San Francisco Board of Supervisors — Budget and Finance Committee Meeting (January 7, 2026)

The Budget and Finance Committee held its first meeting of the year on January 7, 2026, chaired by Supervisor Connie Chan, with Vice Chair Supervisor Matt Dorsey and Member Supervisor Cheyenne Chen present. The committee heard and acted on multiple resolutions involving SFO concession rent relief, retroactive federal “prize” authorizations for building electrification, homelessness/Medi-Cal enrollment capacity grants, several affordable housing financing and operating subsidy actions, and multiple Department of Public Health (DPH) grants and contracts—including state Proposition 1 capital funding for new/expanded behavioral health facilities. The clerk noted items approved were expected to appear on the Board of Supervisors agenda on January 13, 2026 (unless otherwise stated). All items advanced to the full Board with unanimous 3-0 votes.

Public Comments & Testimony

• Essence Winston (public speaker) on Item 6 (supportive housing operating subsidy): expressed support for the funding and intent, and urged that housing investments be paired with addiction (including fentanyl) and mental health treatment access, describing concerns based on her nonprofit work experience.
• No other public speakers testified on the remaining items.

Discussion Items

• Item 1 — SFO food & beverage concession rent relief / MAG methodology changes

  • SFO staff presented a program with three elements: (1) one-time MAG reset for certain tenants, (2) reduced pre-security percentage rent for some leases, and (3) change to annual MAG adjustment methodology.
  • Key program details stated:
    • Applies to 69 food & beverage leases total.
    • 18 leases identified as having MAGs around 15% of gross revenues vs an average 10%; they would receive a one-time reset.
    • New MAG basis described as: post-security MAG = 12% of 2024 sales; pre-security MAG = 6% of last year’s sales.
    • 7 pre-security leases would move to a flat 6% percentage rent instead of a tiered structure.
    • Annual MAG adjustments would shift to 85% of prior year base rent (industry standard) instead of CPI, applying to most leases (with exceptions/opt-outs).
  • Budget and Legislative Analyst (BLA) reported estimated revenue reduction of about $1.8 million in the calendar year, with a stated General Fund impact of about $275,000 because 15% of non-airline revenues go to the General Fund.
  • Cheryl Brennan (SFO Director of Revenue Development & Management) explained opt-outs: some tenants have older leases with lower MAGs or are performing strongly such that the new methodology could increase their MAG; noted an administrative impact of running two adjustment methods. She also noted many leases expire October 31, 2027.

• Items 2 & 3 — SF Environment: DOE “Buildings Upgrade Prize” (retroactive accept & expend)

  • SF Environment requested retroactive authorization for two $400,000 federal cash prizes (total $800,000) from the U.S. Department of Energy:
    • Item 2: $400,000 (confirmed/received December 12, 2023) to upgrade up to 200 homes.
    • Item 3: $400,000 (confirmed/received March 17, 2025) to upgrade 20 homes.
  • Staff stated buildings are ~44% of San Francisco emissions, and described the department’s funding strategy, citing $83.2 million in grants and two prizes totaling $800,000 since November 2022.
  • Staff explained the distinction between prizes vs grants as described by the department: prizes are awarded immediately upon winning, without a negotiated grant agreement; however, after consultation with the City Attorney and Controller, SF Environment was advised prizes must follow standard local grant procedures, prompting the retroactive resolutions.

• Items 4 & 5 — Human Services Agency (HSA): Housing & Homelessness Incentive Program (CalAIM-related)

  • HSA presented two grants for April 1, 2026 – March 31, 2030:
    • Item 4: $268,000 from Blue Cross of California Partnership Plan (Anthem).
    • Item 5: approximately $1,072,000 from San Francisco Health Plan.
  • Purpose stated: strengthen public benefits enrollment/advocacy for unhoused individuals and increase Medi-Cal enrollment to support CalAIM participation.
  • Planned staffing: two temporary positions—(1) Senior Eligibility Worker (benefits enrollment including CalFresh, Medi-Cal, IHSS, etc.) and (2) Program Specialist (training CBO staff at shelters/navigation centers to help clients obtain/maintain benefits).

• Item 6 — MOHCD operating subsidy grant for supportive/TAY housing at 78 Haight St & 120 Octavia St (retroactive start)

  • MOHCD requested approval of a grant agreement with RSU Associates LP for operating subsidies, with a retroactive commencement date of October 1, 2025, for a 20-year term and an amount described in the item as not to exceed ~$15.3 million.
  • Project description stated by MOHCD:
    • 78 Haight & Octavia: 64-unit affordable housing development on a city-owned infill site.
    • Includes 32 supportive housing units for transitional age youth (TAY) at risk of or experiencing homelessness, with services by Larkin Street Youth Services.
    • Remaining units include 31 studios for adults plus a three-bedroom child care unit.
    • Construction completed September 2025; 41 of 64 units leased to date (including the child care unit).
  • BLA described the funding split as ~$10.6 million from the City’s Local Operating Subsidy Program (General Fund) and ~$4.8 million from No Place Like Home (state funds).
  • Vice Chair Dorsey raised concerns about nonprofit supportive housing financial stability (referencing a recent media story about TNDC selling buildings) and asked what the City could revisit in underwriting/monitoring operating subsidies. MOHCD staff noted underwriting guidelines are revisited periodically and stated 2026 is due for that process.
  • Chair Chan requested that departments provide photos of facility conditions (exterior/interior/common areas/sample units) for facilities-related contracts/grants and asked MOHCD to provide photos before the January 13 Board meeting if possible.

• Items 7–9 — 967 Mission (100% affordable senior housing): bonds, ground lease/loan, and operating subsidy

  • MOHCD presented three resolutions for a 94-unit senior affordable housing project at 967 Mission (SoMa), co-sponsored by John Stewart Company and Bayview Hunters Point Multipurpose Senior Services.
  • Key financing and timeline points stated:
    • Tax-exempt bonds not to exceed $41.7 million (via two notes up to $21.75M and $20M).
    • City ground lease: 75 years plus one 24-year option (up to 99 years), $15,000 annual base rent.
    • City loan not to exceed $44.3 million with a minimum 57-year term.
    • Operating subsidy grant: approximately $10.5 million for 15 years under the Senior Operating Subsidy (SOS) program, supporting 40 units at 15% and 25% AMI.
    • Unit targeting stated: 24 units for seniors exiting homelessness (with LOSP subsidies and supportive services), 5 units for HIV-positive households (≤30% MOHCD AMI), 40 SOS-supported units (15%/25% AMI), and remaining general affordable homes restricted at 50% AMI, plus a manager unit.
    • Construction financing close anticipated February 2026; construction complete December 2027; full occupancy projected April 2028.
  • BLA reported total development cost of about $79 million, with City funding $44.3 million, and cited a City contribution of about $465,000 per unit, described as higher than MOHCD’s typical $250,000–$300,000 per unit, attributed to loss of anticipated state funding (site scored as a “low resource area” under state criteria) and a lower tax credit equity price (stated by MOHCD as $0.86 on the dollar, compared with other projects such as 2970 16th Street at ~$0.80).
  • Chair Chan asked about a prior RFQ scoring tie; MOHCD stated the selection favored John Stewart/Bayview based on more robust neighborhood outreach and local community engagement.
  • Vice Chair Dorsey raised public safety and neighborhood condition concerns for seniors near the 6th Street corridor; MOHCD described operational relationships and tools (including coordination and potential changes in service providers/property management as last resorts).

• Item 10 — DPH / Zuckerberg San Francisco General Hospital (ZSFG) Foundation grant: Epic optimization and Lean/Kaizen

  • ZSFG presented an accept-and-expend grant of $6,755,486 from the San Francisco General Hospital Foundation for January 1, 2026 – June 30, 2029 to support strategy/performance improvement work including Epic (EMR) optimization and staff development through Lean/Kaizen (Kaizen Promotion Office).

• Item 11 — DPH retroactive grant: Disease Intervention Specialist (DIS) workforce development

  • DPH requested retroactive authorization for approximately $1.1 million from the California Department of Public Health for July 1, 2025 – June 30, 2026 to expand training and sustain disease investigation/intervention staffing focused on HIV, STIs, hepatitis C, and MPOX.
  • DPH stated it received the award letter October 28, 2025, after the grantor-set start date, resulting in about six months retroactivity, which Chair Chan requested be clarified on the record.

• Item 12 — DPH contract amendment: A&A Health Services rehabilitative board-and-care

  • DPH sought approval of Amendment No. 1 to extend and increase a contract with A&A Health Services, Inc. for residential rehabilitative board-and-care services.
  • Contract changes stated: extend term to June 30, 2029 (overall term July 1, 2024 – June 30, 2029) and increase by ~$22.7 million for a total not-to-exceed $32.6 million.
  • Program description: 24-hour residential care for adults (stated as 18–59) with serious mental illness and co-occurring conditions; average stay stated as ~12 months, supporting transition from acute care/higher levels of supervision to less supervised settings.
  • Bed count discussed by BLA: 71 beds total (stated as 46 in San Francisco and remainder in San Pablo).
  • Chair Chan requested (and received during the item) facility photos and emphasized the committee’s expectation for visual documentation for facilities-related agreements.
  • BLA recommended improved performance measurement beyond limited existing metrics (e.g., treatment plan milestones, exits to appropriate placements, recidivism/cycling), and noted funding was stated as Proposition C (Homeless Gross Receipts Tax).

• Items 13 & 14 — DPH: State Prop 1 Bond-BHCIP capital grants for 887 Potrero & 333 7th Street (retroactive; includes nonstandard terms)

  • DPH requested approval of two grant agreements (term through June 30, 2030) with provisions including retroactive expense recapture to May 6, 2025, use restrictions, and certain state nonstandard terms (including potential receivership provisions in event of default).
  • Item 13: approximately $21.3 million for improvements at 887 Potrero Avenue (Behavioral Health Center on the ZSFG campus). DPH described this as part of a broader plan to add 90 new behavioral health beds citywide, including more than 50 new locked subacute mental health beds for people under conservatorship at the BHC, and additional assisted living capacity in Hayes Valley (noted as related but not fully funded by this specific grant).
  • Item 14: approximately $6.3 million for 333 7th Street to reopen a 16-bed residential dual-diagnosis treatment program (formerly Joe Ruffin Place, closed 2021), including roof and mechanical upgrades and a new elevator to ensure full ADA accessibility; opening anticipated winter 2026 (stated as Nov/Dec 2026).
  • Chair Chan requested interior/exterior documentation and scope-of-work detail (photos/floor plans) for 333 7th Street before the January 13 Board vote if possible.
  • Vice Chair Dorsey asked about geographic equity requirements; DPH stated reasons it is exempt/non-applicable include: the program is a licensed treatment/social rehab facility (not a covered facility under the geographic equity legislation as described), the City applied for Bond-BHCIP funding prior to the legislation, and acquisition/financial decisions were made earlier (board-approved acquisition April 2024).
  • Dorsey also discussed neighborhood concerns as primarily about overconcentration and emphasized expectation that the City mitigate neighborhood impacts while supporting abstinence-based treatment; DPH described 24/7 staffing, structured programming, good-neighbor policies, and screening restrictions related to certain offense histories given proximity to sensitive uses.

Key Outcomes

• Item 1 (SFO concession rent relief/MAG changes): Approved amendment to attachment (including opt-outs) and forwarded to full Board with positive recommendation, 3-0 (Chan/Dorsey/Chen).
• Items 2–3 (SF Environment DOE prizes, $800k total, retroactive): Forwarded with positive recommendation, 3-0.
• Items 4–5 (HSA Housing & Homelessness Incentive Program grants, ~$1.34M total; Apr 1, 2026–Mar 31, 2030): Forwarded with positive recommendation, 3-0.
• Item 6 (MOHCD operating subsidy at 78 Haight/120 Octavia; retroactive to Oct 1, 2025; 20-year term; ~$15.3M): Forwarded with positive recommendation, 3-0; Chair requested facility photos for Board consideration.
• Items 7–9 (967 Mission senior affordable housing: bonds up to $41.7M; ground lease up to 99 years; city loan up to $44.3M; SOS operating subsidy ~$10.5M/15 years): Forwarded with positive recommendation, 3-0.
• Item 10 (ZSFG Foundation grant $6.755M; Jan 1, 2026–Jun 30, 2029): Forwarded with positive recommendation, 3-0.
• Item 11 (DPH DIS workforce grant ~$1.1M; Jul 1, 2025–Jun 30, 2026; retroactive due to award letter dated Oct 28, 2025): Forwarded with positive recommendation, 3-0.
• Item 12 (DPH A&A Health Services board-and-care; term through Jun 30, 2029; total NTE $32.6M): Forwarded with positive recommendation, 3-0; BLA urged stronger performance metrics.
• Items 13–14 (DPH Prop 1 Bond-BHCIP capital grants totaling ~$27.6M; retroactive to May 6, 2025; through Jun 30, 2030; includes nonstandard state terms): Forwarded with positive recommendation, 3-0, with commitments to provide additional facility documentation for 333 7th Street ahead of the full Board vote.