, and and I am focusing a little bit more on as I I agree with the monitoring plan that we really was focusing on the reasonable reporting.

Was it just, you know, is it training?

Is the staffing the or the maybe even the lack of staffing?

Can you help us understand?

Was what was the cause of that gap of reporting?

Yeah, part of it I'll say was ownership on our part, part of the root cause analysis.

There was confusion around reporting when it's a non-DPH client.

So this was a kid insured by Kaiser because these programs serve all, you know, per serve private insurance, private pay Kaiser.

So we took steps in DPH to update our policy and make very clear around the reporting protocols for clients for um, you know, for incidents that occur for members that are not our members, where there's de-identified reports, but we still need to be aware of what's going on since that impacts the mill you and clients we place there.

So part of it was a lack of clarity around that that improved our policy development.

Some of it was uh working with the Child Protective Service Hotline because oftentimes the staff were getting confused when they report allegations to the hotline.

The hotline workers say this is in our jurisdiction to follow up on this investigation, report it to the state licensing.

So we worked with CPS to really make sure they take all referrals and cross-reference.

You know, and some of it was internal leadership changes and structure internal communication gaps.

The very top leadership absolutely knew the allegations should have been reported to both HSA and DPH, and there was a breakdown in that communication with folks more on the ground.

So we really worked on that internal communication.

We reviewed reports on a monthly basis to see how the timelines for the reporting, the cross-referencing, and now I can say there is an over-reporting of absolutely every single detail that takes place at Edgewood.

I I mean, I always think that actually all across the board, like it's more communications, the better.

Um, many things, not just, you know, something as a serious matter.

Um, but that's good to hear, and thank you so much for walking us through.

Um sounds like there's an improved communication channel.

Um not today, but I think separate and apart because I assume that there is sort of like a formal process.

Should um these reporting happen and that you learn about it and have these information.

I my assumption is there's a specific protocol, um, separate and apart from just communicating to determine action appropriate um to follow up with a contractor.

Yes, we have a quality of care reporting process and policy, and so reports go to BHS and within the Department of Quality Management, there's a risk management risk manager, um, director that reviews all of those incidents and takes appropriate action with with stakeholders based on the types of reports that are coming in.

Understood.

Thank you so much.

I I learned something new every day, and this is something I really want to know about.

So thank you so much for the information.

I really appreciate it.

Uh let's go to public comment.

I don't have any other questions.

Let's go to public comment on this item.

Yes, we're now opening public comment for this item number nine.

If we have any members of the public who was your justice committee, Madam Chair, we have no speakers.

Seeing no public comments and public comment is now close.

And um colleagues, I would like to send this item to full board with recommendation and a roll call, please.

And on the motion of forward to the full board with positive recommendation, the vice chair Dorsey, and Dorsey I member Chen.

Chen, I, Chair Chan.

I.

Chan, I we have three ayes.

The motion passes.

Thank you, supervisors.

Thank you.

And um, Mr.

Clark, please call item number 10.

Item number 10 is a resolution authorizing the Department of Homelessness and Support of Housing to execute a subgrant agreement with the urban institute for a total amount not to exceed 200,000 of just home cohort one continuation funds to retroactively accept and expand those grant funds to support continued project management of the just home program for costs incurred June 15th, 2025 through September 30th, 2026, and authorizing HSH to enter into any additions, amendments or other modifications to the subgrant agreement that did not materially increase the obligations nor liabilities to the city or materially decrease the benefits to the city.

Madam Chair.

Thank you, and we have HSHU or Department of Homelessness and Supportive Housing here.

Thank you.

Good morning, Chair Chan.

Good morning, Supervisors Emily Cohen with the Department of Homelessness and Supportive Housing.

Um, I'm here before you today with an acceptance expend for $200,000 in grant funding to continue San Francisco's Just Home Program.

The resolution authorizes us to retroactively execute a subgrant agreement with the Urban Institute to support continued project management for the Just Home Program for costs incurred between January 15th, 2025 and September 30th, 2026.

As I said before, it's a $200,000 ANE.

And the resolution is retroactive as HSH received the draft sub-grant agreement on July 15th, 2025, when it went into effect.

So we brought it to you as soon as we could.

A little bit of background about the Just Home Program.

It's a national program designed to advance community-driven efforts to break the cycle and break the links between housing instability and incarceration.

And this was launched in 2022 by the MacArthur Foundation and the Urban Institute.

San Francisco was one of four communities chosen to participate in the program.

HSH has, as the lead agency is supporting the collaborative development of a comprehensive, equitable and coordinated system to bridge silos between homelessness, housing, criminal justice systems, and has shared San Francisco's best practices on a national scale with the other partners.

We are proud of the work accomplished under this program over the last few years, which includes the development and funding of a transitional housing, a new transitional housing program for justice involved young people that will be opening this fall in a partnership with Third Street and through Just Home, sorry, through Just Home Third Street will be activating this long vacant site in District 10 to become Tay Transitional Housing.

And I believe I was before you to talk about that program last month.

And happy to answer any questions that you might have.

Thank you.

I don't have any additional questions.

I don't see any other name on the roster.

Thank you so much for your work on this.

Um and we'll go to public comment on this item.

Yes, we're opening public comment for this item number 10.

If we have any members of the public who wish to address this committee.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues, I would like to move this item to FUPOL with recommendation and the roll call, please.

And on that motion to forward to the full board with a positive recommendation.

Vice Chair Dorsey, Dorsey, I member Chen.

Chen.

Aye, Chair Chan.

Aye.

Chan, I.

We have three ayes.

The motion passes.

Yes, item number 11 is a resolution approving the third amendment to the grant agreement between Urban Alchemy and the Department of Homelessness and Supportive Housing for Shelter Services and Operations at 7-Eleven Post Street, extending the grant term by six months from June 30th, 2025 for a total term of March uh 21 2022 through March 31st, 2026, increasing the agreement amount by approximately 4.9 million for a total amount not to exceed approximately 27.6 million and authorizing HSH to enter into any amendments or modifications to the amendment did not materially increase the obligations nor liabilities or materially decrease the benefits to the city and are necessary or advisable to effectuate the purposes of the agreement.

Madam Chair.

Thank you.

And again, we I want to first acknowledge uh Supervisor Danny Sauer is here, and um I am going to, if it's okay, we're gonna have the department presentation and then the BLA report and then remark.

Let's go.

Thank you.

Good morning again, uh Chair Chan, Vice Chair Dorsey, Supervisors Emily Cohen with the Department of Homelessness and Supportive Housing.

And I'm joined today by my colleagues, Gigi Whitley, our chief financial officer, as well as Dr.

Lena Miller from Urban Alchemy.

As the clerk mentioned, the resolution before you today is a third amendment to a grant agreement between our department and Urban Alchemy for the continued operation of the adult shelter located at 7 Eleven Post Street.

We are proposing to extend the term of this contract by just six months to through March 31st, 2026, and increase the not to exceed amount to 27.6 million dollars.

This proposed amendment was reviewed and approved by the Homelessness Oversight Commission back in August.

The amendment is short term, six months only to allow HSH to continue to work with Urban Alchemy as they progress towards full compliance from them both their fiscal monitoring and fiscal and program monitoring findings.

Urban Alchemy has been highly responsive to both the findings from the joint fiscal monitoring as well as HSH's actions and are working very collaboratively with the city to improve their practices so that they can continue to be a really important partner to HSH as well as other city departments.

We are in the process of or Urban Alchemy has detailed an action plan to come into compliance with all outstanding issues.

And we feel like six months, the six month extension is intended to give urban alchemy the time to do that so that we can enter into a longer term contract in full confidence down the road.

So the agreement itself funds both shelter operations and support services for the adult guests at 7 Eleven Post Street.

This the cost per bed per night is about $91, which is below our estimated cost for shelter, and this includes meals, 24 7 staffing, case management, and benefits navigation.

This site is really interesting.

It's a semi-congregate format, it's a former youth hostel.

So people might have a single room, we might have doubles, and we might have quads with bathrooms on each floor.

And so and a few of the rooms actually have private bathrooms.

So it really lends itself to serving people very well in small, very dignified settings in terms of their room, and being able to access robust amenities on the ground floor of the property, including meals and community space, recreation space, etc.

Additional program context.

In the last fiscal year, Urban Alchemy served about 690 unique adults at this shelter.

On any, we have increased capacity at the site slightly so to accommodate for some beds that are offline at an at MSC South for construction, and we are still able to maintain a really uh competitive price at this site and high service outcomes.

Um per the chair's request, we have included some photos.

Um, as you can see here, this is the lobby of the building.

Guests are greeted.

Um, it very much looks like a hotel lobby.

Uh, guests are greeted in a warm and welcoming way as they come in.

This is the hallway on the first floor.

I it's you can't see it here, but there's a really cool mural painted on one of the sides, and it is a very warm and welcoming environment.

This is an image of a single room, but as I mentioned, there are singles and doubles and quads.

And um, you know, I think one of the other things I wanted to mention as we move forward with this proposed extension is the amount of work that's gone on between Urban Alchemy and HSH and the controller's office to address some of the findings in the uh joint fiscal monitoring, but as well as the positive outcomes that the program itself is having.

So outside Urban Alchemy is obviously a very large organization, but 7-Eleven Post, they in this contract, they've met five of their six service objectives.

Guests have very positive things to say about this shelter.

I work very closely with the Lower Knob Hill neighbors and folks around the site, and while there have been challenges, as there are with any project, we have really come together, brought ambassadors to the area, and are doing everything we can to ensure that this site is not only great for the people staying in it, but that it's also a positive asset to the neighborhood, and that's a continuous work in progress, but something that I know we're all deeply committed to.

Thank you.

Item 11 is a resolution that approves uh an amendment to a grant between HSH and Urban Alchemy.

The grant funds a shelter operation at 7-Eleven Post, and the amendment would extend the agreement six months uh through March 2026, and then increase the value of the grant by 4.9 million dollars to 27.6 million.

The shelter programmatically is performing well.

They are largely meeting the objectives in the grant agreement, and the beds are full.

We looked at the past two years of data.

Uh but we also know in our report that there have there are a serious corrective actions um underway that HSH has asked Urban Alchemy uh to address related to their invoicing and then overspending um on city grants.

The problem actually goes back to 2023, it has gotten worse, and apparently at this site, um Urban Alchemy knowingly overspent their budget um by $800,000 um after being told not to by HSH, and then HSH is paying them $336,000 of that demand for additional money for fiscal year 24-25.

So this amendment doesn't just extend the agreement, it also provides the back pay for the spending beyond what the grant budget could support last year, and then annualizes that spending uh going forward.

Uh so you know we look at a lot of nonprofit contracts.

I think this is fair to characterize as um extreme, and uh we don't see this that often.

Uh and I think, but as a practical matter, the city this grant ends in a couple weeks.

So if it's not extended, the service would go away and it would essentially be a 10% decrease in the city's shelter capacity.

Um so given the timing of when the department has brought this to you, uh I think the only option is to end the program or can or continue it for six months.

Uh I think other options going forward, though, after the six months pass, and presumably they come back to to extend the agreement and provide an update on on the performance um towards the financial management goals that the city has set out for urban alchemy.

Um, you know, that the department is planning to reprocure their entire shelter portfolio.

They could change the timeline on that uh and advance it, because right now it's not going to happen for another year with new contracts not starting until 2027.

But um, that's something that could be advanced going forward.

But I think immediately there's very little, there's little room to maneuver on this one.

Thank you.

So advisors outer.

Thank you, Chair.

Um, uh first um I want to spend a minute on the going further into detail on the controller's findings if possible.

And if we don't have anyone from the controller's office, Ms.

Goan, if you might walk us through those two findings again.

Um, you know, because especially hearing them classified as extreme, I do want to make sure we spend some time talking about specifically what the two findings were, and then um, of course, I want to hear from Urban Alchemy on on their response and how they're adjusting their practices to respond.

I just want to quickly flack, we do have someone from the controller's office here, but um, but we let's continue with HSH and then uh let's give the controller's office a minute to to kind of figure this out if if they want to send someone else to here to speak specifically on the letter.

Sure.

Thank you.

Uh Gigi Whitley, I'm the chief of administration and finance for the Department of Homelessness and Supportive Housing.

Um good morning, Chair Chan and committee members, happy to be with you.

Um I'll start with the controllers uh nonprofit um fiscal and compliance monitoring results.

HSH was the lead monitor, so I feel uh well informed to be able to speak to that monitoring.

Um I think as you and the committee are aware, um the controller's office has recently updated their um compliance uh reporting to uh different tier system, tier one, two, and three.

There are certain um uh guidelines in the monitoring, and there are certain requirements as part of the monitoring.

So uh the monitoring focused on two findings.

First was uh the city's guideline that the agency has at least 30 days of operating cash.

Um this is um intended to alert the city of any sort of systemic um financial um uh issues.

The second finding was related to time sheets if employees are paid by more than one funding source, it is recorded and recommended that the um that a time study is conducted for that employee to ensure they are allocating their time appropriately.

So, those were the two um findings that resulted in urban alchemy getting placed on tier two status, um, and uh I don't have more information on that, but it would defer to the controller's office.

I am prepared to discuss our corrective action letter um, you know, that we issued um near the end of the fiscal year.

Sally Ma from the controller's office.

Um, a representative from the controller's office city performance team will come down and address the committee's questions.

Okay, um, do we know how long it's gonna be?

A few minutes?

I hope a few minutes.

Okay, keep no patience.

Let's let's make sure they they run really fast.

Um I suppose.

Sure, if it's okay, could we hear from Urban Alchemy for their response on this?

And and you know, I understand that they've put into place in early July a plan to address these concerns.

So I would love to hear details on those from Urban Alchemy.

Well, actually, if I may then, um, I would actually hear directly from the HSH about, you know, of course we're gonna look forward to see urban alchemy, you know, to be back on track and be able to be in good standing, but that is a I believe a different path, and meaning it's not the same.

Urban alchemy has an issue right now because it's not just with the 7-Eleven post contract, it's overall, um, and we know that there's heart, there's actually other contracts that urban alchemy has with the city.

Um, to address simply just 7-Eleven posts is what I want to discuss at this moment, um, and then while we wait for the controllers to come back or to have send someone to be able to speak the letter as a whole on the larger issue.

What is HSH's plan about 7-Eleven posts specifically, knowing that this is not just about uh you know urban alchemy issue, but it's also about the fact that the contract will come to an end in six months.

What is your long-term plan for this site and what is the alternative, particularly if in six months that urban alchemy is still not quite there yet to come back to the good standing?

Sure.

So a couple things uh separate from the controllers process, uh HSH proactively issued a corrective action letter based on our concerns about end of the year um overspending on this particular agreement.

We have worked uh we have directed um urban alchemy with a five-step corrective action plan.

They've been very responsive.

I've met directly with their um relatively new CFO to see uh what she has put into place.

So I think it would be helpful for um to hear from the urban alchemy leadership.

But this was really a proactive step by the department toward um greater accountability, and you know, I think just a tier two finding would not have been enough for us to recommend a shorter extension.

It was really that coupled with our own observations about invoicing and overspending that we thought it prudent to say, okay, the contract's coming up for renewal, uh we would like to extend until we procure our portfolio on a longer period, but we need to make sure you're on track before we make that decision and bring before the board a longer extension.

So our plan in short, Chair Chan, is to be in close contact with urban alchemy on this five-step plan, which I'm happy to go over, check in with them, you know, weekly, monthly.

Uh, we're in um continual conversation.

And if we see progress, great.

Um, we'll be back before you before the end of that six-month talking about that progress and hopefully recommending a larger, a longer extension to the contract.

If we're not, um, we'll need to make some difficult decisions, including bringing in another provider.

I will note there is an opportunity to cost to all of this.

Uh, you know, finding another provider to take over is not, you know, uh a turnkey process.

Um, the other consideration is that urban alchemy is the lesse at the site, and so um that would also take some working out, but we are committed to working with urban alchemy on a corrective action plan, ensuring that they come back into compliance, and if necessary, bringing in another provider uh to operate the site.

It looks like you do have someone from the controller's office here.

Would you like to continue with the controller's office before you move on to urban alchemy?

Please.

We're asking for a little bit more detail on the two findings on urban alchemy at 7-11 post.

Hello.

Uh Laura Marshall with the controller's office.

Um I can share a bit of detail about our corrective action process in the letter that we issued recently.

Um we uh identified through the fiscal monitoring process last fiscal year.

We've been doing analysis on the findings and determined that Urban Alchemy had one uh finding that was criteria for um a an escalation to tier two.

So uh tier two is how we define what we call serious issues as opposed to tier three, which are this more severe issues, right?

So it's that uh middle level.

Um we issued a memo to uh urban alchemy in a couple weeks ago to notify them of this uh designation.

Um the criteria that they met related to their their payroll and their timesheet records essentially um it's a little bit uh complicated, but uh the we asked them to do uh cost allocation of their employees who are salaried using an actual basis, so meaning they have actually identified how much time an employee has spent on each program that they may oversee and work on.

Um they had been um doing timesheets that are uh wouldn't we're not doing that.

We're not um uh communicating how much actual time each employee was spending on each program.

So they were using a different basis for how they allocated costs across programs.

We have a standard that says they need to have functional timesheet or they need to use a time study, um, and so uh to kind of communicate the actuals that um staff are spending.

They are uh we've met with them since we issued the memo, and so they're actively working on um conducting time studies with their staff now.

Um, and we have some follow-up meetings with them planned.

When we place an organization on a citywide corrective action, we create an action plan with them to determine milestones that they need to meet in order to come off of that tier.

So we're engaging with Urban Alchemy now to establish what those milestones are and how they can kind of communicate that they're now in line with the standards.

So what we'll expect to see is that they have conducted the time study according to general standards for these practices, that they have then integrated that information into their cost allocation plan, meaning that they have updated their budgets to show that they're allocating based on the actuals that they've they've gathered through their time study process.

And once we've identified that they've they've met those standards that they've sort of implemented on those actions the way we expect, then we will take them off of the tier.

Um and they will be presumed to be in conformance with our with our policies.

Can you speak to that?

That is not a part of the controller's office uh corrective action policy.

That's not the um uh criteria that we used when placing them on tier two.

There is a distinction between the work that the departments do to issue corrective actions to their own contractors as part of their contract management, and what um of those corrective actions have been escalated to be considered a severe issue that are result in uh citywide corrective action designation to tier two.

So the only thing that has put them on our citywide corrective action um designation is that timesheet issue that I mentioned.

Okay.

Well, between the guidance from the controller's office and the guidance from HSH chair, I think it might be a good idea to hear responses from Urban Alchemy to all of those points, if we may.

Sure.

Hello, um, my name is Melik Tota.

I'm the CFO of Urban Alchemy.

I started in April of 2024, so I've been here about a year and a half.

I appreciate the opportunity to speak to you today.

So I um I'll start with just sort of generally my mandate, if that's okay.

And then if you have specific questions, I can go into that.

Does that sound okay?

Yeah.

So when I was brought on, um it was really important that we, you know, I focused on internal controls, financial acuum, and really stepping up the entire agency's financial processes.

And um I'm very proud to say that we've made a significant amount of progress already around these things.

Um, and you know, I can share a few just overall um comments around that before anything specific to the findings.

So the first thing that I I really worked on is implementing and creating a structure of data so that we could create appropriate reports.

Um, and so that was like that was very important so that we could ensure we could get data, real data, metrics, things like that out of our systems.

The second thing I did is I hired staff that were um appropriate for financial analysis and planning and accounting prior to me joining all of our accounting staff was outsourced.

Okay, so that was a really important point to bring all of that in-house so that we had direct control and communication and and um partnership with our programs.

Um the third thing that we did is creating detailed budgets for all departments and programs, working directly with the program teams.

Um, and then last but not least, supporting the, you know, identification and reporting, and to the extent that there were or are corrective actions or you know things that we need to do to make sure that we meet budgets.

That's a huge mandate that we have as well with our team.

So our team, our financial um analyst team, is really about the reporting, but also, as I said, the relationships with the programs to make sure that there's understanding, knowledge, accountability around meeting budgets.

And so that's um a huge mandate that I have that I feel like we've made a lot of great progress on, um, that I just wanted to give you that background first before you know any specific questions.

That's helpful to start.

Are you able to speak specifically to the three items here that have been flagged around?

Absolutely.

Thank you.

Okay, so I think the there are the two areas that we're spoken of.

One was just the HSH corrective action plan that was around the overspending, and then the five items that the CFO spoke to.

The first was to develop an internal staffing schedule that reflects the budgeted full-time equivalent.

And so what we've done is we've incorporated into our budget negotiations with our contractors, a shift schedule.

So creating a budget is not just about you know identifying how many FTE it takes to kind of run a program, but it's also a comprehensive shift schedule saying how many days a week, what level of staff, how much staff do we need.

So that then is incorporated into our payroll system.

We have an enterprise-wide payroll system called PAYCOM, and that system allows us to load shift schedules into the system, and so we are able to kind of make that transition loading loading that approved budgeted shift schedule into our payroll system.

And then we also then can run reports that give us actuals to budget, right?

Which is another really critical piece.

So that's something that we have implemented, and as of August 2025, I just wanted to say that we are below our FT count is slightly below budget on both of our HSH programs.

So that track we have a tracking mechanism now that we're issuing, and we're able to kind of monitor that and share that with the program with the funder, which we did.

Um, seek the third is to seek written prior approval before incurring staffing costs beyond what is budgeted.

Um, and again, this is we acknowledge that we have we need to improve our collaboration, our communication with our with our funder, and when we take that very seriously, we um you know commit to providing any kind of um providing a written uh request for any kind of overspending that will potentially occur in the future.

Although that's something that we're really committed to not do.

Um the fourth item was uh detailed written policy for circumstances in which overtime is approved and a procedure, and so we have in our employee handbook clear instructions about um all overtime must be approved by directors and then also uh regional directors as well.

And in general, we have a policy that when we have call outs and our staff, we have supervisors step in.

So we're not um routinely you know adding staff through overtime, and in fact, only one percent of the overage was related to overtime this past year.

And then the last item is um to demonstrate that urban alchemy program and finance leadership are regularly reviewing spending against budget internally, particularly when it comes to staffing and taking action as needed.

And so here I just want to point out that we have about four different reviews that we're doing now, starting with the board of directors.

We issue a report every board meeting, which is every two months, where we show by program how we're spending against budget.

Um, we also share it with our executive team.

We also then share it with our regional directors, and lastly, we share it with our program directors.

So we believe it's really important to have this very strong net of financial review and accountability.

Um, and so that's what we've implemented, um, and we have added more financial planning.

Um, and you know, as I said earlier, focused on educating and holding staff accountable, the program staff accountable.

So those are the five items from the HSH corrective plan.

I can move on to the fiscal monitoring in the two findings.

Yeah, okay.

So the first item was provider was found to have 15 days of operating cash rather than 30, which is best practice for liquidity.

So what I want to do is I want to just acknowledge that yes, it would be ideal if we had more operating cash.

That's that's absolutely goes without saying.

What I do want to say though is, you know, we are in a unique situation like many nonprofits.

You know, we are dependent on our funders, and we have about 45 funders across the US, mostly cities, to fund us in enough time so we can use the cash coming in to pay our bills.

And um, like many nonprofits, we find ourselves in situations where there is a long window of payment, a long payment window.

Sometimes it can be 60 days or more, and that's just you know, based on sort of the the uniqueness, right?

It's just hard sometimes for us.

So what we do is we we look for what's our strategy, what's our strategy for um you know operating capital, and um what we what we've done successfully is we've gone to a bank and with our balance sheet, which is a strong balance sheet, we have a strong net assets, we have strong accounts receivable.

Our bank does a lot of due diligence on our balance sheet and says we will loan you X amount of money for um operating capital, and that's what we've been using, and it's worked for us, you know.

So we do have to have you know a line of credit, we have to pay interest on it.

Many companies do that.

It's not ideal, but that is kind of what we're using, and it's working.

So I just want to kind of point that out.

I don't I'm just hoping that we're not um portraying us as um our financials are not strong because I wouldn't I wouldn't say that, right?

Since we have clean audits and we um you know have a lot of financial diligence around that.

Um, and then I guess the the one thing that we are really focusing on in order to improve our liquidity is our uh development.

We have a development director, we're going after donations, and that's one way that we can actually get you know more unrestricted capital.

So then the last point was around the employee exempt, exempt employees' time is allocated to grants based on proration of the grant budget to a region or agency pool rather than a time study.

Um, and so um, you know, we we understand this is a requirement.

We have implemented it.

We have implemented in June, July, sorry, July, August, and September.

We're having about 15 staff in San Francisco who actually are shared across our San Francisco programs, do time studies, which means they're man, you know, daily going into a log and entering their time across all the programs they work in, and so that's something that we're doing, and we're gonna be incorporating all those results into our billing and our policy, right?

So that's something we take it seriously, we're doing it.

Um, I do want to point out that the majority of our staff are hourly, about 300 staff are hourly, and we use, as I mentioned, PACOM.

And the PAYCOM system, as I said, has a automatic shift schedule that you create in the system, and um we have what we call geofencing technology, meaning as staff enter a zone that they're working in, it automatically um you know registers them as a rival, arriving and departing.

So that's electronic technology that we have in place that we feel is the best in class, and that's for the majority of our staff.

So again, I just don't want to misrepresent that we're you know, we're not recording time properly.

The majority of our staff, we are we have this technology, and then for the 15 that we share, we have implemented time studies.

Okay, well, when did you come on as a CFO?

April 2024.

I see.

And uh so how me understand though that when you came on board, none of these were implemented, like meaning that you'd be at the time study, um, training of reporting, and sort of this kind of an as particularly over spending was not being tracked because you've been able to do that.

So it was done at the um, you know, at a at a like um a leadership level instead of being driven down through the organization, right?

And that's where I think the real change has been.

So, although there was spending done, it wasn't done as often, and it wasn't done as diligently, and we didn't have the tracking mechanisms.

So those all those things needed to be in place to really make it work.

Were you aware of the fact that they were overspending?

So we um contracts.

Yeah, the the contract situation, um, you know, we acknowledge that there was an overspend, and you know, we um had been communicating that overspend, but I think um probably we could have done a better job of communicating that, right?

I also think that what we were putting in.

Sorry, but you should have done a better job communicating with the city or with yourself internally.

Uh both, both.

I I mean, I think that I just want to flag, and I am looking to the controller for confirmation as well, is that the this problem is again not only pertaining to 7-Eleven posts, like separate and apart from 7-Eleven posts, we're talking about urban alchemy today, right now.

About the letter that a controller issue that it's not just about 7-11 posts, in fact, mid-market was also overspending where OEWD came before us for additional four million dollars, in fact, twice.

One is for three million dollars in December, and another four million dollars in March.

So, let me also just be clear that it's not just 7-Eleven posts that urban alchemy is overspending under your watch, it also actually overs an overspend under your watch again with mid-market, you know, uh contracts.

So, walk me through how is this happening all over the place as you as a CFO.

Yeah, so um what we often are um in a situation where we're asked to do work and we don't always have budgets in place for that work.

So I think to me that's the key.

We have to be we have to be a lot better about saying no when we're asked to do things where they're not budgets already approved.

So I think we try to be a very good partner.

We um have been successful in getting budgets approved.

Um, but usually when there's an emergency and and departments ask us to step up and help, we're very willing to do that.

And so I think that is part of the mandate I see is that we can no longer do that if we don't have committed budgets um and contracts in place.

I mean, it's sort of kind of confusing, right?

I mean, I think here I think for the 7-Eleven post, and I think that Department of Homelessness and Support of Housing could correct me if I'm wrong, but it seems like that you were told or you were informed that part pertaining to 7-Eleven post contract that there is no money for that, there's no budget for that, but you went ahead not only to go ahead and do the staffing and spending, but you also increase compensation.

Is that correct?

Understanding the the um sequencing, the sequence of that was different as far as I see it.

We um went through a budget process.

We we asked if we could increase staff wages commensurate with the rest of the the system in San Francisco because everyone's wages was going up.

So we wanted to make sure that this program had commensurate wages because we believed if we didn't, then it would really create a very hard vacancy issue and uh and challenges keeping staff in the program.

So we felt like we really needed to have this.

So we worked with the the city department trying to figure out how we could create room in the budget to make sure that we could take those wages up.

We knew that we might have to eat some of that ourselves, okay.

But we felt strongly that we needed to do that to make sure we kept the program strong.

Uh what happened then later is that we were asked to take on 30 additional guests, and in order to do that, we added more staff than we should have.

And so again, the sequencing was different.

We had less vacancy, that's true, but it was because we added more staffing to take care of sort of this change in mandate and adding more guests.

And that's where, in general, of course, what the controls office saying is is correct.

We had hope to fund the increased salaries through vacancy, but that vacancy didn't materialize because other things occurred that were unplanned.

I mean, I get it because during budget process, there's always a term that goes around, which I think you should familiarize yourself with.

It's cost of doing business, and um, you know, and there's a level of staffing, and then there's the cost of business uh increase, and totally understandable.

I mean, there we have plenty of uh contractors and vendors come through and indicating that you know, if we don't increase the the uh per units of service uh in terms of cost, uh if and funding, then there's gonna be decrease of service.

Uh was there any of those like conversation take place before you went ahead and hire more staffing?

Well, we knew that we had to hire more staff that was part of the mandate, right?

They they asked us to take on 30 more guests, and there was a budget that was given to us for that, including additional staffing.

But we added more than was agreed upon, and that's where the challenge was, right?

So I think um going back to sort of you know what these processes are, we need to have better communication, better um, you know, accountability um in you know the the weekly monthly conversations that are happening.

I think that is the crux, and I think those those things we we take them very seriously when we have implemented them.

Yeah, and then I think you can see, right?

Why I I cannot see why you're a tier two, because added onto that, you actually have a time sheets problem, like tracking problem.

So on one hand, you're you're saying we're at this staffing level, we're overspending, and then on the other hand, the city cannot account you for the actual time sheets tracking and management.

So there's not a data to be able to verify the type of level staffing require or even deploy uh sounds to me, and therefore you're ending up in tier two.

And again, you've been here for a year now, and then some.

So, and and now you just starting implementing this.

I mean, I think that I have a lot of questions moving forward for urban alchemy to be a good partner in this.

Um, and I think that this is a question that I don't know if it's gonna be you to answer this, but if I understand correctly, uh are there any substantiated uh labor violation that urban alchemy actually has in San Francisco right now, or or even like labor complaints file against urban alchemy.

Um well, you know, I do you want to speak to that or do you want me to speak to that?

Um so we we had um, you know, paga um claims um that were settled.

Um and so that is something that you know a lot of organizations across California have experienced.

It's not unique to us.

Um, and in fact, we've um spent a significant amount of time in improving our labor practices and our account accountability and timekeeping.

Um, even we've had out uh external experts say that we're you know best in class and how we track our labor, you know, um our how we've communicated and our timekeeping actually allows us to be in compliance with labor laws.

So I would say that we're better than most on that at this point.

Um, and I just want to also say that the the um the bulk of the cost for 7-Eleven post-overspending was hourly staff, not staff that would be completing time studies.

Those hourly staff wouldn't be tracked in our timekeeping system through geofencing.

So um on my side, I wouldn't say there's any issue with um inappropriate allocation.

I think the issue is more that we had too many staff uh working in that program.

I think um let me just be very clear about city and city laws and requirement, um, and we have seen that, and you know, I think when it involves any type of substantiated labor violation, um, you know, including wage death and many other kinds, it's it's gonna actually uh bring a contractor subject to potential a debarmined process.

Uh that's not where I'm at right now.

Um, what I'm at is that I really do hope that urban alchemy do work with the controller and to show that you can bring yourself back to good standing.

The question now that I have for next one is that will what is the timeline that urban alchemy expects yourself?

Um, but of course, I also want to understand from the controller's office what is the timeline that we can see that urban alchemy can come back on the good standing.

Yeah, so um I um we welcome a conversation and to create the detailed plan with the controller's office, and based on that, I'm hoping that we can have some of this cleared up within three to six months easily.

But I think obviously I'll defer to uh we uh I don't have a specific timeline, but we will be um we are initiating our planning steps.

We're working on scheduling our first kick meeting to get the plan going, um, and so it really um we'll have to wait until we have that discussion to know exactly what the milestones would be and the time it will take.

Um when we do corrective actions, it can take um for sort of fairly straightforward issues, which I would say this one is it it you know may take a couple months or a little longer.

We have some issues that um result in corrective action that can take a much longer time if they're more complex and detailed.

This because it is largely an administrative sort of processing um issue.

I don't foresee taking a significant amount of time, but I would have to get back to you with after we established an action plan with milestones.

Wonderful, thank you.

Um I think my next questions are for HSH.

Okay, thank you.

I think regrettably, you know, with the Department of Homeless and Support of Housing, that in general all across, you know, we're we're gonna have I hate to bring that name, but providence like coming through the settlement as well, and just to name one, you know, anyways.

So I I think the question that I have that it just often feels like feels like this is hard work, it's really really tough work, um, both uh serving the population that you serve and the challenges and the complexity, uh, you know, making sure that we serve the population well, and we're limited with option with our service providers more often than not because it is tough work, and when we do find someone that actually works well, and clearly, in my opinion, that both actually the budget legislative analyst report and yourself have reporting that 7-Eleven is actually um in itself like as a as a program, it's good and the service is good.

Um, you know, we can talk more about you know, of course, how what we want to do in terms of the best practice all across the board, not not just about 7-Eleven posts and how we can do better and be better neighbor, but that's not just 7-Eleven posts.

That's all our um be a shelter program or you know, temporary housing, transitional housing.

But I think the question that I then have for HSH again, it's to hammer back clearly.

I think that Urban Alchemy in good faith wants to make sure that they can come back in good standing anywhere three to six months, but then I think that the controller is saying overall, not just about 7-Eleven posts.

Well, some of them are pretty straightforward, some of them require a little bit more conversation before they can make the determination, then what is HSH plan?

Meanwhile, for the next three months, um, can you just walk us doing maybe confirmation?

I know you you mentioned we you know can't just find a service provider for turnkey.

The lease is actually under urban alchemy, just then what is the plan?

Sure.

Uh Gigi Whitley, thank you for the question.

So um, you know, I as I mentioned, we laid out for our corrective action around the overspending issue some clear next steps.

We documented that in June.

Uh Urban Alchemy responded, you know, uh within two weeks, their plan, and then you've heard from their CFO, new things that they've put in place for this time period almost immediately, and then you know, I think more systemic challenges that um their team is trying to work toward.

So our plan at HSH is to respond to their last letter, you know, thank you.

Here's some additional documentation that we want, be able to check some of these requirements off our corrective action list, and then to continue to meet, monitor their budget, and work with them over the next 60 days or so.

If at that point we're not seeing the kind of changes that we think we need, I think at that point, that would be an indication that we need to start, you know, winding down with this provider or finding a different provider, but I think it's incumbent on us as an agency given what you've heard today for us to continue to work with urban alchemy, given the stronger program outcomes, and we know from working with all of our providers, even those that do good work, that you know, years and years of underfunding or lack of back office support has made compliance and some of the financial requirements that the city has put in place more of a challenge.

So we're committed to working with all of our providers on that point.

I will say, you know, we are one of the few departments that really does a thorough job and has since we were formed of invoice review.

Now that's being more standardized by the city.

So I think we we've also been able to get ahead of some of these things, uh not always, but because before they've become more serious and are committed to doing that.

So that is our plan again, wanting to work in partnership with Urban Alchemy, given that they do provide services at a second shelter.

So, you know, this isn't just limited to 7-Eleven post, but if we're not able to see progress demonstrated, demonstrate a documented progress, we would be willing to, you know, go in a different direction to try to remain the shelter capacity.

I think here's also my question though.

It's I mean, clearly it and you can correct us, I mean, and even the CFO like from Urban Alchemy has indicated that they have articulated to you the mandates that you put on them for additional 30 beds will require additional staffing.

What was your reaction?

I mean, I think if you're demanding additional services, you would then actually clearly would know that you need to amend the contract, or or maybe with the existing contract that you would increase the dollar value without coming to us, but still like help me understand what happened there.

Sure.

Um my understanding from our programs team is uh so a couple things.

Uh we were losing beds at MSC South because of some other delays on the city's part in construction timeline.

We wanted to be able to maintain those beds.

We knew that the site at 7-Eleven posts could potentially accommodate at least 30 beds.

We did work with them on a budget increase and amendment.

We thought that was adequate, but as you heard, there was also a request to write sizing the wage increases across their portfolio.

We are not the employer of record.

We try hard not to get involved in wage direct wage issues with a nonprofit.

But the other piece of this is that other urban alchemy agreements did receive a cost of doing a business increase by the city because it's funded by the general fund.

This particular program is funded through a state grant and did not receive a cost of doing business increase.

So I think those cost pressures, plus the additional services we were requesting.

We thought the money that we put in the contract was adequate.

Um, you know, as you've heard, there was a bit of a back and forth that that was not sufficient, and uh we understood that the vacancies would provide enough flex within the contract so that we wouldn't have to go up further.

Then at the end of the fiscal year, there was this underspending overspending issue.

We reviewed that, and you know, some of that was fixed costs like insurance and other things, and some of that was uh wages for covering these additional beds.

So, you know, these are already always sort of harder negotiations than sometimes they need to be because our budget is fixed, and we are trying to um manage across our contracts to stay within budget.

Um we do try where possible to meet providers where they are, and I think we thought we provided the adequate amount of funds and were clear on what we would and wouldn't fund.

Thank you.

Thank you, Chair.

Um, I think there are you know coming into this uh item clearly a lot of concerns, and and um I have you know those those concerns remain.

Um specific to this item, um, you know, what I would what I want to make sure we're doing is that we're making the best of the next you know six months.

Um I don't I think right now we're in a pretty hard spot.

Um we have few options to do anything uh other than extend this, but I don't want us to be in that same position as we look at a multi-year extension.

So I want us to um you know really understand quickly um if if these changes are actually uh taking place and um how they're impacting 7-Eleven post, and then of course the the broader uh portfolio of programs that are funded by the city for urban alchemy.

Um what I would like, and I know uh I'm in line with the lower knobhill neighbors on this, is I'd like to see this back before us, um, you know, well ahead of any time we're talking about a multi-year extension.

Um, it seems like Urban Alchemy you know made a number of or they give a response to all these findings in early July.

Um so we already have a couple months um to start to look at this.

I would I would love to check back in 60 days or so from now and really see if there have been corrective actions taken uh from a financial perspective and then how that's impacting the service outcomes at 7-Eleven Post.

So that's my suggestion.

Thank you.

And we'll make a note of that, and then please be sure to make sure you submit a report back to this body um as well as to the clerk, and then they can share back out to supervisors, um, just report back about the progress and corrective action.

I think probably we'll follow if controller's office can put a note in to sort of just saying the expected timeline for them to bring back them on track out of the tier two and back to back to normal.

I guess that's the status or good standing, I should say.

Um with that uh I think let's go to public comment on this item.

But before we do so, um colleagues, I think given just where we're at, um, it is my intention, and I think unless you object um to move this item to full board without like recommendation and to just really allow containers to be all of us to be mindful about this item and uh and also to make sure that supervisors um from the district three from this um from this um district also receive the report uh before this contract ends.

So um let's go to public comment on this item.

Yes, we are now opening public comment for this item number 11.

If we have any members of the public who wish to address this committee, Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues as I indicate it.

I would like to move this item to a full board without recommendation uh and a roll call, please.

And on that motion that we forward this resolution to the full board without a recommendation, Vice Chair Dorsey.

Dorsey I, I.

Member Chen.

Chen.

I, Chair Chan.

Aye.

Chan, I.

We have three ayes.

The motion passes.

Mr.

Clark, do we have any other items before us today?

Madam Chair, that concludes our business.

The meeting is adjourned.