Good morning.

The meeting will come to order.

Welcome to the December 3rd, 2025 meeting of the Budget and Finance Committee.

I'm Supervisor Connie Chan, Chair of the Committee, and I'm joined by Supervisors Danny Sauter

and Balat Mamu.

Our Clerk is Brent Haliba.

I would like to thank Jamie Avicari from SFGovTV for broadcasting.

this meeting. Mr. Clerk, 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, it 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 in 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

And while not required to provide public comment, we do invite you to fill out a comment card

and leave them on the tray 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 brent.jalipa.sfgov.org.

If you submit public comment via email, it will be forwarded to the supervisors.

and also include it as part of the official file.

He may also send your written comments

via US Postal Service to our office in City Hall at 1.

Dr. Carlton, be good with the place.

Room 244, San Francisco, California, 94102.

And finally, items acted upon today are expected to appear

on the Board of Supervisors agenda of December 9th,

unless otherwise stated.

Madam Chair.

Thank you, Mr. Clerk.

And with that, before we call the first item,

we first need to excuse Vice Chair Matt Dorsey.

I'd like to move to excuse by Chair Dorsey

and a roll call, please.

And on that motion to excuse,

Supervisor Dorsey from attending today's meeting.

Member Mahmood.

Mahmood, aye.

Member Sauter.

Sauter, aye.

Chair Chan.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

and before again for everyone here including my colleagues supervisor Sauter and supervisor

Mark Mu generally speaking we will have department presentation and then we'll go to the budget and

legislative analyst to report back should they have a report and then this body can ask questions

and make comments, and then we will go to public comments.

But usually we hold off questioning and comments

until after the department presentation

and the budget and legislative analyst report.

So with that, Mr. Clerk, please call item number one and two together.

Yes, items one and two are resolutions

retroactively authorizing the Office of the District Attorney

to accept and expand the following grants

through the California Department of Insurance

for the grant period of July 1st, 2025 through June 30th, 2026.

Item number one is in the amount of approximately $1.1 million

for the workers' compensation insurance fraud program.

And item number two is in the amount of approximately $347,000

for the automobile insurance fraud program.

Madam Chair.

Thank you.

And I believe we have the district attorney's here,

or district attorney's office here.

My apologies.

Yes.

Good morning, Chair Chan and other members of the committee.

Thank you for your time this morning.

My name is Tina Noonzober.

I'm the managing attorney for the Economic Crimes Unit of the DA's office.

Every year, the DA's office applies for the workers' comp insurance and auto insurance fraud grants from the California Department of Insurance.

One of the requirements of our grants is obtaining these resolutions, which are here before you today.

These two grants are vital in the fight against insurance fraud in the city and county of San Francisco.

The grant funding specifically for workers' comp pays for two full-time DA investigators as well as 1.35 attorney positions.

With regard to the auto insurance fraud grant, it pays for half of an attorney and half of a DA investigator.

Additionally, the funding covers important training for our personnel who are assigned to the grants.

It also allows outreach efforts to prevent fraud by informing the public.

Insurance is right now a very critical issue affecting all Californians,

as we have all seen our premiums rise over the last few years,

and some of us have even seen our policies canceled.

And part of the reason for premium increases is the prevalence of fraud that we're seeing today.

Investigation and prosecution of insurance fraud is critical to stemming that tide of fraud

that we're seeing on a daily basis at the DA's office.

In particular, with regard to workers' comp, one good example is that the city itself is self-insured for workers' compensation.

So this means that any fraud that's committed by either claimants or providers or by dishonest city employees

takes funds away from important services to the residents of our city.

Grant funds provide resources for the DA's office to investigate these cases and to also prosecute them.

With regard to our auto insurance fraud grant, a good example is that those funds are assisting the DA's office in tackling the very big problem of predatory towing in San Francisco.

And obviously it's always around the state, but we see a lot of it in San Francisco.

And it's particularly harmful to our drivers and consumers in San Francisco.

These are just two examples of insurance fraud and where our grant funds have provided needed resources to investigate and prosecute these cases.

And with that, I'm happy to take any questions.

Thank you.

Supervisor Mahmoud.

Thank you for the presentation and the context on insurance fraud.

I'm just curious, you implied that there was maybe escalating levels of increasing in insurance fraud.

Do you have any numbers on what that level has been over the last several years, and how is that affecting average caseload for your employees and staff?

I don't have any specific numbers on our statistics, but I could provide that to the board if you would like that at a later time.

We are seeing that there is an uptick in just the number of cases that we're receiving, the referrals that we receive from the Department of Insurance, from insurance companies.

in particular with regard to auto fraud.

And we're seeing bigger cases, more complex cases,

where there are rings involving multiple defendants,

multiple types of fraud.

So we have seen an uptake over the years.

And will this funding provide the sufficient capacity

for funding the staff to meet the caseload

that you need to address these issues?

Unfortunately, it doesn't cover fully what we really need,

but it is a good chunk of what we do need because we build our cases from the ground up.

For example, other units within my office get cases that are investigated by the SFPD

or other law enforcement agencies.

Our cases come to us from insurance companies,

so they're not fully investigated in the way that we need to investigate them

to prove them beyond a reasonable doubt to a jury.

So the fact that we can have two full investigators devoted to workers' comp, for example,

And half of an investigator for auto

It really helps us to build our cases from the ground up my investigators are doing

drafting warrants

executing warrants they're doing all the work that other units get those cases pretty much ready-made from the police department

So it's vital for us to have those funds and it also opens up resources within our office to investigate other types of cases

Thank you. Thank you for your work. Thank you

Thank you. Seeing no other name on the roster, let's go to public comments on these two items.

Yes, we are now opening public comment for both these items, one and two, if we have any members of the public who wish to address this committee.

Madam Chair, we have no speakers.

Seeing no public comment, public comment is now closed.

Colleagues, I would like to move these two items to full board with recommendation and a roll call, please.

And on the motion to forward both items to the full board with positive recommendation, Member Mahmoud.

Mahmoud, aye.

Member Sauter.

Sauter, aye.

Chair Chan.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

Thank you.

And Mr. Clerk, please call item number three.

Yes, item number three is a resolution approving the Third Amendment to the grant agreement between Episcopal Community Services

and the Department of Homelessness and Supportive Housing for Shelter Services at Sanctuary Shelter,

extending the grand term by 24 months from June 30, 2026,

for a total term of July 1, 2021 through June 30, 2028,

and increasing the agreement amount by approximately $15.1 million

for a new total not to exceed amount approximately $40.9 million,

and authorizing HSH to enter into any amendment or other modifications to the amendment

that do 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 we have Department of Homelessness and Supportive Housing here.

Good morning, Chair Chan, members of the committee.

My name is Emily Cohen with the Department of Homelessness and Supportive Housing.

This resolution before you would authorize the Department of Homelessness and Supportive Housing

to extend our grant agreement with Episcopal Community Services

for continued shelter operations at the sanctuary shelter.

This would approve the third amendment to the grant agreement

and extend the term by two years for a new end date of June 30, 2028.

The amendment would also increase the not-to-exceed amount by $15 million

for a new total of $40.9 million

to support two additional years of operation,

increasing case managers and shelter monitors,

and adding a cost of doing business increase.

This agreement funds shelter operations

and support services at the sanctuary on 8th Street.

This site has the capacity to serve 200 adults.

It's quite a cost-efficient program

at an $88 per bed per night rate,

which includes lease costs for the site as well as meals that ECS provides on site.

I do want to note that as we go through our multi-year procurement

and re-procure our entire shelter portfolio,

we do expect to see costs rise to reflect the reality of the cost of doing business in San Francisco.

But for now, this remains a very cost-efficient program.

The 200 beds at Episcopal Sanctuary are an important part of our larger adult shelter system,

which includes over 1,800 beds of congregate shelter.

This is also one of our self-referral sites, so people are placed into the sanctuary through the 311 self-referral process.

Sanctuary had a 90% occupancy rate in the last fiscal year,

which is slightly higher than our average.

And we served over 780 unique clients last year.

The demographics of the clients reflect the population of people experiencing homelessness,

including 31% were black or African American,

and 24% were older adults over the age of 55.

and we've included a couple of pictures here

of the outside of the sanctuary

probably walk by it often

and are familiar with the property

and the inside

the inside has a lovely communal space

a large dining room

and then sleeping dorms

for men and women

and I will stop there

I'm also joined by Episcopal Community Service staff

if there are questions that are more appropriate for them

thank you

Good morning.

Nick Menard from the Budget Legislative Analyst Office.

Item three is a resolution that approves an amendment to HSH's contract with Episcopal

Community Services.

The contract funds a shelter in Soma at 201 8th Street that has a capacity of 200 people

and the amendment would extend the agreement by two years through June 2028.

We summarized the performance on page three and four of the report.

You can see that Episcopal Community Services was generally meeting their requirements of

the grant with the exception of a couple objectives, including referring all clients to coordinated

entry, which is basically the intake to the homeless response system for long-term exits

from the shelter.

We show the budget for the contract on page five of our report.

This is about a $6.4 million a year program that is funded by the general fund.

I think the costs are reasonable, and we recommend approval of item three.

Thank you.

Supervisor Sauter.

Thank you, Chair.

For HSH, I just had a few questions about the performance monitoring.

in particular you know the seems pretty far off on a couple of these goals around the referrals

the 19 percent versus 100 percent requirement the five percent versus the 80 percent requirement

on on the housing referral and then so i'd love to hear about maybe what went wrong on there

on those two items and how they're being corrected.

And then also on the first item of the requirement for attending community meetings,

this is something we've seen in other sites where there's just a really wide gap

and the response seems to be to remove this requirement for the future.

I would be curious, instead of just removing if there's a different goal or directive

that is more appropriate.

I know that there's difficulty in mandating attendance,

but if there's some sort of other participation

or engagement, that could be pursued.

So again, just those questions on performance monitoring.

Thanks.

Thank you, Supervisor.

Through the Chair,

HSH completed fiscal monitoring in FY24-25,

and program monitoring for the site was completed this fall.

This cycle was completed this fall, September 2025.

For this monitoring, ECS had nine service objectives.

We did end up removing one out of the appendix A for the amendment,

as we felt it was a poor indicator of program success

and generally out of the control of the provider,

and that's when referring to the community meeting participation.

ECS achieved seven out of the remaining eight service objectives

within their program monitoring and achieved two

out of their three outcome objectives.

As you mentioned, and sorry, I should also say,

ECS provided responses to all service

and outcome objective findings in October

for their September monitoring.

So they quickly implemented solutions

to the areas where they had deficiencies or shortages.

The referrals to coordinated entry is,

I mean, that was a big question for all of us.

both ECS and HSH staff noticed that right away, and it was addressed immediately.

So when the numbers came in and we saw the below average referrals,

overall case management training was conducted.

There was work with the on-site staff to ensure that they were not just referring people

to affordable housing and housing outside of the homeless response system,

which had been a big practice there, but also doing the coordinated entry referral.

And so we've seen those numbers go up dramatically since that improvement was put into place.

So while problematic initially, we were very pleased with the speed and urgency with which ECS corrected the issue.

In terms of attending non-mandatory community meetings, this is something that had been longstanding in our contracts,

and both HSH and the providers didn't feel that that goal necessarily contributed to a client's success

or contributed to the success of the community.

And so therefore we are pulling it out of our standard contracts going forward

and looking at other things around service participation

that may be a better indicator of client success in the long run.

Can you elaborate on that, what that might look like?

So we're looking at it.

It's definitely not in place yet,

but as we go through our multi-year procurement process

and redesign, we're looking at what level

of case management participation

would we consider successful,

knowing that case management is much more closely linked

to positive housing and health outcomes

rather than attending a monthly community meeting is.

Okay, look forward to that.

Thank you.

Thank you.

Thank you.

When are you going to re-procure all the contract out,

and what does the process actually look like?

Yes, we've already begun our multi-year procurement process.

This is a process that's going to take several years to complete.

We are beginning with our scattered site housing and our youth shelter

and transitional housing program, so those processes are underway.

Shelter and permanent supportive housing are coming later in the process, in part because of the significant size of each of those portfolios.

And the process is about a year long for each segment of our portfolio.

It starts with what we call a D3 design.

I forget what all the three Ds are, but it's a human-centered design process that includes subject matter experts, providers, and people with lived experience to iterate on our program models.

iterate on the outcomes and objectives that align with our strategic plan but better reflect

what success looks like for our clients and we are really baked this into our strategic plan so it's a

fundamental part of our work now and then from there we will issue a request for proposals

go through the traditional procurement process and select providers you know we do anticipate

that this will have a pretty significant impact on the makeup of our portfolio, as well as on

cost. You know, we understand that in many instances, HSH is not able to pay, or the city

is not able to pay the full cost of many of the services we deliver. And nonprofits raise money

and do other things. And so I think through the reprocurement process, we're going to try to

right-size that. And, you know, that could really impact, I think, what our system looks like

afterwards, both in terms of improving performance and sort of right-sizing the budgets.

Yeah.

And I can get you a date-by-date calendar.

I just don't have it in front of me.

I think what we're going to expect for budget process is it's going to be that and just

kind of help us understand the role.

I mean, I think that DCYF had done a tremendous work in terms of, as an example, for a five-year

procurement process. I mean, it's extensive and it's intense because it's like series of workshop

and outreach and trying to get people to train up and how they should respond to the process,

that in itself. And then what, even after all their work, what we didn't think about or anticipate

a lot, but eventually they caught up, but in a very short and intense time period was an appeal

process. And so that was intense too. And I look forward to seeing more of that information coming

from HSH. I know you've been working on it. Yeah, we're happy to provide you a briefing.

We're really excited about this work. I think it's going to be really transformative.

Thank you. And I mean, I see some of these contracts are coming through for anywhere

between a 24-month period. My assumption is seeing that it's good because it's an indication,

at least for me, that you're thinking is, hey, we've got to have some of these put in place for

the next two years time period as you're going through the process. So am I making an assumption,

correct assumption? Yes. So we're trying to align all of our contract extensions right now to the

reprocurement timeline of that particular component of the portfolio so that we will be on a much more

consistent cycle going forward. And we're definitely learning from DCYF. We've looked at their model

quite a lot. Great, thank you. And so with that, I don't have any other question.

Let's go to public comment on this item. Yes, if we have any members of the public

who joined us today who wish to address this committee regarding this item number three,

now is your opportunity to approach the lectern. Madam Chair, we have no speakers.

See, no public comment. Public comment's now closed.

Colleagues, I would like to move this item to full board with recommendation and roll

call, please.

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

Mahmood.

Mahmood, aye.

Member Sauter.

Sauter, aye.

Chair Chan.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

Mr. Clerk, please call item number four.

Yes, item number four is a resolution approving the Third Amendment to the grant agreement between Felton Institute and the Department of Homelessness in Supportive Housing for drop-in center operations,

extending the grant term by 24 months from June 30, 2026 for a total term of April 1, 2022 through June 30, 2028,

and increasing the agreement amount by approximately $7.1 million for a new total amount not to exceed approximately $16.8 million.

and authorizing HSH to enter into any amendments or other modifications

that do not materially increase the obligations nor liabilities nor decrease the benefits

to the city and are necessary or advisable to effectuate the purposes of the agreement.

Madam Chair.

Again, we have, thank you, again we have Department of Homelessness and Supportive Housing.

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

I'm here before you today with a resolution to authorize HSH to enter into the Third Amendment

to our grant agreement with the Felton Institute for the Bayview Drop-In Center.

This agreement was heard and approved by the Homelessness Oversight Commission in November.

This resolution is also co-sponsored by Supervisor Walton, and I'm thrilled to be joined by Latoya

and Lynn from Felton Institute, who are in the room with us today.

As was mentioned, this resolution approves a third amendment to the grant agreement

and extends the term by two years to June 30, 2028,

similar timeline to the previous amendment back into our multi-year procurement timeline,

and to increase our not-to-exceed amount by approximately $7 million for a new total,

not-to-exceed amount of $16.9 million.

The Bayview Drop-In Center is a 24-7 operation that is a deeply rooted Bayview institution.

It's been there for upwards of 40 years and has a longstanding relationship with community.

This contract funds Felton to provide respite for people experiencing homelessness in the neighborhood,

showers, laundry, and locker access, mail service, two meals a day,

and in our FY24-25 client survey,

95% of respondents reported that services were satisfactory or better,

demonstrating the high quality of service that Felton has provided

since they took over the contract in 2021.

The drop-in center puts on service events every month

and brings in the Department of Public Health

to provide health care services during those robust service events.

This drop-in center was previously known as or is otherwise known as Mother Brown's Kitchen.

Folks are probably quite familiar with them and their delicious food.

And as I said, they've been serving the Bayview community for over 40 years.

Felton, in the last fiscal year, provided over 114,000 meals through the program

and brings the Department of Public Health to give urgent medical care on site.

And I'm happy to take any questions after the BLA report.

Thank you.

Item four is a resolution that approves an amendment to a contract that HSH has

with the Felton Institute to fund a drop-in center at the Bayview.

The amendment extends the agreement by two years

and increases the value to $16.8 million.

A drop-in center provides services to people who are homeless, but it doesn't provide beds.

So you can go there and take a shower and make phone calls, but it's not exactly a shelter.

We show the performance of the program on page 10 of our report.

The contractor met the objectives of the grant and delivered the services that the city was paid for.

And then we show the contract budget on page 12 of the report.

you'll see this is about a $3 million a year program funded by the general fund

and we recommend approval item 4. Thank you. Supervisor Sauter. Thank you, Chair. For HSH,

I'm just curious. I see that there's, I believe, two drop-in centers in your portfolio. Can you

speak to kind of how you see this fitting into your larger portfolio of services and sites

Thank you, Supervisor. It's an excellent question. So the vast majority of our resources go into

programs that offer a place to live, right, a shelter or permanent housing. But we know that

there is often a gap, especially in neighborhoods that historically have not had adequate shelter,

which was the case in the Bayview for many, many years. It's no longer the case necessarily

in the Bayview. And the drop-in center provides an immediate response to somebody's urgent needs

to get off the street, come inside, get respite, get connected to care. This is a place where you

can go in and get on the shelter waiting list. You can go in and get support with benefits or

housing. It's essentially a hub where people are fed and offered showers as the sort of the primary

service, but really the intent is to connect them with the larger system of care. And so it offers

a really important, fills a really important gap between the street and something more long-term.

You know, there are people who have eaten at Mother Brown's Kitchen probably for 40 years,

who may be precariously housed in the neighborhood, who may be extremely low income. And then there

are many, many people who come in and use the chairs and use the showers who are literally

homeless in the neighborhood. So it serves both as a neighborhood hub, but also a critical

linkage from the street to long-term care.

Thank you.

Thank you. And I don't see any other name on the roster. Let's go to public comment on this item.

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

Thank you. I want to thank the Department of Homeless and Support of Housing for your presentation.

Again, continuing adding the photos of all these sites that are in discussion.

I really do think that it brings a perspective and really, at least on a personal level,

a whole new level of appreciation about the work that you and our partners are doing.

And I just want to say thank you for that.

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

And on the motion to forward to the full board with positive recommendation, Member Mahmood.

Mahmood, aye.

Member Sauter.

Sauter, aye.

Chair Chan.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

And thank you.

And Mr. Clerk, please call items five through eight together.

Yes, item numbers 5 through 8 are all resolutions approving and or authorizing the following.

Item numbers 5 and 7 authorizes the city and county through the Department of Homelessness and Supportive Housing

to execute standard agreements with the California Department of Housing and Community Development

for total awards under the Home Key Plus program, including funds to be dispersed by HCD,

has grants for acquisition of real property for permanent supportive housing,

hand supportive operating costs, and rehabilitation of their respective properties,

accept and expend anticipated revenue from the city's portion of Home Key Plus grant funds

for the rehabilitation of the following properties,

also approving and authorizing the city to commit amounts in required matching funds

for rehabilitation of the properties,

and a minimum of five years of operating subsidy.

Additionally, the city committed up to 15 years of operating subsidies

through the city's local operating subsidy program,

subject to budget appropriations,

also authorizing the city to assume any joint and several liability

for expenditure of the Home Key Plus grant

under the respective agreements,

adopting the Planning Department's findings of consistency

with the general plan and the eight priority policies of the planning code and authorizing

HSH to enter into any additions, amendments, or modifications to the standard agreements

and the home key plus documents that did not materially increase the obligations nor liabilities

to the city or materially decreased benefits to the city.

Item number five executes an agreement with CalHCD and co-applicants, swords to plowshares,

Veterans Rights Organization, and 1035 Vets LLC for a total award not to exceed approximately

$39 million, including up to approximately $36 million disbursed by HCD as a grant to

1035 Vets LLC for acquisition of real property located at 1035 NS in support of operating

costs, and up to $3 million disbursed by HCD as a grant to the City for rehabilitation

of that property, accepting and spending anticipated revenue from the city's portion of grant funds in

the amount of $3 million. Also for the rehabilitation of that property, hand approves and authorizes the

city to commit up to $8 million in required matching funds. Item number seven, execute an

agreement with the co-applicants, 835 Turk LLC, in five key schools and programs for a total award

not to exceed approximately $17.3 million, including up to approximately $3.6 million

dispersed by HCD as a grant to 835 Turk LLC for support of operating costs, and up to

approximately $13.7 million dispersed by HCD as a grant to the City for the rehabilitation

and associated relocation costs for a real property located at 835 Turk Street.

Retroactively, accepting and expending anticipated revenue from the City's portion of grant

funds in an amount up to approximately $13.7 million to support the rehabilitation and associated

relocation costs for that property for costs incurred from March 5, 2024 through HCD's

capital grant expenditure deadline and approves and authorizes the City to commit approximately

$16.3 million in required matching funds.

Item number six and eight approves agreements and makes findings.

the respective projects are consistent with the general plan and a priority policies of the planning code,

and authorizes the mayor and director of MoCD to execute agreements and make certain modifications and certain actions in furtherance of the respective resolutions,

and authorizes the director of MoCD to enter into any additions, amendments, or other modifications to the agreements

that did not materially increase the obligations nor liabilities to the city,

and are necessary to effectuate the purposes of the respective resolutions.

Item number six, approves and authorizes a loan and grant agreement

in the amount not to exceed $11 million, consisting of a loan in the amount of $8 million

for a minimum term of 55 years and a grant in the amount of $3 million with 1035 Vets LLC

for the purpose of rehabilitating the real property located at 1035 NS Avenue

for veterans exiting homelessness under the Home Key Plus program administered by the California

Department of Housing and Community Development.

Item number eight approves and authorizes the Director of Property and HSH to enter into

a ground lease for the real property owned by the city located at 835 Turk Street and

835 Turk LLC for a lease term also 55 years and total rent out to exceed $1 in order to

rehabilitate and operate 100% permanent supportive housing, and approves and authorizes the

departments to enter into a loan and grant agreement with 835 Turk LLC to finance the

development and rehabilitation of the project, with a loan in an amount not to exceed approximately

$12.9 million for a minimum loan term of 55 years, and a grant in the amount not to exceed

approximately $13.7 million from CalHCD Home Key Plus funds, adopting findings declaring that the

property as exempt surplus land pursuant to the California Surplus Lands Act and determining that

the less-than-market rent payable under the ground lease will serve a public purpose by providing

affordable housing for low-income households in need in accordance with the Administrative Code.

Madam Chair. Thank you, Mr. Clerk. I really appreciate that. And I think for both the

department presentation as well as the

BLA, what we're going to do is

do it by site. Let's start with

1035 NS first

and then we'll go to the BLA report

and then we'll come back to the

835 Turk.

My assumption is your presentation

is one presentation.

So I think just give it a

pause and then we'll go to BLA and then we'll

come back for the second site. If that

works, great. Thank you.

Thank you very much, Chair. Again,

and Emily Cohen with the Department of Homelessness and Supportive Housing.

Here before you with four items related to two projects,

and we will go through them together, or one at a time, excuse me,

and I will walk through the legislation associated with each project.

I'm joined by, these are a couple of very complicated and dense projects,

and so I'm joined by a team of experts here to help answer any questions that you might have,

both from HSH and from OCD, as well as from swords to plowshares and five keys.

All of our partners are in the room.

So thank you.

And I also want to start by thanking Nicholas and the BLA for their thorough work on this.

It was complicated.

There were many reports and a crunched timeline because of the holiday.

So really appreciate everyone collaborating to move these forward.

So I'll start with 1035 Vaness.

there's two pieces of legislation before you today related to this property.

The, sorry, the home key accept and expend and the loan and grant agreement. So for 1035 Van

S Avenue, this was a former assisted living facility, nine-story building with private

bathrooms and small kitchenettes already in every unit. Swords to plowshares under their

Development LLC 1035 Vets acquired the property through a financing loan provided by the Housing

Accelerator Fund, MoCD, and HSH, with funding coming from HSH to operate the site as permanent

supportive housing for veterans. The Home Key Plus grant will support with the rehabilitation

and operations of the program. The project will have 124 units following the rehab,

with operations supported by Home Key Plus, the Local Operating Subsidy Program, or LASP,

and the Veterans Supportive Housing Voucher Program, otherwise known as VASH.

So this is a combination of many sources to bring to life this really beautiful permanent housing program.

We estimate that the rehab construction will begin in January with completion in July of 2026.

The accept and expend resolution authorizes HSH to execute a standard agreement for a total not to exceed amount of approximately $39 million with our co-applicants 835 Turk LLC.

and to accept and expend $3 million of Home Key Plus grants

to support the rehabilitation of the project.

The remaining funds will be dispersed from HCD directly to 1035 vets

for site acquisition costs and to support the initial operating.

This resolution approves the city to commit $8 million in capital and five years of operating subsidies, which represent the required match.

Additionally, the city is committing to 15 years of operating subsidies through the local operating subsidy program or LASP.

So funding overview, just to break this down, this slide shows the detailed breakdown of the Home Key Plus grant award for 1035 NS.

and how that award is dispersed between the city and SOARDS or 1035 Vets LLC,

along with sources of matching funds and capital operations.

The second piece of legislation related to this project is a resolution approving a loan and grant agreement

with Mayor's Office of Housing and Community Development.

So I'm speaking a little bit on their behalf in this moment, but they are here to answer any questions that might come up.

On November 7th, 2025, the citywide affordable housing loan committee recommended approval to the mayor of a loan to 1035 vets for the project in the total amount not to exceed $8 million to support the capital rehab.

and a grant to 1035 Vets LLC for the project in a total not to exceed amount of $3 million

in Home Key Plus funds from HCD.

And this supports the pass-through of HCD Home Key funds from the city to 1035 Vets.

The term for both the loan and the grant agreement are 55 years and a zero-interest loan.

I will stop there and hear from the BLA and then take any questions you might have on 1035.

Thank you.

Items 5 and 6 are two resolutions pertaining to 1035 Van Ness.

One is a resolution that would accept $39 million from HCD as part of a Home Key Plus grant to the city.

The grant requires the city to commit $8 million to operate the site.

over five years which city will far exceed that requirement and the other

file is a resolution that approves a loan from the mayor's office of housing

of 11 million dollars which consists of actually a loan and a grant agreement

to help fund renovations at that site we summarized the renovation work on pages

15 and 16 of our report as well as the sources and uses of the development

budget on the following pages you can see that the total development costs

including acquisition are about $334,000 per unit,

where the city, because of the size of the Home Key Grant,

is only funding about $64,000 per unit.

So it's actually a really low cost compared to other preservation

or new development projects.

But the city is going to incur ongoing costs to operate the site,

both in the form of rental subsidies from the local operating subsidy program

that would kick in around year six of the program after the home key operating subsidy runs out.

That's a journal fund cost that starts at $1.3 million.

And then HSH is going to be delivering supportive services at the site starting at $400,000 a year

paid for by Proposition C funds in year one of the program.

We also note as a policy consideration that although the city is pulling down $39 million from the state,

The site will actually be owned by Swords to Plowshares, which is going to oversee the renovation and then operate the property as supportive housing for veterans.

So it is a little different than other supportive housing on this agenda that you've seen before where the city owns the land and the property, but somewhat consistent with MYCD's other preservation work.

The loan documents include an option to purchase that the city can exercise if the property is for sale, if SOARC is unable to operate the site in the future.

We recommend approval of items 5 and 6.

Thank you.

Let's continue.

Thank you.

In terms of the second property or project, just a little additional context before I jump into the 835 Turk overview.

Home Key Plus is a relatively new source of state funding that developed out of the original Home Key program.

In the original program, we were incredibly successful in San Francisco.

we leveraged approximately $235 million from this program,

which funded nearly 900 new units of permanent housing

for adults, families, and transitional-aged youth

across eight different sites.

And Supervisor Chan, you probably remember many, many times

coming to this board and talking to you over the past several years

as that Home Key program was rolled out,

and this new Home Key Plus is sort of the next iteration of that.

Earlier this year, we were at the board and received approval to apply for the Home Key Plus Awards for both projects, 835 Turk and 1035 Van Ness, and we were thrilled to be back before you with the accept and expend.

Under this set of awards, the city will be leveraging over $56 million to support 230 units of housing for veterans and adults across two sites.

So 835 Turk has two pieces of legislation related to the project, the Home Key Plus Accept and Expend, and the Ground Lease, Loan, and Grant Agreement with Five Keys.

So as a little bit of background on this project, the city acquired the property at 835 Turk Street in 2022 and has been in partnership with Five Keys schools and programs operating the site as permanent supportive housing for adults exiting homelessness since 2023.

The Home Key Plus grant will support with rehab and associated operations related to the construction, which are anticipated to begin in 2026.

The rehabilitation will include focusing on the 106 units in the building, including six creating creating six new ADA units.

The need for ADA units continues to grow and increase across our system,

so we're thrilled to be able to add some capacity there

and also provide critical structural improvements to the property

that are necessary to ensure its long-term stability and safety.

The resolution, the accept-and-expend resolution,

allows HSH to execute the standard agreement

for a total not-to-exceed amount of approximately $17.3 million

with our co-applicants of 835 Turk LLC

and 5 Keys with the state of California's Department of Housing and Community Development.

It allows us to retroactively accept and expend $13.7 million in HomeKey Plus funds.

The remaining funds will be distributed from HCD directly to 835 Turk LLC

to support the initial operating cost.

The retroactivity enables the city to reimburse the project sponsor

for eligible grant costs dating back to March of 2024

as allowed under the state NOFA.

The resolution also authorizes the city to commit approximately $16 million

in capital and five years of operating subsidies

as the required match to these home keep.

plus dollars. Additionally, the city is committed to 15 years of operating

subsidies through the LASP program, local operating subsidy. This slide shows a

detailed breakdown of the Home Key Plus grant awards for 835 Turk and how that

award is being distributed between the city and 835 Turk LLC along with sources

of matching funds and capital operations.

The second piece of legislation before you for 835 Turk

is a resolution approving a ground lease and loan

and grant agreement between the city and five keys.

The city through HSH and the director of property

would enter into a long-term ground lease with five keys,

schools and programs for 835 Turk. The ground lease would replace the current short-term lease

and property management agreement that HSH has in place with five keys. The total term of the

project is 55 years with a total rent of one dollar. The ground lease would make five keys

responsible for ongoing management, maintenance, rehab, and operation of the project as a permanent

affordable housing. In terms of the loan and grant agreement, on November 7th, 2025, the citywide

affordable housing loan committee recommended approval to the mayor of a loan to 835 Turk LLC

for the project in the total not to exceed amount of $12.9 million to support the rehab,

and a grant agreement to 835 Turk LLC for the project with a total not to exceed

amount of $13.7 million in Home Key funds from HCD.

This supports the pass-through of HCD Home Key Plus funds

from the Citi to 835 Turk LLC once made available.

The term of both the loan and the grant agreement are 55 years

and an interest rate of 0%.

And I'm happy to take questions after the BLA report.

Thank you.

Item 7 and 8 are two resolutions pertaining to 835 Turk, a city-owned property.

One resolution approves a Home Key grant of $17.3 million and requires a matching fund from the city of $16.3 million.

dollars. And then one resolution is a loan of twelve point nine million dollars from the mayor's

office of housing to five keys to renovate the site. We discussed the renovation work in our

report. It consists of seismic upgrades and upgrades to building systems and making units

accessible. On page 27 of our report you'll see the total development budget. This is about

$400,000 per unit so it is at a higher cost than the prior the prior project we

just reviewed driven by these higher renovation needs in this building the

building's older and in poor condition we also note that the city is incurring

ongoing cost of 1.8 million dollars a year for rental subsidies through the

local operating subsidy program as well as HSH and public health services at this site.

We recommend approval of items 7 and 8.

Thank you.

You know, I think ultimately the question has always been and really just generally across

and not just targeting these two sites about, you know, 1035 NS or 835 Turk.

I think it's, again, across the board, be it meal delivery or any type of social services provided on sites.

In this case, for these two contractors, again, to manage these two sites.

I think all, as you continue to procure all the contract, I think the challenges for Department of Homelessness and Supportive Housing in the line of work that you do is that how do we do a couple of things?

making sure that you, you know, having diverse options of people that you can work with and

services and that they're competent, you know, they meet the demands and need, but they also are

flexible and adaptive. And I think that over the last like six years, you've been doing,

as a department, you've been doing a lot of that work and try to build up yourself as a department,

but also your contractors, the community partners that you work with, and build up their capacity.

What I do look forward to seeing and learning more, and it may or may not be a budget hearing prior to June process,

is that partly wanted to understand, you know, just the contract procurement standard, your capacity evaluation,

but also the existing vendors that we're working with,

what are their financial management

and evaluation been like for us as a city?

I think that there are challenges,

meaning not everyone,

it's like the standard of capacity is not consistent

and not everybody is the same.

Some clearly stands out.

And in this case, I would say Five Keys clearly stands out, and we've been really consistently relying on them in multiple sites.

This is just one of the sites.

And again, I would say Swords and Plowshares also stands out consistently because of their capacity.

They are doing work in Treasure Island.

They're doing work in multiple sites, Lombard Street.

Like, we have learned over the years to build capacity in partnership with our partners that are not only that they're, we're growing, so are they together.

And I think that through the May, potentially leading to June, when we start talking about your budget, is that I would like to understand then how do we make sure accountability, but also deliverable evaluation.

Again, this kind of referencing back to the civil grantor report that we had, like, discussion.

Was it last year or a year before, right?

And, again, the recommendation is you have over 100-something contract.

You know, it's a reason why you're now going through this procurement process.

You're kind of in the middle of it, but it is a two-year budget projection in a very, like, difficult budget.

So I just wanted to sort of like a heads up, you know, to where we're heading.

I'm supportive of both contract.

I do see that, you know, some of the sites, according to the BLA report, some of the sites that, for example, you know, swords to plowshares manage has high vacancy.

And sort of kind of how do we figure out this 1035 NS?

I mean I'm happy to hear what you have to say

but I think that is like we know there's great needs

how do we continue to make sure the sites that we manage and have

be adaptive meeting the demands

so yeah please go ahead

thank you

thank you for the heads up on what's to come during the budget process

always helpful

In terms of vacancy rates across our portfolio, this has been a huge area of focus for HSH over the last two or three years.

We've brought that number down pretty significantly portfolio-wide.

The veterans' portfolio is a uniquely challenging portfolio because of the role of the federal government in these buildings.

When buildings that have VASH subsidies braided in with local operating subsidies, they're just different requirements, longer processes to get a VASH voucher holder into a property.

And so it does create some challenges.

But we are excited.

Part of the work that we're doing at 1035 is to move existing tenants with vouchers into this property because it's really an upgrade for them in terms of their housing and the conditions.

it's also a known and stable community so we think it's going to really help and

then we'll be able to add to that thank you I don't see any rosters I don't

have additional questions let's go to public comment on these four items yes

we are now opening public comment for these items five through eight if we

have any members of the public who wish to address this committee now is your

opportunity to approach lectern. Madam Chair we have no speakers. Seeing no

public comments. Public comment is now closed. Colleagues I would like to move

these four items to full board with recommendation and a roll call please.

And on the motion to forward all four resolutions to the full board to the

positive recommendation. Member Mahmoud. Mahmoud aye. Member Sauter. Sauter aye. Chair Chan. Aye.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

Thank you.

And Mr. Clerk, please call item number nine.

Item number nine is a resolution approving amendment number one to the agreement between the city and county,

acting by and through the Department of Public Health and Priority Healthcare Distribution Inc.,

doing business as Cura Script Specialty Distribution for the procurement of specialty drugs,

to extend the term by four years from November 30, 2026,

for a total term of December 1, 2023, through November 30, 2030,

and to increase the amount by approximately $89.5 million

for a total not to exceed amount of approximately $98.5 million,

and to authorize DPH to enter into amendments or modifications to the agreement

that do not materially increase the obligations nor liabilities to the City

and are necessary to effiguate the purposes of the agreement for this resolution.

Madam Chair.

Thank you, and we have Department of Public Health.

Hello, my name is David Smith.

I'm the Chief Armistice Officer for the Department of Public Health.

Good morning, supervisors.

As noted, this is a contract amendment to request an additional 89.5 of contract authority,

pushing it to 98.5 total and an additional three years through November of 2030.

And overall, just because of the large numbers, I wanted to emphasize this is contract authority only.

The actual spend associated with the contract is part of DPH's annual budget that is reviewed and approved by the Board of Supervisors and the Mayor's Office already.

Some background, CuraScripts is a pharmaceutical distributor.

So they're like a wholesale distributor.

We currently have a contract for a primary distributor, McKesson.

However, these sets of medications are actually not available from any other distributor except

CuraScript.

So they have the market, so to speak, on these.

So they're really the only place in town that we can go.

They have three main buckets of medications that we utilize.

One is long-acting injectable buprenorphine, which is used for substance use disorder.

That's really what's driving the majority of this contract spend, about 88% or so.

The second is implantable birth control, known as Nexplanon.

And the last one is for a disease today called pulmonary arterial hypertension,

which is usually used at our ZSFG campus and our cardiology clinics and at the hospital.

I do want to say that those long-acting injectables for buprenorphine are really around trying to save lives for the overdose crisis here in the city.

So very much being pushed because increased utilization of the medication in line with the priority to try and decrease deaths.

This drug actually decreases deaths by 50% when utilized.

So it's become heavily favored because it's an injectable.

People can, it can stay in their system for a much longer period of time while they gain

stability and engage in treatment and recovery.

For the reason we need this now is essentially because this utilization has increased so

much in the prior year and a half, we've run out of authority on the initial contract,

which is only for $10 million or a little less than $10 million.

and also because of the large numbers I think it's very important to talk about

cross recovery so all of these medications are generally reimbursable

we try and maximize reimbursement by utilizing distribution only through our

pharmacies that we can bill insurance I believe in the BLA report they said we

put forth about 95% cost recovery right now we're generally trending towards 98

99% recovery so that it really does as little as possible to draw it down from

general fund and so with that I know BLA has a report and I'll defer to them and

happy to answer any questions after that thank you thank you

item 9 is a resolution that approves an amendment to a contract that it's

kind of public health has with priority health care distribution a pharmaceutical

reseller the amendment extends the agreement four years through November

2030 and increased the contract value to about $98.5 million. About 80% of the spending on this

contract so far has been on long-acting buprenorphine. And the cost has not been driven

by price increases. It's really been driven by utilization, which has been increasing by 10% to

20% a year as DPH rolls out this treatment to more patients within their systems of care.

That rate of increase is projected to persist over the next five years of the contract,

based on the results of the treatment so far.

We showed the spending of the contract on page 33 of the report.

It's about $10 million a year now, rising to $22 million a year in fiscal year 2030.

historically, most pharmaceutical costs on this contract or on the McKesson contract,

about 95% of them have been reimbursed by Medi-Cal.

Of course, that's slightly at risk now as the eligibility rules are being changed

from new legislation from Washington,

but that has been the historical nature of the reimbursement.

So for this contract, $98 million in spending would translate only into

about $4.5 million of local funding being spent over the next five years.

That would primarily be funded by the general fund,

and any gap would likely have to be backfilled by the general fund as well.

But we do recommend approval of item nine.

Thank you.

Is there any response to from DPH just kind of the potential changes?

We don't know, but just anticipating potential changes

from the federal guideline for reimbursement

and also criteria for qualification?

Yes, I think that is a question on all of our minds.

Right now, when patients do have insurance, whether it's Medi-Cal or Medicare,

reimbursement is a little above the drug cost, which is good,

and that helps to make up for those that have no insurance.

Considering that right now, I think the 95% does take into account the idea that

if we're reimbursing at 99%, we anticipate our uninsured population to go up.

I also think they're mitigating decisions that this may not be the medication of first-line medication used for those that don't have insurance.

And so that there are other oral options that present different challenges and probably not as effective.

But I think trying to maximize that as a much cheaper alternative just for good financial stewardship,

especially knowing the significant unknowns that are coming in the federal budget.

Great. Thank you.

I don't have any other questions.

Let's go to public comment on this item.

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

If you have any members of the public who joined us today,

we should 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 board

with recommendation and a roll call, please.

And on a motion to forward to the full board with a recommendation,

Member Mahmoud.

Mahmoud, aye.

Member Sautter.

Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes. The motion passes.

Thank you. Mr. Clerk, please call item number 10. Yes, item number 10 is a resolution approving

amendment number two to the agreement between the city and county acting by and through the

Department of Public Health and Hyde Street Community Services, Inc. to provide mental

health services to extend the term by two years from June 30th, 2026 for a total term of July 1st,

2018 through June 30th,

2028 and to increase the amount by approximately 11.8 million for a total

not to exceed amount of approximately 38.8 million and to authorize DPH to

enter into amendments or modifications to the agreement that did 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 again have Department of Public Health here.

Yes.

Good morning.

Chair Chen, Supervisor Mahmood, and Supervisor Sauter.

My name is LaDonna, Dr. LaDonna Norman.

I am the Director for Intensive Services and Access for Adult and Older Adult System of

Care.

And my slide, please.

So just as an overview, this will be an amendment.

This contract was funded back in July 1, 2018.

The contract amendment amount is $11.7 million, not to exceed $38.7 million.

Noted timeline July 1, 2018 to July 30, 2028.

Hyde Street Community Services provides both outpatient and intensive behavioral health services

for our system of care adult and older adult.

Under this proposed contract, Hyde Street would continue to provide the following services.

So for the outpatient program, that would include crisis intervention, medication support,

as well as behavioral health services and targeted case management.

For the full service partnership program, it will include outpatient wraparound services

as FSPs or whatever-it-takes model.

and serve approximately 50 clients per year,

whereas our outpatient, to note, serves 540 clients per year.

DPH humbly asks to uphold the BLA

and request approval for this item, and I'll land.

Item 10 is a resolution that would approve an amendment to a contract that the Department

of Public Health has with Hyde Street, a nonprofit mental health provider that operates two programs

in the tender line.

One is an outpatient mental health clinic, and one is also a budget for intensive case

managers for a portion of the patients there.

We summarized the performance on pages 37 and 39 of our report.

The bottom line is that they are meeting all the objectives in the contract,

and we showed the budget for the contract on page 40 and 41 of our report.

This is about a $3 million a year program, and it's only 28% funded by the General Fund.

The remaining sources of funding are state funds, including Medi-Cal funds.

We recommend approval of item 10.

Thank you. Help me understand the evaluation of this contract. Why was it, if it's correct,

was it exempt from the units of service monitoring and why that was?

This is according to the BLA report.

And if you can walk us through what is units of service means.

Right now you're saying that you serve about 540 clients per year.

My assumption is that is a definition of the units of service, but please go ahead.

No problem.

So in accordance with California Advancing and Innovating Medi-Cal,

Prior contracts were cost reimbursement, which posed a lot of risk to our city and fellow counties.

And so to be in compliance with CalAIM payment reform from that fiscal sustainability piece,

that also allowed us to have FFP, so federal drawdown,

as well as programmatically to be able to have performance objectives

and performance monitoring that is consistent with deliverable client services.

so units of service is based on overall service delivery to said client and then also so yes so

I think that that answers your question thank you that's very helpful thank you and so is it because

then is the transition from previous as you indicated therefore exempt from the units of

service yes understood great thank you so much thank you I appreciate it chair chin thank you

And with that, I don't have any other questions.

Let's go to public comment on this item.

Yes, we are now 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, again, I would like to send this item to full board with recommendation and a roll call, please.

Can I have a motion to forward to the full board with a recommendation?

Member Mahmoud.

I move aye. Member Sauter? Aye. Sauter, aye. Chair Chan? Aye. Chan, aye. We have three ayes.

The motion passes. Thank you. And Mr. Clerk, please call item number 11.

Yes, item number 11 is a resolution approving an agreement between the city and county,

acting by and through its Department of Public Health, and the California Department of Social

Services and its third-party administrator, BDO Government Services, LLC, having anticipated

revenue of approximately $7.4 million for a performance-based period commencing on execution

of the grant agreement through June 30, 2029, and authorizing DPH to enter into amendments

or modifications to the 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 again, we have Department of Public Health here.

Good morning, Chair Chen, Supervisor Sauter, and Mahmood.

My name is Yun-Jang Kim, Director of Residential System of Care at Behavioral Health Services.

So today I'm here to request a formal approval for the grant agreement

for the California Department of Social Services Community Care Expansion Preservation Project.

So I'm here today with Max Rocha, Director of System of Care,

and David Edelman, the analyst at Behavioral Health Services, to support the project.

The Community Care Expansion Preservation Program is funded by California Department of Social Services

via its third-party administrator, BDO Government Services, through June 2019.

So its total amount, grant amount, is $7.4 million.

So today I'm presenting the project to request authority for DPH to accept nonstandard terms

in grant agreement with the CDSS through BDO Government Services.

So before going into the details about the nonstandard terms in grant agreement,

I would like to provide the overview of the project.

So the purpose of CCE, Community Care Expansion Preservation Program grant,

is to preserve and avoid closure of licensed residential adult

and senior care facilities,

so also known as assisted living facilities or boarding care homes,

with a priority for the facilities that serve individuals experiencing

or at risk of homelessness.

So the grant is split into two parts.

One of them is for operating subsidy program.

That is time limited through 2028 and has been appropriated for cover,

to cover potential or projected operating deficits

in existing residential care facilities.

Serving low income residents, adult individuals,

who are also beneficiaries of supplemental security income,

which is known as SSI, or cash assistance program for immigrants.

So the operating subsidy program accounts for about 40% of a grant,

which is $3.2 million.

Another type of funding is for capital development,

which allows the facilities to make essential fiscal repairs

or necessary upgrades to avoid closure or make the facility compliant with licensing standards.

About 60% of a grant that is $4.2 million is assigned to capital project.

So DPH has worked with CDSS to identify 20 eligible facilities that serve low-income clients

and may have demonstrated financial needs.

So DPH plans to engage California Mental Health Service Authority,

which is called CalMESA, to disperse grant funds

and provide technical assistance to selected facilities

as soon as this grant agreement is approved.

So next slide.

So I'm going to review what the nonstandard terms in grant agreement,

CDSS, and BDO government services requests are.

First, dispute resolution process closes obligated the city to settle disputes under binding arbitration.

Second, obligated the city to defend, indemnify, and hold harmless CDSS and video government services.

So, and third, waives the city's right to seek any special consequential punitive damages,

indirect or incidental damages, or for any loss of goodwill, profits, data, or loss of news resulting from grant agreement.

So these non-standard terms are actually similar to ones in other state grants,

including Behavioral Health Continuum Infrastructure Program, which is known as BCHIP,

the Round 3, 4, and 5 and CC expansion programs,

which have been approved by Board of Supervisors in the past.

So the city attorney reviewed and approved

bringing this resolution to the Board of Supervisors.

So DPH respectively request formal approval of this grant agreement.

Thank you so much.

Thank you. Thank you for your work.

I don't see name or roster.

I don't have additional questions.

let's go to public comment on this item this we are now opening public comment

for this item number 11 if we have any members of the public wish to address

this committee

madam chair we have no speakers seeing no public comments public comment is now

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

please. And on that motion to forward to the full board with a positive recommendation, Member Mahmood.

Mahmood, aye. Member Sauter. Sauter, aye. Chair Chan. Aye. Chan, aye. We have three ayes. The motion passes.

And Mr. Clerk, please call item number 12. Item number 12 is a resolution authorizing a two-year

extension of the agreement amendment between the Recreation and Park Department and Active

Network LLC for use of city recreation programs and facility reservations for a term of December

31st, 2025 from January 1st, 2016 through December 31st, 2027 with no change to the contract amount

of $100,000 annually and to update certain standard contractual clauses. Madam Chair.

Thank you. And we have Rec and Park Department here.

Thank you, Chair Chan, Supervisor Mahmood Sauter.

My name is Anne Marie Donnelly. I am the Assistant Superintendent for Recreation and Community Services with the Recreation and Parks Department.

I'm here on behalf of the department to ask for a request for extension of two years for the current contract that we hold with ActiveNet Services.

ActiveNet is a comprehensive business software service that we use for public recreation.

We use it for program registration, memberships and scholarships, point-of-sale transactions,

and for processing permits and allowing the public to make reservations.

It's an online system as well as a front-end system.

If you've ever gone to a swimming pool, you've scanned your pass.

If you've ever signed up for a yoga class or signed a kid up for a day camp, you've used ActiveNet.

And so along with it running our recreation business, we also have it, it is, provides financial and metrics reporting that we can provide to the city.

We process over $20 million in financial transactions annually.

The current contract expires December 31st.

Obviously, without an extension, we wouldn't be able to do regular business at Rec and Park,

and so we're requesting the two-year extension through December 31st.

There's no change to the cost.

We pay a per-transaction fee to ActiveNet.

It's approximately $100,000 annually.

Thank you.

Anne-Marie, time has fly.

Both of us are wearing reading glasses.

I know.

I know.

So you're right.

I do have a quick question.

Is this system different than the pickleball reservation system?

I see nodding behind you.

Okay.

I do have, I just wanted to ask about court reservation system,

but I think I do know this system that's been existing for a long time.

Yes.

I don't have any other question.

I'm glad that you're, and we're happy to be able to accommodate you

to schedule for this so that you can extend the contract or extend the system.

Thank you, Chair.

Thank you.

Let's go to public comment on this item.

Yes, any members of the public have joined us today

who wish to address this committee regarding item number 12?

Now is your opportunity.

Madam Chair, we have no speakers.

Seeing no public comments, public comment is now closed.

Colleagues, I definitely want to move this to full world rule recommendation.

I use the system. I know it well enough to say we need it. And a roll call, please.

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

Mahmoud, aye. Member Sauter.

Sauter, aye. Chair Chan.

Aye.

Chan, aye. We have three ayes.

The motion passes.

Thank you.

Mr. Clerk, please call item number 13, the Lucky 13.

Yes, item number 13 is an ordinance amending the Business and Tax Regulations Code to repeal the cannabis business tax beginning on January 1, 2026, and remove references to the cannabis business tax from the common administrative provisions of the code.

Madam Chair.

Thank you, and I believe we have President Mendelman's legislative A here, Sophie Marie, and the floor is yours.

Good afternoon, Chair Chan, Supervisor Mahmood, and Supervisor Sautter.

My name is Sophie Marie, and I'm a legislative aide to President Mandelman.

The item before you today is President Mandelman's proposed ordinance to eliminate the collection of the cannabis business tax.

The tax is currently scheduled to take effect on January 1, 2026.

Based on discussions with colleagues and the mayor's office, President Mandelman is proposing

that this committee amend the ordinance to suspend the tax for 10 years rather than eliminate it

outright. As you know, the cannabis market has been and remains highly competitive, characterized

by a dominant illicit sector offering comparable products at substantially lower prices and a

smaller legal sector constrained by extensive regulatory and tax obligations at the local,

state, and federal levels. It's estimated that in San Francisco, the illegal market may make up as

much as 50 to 60 percent of cannabis sales. Let me be clear. Illicit sellers do not pay taxes.

They do not apply for business permits, and their product is not subjected to the rigorous

quality control that legal operators are subject to. All of these factors mean the illicit market

can sell products for far cheaper than legal operators. To avoid further burdening legal

cannabis businesses as they struggle for market share against illegal businesses, President

Mandelman has previously asked the board to defer collection of the local cannabis tax three times.

Voters originally authorized the 1-5% tax in 2018 with implementation scheduled to begin in January 2021.

The first suspension, passed in late 2020, pushed the collection date back through December 2021.

The second pushed it back through December 2022.

And the latest pushed it back through December 2025.

After suspending this tax three times for a total of five years, the significant burdens on the legal cannabis market remain.

The illegal market remains dominant, and the rationale for not collecting this tax remains as strong as ever.

And it does not seem likely that any of these facts will change in the near future.

Chair Chan, Supervisor Mahmood, and Supervisor Sauter, I respectfully ask you to forward the ordinance

with President Mandelman's proposed amendment to the full board with positive recommendation.

I'm available to answer any questions today. Thank you.

Item 13 is an ordinance that would repeal the cannabis tax.

If it's amended as proposed by Supervisor Mandelman's office,

it would suspend the cannabis tax from beginning for 10 years.

Right now it's scheduled to begin January 2026.

We summarized the market dynamics in our report.

But I think you'll see on page 43 that statewide cannabis sales have decreased over the past three years by about 6%,

and then locally they've decreased by about 12%, driven by declines in prices, not by declines in quantity of cannabis purchased.

This tax is basically an additional gross receipts tax on cannabis businesses that ranges from 1% to 5%, depending on the level of sales.

Again, that would kick in in January 2026.

So by suspending this tax, you are giving up a general fund revenue that the controller

projects would be $3.7 million next fiscal year.

Next fiscal year only captures half a tax year because the tax years are on calendar

years.

So the full revenue loss in the following fiscal year, 2627, is about $8.7 million.

this would exacerbate the structural budget deficit that the general fund faces.

So for that reason, we consider approval to be a policy matter for the board.

Supervisor Mahmoud.

I just wanted to echo some of the statements that President Mandelman's office made to

indicate that while this is a tax measure, I do view it as a public safety measure.

every day when I walk to work I walk past a corner and market in Jones which has to this day

people normally associate the tenderloin with an open air fentanyl market what they don't often see

is during the day there is a regular weed illegal weed market and on my morning commute every single

day, that illegal weed market is there. And these illegal weed markets persist because of overregulation

by the state and due to just general red tape that makes it difficult to operate any type of

small business in San Francisco. So this measure in having a waiver for an additional 10 years on

these businesses is necessary because by making it harder for legal retailers, we make it easier

for black markets to persist in all the issues that come with them. And I think this is important

in this climate to ensure that we are making it easier for cannabis stores that are operating

legally here and sending a statement that we do not tolerate illegal activity for those who are

trying to comply with the law. And for those reasons, I am in support for this legislation.

Supervisor Sauter. Thank you, Chair. I will be supporting this with the proposed amendments

today. And, you know, I think back to kind of how we got here with the ballot measure and what

the voters had in mind and I think the reality of this market and the sales are probably

not, they probably don't match what voters had in mind when they cast their vote for

this.

It hasn't quite been the gold rush or the green rush that everyone had in mind and I

think, you know, I do have some pause with the budget impact for the general fund but

I also think about the consequences of all of the small business,

largely small businesses that would be impacted here

if we don't give this relief, all their employees,

all of the activity that they've helped generate in our commercial corridors.

So for all those reasons, I will be supporting this.

I do not support this for a variety of reasons.

First and foremost, in 2016, I believe that the California voters really voted to support recreation marijuana with the understanding and the recognition is that cannabis can be treated just like we do with alcohol and should be regulated as so.

And that the benefits come with it is the tax revenue.

And the local perspective mirrors the state perspective when we pass the local tax.

and, again, encouraging.

In fact, San Francisco is, I would say, the starting ground for first medical marijuana,

eventually when the state approved that we can transition into recreational marijuana.

And it has been the case for a very, very long time in San Francisco.

The flourish of the black market, in my opinion, is not because that it was legalized.

I think, in my opinion, is because of lack of enforcement, both on the state level and the local level.

If there's a crime, black market selling cannabis is a crime, and then it should be enforced.

I don't see that the solution to it is simply to repeal or suspend a tax.

What should be addressed is enforcement.

Now, how we actually spend the tax revenue, in my opinion, particularly in the state revenue generated from cannabis tax, should actually put it back to enforcement.

And that is the way that I see how that actually could address and justify continuing to generate tax revenue from the industry by helping the industry to thrive, helping the industry to continue to operate and generate profit because that is how tax revenue works.

It's the reason why I do support knowing that now the state has suspended its state tax increase,

I think by at least two fiscal year, if I understand it correctly, perhaps more.

And I'm supportive of that.

I'm also supportive of the moratorium of new application

because we had these conversations about potentially saturation,

not just in our neighborhood, but saturation of the market in San Francisco.

And I am, again, in support of extending that moratorium, which I understand is expiring.

The moratorium is expiring in 2025.

Isn't it that correct?

I see Ray Law from Office of Cannabis.

Thank you, Chair Chen.

Ray Law, Office of Cannabis.

The moratorium will be expiring in December 2027.

In 2027.

So we already have it in place.

I'm happy to continue to extend it in the 2027

because then I think that is the economic impact report

that is due for the industry.

Isn't it there's an economic impact report?

Ray Law Office of Cannabis, Chechen,

in the same ordinance that enables the moratorium,

It is also codified to mandate the comptroller's office to produce a market study by June of 2027.

So yes, to your question, yes.

So I think that there's an economic impact report.

There's already a moratorium in place.

I look forward to learning more about it and to continue to extend that moratorium.

And by the same, in fact, one of the reasons why we have that is also because it's to trust that we understand that suspension of this tax is expiring this year.

Look, the suspension, the projection, previous three fiscal years suspension of the cannabis tax was at the projection of $30 million total.

So in the last three years, the city has suspended the tax in its total of $30 million.

Clearly, the projection now, again, a concern around black market.

Therefore, the tax revenue projection is lower than previous.

I think the questions for the colleagues who supports it, including Board President Mendelman,

where is this money going to come from?

Like, how do we offset what we have projected as a tax revenue to the deficits that, again,

we're facing $800 million for the next two fiscal year?

I asked the colleagues who were going to vote in support of this to be able to answer the very same question during budget, including Board President Mendelman.

How are we going to offset the money that he now proposed to be in suspending and collecting?

It's going to be a harsh question, but there's no doubt as a budget chair I will ask that.

to colleagues who are here now on this committee,

should you remain on this committee as well as Board President Mendelman,

figuring out how this money is going to come from somewhere

because it's got to come from somewhere.

That's one.

I think two is that I'm actually also in a position

where I can understand the challenges the industry face.

In fact, I have offered and countered an amendment

to, again, Board President Mendelman

that instead of a 10 years, a decade long of suspension, can we actually figure out for two

years, one year or two years suspension that goes along again, there is going to be a moratorium

in place expiring, and then as well as economic impact report. There's no reason to not to

consider a shorter term suspension instead of a decade long suspension when there is actually,

there's no other, it's just to kick the can down the road. It doesn't really help the industry.

It can, like there's no, it's not a, it's not a solution to black market. I can understand the

black market argument, but there's no, this is suspending of the tax revenue is not a solution

to black market. So for those reasons, as it currently written, I'm against it. I'm also

against even the suspension, not because the suspension itself, but it's the date of December

31st, 2025. But I will be in support of the amendment today. But colleagues, what I do ask,

though, I do not wish to send this out unless you can tell me right now how you're going to offset

the dollars lost at this moment to address that. I cannot support sending this out

from a budget committee with recommendation. I'm more than happy to have this and continuing

this conversation at full bore because it has got to be on the minds of all of us,

all 11 of us, when we are going to about to tackle this budget deficit. We are going to face

this mayor's instruction budget instruction in about a week or so and you know we're having our

finance letter from the controller and with our five-year projection report I would like to have

a intellectually honest but really just honest conversation about budget I would not be supporting

to having this out there with recommendation I don't think we should do that it's not fiscally

responsible to simply recommending this. But we can have this debate at full board.

So, Vice Mahmoud.

I just want to acknowledge and appreciate the comments and the feedback that we are losing

potential tax revenue here, and it's a reasonable question. I will just reiterate, though, that

there are multiple ways to estimate the financial impact of different decisions that these type of

decisions have in the city. One, by increasing, obviously, having taxes on these businesses

from basic supply and demand.

They pass these on and have to raise prices to the consumer.

That's what allows the black market to persist

because the prices for legalized cannabis

are higher than what the black market can offer

and in turn allows them to undercut the market

through the black market,

to undercut the legalized market.

And so that's what the intention is here

is to allow a lever to really hit the heart

of a black market that has been persisting for some time.

And it's one tool amongst many.

I agree.

We have to complement this with enforcement, and we have to work with SFPD to understand how can we improve those things.

I don't view those as mutually exclusive.

I view them as complementary.

To the question about how do we make up the gap amongst a difficult year, I would be glad to put in the work.

We don't have answers for those questions right now because we're just focusing on this legislation in isolation.

I disagree.

I mean, I think that the way that I view it is that if you are going to approve a legislation with recommendation, shall you, then I would like to understand.

Like, if you are in the capacity to recommend something as such that you can see and indicating that by the budget and legislative analyst report in the projection of revenue laws of $24.8 million over the next four years period, tell me how you're going to make up that dollars right now if you want to send this out with recommendation and approving it before we even have a conversation about the upcoming budget.

I am not in a place where that I can be supportive of fee waivers or any type.

And right now, when we're in the middle of trying to put together a budget, or when I say we, I really mean the mayor.

But I can send this out today, but without recommendation.

The last point I wanted to make in this context is what's missing from the BLA analysis report is the economic impact analysis of the illegal black market on the surrounding businesses in the neighborhood.

That is what we're not accounting for.

So yes, there's a loss in tax revenue from repealing this tax, but we're not estimating the loss in tax revenue from surrounding small businesses that have to suffer at the proper at 50 Jones because they're losing out in tax revenue.

At the Hibernian right next to 50 Jones, which is right next to the black market, which is losing out in tax revenue that could be coming to the city as well.

So there's additional impact analysis that could be done provided by the BLEA that we're not measuring in that sense as well.

So that's why, from my perspective, this repeal actually helps to, again, undercut the black market, which is undercutting the legalized market, and in turn help to boost the revenue for sales tax revenue around the surrounding businesses.

So what I would hope is that we can have an analysis in the future to actually estimate this.

And that's why I think this could have some, it's not a complete reduction in tax revenue.

We will see a commensurate potential increase over time through undercutting the black market.

But again, I agree with you as well.

this has to be complemented with SFPD action and that is something that has to be done

but I view them as complementary rather than mutually exclusive. Sure but Supervisor Mamou

like the reality is that like when we do budget we do it with number we don't do it with theory

like theoretical so the question is while we have I would like to have to talk about the economic

impacts in general but that is not that data is does not exist before us at this moment right now

So there's no data that I can base on to be able to say, let's go and go with this.

But not to mention this, though, by that very same philosophy and same policy attitude, or actually say principle,

when we talk about illegal vending, that we actually put together enforcement,

we put out staffing, city staffing, to do those illegal vending enforcement.

I don't see a conversation about waiving the very same sales tax.

In fact, we're increasing sales tax because we find that sales tax to be funding our public transit.

I think that that's a question that I lay out before us, that, again, the address, the solution to enforcement,

or I should say black market, because that is our attitude to illegal vending, it's enforcement.

Then let's address enforcement.

because I would say the association of economic impact on both cracking down illegal vending,

cracking down on black market, enforcement has to be in place,

and we can debate on economic impact, but a dollar is a dollar,

and here is a $24.8 million over the next four years period.

There's no economic impact report to show us and indicate us at this moment that is otherwise.

So I want to make the motion to send this out without recommendation.

But again, I am here for debate because I can clearly see it's two votes to one.

But I believe I have expressed that very same desire to President Mendelman.

I don't think he object to me sending this out without recommendation.

He understands where I'm coming from.

Can we do the motion to amend first?

Yes.

I'll make a motion to amend the legislation as read into the record by President Mandelman's office staff.

Do you want to re-allow the amendments?

The amendments include, on page 1, lines 1 through 2, adding extension suspension of and removing appeal.

In the long title, page 1, lines through 5, adding extend the suspension of the cannabis tax through December 31st, 2035.

and repeal the cannabis banasis tax beginning on January 1, 2026.

On pages 1 through 17, section 1, restore article 30.

On section 1, subsection 3003C, page 9, lines 13 through 14,

add the imposition of the cannabis business tax under the section 3003,

which shall be suspended for the tax years 2021 through and including 2035.

In section 3, subsection B, pages 36, line 6 through 7, add upon the effective date of this ordinance.

This ordinance shall be retroactive to January 1st, 2026.

We have two motions on the floor, but let's go with the motion to amend first.

Roll call, please.

Before we take any action, Madam Chair, we should call public comment.

Yes.

Let's call public comment.

Yes, we are now opening public comment for this item number 13.

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

As soon as the first speaker approaches the lectern, I'll start your time.

First speaker, please.

Good morning, Supervisors.

My name is David Goldman.

I'm the president of the Brownie Mary Democratic Club of San Francisco,

a cannabis policy-oriented democratic club.

I'm also on the board of California Normal, a statewide advocacy organization

devoted to cannabis regulatory reform and a board member of the Green Cross,

San Francisco's only nonprofit cannabis retail dispensary.

I urge you to pass the legislation to avoid a 50-fold increase in the gross receipts tax rate

from 0.1% to 5% on cannabis retailers.

Cannabis businesses are currently struggling to stay afloat,

as evidenced by several closures in the past few years.

When Proposition M was passed by the voters in 2024, only cannabis retailers, no other retailers, were not excused from any gross receipts tax if their gross receipts tax income was less than $5 million, a glaring omission on our part.

I also would point out that since Prop D, which was the impending tax increase on gross receipts, has not been implemented, there has been no loss of income during this period.

And if this legislation passes to end this tax increase, there will be no change.

There will be a continuation of the status quo.

I urge you to do what the board has done before and suspended passing of this tax increase.

I urge you to pass the legislation to eliminate it completely.

Thank you.

And thank you much, David Goldman.

Next speaker, please.

Good morning.

My name is Bram Goodwin.

I'm a resident of the Haight-Ashbury.

I'm a state cannabis medical patient

and a member of the San Francisco Brownie Mary Democratic Club.

I ask the supervisors to please pass this with recommendation.

This is an affordability issue.

All the supervisors talk constantly about affordability.

That's what this issue is about.

And it affects not only retailers, but medical cannabis patients.

I'd like to emphasize something very, very important.

and to the chair, Supervisor Chan,

I'd like to address this specifically to you.

Cannabis is medicine.

It's not like other substances that you're taxing.

It's medicine.

Most of the people, many of the people who use this product

are medical patients.

You wouldn't be taxing other kinds of medicine to this extent.

I'd like to point out that the tax rate right now is 30%.

Is that a fairness?

Does that sound fair to you?

No.

Please pass this resolution and recommend to the board that it also passes.

Last thing quickly, you supervisors sit on the shoulders of other supervisors

who when our government turned against HIV patients,

they passed our ability to have legal cannabis.

The speaker's time has expired.

Thank you much, Brian Goodman, for addressing this committee.

Next speaker, please.

good morning chairman chan i ask you to take a deep breath

okay i'm indiana davis i am opening a cannabis delivery right now hopefully i'll be opening in

the next month more importantly i'm a medical patient i have a seizure disorder and chairman

Chan, I heard you when you talked about enforcement, and I agree with you. However, I would like to be

said, I'm from a small town in Alabama where they have the breadth of a law force where they can do

the enforcement. The town is small enough, and it's being done, and I'm going to tell you what happens.

the black market grows. If you want to talk about numbers, I like to talk about the huge amount,

the potential of capital of people that go to the black market simply because it's cheaper.

Unfortunately for them, it's much more toxic, and they could maybe even die from fentanyl.

So I think it's very important for medical reasons, as a person who takes it, procedures for this to pass.

And also, when the budget was passed however many years ago, the tax was punitive then.

So if you want to talk about why the math isn't mapping now, it's because when it was implemented, it was in a punitive manner.

Thank you.

thank you much and Davis next speaker please hello supervisors my name is Alex SF all I am

born and raised here in San Francisco and what many people would call a rough neighborhood actually

my store I've come a long way to get in order to open my store here in my city and making sure

that I'm doing it the right way. Let's see. My store's name is Obsidian Dispensary. I work,

let's see. I think we all understand the challenges of the cannabis industry. Supervisor

Chan, I heard mention of enforcement versus repealing the tax. I think two things can

be true in the same instance. Yes, enforcement is essential, but if cannabis businesses fail,

then we don't have much to enforce for relative to this matter.

The more immediate and impactful change would be repealing the tax for the businesses

who contribute to the city in many ways, like employment, taxes that we pay, and so forth.

I'd like to point out that many cannabis retailers have already closed, a whole bunch of them,

and I don't think any taxes would help the situation out much.

I would like to echo Supervisor Mahmood's and many other sentiment.

If we continue to impose these kinds of taxes on the legal cannabis market,

we are impacting the cost for seniors and cannabis medical patients.

We are indirectly supporting the illicit market

and directly hurting small cannabis business.

So these things I hope you can consider.

And your attention is greatly appreciated, Supervisor Chan.

Yeah, thank you guys for your time.

Appreciate it.

Thank you much.

Next speaker.

Good morning, supervisors.

Thank you for hearing this item.

My name is Jesse Stout.

I live in District 6.

I'm here as a member of the Green Cross, which is the city's last nonprofit retail dispensary

located in District 11.

I support the repeal of the cannabis tax, and I also support the repeal as amended to

delay the tax.

I would point out that all sales taxes are inherently regressive and should be replaced

with progressive income taxes anyway.

And in particular to this morning's committee discussion, I would point out that the issue

of replacing the funds that we would have gotten from this cannabis tax is a matter

that the state should take up with the state.

The state already taxes cannabis with an exorbitant 15% excise tax, and to replace the potential

lost revenue, we ought best go to the state government to ask that the state give us the

taxes that they're taking from San Francisco at our cash registers and

bring it back to the city budget thank you very much thank you much next speaker

good morning supervisors my name is Nina Parks I represent an organization called

the equity trade network we help to create the equity program in multiple

municipalities I also have a stakeholder in a in a dispensary in the Mission

District, as well as a distribution in Oakland that

helps to distribute equity businesses.

Now, I hear everything that you're saying on wanting

to make up some revenue.

But we do have 60% of cannabis users

that are not coming over into purchasing

in legal dispensaries.

And so there is a huge gap of potential funds

that could be brought over if we create a greater market

and a greater environment for these folks to cross over

by making it affordable.

We are seeing a rise in the cost of living everywhere,

from gas to groceries and any increase.

Because what we saw in the three months

that the state increased to 19%, retailers lost from 11%

to 23% of their business.

That is a problem, right?

The city also gets sales tax.

You guys get about 2.9% as the city county of San Francisco through sales tax because you guys are not not getting cannabis money.

So the idea would be in not increasing the tax to try to squeeze blood out of a stone is to create an environment in which people can cross over and we can actually have extended businesses with longevity.

I have so much more to say, but I will leave it at that.

Thank you.

Thank you much.

Nina Parks.

Next speaker.

Good afternoon, supervisors.

My name is Duncan Lai.

I'm the head of the San Francisco Cannabis Alliance and the owner-operator alongside

my equity partner, Dracari Donaldson.

I want to echo Supervisor Mahmood and Sauter's support for the cannabis tax sunset.

Appreciate that.

The tax will cost San Franciscan jobs.

Our industry doesn't outsource every job.

Every dollar earned stays here.

When voters pass Prop M to eliminate gross receipts taxes for small businesses doing under

$5 million, it's hard to believe they have to be able to do that.

intended to leave cannabis behind. Our industry is still struggling. Affordability challenges for

patients and consumers are at an all-time high, and now is not the time to enforce an additional

tax. Supervisor Chan, we will take you up on your offer to discuss continuing the moratorium,

increased enforcement on the illicit market, which we know will drive more revenue and thus taxes to

the legal stores in the city, and we'd love to see that economic impact report. Thank you,

Peshitankin live. Next speaker.

Good morning, everyone. My name is Romwald Connolly.

I am, my husband and I own two cannabis dispensaries here in San Francisco,

one in the heart of Fisherman's Wharf and the other one in the heart of the Castro.

One serves all the tourists to the city.

The other one serves the majority of medical patients.

You know, while I sit here, I'm a decreed economist.

I spent 23 years in the software industry.

majority of it were looking after worldwide sales for the number one software company in the world.

And now my husband, who is in biotech, we own cannabis dispensaries.

I'm hearing an 8.1 deficit.

I'm hearing a 24.x number deficit over the next couple of years.

But no one is reflecting on the decline of the taxes that the city has been receiving over the years

because we are your market.

We're the ones that are impacted by the economy, inflation, and the taxes.

And on top of this, I don't think you're taking into consideration

that the 5% tax then gets taxed by the CTTFA.

You do know that they tax the excise tax, and they will tax this tax.

So it's not just a $24 million deficit that you're going to lose on your budget, but that deficit is going to drive probably, I would say, maybe $50 to $60 million into the black market.

So if you put this tax in, it's not $24 million on your books.

It's going to increase the black market by 25% to 40% increase because we're going to lose customers,

and they will go to the black market.

So I hope you understand that, because I'm afraid that this is going to backfire if it's approved.

Thank you.

Thank you much, Ronald Connolly.

Next speaker.

Hi.

Good morning.

I think it's still morning.

I don't think there's much I can add.

I actually feel like following the credentialed economist is difficult.

My name is Laura DeCaro.

I'm a lawyer who's been practicing in San Francisco cannabis for 20 years almost,

and I've never seen a more dire moment.

So I'm here to support the full repeal.

I would support deferral language as amended,

but I really do support the supervisor's consideration

of this particular and very important issue.

The goals of tax policy are to influence behavior and collect revenue.

In a cannabis environment where almost all people have access to what is already essentially untaxed cannabis in an illicit market, it will do neither.

So I urge you not to try to use this particular tax to try to close that looming budget shortfall on the backs of small businesses, because it won't do that in the end.

There were a whole bunch of articles that came out in June, right before the state tax increased to 19% from 15%.

Talking about the 11% drop in sales compared to the same quarter of the earlier year, right, 2024, according to tax data analyzed by multiple journalists and news outlets, 11% before the tax went up, we saw such a decrease in sales immediately following the implementation of the 19% tax that they immediately reversed it.

The data is there.

It may be empirical at this point,

but the consumer behavior is evidenced by the tax rate.

And I thank you for your time.

And thank you much for addressing this committee.

Next speaker.

Morning, everybody.

I'm Eric Alfaro, the manager at the Green Cross.

Just want to say that it is a medicine.

It does help out a lot of our members.

There are a bunch of our members that come in

that solely just need this medicine for them,

and it's an affordability issue for them.

And I've seen it more and more as it's just hard for them to get their medicine.

And raising their prices doesn't help them at all.

They just have told us so many times they have to stretch it out a little bit longer,

and it's not helping them at all.

So I just wanted to make sure that it's known.

Thank you for your time.

Thank you much.

Next speaker.

Hello, supervisors.

Thank you for your time.

My name is Kevin Reed.

I am the president of the Green Cross, and I've been a medical patient for 25 years here in the city.

And the majority of the people that we serve are medical patients.

When California decided to legalize recreational use, we've seen so many people in the industry just completely disappear.

But the customers, they stayed the same.

if you have a place down in the Fisherman's Wharf

you do see a lot of tourists probably these days

but the neighborhood dispensaries that we have

they're still waiting on our patients

and in California we just don't tax medication

but that's not what we did when we legalized marijuana

we didn't consider the medical marijuana patients at all

and it's so sad to see people

have to spend so much money because every product in my store is double what it was,

at least double what it was when it was medical and now recreational.

And our government just sees this as a revenue.

This entire conversation you had, nobody said medical, medical marijuana.

Nobody said patient.

Nobody's thinking of that in government.

And while I appreciate anything that you do for our industry, we have to think about this as a medicine because it is an unaffordable medication.

And if these people have to go back to the streets to get their medication, there's no telling what they're consuming.

And it's just, it's the wrong thing to do.

I implore you.

I implore you to do the right thing.

And thank you much for addressing this committee.

Seeing no more speakers in the queue, Madam Chair.

That completes our queue.

Seeing no more public comments.

Public comment is now closed.

I want to thank everybody that came out to make public comments about this.

I voted for cannabis during the COVID period, voted for cannabis as essential business, as an essential service.

because recognizing that it does actually have its medical needs for a lot of people.

And there is not a debate about whether cannabis is important or not.

In fact, it is.

I want to acknowledge the medication aspect of cannabis and how it has been longstanding.

It's the reason why I mentioned that in San Francisco, we started with the recognition of what that is.

Again, I think the challenge is that it's no longer just medical marijuana.

It has transitioned into recreation marijuana business.

And if anything, I think that perhaps it is time to have a conversation about reforming the tax code itself,

how it is double tax, and that what else can we can do, both on a state level and a local level.

So for that reason, I am, again, in support of suspending it for a short period of time.

But 10 years long, it's a long time.

So with that said, I want to first make the, I believe the motion was made by Supervisor

Mahmoud.

So I want to make sure that we do the motion to amend and a roll call for the motion to

amend.

Hand on the motion by Member Mahmood that we accept the amendments as so written to the record.

Member Mahmood.

Aye.

Mahmood, aye.

Member Sauter.

Sauter, aye.

Chair Chan.

Aye.

Chan, aye.

We have three ayes.

The motion passes.

And I would like to go on recess at this moment.

I would like to check in directly with Board President Mendelman for a brief period before we move on.

So right now it's 12.05.

Give me 10 minutes, 12.15, that we will come back.

recess.

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Music

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guitar solo

guitar solo

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We'll see you next time.

We'll be right back.

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Outro Music

SFGov TV, San Francisco Government Television.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you, and welcome back to the Budget and Finance Committee from recess.

I would like to make the motion to move the item, which was in discussion, item 13, as amended, proposed by Supervisor Mamou, to full board without recommendation and a roll call, please.

And on that motion that we refer this ordinance to the full board without recommendation as amended yes

Member my mood

Yes, okay, my good eye

Member solder solder. I church and I chain I we have three eyes the motion passes and

Mr. Clerk do have any other business before us today

I'm sure that concludes your business the meetings adjourned

Thank you.