Good morning. The meeting will come to order. Welcome to the February 4th,

2026 of the Budget and Finance Committee. I'm Supervisor Connie Chan, Chair of the Committee.

I'm joined by Vice Chair Supervisor Matt Dorsey and Member Supervisor Danny Sauter.

Our clerk is Brent Haliba. I would like to thank Jeanette Eugene Loff. My apologies.

if I'm not saying your name correctly, but nonetheless, I'm very grateful for SFGovTV for broadcasting this meeting.

Mr. Clark, do you have any announcements?

Thank you, Madam Chair.

Just a friendly reminder to those in attendance to please make sure to silence all cell phones and electronic devices

to prevent interruptions to our proceedings.

Should you have any documents to be included as part of the file, 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 and public comment is called,

please line up to speak on the west side of the chamber to your right, my left, along those curtains.

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

and leave them on the tray by the television to your left by the doors

if you wish for your name 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 at sfgov.org.

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

You may also send your written comments via U.S. Postal Service to our office in City Hall at 1,

Dr. Carlton Beagle Place, room 244, San Francisco, California, 94102.

And finally, items acted upon today are expected to appear on the Board of Supervisors agenda

of February 10th, unless otherwise stated.

Madam Chair.

Thank you, Mr. Clerk.

And before we call the items for today, for the public that should know, for all the items

that we have budget and legislative analyst report, we will go to the department presentation

and then the report.

Then we will go to questions and comments from the committee.

Then we will go to public comments.

And with that, Mr. Clerk, please call item number one.

Yes, item number one is an ordinance deappropriating $250,000 from the general city responsibility

and appropriating $250,000 to the Department of Children, Youth, and their families

to support the District 10 safety plan, including services at the HOPE SF sites,

violence prevention events, safe passages, response to schools, and as needed support

to the youth and residents most impacted by violence in fiscal year 2025 to 2026.

Madam Chair.

Thank you.

And today we have Supervisor Shimon Walton's representative here, Tracy Gallardo.

Thank you, Supervisor Chen, members of the committee.

As you guys are aware, Supervisor Walton put out the need for safety plans by neighborhood,

and we have worked on ours.

I brought a copy just so that people can see it.

We've submitted it before.

This is a process where community gives input.

We hold safety town hall meetings twice a year and once a year with all city departments

to kind of figure out what the needs are of the community.

As you see, there is a rise of violence right now, especially among youth, and so I think it's super important to have this passed.

It is in alignment with the safety plan that has been implemented by community, and I'm available for questions.

Thank you.

Good morning.

Nick Menard from the Budget Legislative Analyst's Office.

item one is an ordinance that reappropriates two hundred fifty

thousand dollars set aside and the general city responsibility budget unit

to DCYF to fund three positions at young community developers a position to

administer the violence prevention program the violence interrupter to do

school-based conflict resolutions and then an intern these are three existing

positions at that nonprofit that would continue those services primarily in D10.

So this is just moving money around from one area of the general fund to the other.

We recommend approval of item one.

Thank you.

Thank you so much to Supervisor Walton and his team for bringing this work before us.

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

Yes, we now invite members of the public who wish to address this committee regarding this

item number one.

now is your opportunity to approach the lectern madam chair we have no speakers

seeing no public comments public comment is now closed and colleagues I would like

to move this item to full board with recommendation and a roll call please

and on that motion to refer this ordinance to the full board with a

recommendation and vice chair Dorsey Dorsey I member Sauter Sauter I

Chair Chan? Aye.

Chan, aye. We have three ayes.

The motion passes.

Chair Clerk, please call item number two.

Yes, item number two is a hearing on Proposition C of June 2018's reserve fund balance,

totaling $572.5 million at the conclusion of fiscal year 2024 to 2025,

according to the Department of Early Childhood,

and how the City can use this reserve balance to expand eligibility for child care subsidies

to families earning up to 200% area median income.

Madam Chair.

Thank you.

I want to acknowledge Supervisor Stephen Sherrill joining us today, and the floor is yours.

Well, Chair Chan, thank you very much for having us here today.

Vice Chair Dorsey, Supervisor Sauter, thank you for having us here today.

I am really excited to be here.

I am really excited that the mayor, in his State of the City speech, announced the expansion of this child care subsidy of baby Prop C to families making 200% of the area median income.

I think former Supervisors Norman Yee and Jane Kim deserve an enormous amount of credit for being early leaders here.

and the advocacy community. I see Liz Winograd in the audience here and many others. Thank you all

also for really fighting for our families, for the future of San Francisco. I think we're all

aware that we're the third oldest city in America. We're the fastest aging city in America. We have

the lowest number of children per capita of any major city in America. And when it comes to young

families, after housing, child care is the number one expense. This is really a critical issue for

so many of our families. I can see Danny Sauter nodding here as he thinks about his checkbook

getting lighter and now maybe heavier with this subsidy. But in all seriousness, this is near and

dear to so many of our hearts, really even just sitting up here right now. Supervisor Melgar has

long been a leader and a fighter on this. I'm really thrilled that we're here together and

that we can be here. So with that, I also really want to thank Ingrid Mesquita, the director of

Department of Early Childhood. You know, her work, her advocacy, and not just advocacy, but work,

has gotten us to this point. So today, I'm very excited to be able to hear about the plans,

really excited to begin this collaboration as the board supports you in not only building out

the expansion of the subsidy, but also reaching out to members of our community. How do we

get in touch with people? How do people know it's available? And so today, you know, I'm excited to

do three things. I know my colleagues are probably excited for some others. For me, it's about

drilling into the budget, about looking at the implementation timelines, and then really about

defining success. I know these are things you've thought of deeply. I think it's really important

for us to understand, to help you along with that, and also to talk to our constituents as well.

So with that, Director Mosquita or someone from your—

Oh, sorry.

I'm sorry.

I want to make sure that—

Oh, I apologize.

No, no, no, no problem.

Supervisor Malgar.

Thank you very much, Chair Chan, and thank you, Supervisor Cheryl, for introducing this hearing request.

I also have had a long history with this issue and continue to hope that we can truly meet the will of the voters with baby proxy funds.

I am grateful to our former mayor, Breed, for her leadership in merging the Department of Early Care and also the First Five, and really creating a vision for a comprehensive set of supports for families in San Francisco with Littles.

And I also continue to have a vision for what this could be for our city.

You know, the fact is, you know, the face of poverty in California is a woman, a single mom usually.

And child care and housing are the two biggest economic factors in the financial health of these families.

In addition to that, every dollar we spent before the age of five has a multiplier effect that is beyond everything that we know.

In terms of school readiness, of school success, K through 12, and then workforce.

So every dollar that we spend in the early years really dictates the success of these kids far beyond those first five years.

I do look at it as an urban planner as well, in that we live in a city that is very segregated by race, and that young people who are in their childbearing years have a hard time affording our city in terms of housing in addition to childcare,

and that I want to make sure that what we create supports the hopes and dreams that we have for our city for the next generation

and also supports the success of our public K-12 education system,

especially as the state has now rolled out its TK system.

So I want to make sure that as we are supporting this department and rolling out of these funds,

that we also keep in mind that we have multiple goals.

Some of those goals are not within the purview of this department,

but it is absolutely necessary that we include them in our strategic planning

and how we roll out these subsidies.

In addition to that, I think that the systems that we may have built for earlier iterations of these subsidies may not be the ones that work for future iterations because it is a different population.

and I want to make sure that when we talk about quality and geographic equity,

we are keeping in mind that the needs of the communities around San Francisco are diverse,

that we have different language needs, different cultural needs,

and that we keep in mind that in order for the program to be successful,

we need to keep those in mind as well.

So thank you, Supervisor Cheryl.

Thank you, Director Mesquita and your staff for all the work that you've put into this.

And I look forward to getting into the meat of this hearing, hearing from the advocates,

and making sure that we are building a better tomorrow for all families and children in San Francisco.

Thank you.

Thank you, Supervisor Malgar and Supervisor Sher.

Would you like to continue to?

Great. Thank you.

Director Mesquita, please.

Thank you for being here today.

We really do appreciate this opportunity to collaborate with you.

Absolutely.

Good morning, Supervisors, Chair of the Budget and Finance Committee,

and all the members, Supervisor Cheryl and Supervisor Milgar.

And I think Supervisor Milgar said it all.

Like, really, and this is really the framework of what we've been doing.

I mean, your leadership throughout the last three years,

especially being on a Children and Families Commission,

working with us and setting up the department, organizing the strategic plan,

understanding sort of the needs of parents and communities across our city has really shaped what

we have to date and we didn't start just now we've been doing this for quite some time rolling out

universal initiatives starting with our preschool for all program back as early as 2005 and so from

those learnings we've been able to develop sort of these roadmaps around what works what are things

that we still need to improve on, and how do we actually get children to be school ready?

Because at the end of the day, this is really our North Star, and the ability to be able

to support families in their journey, also in parenthood.

So as I lay out the following 100 slides, just kidding, just a few slides, but they're

very compact, so they say a lot.

And I'm going to take you through that process.

So part of it is also doing a little bit of level setting for folks who are not as familiar with this legislation,

ensuring that the legislation is also highlighted as part of our sort of guiding principles

around not only looking at program quality, but also supporting the early educator workforce.

And that was really what Prop C intended to do, is to support a system of early learning

that included early educators that are also mostly, if not almost all, comprised of women, immigrant, women of color.

And so we want to ensure that as we build out this system of supports for families,

we also take into consideration how this system is built.

So I'll start with the Prop C spending the fund balance,

because that is what the request was for,

is to better understand how this fund balance will be used

to offset tuition costs not only for families earning up to 200%,

but also for the workforce that makes up this early care and education system.

And without the workforce, honestly, we would not be able to go towards a goal of a universal child care system.

So part of Prop C has always been around, again, the quality of the care, children and families earning up to 200% of area median income.

But it also went through a litigation process which created this fund balance.

And through those three years that the money was being collected, we also laid out a plan and a framework for how we were going to use the funds once we were allowed to actually use them.

And so how we have done that is we started with expanding child care subsidy eligibility for families based, again, on the legislation that were under 85% of state median income.

We've also been able to expand the workforce because without the workforce, again, we cannot expand the child care system.

So we've been growing the capacity where the demand is the highest, and that has been really in infant and toddler care.

We've been working for the last two decades on a universal preschool system, and honestly, now we can say we've checked that box.

We're the first in the nation to have been able to get out the gates in doing that,

and now we're doing that for earlier years.

That's infant and toddler.

And with that, we want to make sure that we're responsible

in how we use the spend-down of the fund balance

because at the end of the day, this is one-time-only funds,

and so we want to ensure that we have some viable ramp-offs,

some smoothing out of the edges.

And I'll talk a little bit more about that.

So again, sort of to level set, this is what the Prop C legislation defines eligible spending.

We focused in the first couple of years after the litigation was done that we eliminated,

practically eliminated the wait list for families who were lower income.

And that we're extremely proud of.

We built a lot of infant and toddler care, but also within the framework of that being

comprehensive early care and education services.

It's not just care.

It's also understanding the needs of the educator

and understanding the needs of children.

So getting into sort of the meat of how we're using the fund balance,

we were already on a plan to be able to use the fund balance

on one-time only projects.

But that was only going to take us so far.

The amount of facilities that need to be developed,

what we need to invest in the workforce in terms of educational pathways,

and ensuring that we're weaving the early care and education system

into this broader ecosystem, which is called early childhood.

That wasn't going to get us fast enough to be able to spend down the fund balance.

And so through a lot of input, feedback, and also a lot of the advocacy here at the board, and thank you again, Supervisor Milgar, because you've been very steadfast in this process for the last several years, we looked at the fund balance and said, well, I think that what we can do is we can also now we're in a good place to be able to expand the affordability of child care up to the 200% of area median income.

In order to do that, we also had to run a lot of scenarios because the last thing that we want to do is pull the rug out of families midway.

We want to ensure that we can sustain this over time while we're also parallel to that process,

ensuring that we have other strategies as we roll out and we spend down the funds.

because this initiative really is twofold, is to provide care,

but it's also about lifting and professionalizing

and supporting the early care and education workforce.

So these two things are coupled, and it's difficult to uncouple them.

So as we're using the subsidy, the fund balance,

and I'll give you more detail,

we are looking at now rolling out up to 200% of area median income,

and in San Francisco that means for a family of four,

That's around $312,000 a year in annual income.

At the same time, we have to build the early care and education infrastructure.

That means investing in educational and career pathways for all the early care and education providers and educators who are part of this system.

So we're also setting aside funding to ensure that people have a good entry point into this career, but also can see themselves in this career in the long term.

This aligns very well with the mayors advancing the family opportunity agenda, which, again, Supervisor Milgar, you've been really pivotal to this, especially around housing.

and this is an area where families, as you said, Supervisor Cheryl, this is an area that families

also struggle with. It's not just housing, it's also the affordability of child care. Child care

is very expensive and this is something that San Francisco can do and can do right now

to help families as they're moving through, like I always say, the journey of parenthood.

So how is child care sort of central to affordability?

Again, to sort of level set, we already are offering a tuition credit for families.

And again, this has been part of a sort of a phased out rollout of the initiative.

So right now, and the mayor also announced this, for families who are making up to 150% of area median income,

which translates around $234,000 a year, families are already getting free.

So that means their tuition is discounted at 100% of our reimbursement rate.

At over 500 plus, we're actually almost reaching 600 programs across the city.

As of this fall, that's going to be extended because that's how enrollment works.

Families are, as they're coming into the fall semester,

for those families who are earning above 150%, up to 200% of area median income,

will receive a 50% tuition discount, which if you have an infant, that translates to roughly $18,000

a year that you will be saving in child care costs. And of course, we will continue to fund

all of those families who are currently enrolled in our system. So we're starting now. So beyond

sort of the vision setting of what baby prophecy was meant to do, we are now building not only the

infrastructure, but also the expansion. This is more than just child care. Again, child care sits

within this very wonderful ecosystem of early childhood. And so we have to ensure that as

children are experiencing their early childhood, we want to have this very, very real way of

ensuring that when they enter kindergarten, they enter ready to learn. Because of all the research

that has backed this up for the last 30 years,

and for the last 20 years in San Francisco,

our own local school readiness data indicates that if you start,

how you start school is how you end up.

So if we can give children sort of a head start, if you will,

in being school ready,

they don't necessarily have to have the burden of always having to catch up

because what we've been able to see is that seldom do children really catch up.

And so with that, we're first in the nation in order to make sure that those healthy relationships

with the educators are also at foster school readiness in the classrooms,

whether it's infant, toddler, or preschool, we're providing the first in the nation wage augmentation.

And when we say first in the nation, we really do mean first in the nation.

In other places across the country, you've seen it like maybe in Denver, in Dallas, where a wage augmentation or a stipend is provided to teachers, but only within the public school system.

Here, we're actually doing it in the private programs, in what we call the mixed delivery system, which is family child care, which is home daycare, and also center-based programs, where we're lifting those wages to living wage as a minimum, as the floor, but also raising those wages to be comparable to that to the school district.

Now, that's the goal, and we are slowly getting there.

And this is to, again, make sure that we have a stable workforce,

that we're respecting the early educators in the work that they do every day

in ensuring that our children are also getting the best early childhood experience they can.

So right now, all ages are eligible birth to five,

and we're increasing capacity as we speak right now for infants and toddlers

because really that's the focus of Baby Prop C.

And all of this is locally led,

and of course we will be looking at the state

to continuously leverage other public funds.

And so to take you back to before the pandemic,

just a few years ago,

we knew, we were hopeful, I think,

we were very optimistic that the litigation

was going to be in the favor of San Franciscans.

And so we already started planning around how we were going to move into the infant and toddler world.

But really, because of all the years of preschool focus, our funding and our supports were mostly going for preschool enrollment.

We now have universal access in every neighborhood for preschool-age children.

So that was great.

But in the early years, as you can see through this chart,

most of our enrollment focused on funding preschool-age children.

Once we were able to get access to the Baby Prop C funds,

we quickly shifted gears towards building more of that enrollment in infant and toddler.

And so as you can see in the blue and sort of turquoise bars,

this is where we started seeing the impact and the growth

and the funding that was going out for infant and toddler enrollment.

And as of this year, actually infants and toddlers outpace enrollment of preschool-aged children,

and that is, again, a first.

We are the first in the nation,

and this is something that no other place can say that they've done it and done it well,

and we're very proud of that.

And we're not done.

we're still enrolling more programs and more providers. And so in the last few years, again,

like I said, even before the pandemic, we knew we were going to get, the litigation was going to be

in our favor. We started enrolling more programs. We started looking at how to sort of support the

early education workforce. We were bringing in programs every year, and we have not stopped.

During the pandemic, however, I must say this because this is the early education system was put to a major test during the pandemic, especially with public health, very stringent public health guidelines.

But instead of contracting, like many places across the nation, we actually grew licensed capacity in San Francisco.

and then this is again sort of again to a lot of leadership and support from not only this board

but also from the community that really believed in what we were doing and so we stabilized the

early care and education system we grew spaces and we actually funded lots of different types

of grant making to ensure that the infrastructure was going to be left intact knowing that we were

going to be coming out of that pandemic. And so that demonstrates in the ability of us to be able

to keep enrolling new programs every year. And so in our pipeline, we have what we call the pre-alpha

folks who are coming in as they are also focusing on infant and toddler care. We are doing much

less a preschool expansion because we have reached universal access in every neighborhood.

And so it doesn't make any sense for us to continue to build out preschool capacity.

However, for infant and toddler care, the growth is much smaller because, one, the adult

to child ratio is higher.

And so what used to be in preschool where you could have 20, 24, 30 children, actually

that gets reduced significantly. And these are all because of not only licensing standards, but also

really evidence-based around what is the right ratio when you're talking about babies and toddlers.

So for every three children, you should be having one adult. So again, that reduces the number of

actual number of children. It increases the number of staff that also we also have to project around

what is going to be the cost for wage augmentation because we, again, this initiative is coupled

between the cost of care, which is our tuition rate, but also what we are doing as part of wage

support. We also have capital projects in the pipeline, meaning that as we're bringing in

existing license capacity, we're also building new license capacity. We are in every affordable

housing complex there is across the city. I'm hoping that with the new housing policy,

the west side is going to be able to have more of those opportunities to be able to build out

more infant and toddler care. But wherever you tell us there's availability, we will be there

in support of that, including in two major hospitals. One is with San Francisco General

and the other is with Laguna Honda.

And those projects are down the line,

but nonetheless, we're still going to have babies down the line.

So we're planning for that as well,

including family child care homes.

And again, our focus is for infant and toddler care.

And so this is where all our sort of programs are across the city.

Of course, it's a little bit more heavy

on the eastern side of San Francisco,

and that's because of history too.

It's more dense.

There are more children under the age of five living in the eastern side of the neighborhoods,

and that really has been the focus for the city for many, many years.

But we're now moving on the west side of the city more and more,

and so this has really shifted towards also the population of where families are,

who is ready to start building and supporting infant and toddler care,

and also how can we help.

Because at the end of the day, we're a department that focuses on the whole early childhood experience,

not only for children, for families, and for the educators who are part of the system.

So we have built out significantly on the east side,

and the west side is now sort of the next sort of frontier, if you will,

of building more care in neighborhoods like West Portal, the Sunset, the Richmond,

and also especially in the Sunset.

And this is one of the areas that I hope that we can really partner

because one of the difficulties with this West Side,

which I'm sure for supervisors who live on the West Side know this much better than I do,

is there are really systemic barriers on the west side.

The zoning is an issue to be able to build out a center-based program.

Most of the west side is residential, predominantly residential,

and so our presence mostly is within family child care homes

and some school district sites,

but we could always use a little bit of support

and sort of help in how to create additional access for families in areas,

especially in some of the commercial corridors.

And part of, like I said, part of this initiative is a really two-fold initiative.

It's increasing access, but you cannot increase access without early educators.

And so we are very proud that we've been able to introduce a wage support for all the folks who are part of the Early Learning for All initiative,

with, again, building up a wage floor that is a living wage and only going up from there.

Um, currently we are providing, um, not only a wage support, we're in the, where we provide grants directly to, um, all the nonprofit organizations that serve children and families, um, um, and have teachers as, as their staff, but also family child care providers who are owners and teachers, directors, and they do so many things as micro entrepreneur, micro business entrepreneurs.

And to give you an idea of what the average stipend is for those folks who have a stipend, we're averaging around $12,000 a year for assistant teachers.

And for family child care owners is a little bit over $16,000.

So it's a nice little boost.

Absolutely, we could do more.

but as we bring in also new providers we also have to be mindful of how we spread sort of the wealth if you will.

We're also advancing people to have much more opportunities again early education as part of a career

to see themselves in in this field for a long term.

We have already funded and graduated 456 people who now have a degree, who have been part of apprenticeship programs, and we have another 971 early educators who are receiving stipend to complete their coursework or do certifications, especially as in areas that are emerging as a real need.

not only infant and toddler care, but children with disabilities or special needs.

But our work is more than just place-based.

It's also looking at all children's needs around family having access,

first and foremost, absolutely, to high-quality early care and education,

and also having resources that they have in the home, like a home library.

We partner up with the San Francisco Public Library and the state, and right now every child in San Francisco is eligible to receive a free book in the mail with their names on it if they sign up with us.

And that's a fantastic way of being able to, again, promote not only early literacy, but also the things that we know that also support children's language development and eventually school readiness.

We also focus on pregnant people.

We have a pregnancy family village that we fund,

and we collaborate with DPH and UCSF

and the San Francisco Health Network

to ensure that families are getting access to prenatal and other supports,

not just clinical supports,

but all of these other community resources and supports.

And as we're moving through the infant and toddler world,

We're continuing to assess not only the space needs.

There are some preschool classrooms across the city that no longer have the same type of wait list or enrollment.

And part of that, again, has been because of the expansion not only of transitional kindergarten,

but also because we've been building preschool for many years.

And so we're looking at some of those classrooms and converting them to infant and toddler spaces.

But that also is not just a physical conversion of it.

It also means that we have to support the early educators from focusing on pre-K years

to being much more age and developmentally appropriate in infant and toddler caregiving.

So now is the breakdown of how we're going to create all of this wonderful access to families

who are going to be part of this expansion into eligibility.

And so with our fund balance, like I had mentioned earlier, we were already on a plan to spend the fund balance.

But in our original plan on spending the fund balance mostly was for those one-time only projects, mostly capital projects, and also ensuring that teachers had access to completing their degrees.

Those are things that once you have it, you have it, and you're done.

And so we looked again as to how we can actually be able to expand the eligibility of families.

And so we are using the fund balance to be able to do that.

But that only takes us through a certain period of time.

Again, the fund balance is one time.

And so what we are making a lot of these projections on is also the revenue of Baby Prop C.

This is based on the controller's sort of projections of the information that we've been able to get from the controller's office

around what the expected revenue looks like for the commercial rent tax.

And based on the spending that we have, again, most of this, half of the spending will be still to expand facility growth

or expansion of infant and toddler because infrastructure-wise we need it.

We cannot give parents what we don't have.

so we have to build that capacity.

And also spending a portion of the fund balance

in making tuition much more accessible for families

earning up to 200% of area median income.

And so we only have projections from the controller's office

that takes us up to fiscal year approximately, I believe, 30.

And so a lot of everything else is sort of a hypothetical

at this point. We do have a few caveats here. One is that as we spend down the fund balance,

we will hopefully, knock on wood, there's the expiration of the interest subvention,

so we get the general fund restoration, so we can put that money back into the system,

and that we are somewhat suspended in time because of our ECE baseline.

So that right now, again, is around $93.8 million.

So understanding what our revenue looks like is a little bit of crystal ball looking right now out in beyond five years.

but we do know what the expenses will look like if we continue on this path.

So this is more, a little bit hard on the eyes,

but it's much more greater detail on how the Prop C expenditure,

and this only represents Prop C, by the way.

Subsidies that we provide are also funded by other sources,

state, federal, and the Public Education Enrichment Fund.

So this is just a snapshot of Prop C.

It looks at the enrollment but also the wage supports that we're currently funding

along with the one-time only funds, which is the fund balance and the use of the fund balance.

So the same categories that we have in our regular appropriations or our spending plan.

It's also reflective in the lighter colors for the one-time only funds or also fund balance.

And as you can see, as we continue to draw on the fund balance, if we continue on the same sort of revenue projections that we currently have, again, the Comptroller's Office only gives us five years, everything else is quite speculative, we are going to be running into a deficit.

And so we have some measures to be able to sort of smooth some of those things and have sort of softer off ramps to ensure that families always have access, because that is our always and always has been our goal, is to ensure that families have this infrastructure and these investments on a long-term basis, that we are not a fly-by-night kind of operation, but rather that this is part of the infrastructure of the city.

So, it is important to recognize that some of these things are unknowns in terms of what is going to be collected on the commercial rent tax on an ongoing basis beyond five years, six, seven, eight years.

But we are hopeful.

We're also very hopeful that a lot of the advocacy that we're doing with the state is also going to pay off.

maybe not this year, but we have six, seven years

to be able to plan for multiple strategies

as we continue to spend down the fund balance.

And so some of those options that we look at

is going to be, and this is something that

Supervisor Milgar, you had also mentioned,

as part of housing, there are different ways

of being able to look at sort of how much support

you provide families in terms of how housing subsidies work.

Very similar.

We might start looking at how subsidies,

sort of financial support is given to families

above a certain sort of income threshold.

Again, these are all sort of options to be able to consider.

In terms of workforce development,

being able to slow the growth of around how much investment we make

into degree pathways or other types of things

that again are drawing on the fund balance, including capital new development projects.

So these are all part of the scenario plannings that will take into effect six, seven years

down the road.

But that doesn't mean that we don't think about it until six, seven years down the road,

but rather constantly monitor to ensure that we're being fiscally responsible and that

our projections are financially viable.

So anything with any new initiatives or expansion of new initiatives, again, we would have to consider as part of the scenario planning.

And that is it in terms of the lots of slides that I had.

Great. Well, thank you, Director Mesquita.

I've got a variety of questions here, kind of first starting with the budget, then getting into the implementation timeline,

and then finally talking about a definition of success.

Colleagues, I could easily just hammer through all my questions,

but that may not make the most sense.

So please do not hesitate to interrupt me if you'd like to follow on

or you have a set of questions kind of in that thread.

So I may miss your name on the roster or something like that.

I know Chair Chan is an excellent moderator here,

but please don't hesitate to interrupt.

I think this is going to be very collaborative.

Great. So first of all, thank you. That was really comprehensive. You've put an enormous amount of work into this, obviously, not only for today, but really for the whole part.

So talking about the budget. So the proposal presented today really kind of, you know, two main spending categories, obviously, one-time only programs, ongoing programs.

When we talk about quality spaces, I'm curious, looking at that map, how this infrastructure will be geographically distributed.

How will the city be deciding where the funding for either infrastructure improvements or new construction will go?

Well, our priority has always been affordable housing.

So we have been part of all the HOPE SF projects.

we've been pretty much in every affordable housing project across the city. Most of them are within

the eastern side of the city historically. It doesn't mean that they can't happen also even in

mixed housing on the western side. So we're looking at those spaces because that's where families are

and so it you know infant and toddler care should be and could be very place-based. We're also

looking at the hospitals like Laguna Honda and SF General to be able to build out that kind of

infrastructure. For infant and toddler care, it really comes down to sort of like real estate,

right? Location, location, location. Typically, that's how you build out programs. For infant

and toddler care, it really is location, location, location as well. So where families are at,

where the more sort of geographically,

where especially children zero to five are being mostly clustered,

it's where it makes sense to build out infant and toddler care.

It doesn't preclude us from funding in areas probably

where there's people go to work or things like that,

but really the focus really is in more neighborhood-based areas

because, as we all know who have had babies,

it's not easy to put them in a carrier or in a stroller

or even try to drive somewhere.

You take a lot of stuff with you,

so we also have to make it convenient, as conveniently as possible

for families who are dropping off their babies.

Has there been an exploration of siting new child care facilities

closer to where people work instead of where people live?

Has that been expressed by parents or advocates as something of interest?

We also have parent focus groups that we've been developing over multiple years.

As people have babies, they sort of age out as their children get older.

But every year we have multiple parent focus groups that give us this type of feedback around where they're asking for care to be.

Part of that is really now, and I think the pandemic has shifted a lot of ways of how we see work and workplaces.

And so what families are really asking it to be much more neighborhood focused, much more culturally and linguistically responsive to what their needs are.

And so we're looking at development and building out infant and toddler care within that context,

because that's what families are asking us.

And so are we looking at that information for the past several years where remote work obviously came onto the fore,

but are we projecting out that those remote work trends are going to continue over the next decade,

or do we think there might be a shift in that behavior?

You know, I think this is an area for also sort of the business economic development team.

What we're responding is to what parents are telling us.

Got it. Got it.

And so right now in this moment in the way of how work and life sort of balancing act that we do as parents has sort of shaken out is that families are focusing much more in their neighborhoods.

And that's where they're asking us to consider to building out or supporting or enrolling new programs.

Thank you, Supervisor.

I just wanted to follow up on that, on your specific line of questioning.

So, you know, you inherited a system that was already there and then expanded it, you know, within the newly formed department.

and at the risk of stirring up the pot,

I'm just going to put it out there

because we could create a different system.

And I'm going to push back a little bit

on something that you said earlier

about the sort of east side-west side divide

because while it is true that most low-income families

have lived in the east side

because that's how we decided it in the city

in terms of where we build affordable housing,

where we build housing,

Um, the fact is, you know, the Marina district and supervisor Cheryl's district actually has one of the highest concentration of children.

Um, and you know, they're not necessarily low income children.

We do have providers there.

There's the Montessori's and the Waldorf's that are very expensive and high quality.

They're not necessarily part of the ELFA system.

So for me, you know, like that, the promise of public education is that it's an equalizer.

It is where families meet other families that perhaps have more resources or less resources.

Kids sort of grow up knowing different kinds of people.

And then, you know, meeting those families may, you know, involve having new connections,

new social capital, introduction to, you know, different opportunities.

And so that is sort of like there's all this evidence, you know, out in the world about

that in terms of public education. It's the same for, you know, the pre-five education as well.

And so I'm wondering if we have thought about, you know, both the qualifications of alpha providers,

but also a different way to disperse a subsidy that may not necessarily be based on, you know,

the family, but the center, and incentivizing those centers or providers to take children as

opposed to the other way around. Yes. Thank you. Yes, to everything you're saying. Absolutely.

And we also do have a history with some of the programs in the Presidio, for example.

One of them actually started a school called Presidio Knowles right off the Lombard, which

now is one of the largest Mandarin immersion programs here in the South of Market.

And we, as a city, funded, supported, embraced, and brought that program in.

And so, yes, absolutely, I think the relationships really do matter with the programs on the West

side too, to be able to also promote what the benefits are of having an early learning for all

system, really for families to access citywide, regardless of where they live or regardless of

where they work. It's also about parent choice too. And incentivizing not only the programs,

but also working with those communities. And as district supervisors in those communities,

I would also look to you to be able to help us in that endeavor.

But how specifically, Director Mesquita, would we do that?

So, you know, like I look at places like, you know, Union Street or West Portal and, you know, very, very healthy commercial corridors.

And I can tell you the service class in those areas are almost overwhelmingly Latino, you know, female, you know, people who have children and those kids are somewhere else.

And, you know, the thought of having them be at a Montessori, like it's two different universes.

So how exactly do we make that connection on a practical level?

Because I see that we have this opportunity here with this fund that we haven't spent.

And I want to make sure that we do it in a way that builds an infrastructure that we can believe in to make a better tomorrow.

Because I also think that that will help the sort of segregation in public schools.

By definition, these kids turn five.

Every year, predictably, there's a bunch of kids who turn five and go into kindergarten no matter what.

Absolutely.

Absolutely.

And as a child of a segregated school system here in San Francisco Unified School District,

I was bused from the mission to Chinatown.

I never made it to the west side, by the way.

But having also, that was 50, I won't say how many decades ago, but that was a very

long time ago.

And that is what we're trying to build, a better tomorrow.

And we do have lots of private programs that are participating that are on the west side

who truly sort of align with these values.

Everything that you have said,

most of the programs that are part of Alpha

have expressed the same thing.

And they're putting in place,

not only through the tuition sort of reimbursement

that we're providing through the wage support,

they also do their own fundraising

to support a more economically diverse population.

And for those programs that still are sort of on the fence,

absolutely, we talk to them all the time.

We work with them as to where they might need a little bit more support, and we are open for that.

This is not a pass-fail sort of situation.

It's like, how can we get there with you that also doesn't impede also on the bottom line, too?

Because that's also a concern, and we understand that.

Great. Thank you.

One thing, you know, in terms of this geographic distribution, you showed a map, I think, on slide nine of the alpha and pre-alpha sites.

Do we have a map of the non-alpha sites?

Not in this presentation, but we can provide you that overlap.

But theoretically, it is available.

Oh, yeah.

Yes.

I think that would be important to look at as we look at expansion across neighborhoods because, you know, when I look at these budgets, there is a lot of spending towards building new sites.

And that is not bad.

That's probably very, very good.

But there's going to be inherent tension as we look at spending down the capital of saying, hey, should we build out a new site or should we give a family money to go to an existing site?

I think that's an inherent obvious tension.

And I know from my point of view, I guess this is less of a question, more of an ask.

I would love to understand where the non-ELFA sites are as well to better inform how we think about spending on either capital or infrastructure or on expanded subsidies or on expanded certifications of existing sites to be in the ELFA program.

So I would love, as just a follow-up item, to see kind of a map if we have a map of where the non-ELFA sites are as well.

Question, in terms of workforce development, there's certifications for inclusion.

Does that include special education certifications?

So that's a different certification that only teachers that work in local education agencies are required to have.

That's the public education system.

For us in infant, toddler, and pre-K in community settings, we call that inclusive settings.

So it's more around inclusive practices, and it is a certificate, not certification or credential.

It is more of a certificate, which means that we cluster college coursework that focuses on atypical development.

Does this spend-down plan include funding dedicated to hiring or training providers that will serve children with diverse learning abilities?

Because it does not, we actually have to create it, because it does not exist.

It exists in a credential for special education in public education,

but it does not exist for zero to five in community-based settings.

So that is a knowledge base that we need to develop, grow, and also create systems for.

One last question on the budget here for me.

Tenderloin has the highest concentration of children in the city, I believe.

I believe that's still the statistic.

But there are also a lot of safety concerns.

Have we thought around investing in security personnel around child care sites in neighborhoods that have safety concerns?

Yes, and this is a coordinated response.

So we're working with the mayor's office around multiple strategies on how to support the child care programs in the Tenderloin and the families and the children who live there.

Thank you.

Well, you two can fight it out.

No, go ahead.

I'm just trying to conclude this.

Thank you, Director.

I want to look forward a little bit to the expansion on the horizon.

fall 2026 is that when people can start signing up or is that when you know children would actually

begin to be placed in the centers so currently we already have um close to 10 000 kids enrolled

the distribution is half more a little bit more than half of that is infinite toddler

Families who are currently enrolled,

earning up to 150% of area median income,

are already getting the tuition credit 100%.

As we're looking at the fall enrollment,

which means that we have to, as we're bringing in new programs,

to build more capacity, new spaces,

and as some of those babies age out,

they're leaving that space behind,

we'll be enrolling additional families.

So we will be able to go up to 200% of area median income.

So it's a both and, and I guess it's an and.

But could someone sign up, someone who's now eligible under this expanded up to 200% AMI, can they sign up now?

Or does the sign up not begin until the fall is what I'm asking?

No, no, no, no.

So we're working with 100% private programs.

So we fund this private system that's made up of the early care and education system.

Those programs have their own enrollment sort of like ways of how families come in.

And so they have enrollment periods of when they accept new applications or new students.

And so it's really based on each program.

But we have sort of a seasonal, if you will, sort of enrollment period.

which is usually like college by March you you kind of know whether you're going to be able to

be offered a space or not but the sub the subsidy expansion begins in the fall yes okay and that's

for budget purposes and there was a prior expansion under the previous mayor what did you learn from

that expansion how many more families enrolled and how does that prepare you for what you're

going to do here? What do you expect? Yeah, so the availability, so we have expanded access.

The one thing that is, we're still, it's an art, a little bit of an art and a science, mostly art,

is the preferences of families, cultural preferences, language preferences, location

preferences. Those are still a little bit difficult to pinpoint to us exact like science,

But the availability of more infant and toddler care has certainly brought in more families, for sure, and being able to access it.

Because now it's available and it's also not strenuous.

It's much more affordable.

But do you think, I mean, I believe the prior expansion was $110 to $150, and now we're going from $150 to $200.

I'm trying to understand, like, what you expect the demand to be.

Well, the uptake we're looking at is based on the availability of spaces that we're bringing online.

And that's just because it's what's available.

So as we're bringing in new infant and toddler spaces, for example, we've been bringing in close to 400 spaces new every year of infant and toddler.

And the difference here, and I know that doesn't sound like a huge number, but in the infant and toddler world, it's huge.

And that's because of the child-to-adult ratio.

These are smaller group settings, and so that enrollment number is big.

So we've been able to fill those up, those additional 400 spaces.

So we're bringing them in addition to what we already have in place.

And we already have almost close to 5,000 children enrolled in infant and toddler care.

So with this, I guess I'm looking for specifics, with this next expansion, you expect 400 more or so?

Approximately 400 to 600 more as we're bringing also new providers.

So it's that capacity.

It's constantly having to bring in every year more infant and toddler spaces, which there's a scarcity of.

Is that 400 to 600 more children every year or across the whole 10-year period?

Every year.

Every year.

Okay, and then going back to the point that Supervisor Sauter made about the expansion to 150% of AMI,

I've got a number that maybe 145 families enrolled in that expansion.

I don't know if that's an accurate number.

It's not a complete picture.

145 is more the portable vouchers, if you will, where families choose whether it's in family child care or they might choose a center.

And again, it's an art and a science.

It's like there's family preference in this sort of equation.

We also have direct contracts with center-based programs, which they're the ones who dominate really the child enrollment.

Those, by our accounts, between the vouchers where families sort of make weave in and out of different programs and the center-based contracted spaces that we have, it's more around 800 children.

800 new children who weren't getting a subsidy before now are getting a subsidy?

Of current budget year, yes.

Okay.

so not to over drill on this point but you did give us you know projections that have

a number and so it's hard to uh square sort of like the art and the science because math is

finite you know and if you say that we projected deficit in 19 in 2033 because we are basing that

on a percentage uptake of families between 150% and 200% of AMI,

that sort of puts us in this position, right?

Because we have to, like the chair of the budget committee

has to balance the budget every year.

And then if we are relying on the interest of this fund,

it puts us in this position.

So I just want to drill down on this

because I did look at those numbers of the uptake of families

between 100 and 150% of AMI.

And I'd like to know what is that percentage uptake

that you are basing that chart of the deficit starting in 2033 on?

Is it 100% of eligible families?

Is it the percentage that you have observed since we expanded the program?

What is it?

What is that percentage number?

It's a combination of both.

So when we were operating our universal preschool system, which was not means-tested at all,

it was just you were four, you're a resident of the city, we had an uptake.

That uptake percentage was around 45% or so of families with a four-year-old that enrolled.

And so we're also looking at other factors as well.

it's not just the uptake but also what we can offer in terms of an available space.

So as we're looking at the facility pipeline and the number of spaces that we're bringing on board,

we're also having to look at the compensation model that we also have, which is a wage support.

So it's all of those three factors. It's the number of eligible families,

but also the number of spaces that are going to be coming online, and it's also the wage support.

So all of these three things are part of the scenario planning.

Why did we abandon that system?

This was a very community-led, community-driven process for not only Baby Prop C,

the legislation of how it was written, but also the compensation program and how it was rolled out.

So these were things that the community was very adamant about in terms of certainties.

that needed to happen to be able to expand early care and education access.

Okay. I'm not going to belabor the point. Thank you.

I may, if I may, then.

Yes, please, please.

So I want to, I do actually, I appreciate that, and I want to draw down into just where a baby

prop C really is, and I'm looking at the controller's office, because let's actually go through what

exactly is funding baby prop c the baby prop c and correct me if i'm wrong i am looking to the

controller's office is that is really a grocery seat for uh you know person and a group that is

leasing commercial space in san francisco and that's including both leasing as a you know

tenants but also a sub leasing as a sub tenants and that from that on and we uh tax them for the

grocery seats. As you indicated, because of lawsuits, we have cumulatively, you know, piled up

this set of money, which what really allowed the mayor to be able to make that announcement, I think,

also has to do with this committee approving, you know, roughly about $436 million for Children's

Council, and then another $237 million for Wu Yi, $436 million for Children's Council.

But really, that money allocated and approved from this body last year has everything to do

with the fact that it's really what we anticipate it's the next three fiscal years. Well, actually,

from July 2025 all the way to December 2028.

We know that what you're having,

which I really appreciate my colleagues,

they're drilling you down.

It's like, how is this money that we have provided

are actually being allocated,

and particularly that it's being spent wisely,

that it's actually equitable all across?

I'm now asking the controllers,

help me understand the projection of this very proxy,

in terms of gross receipts, both retroactively,

how much do we actually generate in terms of tax revenue,

and then what is the projection?

Let's not go as far as 2030, just the next two fiscal years.

Just help us understand.

Thank you for your question, Chair Chan.

Devin McCauley from the Controllers Citywide Budget Manager.

You're correct.

So in 2021, there was the $490 million of actuals collected.

And since the time of fiscal 22 to 24, it has averaged about $190 million.

$190.

This last year, of course, that has fallen.

And we do project that that will continue to be soft and fall through fiscal 30 because of the softness in the commercial rent market.

Yeah.

Yeah, and so it's one of the reasons why we all do care about downtown.

We all care about the revitalizations of really the commercial property

and trying to make sure that because that is really how Baby Prop C generated.

So we were at one point at $437 million, is that correct,

of the gross receipts generated from Baby Prop C,

And then now we're projecting at $190 million and less in the coming years.

That's correct.

So fiscal 21 was $490, and we are projected to be below $190 going forward.

Thank you.

But what I'm seeing here from your presentation, and please correct me if I'm wrong,

and that if you're ongoing roughly, because there's like two numbers here.

I'm kind of confused for your slide.

That is on page four, your slide four.

Is it $346.6 million annual spending, or is it $693.9 annual spending?

I'm going to have our fiscal person actually answer that very detailed question.

Please. Thank you.

I just want to make a quick comment first on the collection.

It's a commercial rents tax.

So it's not based on the receipts of the business.

It's based on the cost of the lease.

And so that was, to your point, the lease and the sublease.

That initial amount that was allocated in 2019 was not a single year of collections.

That was based on the 2018 passage and collections that had been collected over the years prior to the litigation.

And so that's why there was such a big amount.

It's not that it was a precipitous decline.

The only other comment on that is that because of that, there's a long tail on it.

Leases are long-term leases.

They're capitalized on businesses.

And so while we saw many declines, we saw office vacancies go way up.

Those leases were still maintained, which is why we've had relatively consistent revenues.

There is a decline in the interest because as we use the fund balance and we use the controller's office yields.

But as we draw down on the fund balance, we generate less interest every year.

And so that overall, because that's counted in our projections, that means that we have less and less revenues.

Part of the reason why that tail is shown there.

For this, this is cumulative over 10 years.

So this amount of money that you're seeing here is the total spend.

On the top, it's the one-time only.

So historically, as we've been trying to spend this money,

it's about $350 million total on the one-time only programs.

That's between 26 and 35.

And then on the bottom is the expanded ongoing programs.

That's the deficit spending only.

So that's not the money that's generated on an annual basis from Prop C.

That amount of money, obviously, we're running on our operating revenue.

That's our OPEX. Since this was about spending down our balance, the bottom amount represents just that deficit spending on an operating basis, though.

So that's where programs are ongoing programs. We are just allowing them to exceed our annual income.

And that will generate over 10 years a deficit, approximate deficit of $346.6 million.

Sorry, so the $346.6 million is a deficit.

That's the deficit spending. So the slide that shows this here, if you look on the bottom, that purple line, that's the one-time only spending.

You can see how low that is, right? Over 10 years, that generates $347 million, which wouldn't spend down that $572, right?

Sure, but sorry. I'm sorry to interrupt. I just really want to make sure I understand it.

So per fiscal year, how much are you budgeting to spend per fiscal year?

Oh, I can actually tell you if you want to, it changes by year as this deficit goes up.

You can see right here the green line is our operating costs.

So we have to add to that the one-time only costs and we get up into the range of that

$250 million a year.

So you're roughly spending about $250 million a year.

The total expenditures for Prop C are ranging between $207 million in fiscal year

2017 all the way out to $235 million a year in fiscal year 2035.

So you're roughly anywhere between $230 million to $250 million?

Yeah, $200 million to $235 million, yeah.

Okay, per year?

Per year.

Per fiscal year.

And then we're generating anywhere between $190 million.

It goes down.

So yeah, we have to deduct from that.

So on the revenue line, it's a little bit different here

how we've done it because we have that 15% tax

to the general fund.

Those funds are never part of our operating revenue, right?

That's a fixed amount that gets transferred to the city.

And so when we look at our revenue, including interest,

we are looking at fiscal year 27 projected at 156.2,

Out to fiscal year 30, well, I'll go to 30, because that's where controller's office ends, 142.8 million.

So there's a decline.

That's eating into that deficit, right?

Part of the deficit is like an uptick in the operating costs, and part of the deficit is the decline in the revenue,

which, again, includes that decline in interest because the fund balance is going down, so those yields decline.

Totally.

I mean, I think this is a long – and the reason why I'm drilling this down is because actually Supervisor Meredith Malgar and I have this conversation.

Yeah.

that is really with the, been a long time, right?

It's like, okay, we know that it's,

it's not news to us, by the way,

that this has been in decline.

And we knew that this was in decline.

And what we have been doing is that to sort of this,

we had this conversation and thinking about as policymakers

that are we going to sort of, you know,

we see that there's this money that is cumulative,

you know, because of the lawsuits and generating interest

and then the mayor had a tendency in balancing the budget during off years

to take those interests, not just baby Prop C but also Big C,

taking those interests, plucking that hole somewhere,

or do we spend it all down?

Even though we know that what we're going to bring in in projection

in the next 2, 5, 10 fiscal years is actually going to be much lower

than what we want to, how we went in,

when we think about universal child care.

Now, I actually want to applaud Mayor Lurie

for just go ahead and say,

let's do this, universal child care.

We're going to go for it for the next three fiscal year

and see what happened.

So I think the question actually back to,

you know, Director Ingrid,

like it's that, you know,

you are now have taken that leap.

Great.

We're going to go for this whole thing,

which, again, I'm going to defer all my colleagues

to sort of opine about the policy itself, how to spend,

and because they just have much better expertise on that than I do.

But some are, you know, parents with young toddlers and kids,

and Supervisor Malgar really has been in the trenches

with their service providers.

What I do want to ask, though,

is that in projection of understanding that deficit

and understanding the fiscal reality,

and while you are now significantly expanding

the universal child care program,

what is then are we going to do

in the projection of the outer year of the, you know,

the fourth and the fifth and the sixth fiscal years

starting from 2028

when you know that money is going to be spent down?

What is the plan?

Yes.

And so we also are very aware of that.

And because of that, we've been very fiscally responsible in how, even risk averse, if you will, of how we were using the one-time only funds, which was specific for one-time only.

And as we're planning these different scenarios of the expansion to families who are up to 200% of area median income, we have other scenarios too, which includes sort of the smoothing out of the tuition, not looking at what are the different sort of levels of tuition assistance that we can provide in the outer years if the Prop C regular revenue continues to sort of have this long-term

pattern. But also we're leaning on the state. Like TK, the state also has plans for rolling out

more infant and toddler funding. Then I'm sorry to interrupt you right there. That is exactly what

I worry about, what you're doing right there as a planning. Why is that? It's because right now,

as we all know, HESTAR by the federal government already has taken a hit. And that is a problem

for all of us already.

And not only that, we also know that Trump administration has also withheld, which is

thanks to, you know, our Attorney General Rob Bonta is now entangled the lawsuit in

trying to unlock $5 billion for the state of California, again, for child support and

many other child care funding and support.

So technically, in my opinion, I'm so glad that we released that funding for Children's

Council and for Wu Yi in advance because that's also anticipating the potential of head start

cuts from the federal government and again the withhold of the $5 billion of these child care

funding from the federal government right now that is being withheld. What I do worry is that

where it seems to be in the next three fiscal years already setting us out setting us ourselves

for failure or false hope for a lot of parents thinking that they would qualify,

and putting our child care service providers in a bind where they're now at the two ends.

On one hand, we're expecting them to expand the child care service for also middle income

and for many others because now we set the expectation.

But at the same time, they are now facing a federal government that they can't quite

care for the lowest income of their families that they have to care for because of the

head start and because of federal government withholding that $5 billion.

So help me understand that not even just in the outer ear then, right now in this immediate

term, with this expectation that I'm just saying that you have a hard job and it's almost

impossible and I'm just pointing it out, the obvious, but because we have to talk about

that physical reality. While it sounds great that we're providing universal child care, I love it,

we are, but I am doubting that financial reality even at this moment.

Yeah, I think you've said it all. I think we're being very careful. This is where we did not go

fully into this overly ambitious uptake as well, because we're also having to be cautious

and watch around what's happening.

And the city has always stood by,

especially our immigrant families,

has always stood by lower-income families,

and that's why how Baby Prop C rolled out,

it rolled out really with the highest priority

of families who had the least access

and being able to roll out.

And that is what makes up currently

the majority of our system right now

of completely free financial assistance

in combination with federal and state dollars.

And so it's a little bit of plain Jenga, right?

If those federal dollars were to go away

and cross all my fingers and toes,

that there's going to be a massive outcry over that.

And of course, sort of looking also at our local leaders

and legislators to champion early childhood

for the lowest resource families,

that's all we can do is look at the different projections, the trends, and be very mindful and watch it on a month-by-month basis.

This is looking at the horizon, but also looking at near term.

It's an and.

So as we're looking at the highest and best use of the spend-down of our fund balance,

we're also looking at what are the emerging needs of our community and our vulnerable communities.

and so I think that brings to the reserve uh in your presentation on slide four again like going

back to having the reserve of 60 million dollars for the salary support and then 15 million dollars

of just rainy day um how we understand is that what you anticipate the kind of reserve is that

you're listening here and I maybe maybe I just do not understand how it's being written so is the

60 million and 15 million combined 75 million dollars of reserve is it per fiscal year that

you are holding yourself to say I need to have this kind of level of reserve per fiscal year

Yes.

Or is it like from fiscal year 26 to our 35?

It's one time to just keep it always because we've made a commitment to the early education workforce of a salary support.

So the $60 million represents one year's worth of what we're currently allocated for.

So if, God forbid, something horrible, more horrible than what has been happening, we still have a commitment to that salary support for all the early educators who depend on the salary support.

Supervisor Malcar.

Thank you.

You know, this is the last I'm going to say about this because, I mean, it's no secret that I support the expansion.

And it bums me out that I think that we're not doing it differently.

I think that I have made that clear to some folks.

I think we have spent a lot of time thinking out goals and programs.

and our goals of racial equity, kindergarten readiness.

I think we have not spent enough time on the fiscal.

And I want to not miss the opportunity that we have this big pot of money

instead of spending it, that we can be more strategic

about the sustainability of the system.

I think those two things are not polar opposites.

the predictability of the commitment that we've made to the workforce can happen with a different system than one we currently have.

So that's all I'm going to say.

I do think that for us, you know, sort of vetting an expansion that we know sets us up for failure in a couple of budget cycles is not what I want to be doing.

I would rather think about is giving the same subsidy to somebody at 50% of MMI and 149% of MMI the right thing to do.

Is it the alpha system and the way that we have it right now?

There's a bunch of things that have fiscal impact that I think we haven't thought through enough.

And I do think that it is an opportunity to think about money, both revenues and how we spend it, while still keeping our promises to the workforce and actually expanding it.

But, you know, thank you for bringing these issues.

I do think that every year that we spend the interest is hard for me.

It's been difficult and we are in a deficit.

I don't want to do it anymore, but it is hard to do.

it if we don't have a projection that is more science than art in terms of where we're putting

this money in terms of our promises.

Can I ask a couple questions about the Alpha system specifically?

I've been told that there's a ceiling of about 20 centers per year that can enter the Alpha

system, but I've also seen the expansion maybe as more than that in years past.

about how many alpha systems are you targeting to enter the system each year going forward?

New programs to enter the alpha system.

So there's a combination.

It's a combination sort of answer to that.

One, we already have planned expansion as part of our capital dollars that we're funding into facilities.

So we have to also consider that.

The number of new classrooms, new early care and education settings comes with enrollment and teachers.

and so with the programs that already have that capacity and are interested in participating

in our city's network they also have to meet certain criteria and again this is not a pass

or fail we're a public grant making entity we have to have criteria that's part of public

stewardship and accountability and one of them is a focus on infant and toddler and so some programs

may be willing to come into the system, but they only offer pre-K. And so that takes us into sort

of another level of a conversation around whether they're interested in expanding an infant toddler

or they're willing to do sort of some modifications, all of those things. And that's why it takes a

little bit of time for some programs. Is the focus on infant and toddler driven by,

what are the demographic numbers or the availability numbers that drive that focus

on infant and toddlers? So the reason Baby Prop C made it to the ballot is because of the low

availability of license capacity for infant and toddler. So of all the spaces, licensed spaces

in San Francisco, when we first started, only 15% of those licensed spaces were for infant and

toddler care. That is a huge delta. How does that relate to the number of infants and toddlers in

the city? I understand that is a small percentage of the entire

number of spaces, but how does that relate to the actual number of kids? Currently, children under

the age of three, which that would be considered up to a little bit of

an older toddler. We have approximately

6,500 births a year. We're talking

somewhere in the vicinity of 24,000 or so children,

definitely less than 25,000 under the age of three.

not all families who birth in San Francisco stay in San Francisco too

so there's also that percentage that we have to consider

and sorry how many spaces were there for those let's call it 2400

24,000 kids give or take

no no we're probably around

around 12,000 if licensed spaces at this point

But that's also assuming that every infant and toddler is going to go into group licensed care.

Sure.

So there is not a licensed space for every infant and toddler born in San Francisco?

Correct.

Okay.

When do providers have to register to be one of those kind of new providers in the ELFA system?

Like is there a deadline?

Is it a rolling application?

We have an enrollment process on our website.

It's all laid out.

And we usually open up that enrollment period in the springtime as programs are sort of looking at their enrollment for the following year.

They're sort of making these considerations of whether they want to or not want to participate in our system.

And we take those applications.

And again, there's a lot of follow-up and a lot of conversations that we have with each and every program that applies to see whether this is a good fit for them right now or a little bit later.

Why an annual process versus a rolling process?

Because there's also a capacity issue around the training, education.

Sometimes programs need, teachers need coursework.

There are all of these sort of logistical things that need to be organized.

And part of that is also capacity both at the college course level,

but there's also capacity around any modifications that need to be made,

especially to early care environments.

So there's a number of factors.

Got it.

Do we have a sense of how many sites you'll be entering into the system,

new sites entering into the system over the next few months or next year?

I believe we have currently, if we go to slide, currently we have close to 30 who are ready of existing licensed programs.

And then we have 22 sites that are in the pipeline that are already existing providers that are expanding.

So when you say they're ready, what's the difference between ready and part of the program?

That they're already licensed.

So they're licensed.

They have capacity.

Some of them are plug and play.

Some of them are not.

But that they will be coming in.

These are already existing sites.

And then there's new sites, brand new, that we're facilitating through funding to be able to bring online.

But aren't there more than 29 licensed sites in the city that are not part of the ELFA system?

We are already covering over 75% of infant and toddler care in the city.

And to answer your question, yes, there are.

And there are a variety of programs for a variety of reasons that some programs may not want to participate.

So we're looking at all the programs who are interested in participating.

So then what's the difference between a licensed site, and I know there are specific differences that probably are too myopic to get into today,

but what's the difference between a licensed site and a site that is a certified ELFA site?

All sites for us to consider have to be licensed by community care licensing, which is a state regulation.

But what's that jump?

Like, all right, I got a community care license.

Great.

Now I want to be alpha.

What does that gap look like?

What does that process look like?

Maybe at the most would be between family child care and center-based programs, no more than 200 sites.

That's the delta.

Sorry.

Let me rephrase my question.

If I, Stephen, run a licensed child care center and I would like to become a certified alpha, part of the alpha system, what do I have to do to get certified to be part of the alpha system?

All you need to do is contact us and then we will walk you through the process.

Right, but there's a process.

What's that process look like?

That process looks like is one, you also have to have your license in good standing.

Let's assume that I've done that.

You've done that.

Great.

I think there are a lot out there who've done that.

Yes.

And the other is that we also have a minimum requirement of teachers having child development background.

So part of this program really is to support children's healthy development.

And that's ensuring that we're looking at children's cognitive, social, all their sort of their entire development of children.

And so there is a requirement that has to have child development coursework for the people who are going to do the caregiving and education of our kids.

Okay, so this is not like a totally simple context to us and you're in.

There's a decent amount of getting documents in order, putting together background or CVs or something on all the teachers.

This is a process.

It's a process because, again, this early care and education system was designed specifically to support children's development, provide family support, and ensure that the educators also have a career and also adjust wage.

wage. And so with all of those things in mind, those are the parameters for how the initiative

was designed, developed, and implemented for the last five years. I think supervisors Chan and

Melgar both touched on the financial sustainability of this program. And one of the questions I would

have, and this might be an open question, is when we look at the one-time only funds, there's a lot

of infrastructure improvements there. Are the thresholds for accepting new licensed facilities

into the Alpha system too high? Could we be spending more money on subsidies or building

out a longer financial roadmap by looking at incorporating existing licensed facilities into

the Alpha program? It's all of that. It's all of that. It's necessary. The early care and

education system has very similar to public education has been severely

neglected and underfunded for decades and so we are trying to catch up to a

standard of what children deserve and families deserve and so our investments

are to support early educators the facilities in which children spend eight

to ten hours a day to ensure that they're they're designed specifically

for child optimum child development and that we facilitate the funding to support

that. If a provider already has alpha certified sites in the city and opens a new facility,

would that new facility get automatically added to the system? If it's an existing provider that

we've had a funding relationship with, yes. Yes. So like pretty simple, move right in.

We're giving them the benefit of the doubt. The process moves quickly? Well, because they already

know what the standards are and they've been meeting them. And does that happen on that annual

basis? Like if the annual application to become an alpha program is between February and May and

they open up in July, can they just, hey, we're turning it on? Yes. And that's because we've been

part of the process from the very beginning, including site where they're going to move into,

whether it's a new site. We've been extending capital funding for capital new development.

Like there's a whole entire process that leads up to that opening of that new classroom.

Okay. I've heard some differing things there, so we might follow up on that. Any other questions on kind of implementation timelines? I'm curious about the one-time only spending over the next 10 years. It's a lot. It's $347 million there.

What are some of the metrics or targets you're trying to hit with that spending?

Do we have a certain number of facilities, a certain number of teachers, a certain number of spots?

What are the numbers that that nearly $350 million is going towards?

Yes.

So in order to build out a universal system to support infinite toddler care across the city, we also have to invest in the workforce.

That means that we also have to recruit new people because we also have an attrition.

Our workforce is aging.

For people who have been in the field for 30, almost 40 years, some even 50,

people are leaving the field.

And so there's both accumulation of replacement but also adding.

And so those dollars over the course of the next 7 to 10 years

is an investment of recruiting, retaining,

and also advancing the early care and education workforce.

And yes, with precision of planning, we're looking at anywhere from 800 to new early educators that are needed over the next 10 years to, again, sort of for the people who are leaving because they're retiring, but also because we're also adding more spaces across the city.

So then I guess I'll ask one last combo question.

In terms of targets, it sounds like 800 new individual providers in the workforce.

How many new children and families do we hope to add to the system over the next 10 years,

and how many new facilities do we hope to light up,

both as ones that we're investing capital dollars into

and as ones we're looking to get certified into the Alpha system?

On the ideal sense, it's at least 50 new facilities that we would need.

And some of this is mostly within areas that have been underserved because of the, again, sort of like the inability to be able to expand in areas like in the western side.

And how many new families are we hoping yet?

Or children, really.

I think about it as children, not families.

Yeah.

Yeah, so we're looking at least a minimum of 2,200.

And again, these are infants and toddlers,

so the enrollment number may not look impressive,

but it is 2,200 at minimum,

more than what we currently have right now.

That's cumulative over the next 10 years?

Because we're also backing in to what the resources that we have.

Okay, thank you.

I don't have any more questions.

Thank you.

Thank you.

Thank you, Supervisor Sheryl.

I think this is a very important hearing for us to have.

I think, Director Kita, I think what I would look forward to, and along with your CFO here,

that is for this upcoming budget is, first, I would like to understand a strategy on reserve,

tackling potential further federal cuts

and also potentially not receiving the $5 billion

for the state of California from the federal government.

We'll love to see in your presentation for budget

is two scenarios.

I think one scenario of, you know, in the out year of 2028

when you potentially have no additional funding,

which is roughly anywhere between $190 million or $145 to $190 million.

What does that actually funding scenarios look like for you?

And then, of course, the second scenario is that if we're consistent with the stream

or potentially increase of a spending scenarios, which is around $230 to $250 million and more.

And so we'd love to learn more.

clearly that's not the fiscal one and so I would love to learn more in this

coming June seeing that those kind of information key information in your

budget proposal but thank you like this is really important work I think that

you know spending on child care is worth it it is something that San Francisco

should most definitely invest in even should the revenue that we generate from

the gross receipts from baby proxy is going to be quote unquote less than what is really cost us.

I think there is the children spending baseline. There's so many so much more that as an indication

why San Francisco should invest in universal child care and that it does means that you know

both for Mayor Lurie his administration as well as this body to start thinking about

that what are actually our spending priority and if budget is the statement of our values

then we ought to actually make sure you are funded.

And the work that you're doing,

we are not leaving you hanging

to actually tackling these deficits

by simply cutting what you already are providing,

but actually to help you to continue

to make sure that you're fully funded.

I think that's really my goal of why we are drilling down

and to recognize that is the responsibility of this body,

but particularly those who have expressed,

you know, in saying that we are interested

and that we're supportive of your work,

then we need to put our money where our mouth is.

So thank you so much for your work,

and I really am grateful for you and your team

and for all the child care service providers

and the workers for the work that they provide for our kids.

So with that, Supervisor, what is your will of this hearing?

Would you like it to be filed?

Before I go to public comments, would you like it for it to be filed

or would you like it for it to be continued?

I'd love it to be filed. Thank you very much.

Understood. Let's go to public comment on this item.

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

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

please line up along those curtains to your right, my left.

And as soon as we have our first speaker, I will start our time accordingly.

And we have two minutes.

First speaker, please.

Good morning, supervisors.

My name is Quinn Chunk.

I'm a parent leader with Parent Voices San Francisco,

and I also serve from the steering committee with the Family Service Alliance.

I'm here today with my daughter.

She is not in full-time child care right now.

I'm on the wait list for the family, friends, and neighbor care, but I've been told that the wait

list is very long. I care for my daughter every day. We attend play groups at different family

resource centers across the city. These play groups help my daughter learn, make friends,

and get ready for kindergarten. They also support me as a parent, and I learn a way to support her

learning and emotions at home.

I support Mayor Lurie's proposal to expand child care coverage to middle-income families.

At the same time, we need to expand family choice to include family, friends, and neighbor

care if Alpha is not available to meet the needs of families.

I also hope the city will continue to support playgroups and other programs at family resource

centers.

They're very essential to families like mine.

Thank you for listening.

Thank you much for your comments.

Next speaker, please.

Thank you.

My name is Salam Jaser.

I'm a parent of two children, and I'm a member of Parent Voices Advocacy Group.

I'm asking that the definition of high-quality child care be broadened to include family, friend,

and neighborhood providers, as well as licensed but not accredited child care centers and family

child care homes. High quality care should not be defined by accreditation or loan. Many family

friendly neighbor providers and licensed non-accredited programs provide safe nurturing

and culturally responsive care that families trust and depend on, especially families working

non-traditional hours and families from diverse communities.

These providers build strong relationships and meet children's needs in ways that matter.

Instead of excluding them, we should invest in them with appropriate training, resource, and support.

These providers can continue to offer high-quality care with respective family choice and promoting equity.

Thank you for your time and opportunity.

And thank you much for your comments.

And before we hear from our next speaker, I do want to remind the public commenters,

I do invite you to fill out a comment card if the spelling of your name in the minutes is important to you.

Otherwise, you have to rely on how I think your name should be spelled.

But with that, next speaker, please.

Thank you.

Good morning, supervisors.

My name is Maria Yandres.

I am a San Francisco resident, small business owner, and a leader with Parent Voices San Francisco.

Like many families, I've had balanced work, survival, and the impossible cost of child care in this city thanks to child care funding.

I want to thank the mayor for expanding child care assistance, offering free and discounted care for middle-income families like mine.

It's a strong step towards universal child care.

But eligibility does not equal access.

Families are paying up to $30,000 for child care per year, while hundreds still remain in the wait list.

The system, it only includes about one-third of the existing providers.

Family child care homes and family friends and neighborhood cares often are the only option that families like mine have and are being excluded.

If we expand the eligibility without expanding supply, families will qualify on paper, but there will still no place to take the children.

I urge you and the mayor, prioritize families that are already waiting.

Expand the provider network immediately.

Remove unnecessary barriers for trusted providers and partner with parents and providers for the implementation.

San Francisco can lead, but only if the system works for families.

Thank you.

And thank you for addressing this committee.

Next speaker, please.

Good afternoon.

My name is Tracy Zaropoulos.

Thank you for holding this meeting.

I live in District 6 and I work in District 5.

I am first and foremost a mother of a 4-year-old and fortunate enough to benefit from the Children's Council

Council and Wu Yi

stipend for my child

and I wouldn't

it was definitely a lifeline for me

to be able to do the job that

I do

and to work in the realm

I do. I am a preschool

teacher at Pacific Primary

it's a model center in SF

and I work with very

passionate people who also benefit from

this stipend and

I feel like

as a preschool teacher

we are building up the internal voice of these children

that they will hear forever for the rest of their lives,

letting them know that their voice can be heard,

that they can stand up and do things that are hard.

And this is no small feat.

I invite you to come to my Prairie Dog Classroom

and be with me with my 18 three- and four-year-olds

and see the mental gymnastics that we do,

the reasoning and brain-building art that we do in our classroom.

At the same time, as a child care worker,

the workforce stipend for my colleagues and me

are in a precarious position as well.

The requirements are shifting.

We may have to support an increase of low-income families to 50%.

While our commitment to equity and community would love to see this,

the stifons for the children are not meeting how much our tuition is. So Pacific Primary pays $10,000

for each child that comes in of low income. And like I said, we would love to see more low-income

families in our preschool. But if we were at 50%, that would mean that we would pay $750,000 a year

for those 50% of low-income families to come in,

and that drops us off of the alpha stipends.

Speaker's time has expired, but thank you so much.

Thank you for hearing me. Have a good day.

Next speaker, please.

Morning, supervisors. Thank you for this hearing.

My name is Maria Lustori.

I'm the organizer of Parent Voice San Francisco.

Parent Voice is a member of a national network of organizations

called Child Care for Every Family Network,

and they are writing to applaud what San Francisco has done.

What Mayor Lori's announcement really excited a lot of people.

We got a call even from Toronto National Daily

wanting to find out about it.

We know that we are afraid of certain things,

what's happening in the country right now,

the cut on Head Start, projections of revenue loss,

But I think we have to think that children, their time to be little, like Kelsey, is short.

We have to act now.

We have to do what we need to do today and then plan when, like we always say, we cross the bridge when we get there.

It's good to plan.

And Supervisor Chan, you were concerned about Head Start.

Center for Law and Social Policy actually shared with us that NAACCP filed a preliminary injunction,

and they won.

So Head Start right now is funded again.

We hope it holds.

So a lot of good people are doing a lot of good things.

We're hopeful.

And we want to work with you.

We want to work with everyone.

We echo everything.

I echo everything that the parents have said so far.

and you will also be getting a letter, the official letter from Child Care for Every Family Network.

San Francisco is setting an example that inspires a lot of people in the country.

New Mexico did their own policy but was not funded by new revenue.

Ours is. New York also did.

So we have to be proud of what we've done, and we hope you continue to work with us,

with the community, to really address the needs of families

and expand the care that families need.

Thank you.

And thank you much, Maria Lustari.

Next speaker.

Good afternoon, Supervisors.

My name is Kula Koenig, and I'm the new Chief Policy Officer at Safe and Sound in District 10,

five days into my role.

I'm here today representing the Family Services Alliance, a collaboration of more than 40 family support organizations,

including all 26 family resource centers currently funded by the Department of Early Childhood.

The Family Service Alliance, in partnership with the Child Care Planning and Advisory Council,

strongly supports expanding child care subsidies to families, earning up to 200% of the area median income.

As a mom of an almost two-year-old myself, I totally understand the cost of child care.

Ooh, child, it is a lot.

I also want to name a real disconnect that we're hearing from families and providers.

Family Resource Centers are a trusted community-based support for families with young children.

And right now, they receive a combined $1.5 million grant that is set to expire next year.

So at a time when the city is holding about $600 million in Prop C funding,

there's still no identified funding for the Family Resource Center.

Family Resource Center are eligible to receive this funding

as they provide comprehensive early care and education services

that support the physical, emotional, and cognitive development of children under the age of six.

So we're well in line with what is proposed in Prop C.

And family resource centers are there to support infant and toddler's well-being.

You know, they strengthen the caregiver and child relationships,

they stabilize their basic need, and they reduce toxic stress.

This is so important.

So we are requesting a line-item breakdown of the reserve spending,

and we're really hoping that we can see some specific funding for the family resource centers.

It's really, really critical in this time.

Thank you so much.

And thank you, Kulukhandic.

Next speaker, please.

Hello, good morning. My name is Claudia Quinonez, and I am the Chief of Staff at Children's Council of San Francisco.

I'm also co-chair of the UPK workgroup under CPAC.

And first, I just wanted to share my appreciation for moving forward Prop C,

particularly to the Mayor, Board of Supervisors, and Department of Early Childhood.

I do want to recognize that I've been in the field for over 16 years,

and to see now our conversations, how they shift so drastically to having, feeling hopeless,

our staff feeling hopeless that they're unable to maybe support a family or put them on list.

They have to wait for care to now be able to say, oh, I have an option for you.

I have a voucher for you.

Let's get you started.

It has been a game changer.

And I just want to recognize the great work that the department has put forward.

I do want to acknowledge two things in the sense of special needs and being able to support

inclusion environments for our children is a significant also advancement in that we're really

excited to see that moving forward. And the other thing I would want to elevate is the need to

continue to invest resources for our Latin A children that as we see through our kind of

readiness preparation of them being ready for kindergarten, that population particularly and

children with special needs are having the lowest scores. And so making sure that we still

continue to focalize investments into this group of our community to make sure that they have what

they need to be able to move forward successfully into kindergarten. Thank you. And thank you,

Claudia Caniunas. Next speaker. Good morning, Chair and Supervisors. My name is Mark Ryle. I'm

the CEO of Wuyi Children's Services. Wuyi Children's Services is the largest provider of early childhood

education in the city serving more kids than anyone except the school district.

I tell you this not to boast, although my colleagues may differ.

I tell you because we are knee-deep in this work every day.

And we have, from the beginning, from DEC's beginning, and certainly from the mayor's

initiative, been at the table talking through this.

It is critically important to your comments, Chair Chan, that we figure this out long-term.

and every conversation we've had has been about efficiency,

about effectiveness, trying to do more with less

and sometimes do more with more.

And we can't sacrifice quality in an expeditious process.

It's too important.

If anything, we learn from friends, family, and neighbors programs

and family child care centers as they learn from us.

So I support everything you're thinking about

and the detail you are

and I'm proud of the bold measure taken.

Thank you.

And thank you much.

Next speaker.

Good afternoon, supervisors.

Thank you for spending so much time on this important topic.

My name is Sarah Hicks-Kilde.

I work with early care educators of San Francisco,

talking with early care educators of San Francisco throughout the city,

and we keep a pulse on what their experiences are as funds have rolled out to them.

One thing that we're hearing lately is post-pandemic,

There are reports of 40 to 60 percent of classrooms having children with identified needs or waiting to be identified for specialized services.

I want to take you with your important questions about sustainability of these funds to a more granular level of the experience of educators in the classroom supporting children and families.

As an early educator in the classroom myself in District 3, working on a master's degree years ago in special education, focused on early care and education, I had a child who had a stroke at one year of age.

He lost mobility in his left side.

The parents were advised to remove him from our program, and they were distraught.

We came together as a group of educators and said the best thing for him was to stay where he was

with familiar friends, with familiar educators who could care for him.

His parents cried.

We worked with specialists and with me working on my master's to integrate his services into his regular routine

and our classroom, and we were able to keep him in our program with success.

When I got my master's, I was told I'd hit the wage ceiling, so I left early care and education.

These are the investments we lose if we don't ensure the right resources are at the site level,

and I don't just mean the wage increases.

I mean the staffing that can come together as teams to figure out individualized services for every child.

Let's be mindful as we allocate resources that sufficient funds go to the workplace

and working conditions that allow us to support quality early care and education.

Thank you for your time.

And thank you for your comments.

Next speaker.

Hello.

I'm Regina Chavez.

I'm an early childhood special educator.

I've been in this field for over 23 years, and I'm grateful for every moment.

And as the previous speakers have mentioned, special education in early childhood is underfunded.

Children, okay, this is such a strong topic for me.

So right now, unless you have a 33% delay, you do not get services.

So if you have a 15% delay or a 20% delay, you don't get services.

So I think that it's really imperative as we're thinking about these funds and we're thinking about children with special needs that every classroom, every site has an early childhood special educator, a speech therapist, and an occupational therapist.

So we can work on a transdisciplinary approach to support all children.

It is imperative that we support all children.

It is not okay that kids who have a 30% delay aren't getting services.

You know, every family and every child deserves access to a free and appropriate education,

and it's why I came into this field.

And my heart is broken after 23 years of seeing kiddos and families underserved.

And so we have a really big opportunity, and I implore you to please support our families and children.

Thank you, Regina Chavez. Next speaker.

Good to see you all again so soon.

Dr. Megan Rohr, Policy Director at Compass Family Services.

Down one block at 37 Grove, we are currently helping anyone who is in need of child care to get connected.

So if you came to this hearing because you were like, I need child care, call Compass or walk a block down.

We'll help you out.

But we also have a child care center up at 144 Leavenworth where we actually pay for our own special education staff and speech therapists

because the assessments that people need to transition from zero to five before they go to SFUSD schooling,

those are contract positions and they go to the areas of town they think are the safest

and so let's guess how many want to go to the tenderloin to try to provide these services

so we finance that on our own and still it's hard to keep special education staff employed when they

hear from a five-year-old about what the dead body on the sidewalk in front of our building looked

like that they saw on a Saturday, and they're trying to actually work through their assessment.

We need support for special education for these students. It can take up to a year and a half to

transition between the special education provided in ECEs to what you will get in the San Francisco

Unified School District. It's a gap we can cover with funding and support. It's going to take some

safety support, maybe from DEC or maybe from specialized SFPD three-year exempt funding,

but it's something we can accomplish. Thank you. Thank you much, Dr. Orr. Next speaker.

Good afternoon, supervisors. My name is Mei Guo, and I live and work in District 11 of San Francisco.

We thank the mayor and the department for their work to expand subsidy eligibility to 200% AMI

and offer full subsidies for families up to 150% AMI.

Our goal must remain to grow the system in a way that is equitable, sustainable, and responsive to family needs, while keeping those with the greatest barriers at the center.

As DEC noticed in its budget priorities last week, expansion cannot truly work without investment in other areas.

BBC funding is still needed for more support for family child care providers, especially as UPK continues its rollout.

Many family child care providers have seen enrollment drop since its inception.

Thank you very much for your time.

And thank you for addressing this committee.

Next speaker, please.

Good afternoon, Supervisors.

My name is Liz Winograd, and I just want to thank Supervisor Cheryl for your commitment to hosting this hearing.

and also thank you to Supervisor Sauter and Melgar for signing on and sponsoring.

I appreciate you creating spaces for community voices.

I also appreciate the time, attention, and openness you've brought to today's discussion.

Your willingness to listen and engage thoughtfully with the issues before us is essential,

and I'm grateful for the opportunity to contribute.

Thank you.

Thank you much, Liz Winograd.

And seeing no other speakers in line, Madam Chair, that completes our cue.

Thank you.

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

Upon the request of Supervisor Cheryl, colleagues, I will make the motion to file this hearing.

This hearing has been heard and now filed.

And a roll call, please.

And on that motion, let this hearing be heard and filed.

Vice Chair Dorsey.

Aye.

Dorsey, aye.

Member Sauter?

Aye.

Sauter, aye.

Chair Chan?

Aye.

Chan, aye.

We have three ayes.

The motion passes.

Thank you.

And with that, I know that Supervisor Jackie Filder is going to join us for item number three.

I'm pretty sure she's on her way.

So let's call item number three.

Just to give a second.

Yes, item number three.

Here's an ordinance amending the health and business and tax regulations codes

to revise the definition of a mobile food facility permit

and add definitions for compact mobile food operations,

mobile support unit, and permitted auxiliary conveyance permits to reflect recent amendments to the California Retail Food Code

and revise existing definitions of various other terms to reflect state law definitions in that code,

establish annual permit and plan check fees for auxiliary conveyance,

compact mobile food operation, and mobile support unit permits,

and remove annual food facility surcharge fees.

amending the Public Works Code to include a definition for compact mobile food operations

and to expand the Department of Public Works street vending authority

to include regulation of compact mobile food operations

and require that department to consult with the Department of Public Health

and Fire Department when issuing rules and regulations that regulate street vendors.

Madam Chair.

Thank you, and Supervisor Jackie Filder is joining us on this legislation, and Supervisor Filder.

Thank you so much, Chair Chan.

I want to thank the Department of Public Health for moving this forward and hearing me out on some concerns that have been coming from the community.

I do have questions for the department.

Chair, I'm not sure how you want me to proceed if you want my questions after their presentation.

Yeah, so then if that's the case, then let's go for the presentation for our Department of Public Health and the foreshores.

Okay. All right.

Good morning, Chair Chan, Vice Chair Dorsey, and Supervisor Sauter, and as well, Supervisor Fielder.

My name is Phillips Osai, and I'm a Senior Environmental Health Inspector with the Department of Public Health.

Today I am here to present an ordinance that would amend the Health Code, Business and Tax Regulations Code, and Public Works Code to establish compact mobile food operation definitions and fees.

I will be presenting today alongside Jennifer Callowar, Acting Director of the Department of Public Health's Environmental Health Branch.

Next slide, please.

the compact mobile food operations background.

For a brief background, the California legislature amended the California Retail Food Code

to formally recognize compact mobile food operations as a distinct category of food facility

through Senate Bill 972 to enhance the safety of sidewalk food vending.

The Senate Bill 972 went into effect January 1, 2023.

And what a compact mobile food operation or CMFO is,

it's a type of mobile food facility at a smaller scale,

and it operates from an individual, a push cart, a pedal-driven cart, or a wagon, et cetera.

Next slide, please.

and an overview of the compact mobile food operations is this local ordinance file 250967

brings san francisco in alignment with the state level code changes established in senate bill 972

today's ordinance amends article 8 of the health code which defines various types of food preparation

and service establishments.

The ordinance is designed to support public health,

economic opportunity, and regulatory clarity

for vendors and enforcement agencies alike.

Next slide, please.

All right.

The CMFO is defined.

To reiterate, these definitions on the slide bring our local codes

into alignment with the state definitions.

There are three CMFO categories defined in the ordinance.

The first, CMFO low risk, is approved for the sale of more than 25 square feet

of prepackaged non-potentially hazardous foods and or whole uncut produce.

An example of this would be a cart serving chips, bottled drinks,

and whole uncut fruit. The second category is CMFO moderate risk, and it is approved for

pre-packaged potentially hazardous foods and or limited food preparation that does not include

preparing raw meat, raw poultry, or raw fish. An example of this would be a coffee cart,

a fruit cart, or a tamale cart. And third is the CMFO high risk, and it is approved for limited

food preparation, including the preparation of raw meat, raw poultry, or raw fish. And an example

closely resembling this would be the halal cart, which is permitted in San Francisco.

All right, next slide, please.

And other ordinance amendments.

Today's ordinance includes a few definition updates in alignment with the state code amendments,

which includes mobile support units, which provides supplies to CMFOs and other mobile food facilities.

It also includes permitted auxiliary conveyances, which are required, hand washing and or wear washing sinks for operating a CMFO at a site-specific location.

The ordinance also includes language that clarifies the joint authority of DPH and DPW to enforce and permit compact mobile food operations.

All right, next one.

All right, permitting.

Compact mobile food operations require permits from DPH and DPW and also SF Fire if the CMFO involves an open flame.

To summarize the process, an applicant will fill out the CMFO application.

There will be a structural inspection, which may include SF Fire if applicable.

and at the end of that point the DPH permit will be issued to the CMFO next

slide and here are the fees the slide shows the fees established in the

ordinance for the CMFO categories today you have all received amendments which

Jennifer Califor Calewar will speak about on the next slide these

amendments will waive all city department licenses and permit fees for

CMFOs and now I will pass the presentation to Jennifer Caliward acting

director of DPH's Environmental Health Branch thank you thank you

thank you senior inspector of si hi I'm Jen Caliward I'm the acting director of

the Environmental Health Branch good morning committee members thanks for

having us today you can go to the next slide please today you've received the

draft amendments to be read into the record these amendments are summarized

on the slides the amendments expand the definition of stadium concessions to

include food facilities and stadiums with a capacity of 5,000 or more this was

included in the original legislation but more meant there's an amendment to the

legislative title only. The amendment revised the mobile food facility

category one and two which is our food trucks to low risk and high risk and

revise the respective fees for both categories to $778 and the amendment

also waives as was discussed all city department license and permit fees to

the compact mobile food operations.

We are requesting several amendments to the legislation,

as just discussed.

Clerk, would you like me to read the amendment

into the record?

Are you finished with your presentation

in its entirety before you?

Yes, other than my conclusion slide, thanking everyone.

Understood.

Because I believe that Supervisor Jackie

Fielder also have amendments.

And why don't we hold off the amendments

on reading to the records

and then allowing Supervisor Fielder

sort of commenting on the legislation itself.

And I think that she also have amendments.

No, but because you're already coming

to the agreement for the amendments.

Would it be okay then we'll see the floor

to Supervisor Fielder

and then we'll help you to read out loud of those amendments?

Absolutely.

Thank you.

And then I just want to mention

that we have representatives

to the Department of Public Works

and OEWD here

in case there's specific questions

from the committee

or Supervisor Fielder

around their subject.

Thank you so much.

Yes.

Supervisor Fielder.

Thank you, Chair.

Thank you so much, Director Calwart.

And I just want to thank

all the departments

for coming together

as well as the City Attorney's Office

to work on those amendments

to ensure that any permits

and fees assessed on CMFOs

could be waived for this. I just want to give the departments an opportunity to shed light on

how we got to this point. So I'll have a series of questions, and I'm so glad Department of Public

Works is here, as well as OEWD, to help answer these questions. But just, it's all for clarity,

so thank you in advance. But can you shed light about why we are putting forward this legislation

now instead of two years ago when the state law passed?

Yeah, thank you for that question.

As mentioned by Supervisor Fielder, the legislation went into effect statewide in 2023.

With the process of getting a legislation together, that does take time.

There was also considerations of multiple permits needed for compact mobiles, including a fire permit as well as a permit from the Department of Public Works based on location.

So there's been several interactions with those departments, the community, to determine the best step forward.

There's also been several communication lines between the SF Planning Department and the Office of Small Business in terms of having these permits be applicable to vacant to vibrant locations, which are not on public right-of-way.

They're on private property.

And so based on all those conversations and putting together the legislation to meet, including the fee waivers, we are here today, two years later.

Thank you.

And my other question is, are permits required under the state law?

Permits are required for food sales under the state law and under the California Retail Food Code.

if they're served to the public and retailed, or whether there's a fee or not.

Okay, thank you.

And as far as who is required to use a commissary,

what kinds of foods or risk levels are required to use a commissary?

Which kind of stakeholders in the CMFO world are required to use a commissary?

All food establishments that serve food and beverage in the state of California are required to have a commissary kitchen or a permitted kitchen.

So that can be a restaurant, a commissary, like we think about catering, as well as any permitted food storage to store their food, prepare their food, and also store their equipment.

And to be able to clean and sanitize appropriately to prevent foodborne illness.

Thank you.

And then with respect to the equipment requirements, depending on the risk level, there's requirements for a sink or, you know, when it comes to open flames, there's just a lot of specifications.

Are those requirements under local law or state law?

Those requirements are under state law.

Okay.

And then just a question about enforcement from the environmental sector of DPH.

Will DPH be stepping up enforcement after this ordinance is passed?

Or kind of the same amount as we've seen?

We're required to enforce the retail food code, and so we have a task force with DPW,

fire, police, and environmental health under DPH, though there's no plan to not disassemble

that task force, and so we will continue to enforce.

Thank you.

And when it comes to enforcement, how does DPH decide to, or this task force decide to deploy enforcement?

And to where in the city?

So we have a complaint-based system, right?

So we receive 311 complaints from a variety of stakeholders, including our brick-and-mortar permittees who serve food and beverage.

So we do prioritize based on complaint base.

Okay.

That's helpful information.

Those are all my questions for DPH.

I wanted to invite OEWD.

Thank you so much, Director Cowart.

Thank you.

I just wanted to invite OEWD, Mr. Rafael Moreno from Office of Economic and Workforce Developments here.

Can you shed light on kind of how the city, because, you know, you have been in this position and kind of, you know, had a front row seat to how this has all unfolded over the past several years.

I'm wondering if you can shed light on kind of how we got to this point and what the city,

from OEWD's perspective, is doing to ensure that this is not

unjustly keeping food vendors out of our economy, but truly being a pathway.

Just invite you to share more on that.

Definitely. Thank you again, Rafael Moreno, with OEWD.

So this effort, just to kind of take a step back a little bit, it's really coordinating

the different departments that have overseen these permitting, right, for food vending,

for street vending, et cetera.

So it's DPWs, DPH.

It is our departments like fire and supporting, you know, and our supporter department, the

police department.

And so first, you know, it's very complex, right?

It's not as simple as we may think it is.

And so according to departments that come up with actually true programming and permits that really support vending and inviting to the economy and ensuring that continues to be part of our vibrancy and neighbors like the mission, right?

Where it's there, right?

It exists.

And so we're doing that in partnership with the departments to coordinate in alignment with the mayor's priorities of really streamlining our permitting process and ensuring that small businesses, which street vendors are, are part of this process and are being able to get very,

very clear direction and where to go and how to do things and so we are a WD

are helping supporting this according to departments around this effort as

well working in partnership with community members community groups like

the Mission Street vendors Association to really get insight and input on how we

can produce these permits and produce these programs in the long term thank

you and then you know there are so many departments involved because it has to

do with the street and the right-of-way which involves DPW, DPH because of the food and the

health codes, fire because of kind of egress and accessibility issues. How, you know, how can we

ensure that, I don't know, what is kind of feasible for now, especially because

there is a lot of complaints from constituents from you know other vendors from brick and mortar

about in general illegal vending and vending from people that have no intention of becoming

a part of the system or regulated just how is how is the city and kind of the departments thinking

about building on the modicum of success

that we've seen with the pilot in the mission

when it comes to merchandise retailing

and how do we rope in food vendors

into those considerations and that system,

especially because space is limited?

No, definitely.

It is a complex process, right?

I think we refer to the Mission Street vendor pilot program

we have on Mission Street, right, which we really got to test what works and what doesn't work,

right? How are we measuring space? How are we looking at the relationship of having a good

neighbor policy among vendors with brick and mortar businesses and really balancing out those

two, right? As well as ensuring that there's enforcement from our colleagues at DPW and,

you know, and so really using that as a model to how that we can look in other commercial corridors

and commercial districts throughout the city of what works and what doesn't work. And again,

And, you know, it's a very neighborhood-specific approach that we're doing in the mission.

Is that necessarily going to work in a neighborhood such as, like, Chinatown?

Might not, right?

We have to consider sidewalk widths.

We have to consider all these different factors.

And so that is something we as a collective of departments are looking at for these next steps

and how we really deploy a more robust, stronger program, right,

that really is bringing in folks into compliance,

as well as ensuring brick-and-mortar businesses have room to be able to sell.

There's room in Patten Travel for folks visiting the neighborhood

and being in the neighborhood,

as well as ensuring that there's a level of enforcement happening

from our colleagues at DPW and DPH for folks who don't want to be in compliance.

Thank you.

And then just lastly, my understanding is that,

and I just want for the record,

that food vendors can come to the Office of Small Business

to get help with their permits and any requirements around plan checks

and the structure of the carts and kind of they can basically have like a one-stop shop

at Office of Small Business with the language that they're most comfortable speaking.

Correct, yeah.

We welcome many vendors to come to the Office of Small Business.

We're here located at City Hall on the first floor,

able to talk to our business coaches down there

to really figure out their business model, their business plan,

which then would help direct them to the next step

of going to the permit center with DPH

to do the plan check of the cards and what cards they want to do.

And even if they don't, before they even want to get to that step

of maybe stopping OSB,

our divisions, Community Economic Development Division,

OEWD, are happy to meet with folks in a group setting,

one-on-one, so really just kind of think that through

like we have been, so we can really coordinate

and refer you into the right direction.

Thank you. And then, you know, those are all my questions. At this point, I just have comments.

Thank you, Supervisor. Thank you. Thank you, Supervisor. I think just an offhand quick question.

I thought that the state law does allow home kitchen. Meaning, I'm just thinking, I'm just throwing out.

By the way, I really appreciate the whole mobile food facility category

and being able to codify it.

It's great.

And just reading through this, too,

and to understand the difference between mobile food facility versus,

I guess you say here is this the compact.

Is that what it is?

The compact food facility.

I love how you clearly define motorized vehicles versus push cars and different kind of risk.

I really appreciate the work.

Clearly, everybody has put in the work.

But just kind of, I'm just looking through the whole preparation facilities by definition.

It doesn't seem that it includes home kitchen, which I thought that state law allows.

So the state law enacted the micro enterprise home kitchen in 2019.

It was put into law to give local county and city jurisdictions the tool or opportunity to enact a program versus the compact mobile operation amendments is requiring the city and local jurisdictions to create a permit system.

So it's allowing saying that if a city wants to enact a program, there is that opportunity, and here's the code that would go along with that.

So it is available.

When it was enacted, the city collectively, it would impact several different departments.

It's not just a Department of Public Health permit.

Like DBI?

DBI, fire, planning.

You think about the stakeholders for the property owners.

So there was a lot of different key stakeholders,

and the decision was made by the city to not opt in at that time.

I am not drilling into this today.

I know there's a lot of conversations and a lot of work already.

I want to say this

and I'm going to

I think I kind of know what Supervisor Fielder

was kind of going with

and I'm going to put it out there

I'm not trying to derail

the conversation that has already taken place

but I really want to strongly encourage

Department of Public Health to actually

recognize that the micro

kitchen

and it's happening

and

I'm just kind of again

because you already went through the step about the compact food facility

with Push Car and everything.

The next steps I can imagine, which we saw, like some example,

is that you have entrepreneurs that is, be it creating a new jam or a kimchi

that they then will bike around at a farmer's market that they want to participate.

And I think those are worthwhile opportunities for many people who do want to.

It's almost like a startup.

It's like a food startup that I do want to encourage us to think about in that direction and allowing young people.

I would say younger entrepreneurs tend to have those opportunities and experimenting and be ice cream.

I can just think of like a million things.

Maybe that's because my side alternative dream career would be like, oh, I'll be riding around bike if I really can bike, you know, and be like, you know, selling kimchi or jam or something.

and just be like a startup and joining like farmer's market

and just having that opportunity.

I think it's interesting.

And also just a thought about City College of San Francisco

having a great culinary program

and just kind of see how that can really come together.

I just want to encourage after this,

maybe like there's going to be a whole another level

of just start thinking the potential of that.

it's really worthwhile for this economy, the both, the micro economy, local economy, to be able to

encourage that to flourish, just seeing, I think, just one more opportunity for workers to be able

to launch their own career and business. So just wanted to encourage that thought.

Supervisor Sauter. Thank you, Chair. How does this particular category compare to temporary

food facilities? So the temporary food facilities is also in the California Retail Food Code.

That is connected to a community event. The compact mobile operation does not need to be

connected to a community event. Okay. I think that's an important distinction because

temporary food facilities are more common at farmers markets, and then what we're talking

about here is a little bit more kind of ad hoc on the streets and sidewalks. Is that accurate?

Correct. And the annual temporary permit has a limitation on the number of days you can operate out of a year.

It's roughly a couple days a week.

And so the compact mobile would allow unlimited and then not being part of an event.

the cottage food permit is also a home kitchen permit where you we have in place in san francisco

and that is where people can make cottage foods and those are also sold at the farmers markets

and at temp events and then all of the retail food vendors that have pre-packaged potentially

hazardous foods at farmers markets also have a permit. We've just recently enacted an annual

permit which allows unlimited participation in any farmers market in San Francisco for one set fee

which allows a huge expanse for these small businesses and entrepreneurs to participate

in marketing their food. And thank you for that work. Having run a farmers market before,

the quarterly process was very painful and time intensive and costly. So moving it to an annual

period has made a big difference, I know. So I would just encourage you to keep looking for ways

like that to make it easier on all the organizers. Thanks. Thank you. Thank you. And Supervisor

Philger. Yes, thank you so much. Building on Chair Chan's questions around MECO, just aside from the

interdepartmental work that it would take involving so many departments. From the DPH

end of things, what would it take to run a MECO program? It's a great question.

There would have to be a budget analysis conducted on the cost for the department.

It's a very large program, so we would need to have conversations about staffing needs

and do a full analysis of that program.

Okay.

Yeah, before I could comment any further.

Thank you.

Just, you know, I concur with Chair Chan's remarks about MECO

and how, you know, in the spirit of making it easier to run a small business,

open a small business in San Francisco,

this seems like a synergistic opportunity,

opportunity, not just for the food vendors, but also for the city. You know, I've talked to the

mayor several times over the past year about what we can do to activate the plazas, to make Mission

Street more vibrant, welcoming. And aside from the regular enforcement of laws, it also has to be

a welcoming place and and in the mission food vendors are a part of that they have to be and

and just are completely a part of the social and economic fabric of street conditions that I think

it is actually helpful for us as a city and helpful to our constituents helpful and and

And it's promotional as well to have tourists be able to come to places like the mission, feel a sense of vibrancy and activity that is not the kind that we've been seeing over the past handful of years since COVID.

And so I'm looking forward to looking more into the MECO program.

I'm looking forward to more conversations with the mayor's office about the MECO program

because I think it's really just a win-win for everyone and so I hope to also have have the

support of my colleagues on that thank you so much director for answering my questions thank

you to chair Chan for having me and thanks to the committee thank you thank you and with that

Could you please now go ahead and read the amendments, propose that, and then we'll go to public comments on this item.

Thank you.

All right.

So the amendments include on page 1, line 4, we would like to delete the word add.

And page 1, line 6, we would like to delete the word add as well.

On page 1, line 7 through 9, we would like to add and expand the definition of stadium concession to include food facilities and stadiums with a seating capacity of 5,000 or more.

On page 1, lines 11 and 12, we are deleting remove annual food facility surcharge fees

and adding waive license and permit fees for compact mobile food operations.

On page 1, line 14, we are adding the word 2.

On page 1, line 15, we would like to add the word the before fire department.

On page 7, line 11, we are deleting the number 1 and adding low risk.

On page 7, line 16, we are deleting the number 2 and adding high risk.

On page 13, line 18, we are deleting the number 1 and adding low risk.

We are also deleting the number 893 and replacing it with 778.

On page 13, line 19, we are deleting the number 2

and adding high risk.

We are also deleting the number 893

and replacing it with 778.

On page 15, line 15, we are deleting the number 1

and adding low risk.

And on line 16, we are deleting the number 2

and adding high risk.

On page 17, lines 5 through 13, we are adding D,

all permit fees and license fees required on the municipal code

for the operation of a compact mobile food operation

shall be waived, CMFO, shall be waived by the department

otherwise authorized to impose such fees.

For purposes of this Section D, permit fees means

all permit application or other fees payable to the city

under application for or issuance of

any permit relating to the operation of a CMFO.

And license fees means fees payable to the city relating

to the operation of a CMFO, including but not limited to fees

imposed under Section 249.23B of the Health Code.

Notwithstanding the foregoing sentence, the waiver in this

subsection D does not apply to the business registration fee imposed under Article 12 of the

Business and Tax Regulations Code. On page 18, line 12, we are adding accept where the municipal code

provides for a waiver. On page 20, lines 11 through 18, we would like to add this ordinance as

introduced on September 30, 2025, proposed to amend the Business and Tax Regulations Code

by eliminating a permit fee for a catering facility and rescinding Section 249.21,

which established a food facility charge, but those changes to the Business and Tax Code

had already been effectuated through the enactment of Ordinance No. 279-24,

which was approved on January 18, 2025,

and the Ordinance No. 140-25, which was approved August 31, 2025.

Therefore, the inclusion of these proposed amendments was in error.

The committee amendments introduced on February 4, 2026,

omit these proposed changes from the ordinance.

On page 21, line 1, we are adding section 6.

We respectfully request that the committee accept these amendments.

Thank you.

And Deputy City Attorney Brad Russe?

Sounds like these amendments.

Good afternoon, Supervisors.

Deputy City Attorney Brad Russe.

These amendments are substantive and will require a second committee hearing,

So if you wish to adopt them today, you should continue this to a future meeting.

Thank you.

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

Thank you.

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

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

Just as a note, interpretive services were requested,

and unfortunately with the length of item number two, our interpreter did have to leave.

But in partnership with OSEA, any public comment given in language will be provided to me in,

will be interpreted as a hard file and will be provided to me for inclusion into the file.

So with that, first speaker, please.

Real quick before we start with that, as a note, we do have somebody that could translate for the vendors,

if that will be allowed within the two minutes.

Any public comment given in language, we will also afford that same time in interpretation.

Gotcha.

So it could be here and then here, correct?

Yes.

Okay.

Thank you.

So good afternoon, supervisors.

My name is Josh Jacobo, and I'm an organizer and a director with Nuestra Casa, or NC,

a mission district agency.

We support street vendors through policy analysis and advocacy.

Behind me stand 20 street vendor voices.

Street vending isn't just commerce.

It's culture, it's history, and for many families, it's the lowest barrier to economic mobility.

We want to be very clear today.

We are pro-legislation.

We believe the intent of this policy and want it to succeed.

Our ask is simply that the full spirit of the legislation be implemented, including MECO.

So that this policy works for everyone, essentially the vendors it impacts at its core.

As this legislation currently stands, vendors face a crushing financial hurdle.

A population earning an average of about $2,000 a month in monthly revenue would be expected to absorb an enormous cost essentially overnight.

That reality puts families at risk of being pushed out rather than brought into compliance, essentially a de facto ban.

Our ask is simple, fairness and certainty.

Fairness means giving families a real chance to adapt when rules change, not asking them to absorb the impact all at once.

Certainty means knowing that the protections are fully in place before enforcement begins.

That's why completing WECO matters.

With the full policy package in place, this legislation can do what it's intended to do.

Create stability, support compliance, and allow vendors to succeed.

together we can ensure this policy becomes a path forward not a barrier

for vendors their families and our shared community lastly thank you to our

partners in supervisor fielders office Rafael Moreno and his colleagues as

well thank you thank you much Dr. Coppa next speaker please

Good afternoon.

Hi, everyone.

My name is Karina.

This is Andreas.

Actually, I'm pausing your time.

To the person providing interpretive services, there is another microphone.

Please continue.

So, buenas tardes. Mi nombre es Andrea.

Y soy líder del Comité de Vendedores de Comida de San Francisco.

Good afternoon. My name is Andrea, and I'm the leader of the Committee of Vendors in the Mission District of San Francisco.

Quiero ser muy clara sobre lo que esta ordenanza significa para los vendedores como yo.

I want to be clear what this ordinance means to vendors like me.

La regulación sin los apoyos necesarios no es una transición, es una destrucción económica.

A legislation without support is an economic destruction to us.

Nos están diciendo que cumplamos ahora, mientras que las cosas que hacemos es cumplir.

Oh, we are being asked to comply with these ordinances, and we do, however.

We keep getting, we keep trying to get support.

However, the way that it's being lengthened, it's not helping us at all.

Without the program, Miko, we are forced to use different kitchens.

Something that is very expensive that costs around $2,000 without the support of the city.

Nos exigen comprar carritos entre 8 y 18 mil dólares.

We are asked to buy cars between $8,000 to $16,000.

Y la mayoría de nosotros no tenemos ese dinero.

And the majority of us do not have that kind of money.

Cuando esta ordenanza pase, la aplicación de la ley nos espera.

When this program passes, the application of the law is not going to wait.

La renta nos espera, los gastos nos esperan.

We have rent, we have different costs.

Los vendedores seremos expulsados ante cualquier apoyo.

The vendors will be displaced without any support.

Si la ciudad quiere que los vendedores sobrevivan.

If the city wants vendors to be able to have a livelihood,

You should consider advancing the program MECO.

Something that creates a safe space for us and support to be able to vent.

Thank you.

Thank you much, Andrea, for your comments.

Next speaker.

Next speaker.

Good afternoon.

Mi nombre es Rosa Villanueva.

Nuestro comité reunió más de mil firmas en la comunidad.

Our community has gotten around 1,000 signatures in our community.

Que entienden lo que nosotros estamos pasando.

That understands what we are going through.

We are trying to get support however that is not happening.

Our ask is that MECO passes at the same time that the CMFO law passes.

passes. Because that would mean that our families will be able to stay afloat. Because we are low

income, we do not have the resources to be able to add the expense of a cart to our daily life.

Since Saturday, we have not been able to vent in our usual spots,

which means this week we do not have the income to feed our families.

Thank you for listening.

And thank you much for addressing this committee.

Next speaker.

My name is Edgar Rafael.

Good morning, this is Edgar.

I am also a leader and part of the committee here in the Mission Vendors District.

I have been a vendor for many, many years.

I know what it means to be able to vend.

and I know what it means to not.

In this moment, the city is asking us

to be legalized

without giving us the floor to stand up.

That is not the way.

it's a plan that is not certain

we keep hearing that Miko will come later

that the money will maybe come later

that the space will go later

but later does not protect us

When this ordinance is in order,

without Miko, we face a decline of thousands of dollars

in new costs every year.

Without support with the carts,

we face costs that we do not expect.

that we cannot pay.

And without space, we cannot comply with what we have.

And where to go.

If these supports come at the same time,

la regularización de vendedores desaparecerá inmediato.

the regulation will disappear immediately.

La certeza es ahora.

What is certain is right now.

La única forma de evitar la destrucción después.

The only form to...

The only form to...

Sorry, excuse me.

The only form...

The only way to avoid displacement is right now.

Gracias.

Thank you.

And thank you much for your comments.

Buenas tardes, supervisores.

Mi nombre es María Villegas.

Yo soy representante de un grupo de más de 60 vendedores de la misión.

I am a representative of more than 60 members in the mission.

we come here to seek support

to be able to continue vending in the mission

now that many vendors we have stopped vending daily

and in this moment we are suspended from vending

because of the Super Bowl.

And instead of letting us be able to make a little bit of money,

the city is causing us to be deprived of this extra income

and they are not supporting us.

Because we are part of the Hispanic community, we are important to the people who come to the Super Bowl,

that come to want to get to know the culture that San Francisco has.

That's everything. Thank you.

And thank you much for addressing this committee.

Next speaker.

It's sacrificing the salaries of low-rescurses people.

And through this, we give the maintenance

for our families and our children.

Thank you very much.

I am also a part of the Mission Vendors Association,

and I am here to let everyone know that because this

is depriving us from being able to vent,

it's affecting our livelihoods and our families.

Thank you.

And thank you much for your comments.

Next speaker.

Good afternoon, I'm Celia Romero.

I'm a sales manager of food and leader of the sales committee of food and food of San Francisco.

In theory, this policy can seem viable in the policy.

Without all the pieces, it is not.

Good afternoon, excellent afternoon.

This policy could be seen as something that is bright and new and helping us.

However, without evaluation, it's not what it makes it seem.

Thank you so much.

And thank you.

Next speaker.

Hola, muy buenas tardes.

Mi nombre es Cecilia Contreras.

Y soy vendedor de alimentos y líder de comité de vendedores de alimentos de San Francisco.

I'm also part of the committee of food vendors in the Mission District of San Francisco.

Los vendedores no deberían perder sus medios de vida porque las distintas partes del sistema avancen.

The vendors should not be able to lose their livelihood because of certain laws that are passing.

A distintas velocidades, las demoras burocráticas no deberían determinar quién sobrevive y quién no.

The policy should not be able to decide who can survive and who cannot.

We are here to ask supervisors, please put your hand in our hearts and see how it is affecting us and our family because of the Super Bowl.

We do not ask for handouts, we are just asking for you guys to let us work.

This is the only income we have to bring food to our table, to our children, and to our families.

Thank you, and we ask for you guys to consider putting yourself in our shoes and in our hearts.

Thank you.

And thank you, Cecilia Contreras.

Next speaker.

Buenas tardes, señor supervisores.

Mi nombre es Felipe Reyes Pérez.

Soy vendedor de alimentos, líder del Comité de Vendedores y Alimentos de San Francisco.

We are here for us to support everything that can get us out of the risk of being displaced.

We are very cautious of cross-contamination and antibacterial ways that go into our food.

We are very, very cautious.

That is the one thing that we take pride in.

and we just want your guys' support

for you guys to listen to us

for you guys to actually put these things in place

and I appreciate you guys

I would appreciate your support

I am disabled for life

I can only work up to four hours because of my kidney transplant.

And if I don't work every day, I don't get the bread every day in my family.

Thank you.

Thank you, guys.

I hope that you guys are willing to support us, because without your support,

I don't have the support to bring food every day to my family.

Thank you.

And thank you much for your comments.

Next speaker.

Buenas tardes.

Mi nombre es Yesenia.

Soy vendedora de alimento y líder del comité de vendedores de alimento de San Francisco.

I'm also part of the Mission Food Vendors Association.

We ask for a just policy that will support us as vendors in the community.

We ask you guys to let us work. We work legally. We pay our taxes. And if we don't work, we can't afford to support our families.

Thank you.

Thank you.

And thank you, Desenia.

Next speaker.

.

.

.

.

.

I have no work. I have three years that I have no work.

I am fighting for my two girls and a child.

That's why I am fighting. I need support.

That's why I am with these groups. Thank you.

I am a single mother, and I have a little girl and a little boy,

and I am here to ask for your support.

I am here fighting because I don't have any other support,

and without work I cannot take care of my little children.

Thank you.

And thank you for addressing this committee.

Next speaker.

Buenas tardes.

Mi nombre es María Jorge.

Y nada más le pido a los supervisores que nos ayuden con el...

que nos da un permiso para vender en la misión.

Nos da la oportunidad y le agradecemos mucho.

Gracias.

We are asking for permission to be able to sell, for you guys to give us the opportunity to sell.

Thank you.

And thank you much. Next speaker.

We keep hearing that the city is working towards

that you guys are working towards a solution.

However, we cannot work without

without your support.

And this law needs to move forward with everything else put in place.

They need to be put in place at the same time

so that we don't have the risk of being displaced.

Thank you.

And thank you much for your comments.

Next speaker.

Good afternoon, supervisors.

My name is Leila Ovando.

I am the Director of Food and Equity Access for Nuestra Causa.

I was also the ones who provided the Surfsafe food handlers cards for our food vendors.

So they are certified through us, or they got it through our programs.

And I'd just like to start with, I'd like to be clear about what is at stake here.

It is not that we are against the ordinance.

We would just like to make it clear that the regulation without the accompanying support is not neutral.

It produces a predictable outcome, economic displacement of the very communities this ordinance is meant to protect.

Food vendors are already operating at the margins.

When we pass regulation without simultaneously legalizing MECO,

without funding for required carts and without resolving vending spaces,

we are not creating a pathway.

We are creating a cliff.

Once the ordinance takes effect,

enforcement costs and compliance pressures begin immediately.

Promises of future fixes do not pause that reality, unfortunately.

Food equity is not just about what is available, but who is allowed to produce it, sell it, and survive doing so.

State law created MECO specifically to open doors, low-income and immigrant food entrepreneurs.

Leaving it out here closes the doors for that.

We often hear that the city is working on it, or it sounds like solutions, or it's coming soon for vendors.

That uncertainty is devastating because rent and food costs do not wait for enforcement or to operate on future timelines.

Equity requires certainty.

If this ordinance moves forward, the supports must move in parallel realization.

Thank you very much.

Thank you for addressing this committee.

Next speaker, please.

Thank you.

Good afternoon, supervisors.

My name is Alma Castellanos, and I'm the Director of Operations at Glecha.

We do small business support primarily for Latino businesses here in San Francisco.

I want to start off by saying thank you to DPH and OEWD and Jackie Felder's office for

giving us a platform and the space to be able to come together and bring this to the table

so we can all discuss this.

I do believe that right now, because the program is so new and it's a program we haven't had,

there is a lot of alignment and then a lot of disalignment.

And we've seen that, and that's what the conversations are for, is for us to come here and discuss this.

I do feel, however, there is alignment in some areas,

and I believe there's an opportunity for us to align and reach a solution together

so we can move forward for the best interest of the community.

Like I said, we do the small business support in San Francisco,

so we understand what a brick and mortar goes through,

but then we also understand what our small businesses

that are on the street vendor side also go through.

So definitely we are here to support in any way,

and we would love to see some kind of alignment

between all to better for everybody.

So thank you.

And thank you much for addressing this committee.

And seeing no other speakers in line, Madam Chair, that completes our queue.

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

Colleagues first, of course, this needs to be amended, which I am in support of the amendments today.

Should you also support the amendments, we will have to continue to the next meeting.

However, I do want to say this.

And if I could ask public health for two questions.

One is about related to Super Bowl.

And second is the implementation of this legislation and fees and how long is it going to take you to do so.

Given the fact that, you know, this is still pending in committee at the moment.

So you're probably my assumption is you're going off the existing fee structure or law or regulation.

the fact that it's pending right now how has the enforcement what does the enforcement actually

look like if any and what does the penalty looks like if any so the enforcement of food vending

is focused on operating without a permit which is the same if you're doing pending or not

So that's how we approach it. And then our enforcement is based on complaint based and risk.

So health risk in San Francisco. So we enforce citywide and have multiple operations throughout the month.

understood

it sounds to me though

I was like

I just have to say I just learned about

the acronym of Amigo

which is micro enterprise home kitchen operations

now I understand what it is

clearly

there's a sense of

wanting to see there's a

program for that

is there a conversation about

providing potentially

if the vendor

in this case. Clearly, they probably will still need a compact

mobility fee. They still have to pay for that fee

or even if they're the mobile food facility fee.

So help me understand that. Was there ever a conversation

say if this is a

micro enterprise home kitchen operations, but then now they're selling on the

streets, be it through a push car or through a, I don't know, motorized vehicle, could there be

temporarily an exemption until you establish a program that you can actually issue or be, you

know, that you fit into the category of definition as a kitchen? No, there is no existing category

right now for a home kitchen other than the cottage food operation permit.

Yeah.

And so I think that's my question, right?

So this is sort of like we're leaving it a void there that when you recognize that state

law is allowing you to do so, but logo level is not like codifying that program.

So you have people that caught in between.

And clearly they're allowed to do so because of state law saying you could,

as long as there's a local codified program issuing you the permit to do so.

So I'm asking for the short term, could there be a consideration and say,

well, if you actually comply with what the state law already has,

and yet we as a city have not been able to actually provide either staffing,

permitting process, whatever it is that's on us,

But that does not mean you are illegally operating, that we could then provide you an exemption as long as you meet all the other criterias and fees.

So it's a question that's larger than Department of Public Health, but the health department is committed to having those conversations citywide with all the relevant agencies.

I am committed to do that.

I have not seen a temporary permit in place for something like that, given the complexities of it.

Yeah.

And the resources also that need to be taken into consideration citywide, given the climate, the budget climate.

Yeah, and I think that this is the kind of questions that I may have for city attorney to help us sort out, like, what if city providing an exemption for a home kitchen, and then, you know, and instead of putting, providing an exemption for home kitchen produced food products, instead of penalizing them, or in any way, just because we don't have the resources to be able to staff up and permit and

codifying, like, is that an option that we could? So because of that, if I, and I'm putting out

there and colleagues that I would like to continue this as substantive and that I would like to

continue to the call chair to allow me to just explore this question with city attorney and

with Department of Public Health that potentially providing an amendment for exemption for a micro

kitchen until just having an exemption in place.

So I am open for discussion.

So that allows us to continue this item to the call chair.

I see nodding.

So if I may then.

Thank you so much for your work.

Just because the continuing to call chair does not mean that we cannot bring it into

the next meeting.

I just want to be.

I understand.

I just want to clarify that, that we could still continue the discussion and move this forward.

It just allowed us a little bit more time and allowed me to just have that questions with the city attorney.

Just allow me to ask that question.

So I really appreciate your work.

I really appreciate everybody came out for public comments.

I wanted to kind of look at Supervisor Filder.

How do you feel about continuing to the call chair?

Or would you like to move this forward?

Absolutely.

appreciate that and would love to be a part of the discussions with the city attorney.

And yeah, thank you so much.

Thank you. So with that, I would first like to make the motion to amend.

Actually, Madam Chair, ahead of that motion, I'd be remiss if I didn't mention that if we did

continue the call to the chair instead of a date certain because of the amendments,

I will need to re-notice this as a fiat.

Understood. So what I'm going to do is I'm going to continue to the next meeting.

And then if we need, like, more time and figure this out, then we will continue to call chair.

Is that okay? I'm just, I want to be in good faith, like, to say that's not my intention to stop this.

Because I do understand that there's also public health, you know, purpose that we're trying to carry out.

Managing food vendors. So we will do that then. Thank you so much for the reminder.

Let me make the motion to amend the legislation as proposed by the Department of Public Health

and then continue to the next meeting with the intention potentially that we will continue that conversation.

And a roll call, please.

And on that motion, that we accept the amendments as so written to the record by the department

and that we continue this ordinance to the February 11th meeting of this committee as amended.

Vice Chair Dorsey.

Dorsey aye member Sauter Sauter aye chair Chan aye Chan aye we have three

eyes the motion passes thank you and colleagues my apologies I want to

recognize the time is 1 19 p.m. it's not what we anticipate or it's not what I

anticipated for for this I am going to continue what is on our agenda as in its

order but if you feel like there are any things that you would like to call out

an order please let me know otherwise I am going to continue to item number four

hold on one second okay yeah

Which one?

But I just wanted to make sure that there's nothing no one wants to hurry.

Otherwise, like, because you.

Okay, so let's call item number four.

Yes, item number four is an ordinance approving a hotel development incentive agreement between the city and county and bespoke hospitality LLC.

for the Hearst Hotel Development Project to provide financial assistance not to exceed $40 million in net present value.

Over 20 years calculated for measurement purposes only as a percentage of new transient occupancy taxes

the city actually receives from occupancy of guest rooms in a proposed new hotel.

Related to the development and operation of a project on certain real property known as 5 3rd Street and 17 to 29 3rd Street,

waiving Chapter 21G of the Administrative Code and certain sections of the Labor and Employment Code,

ratifying past actions and authorizing future actions in furtherance of this ordinance

and making findings under the California Environmental Quality Act

and making findings of consistency with the general plan and the eight priority policies of the planning code.

Madam Chair.

Thank you. Supervisor Dorsey.

Thank you, Chair Chan.

This agreement is an essential catalyst for downtown investment that will help to bring new life to an iconic historic building along Market Street's corridor.

Tourism is the backbone of San Francisco's economy, as we know, and a vibrant hotel scene helps us to attract and retain conventions and leisure travelers alike.

Beyond that, the reason I am so bullish on adaptive reuse projects like this one and those we discussed at yesterday's full board meeting

is that they enable us to retain our rich architectural heritage and historic assets,

which make our downtown streetscape such a globally admired destination,

while also facilitating new uses to reinvigorate our downtown for 21st century economic imperatives.

This is exactly the kind of adaptive reuse project we should be supporting.

This hotel will generate significant economic activity as well as tax revenue, support the preservation of an historic resource, as I mentioned, and bring roughly 150 hotel jobs, including good union jobs, to the heart of downtown.

This financing structure is a creative way to make the project possible while implementing important guardrails.

As you'll hear from staff, this agreement was tailored to match the project's feasibility gap, and it has a sunset.

The city would make incentive payments of up to $40 million over 20 years.

If that cap is reached sooner, payments would cease.

If it generates less, it would expire in 20 years.

Last year, the state of California awarded this project a nearly $30 million historic preservation grant.

The project must draw these funds down by April, or the state will direct those dollars to another project.

And none of the other eligible projects is in San Francisco.

So for our city, this is a use it or lose it proposition.

We'd lose out potentially on a $30 million generational investment to another municipality.

We are blessed to have historic buildings like this one on our main thoroughfare and throughout our city.

And I hope we can maximize every opportunity to preserve and enhance and repurpose them.

We are also blessed to have the talented staff at OEWD working hard through the details.

and I thank them for their efforts to balance our shared goals of financial responsibility

and supporting downtown revitalization.

I look forward to supporting this item today and sending it out to the full board in time

to leverage the historic preservation dollars.

Thank you so much, Chair Chan.

Thank you, and the floor is yours.

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

My name is Maggie Mattson, and I'm here from OEWD's joint development team.

I'm pleased to be here today to introduce this legislation,

which will enable the redevelopment of the iconic Hearst building at Third and Market downtown,

taking it from a nearly vacant office building to a vibrant and booming hotel.

The legislation before you today, which is sponsored by Mayor Lurie and co-sponsored by Supervisor Dorsey,

ratifies an agreement between the city and Hearst Hotels developers,

who are JMA Ventures through their affiliate LLC, Bespoke Hospitality.

This agreement would provide a financial incentive equivalent to the project's demonstrated funding gap.

Receiving this incentive is critical to the Hearst Hotel's ability to move forward when it is otherwise shovel-ready.

This legislation is just part of a multi-year focus effort to invest in downtown

and to create a resilient neighborhood that is open 24 hours a day, not just 9 to 5.

To achieve this, we need to encourage projects like this hotel

that have the potential to transform their surrounding area

in terms of commercial and economic activity,

pedestrian activity, and neighborhood feel.

The tool that we are using,

which is an incentive based on the transient occupancy taxes

generated by the hotel,

was first used by the 530 Sansom agreement

approved by the Board of Supervisors last year.

We have created parameters for its use,

as you can see on screen.

We're looking at new hotels that are poised

to make a significant economic impact

and have a demonstrated funding gap

that we've got with a third party.

To encourage development, these projects have a five-year clock

to build before they begin to see their incentive payments

decrease or they lose access entirely.

The maximum percentage of TOT that we offer for these incentives

is 89.3% to ensure that we don't impact the share of TOT

that is allocated to arts and cultural funds.

The maximum term length is 20 years.

In reviewing the Hearst Hotel project,

we found it to be a great fit for this hotel incentive tool,

as well as an excellent project to further our policy goals

on downtown recovery in hotels.

Its location at Third and Market is on a key block

in the downtown corridor, linking the financial district

to nearby Powell and Union Square areas,

and is close to the Moscone Convention Center.

This is a historic building that was once the headquarters for the San Francisco Examiner

and features a lobby designed by Julia Morgan that will remain preserved as is.

Its current use as an office building has left it about 70% vacant.

That number is actually about 74% as of December 2025,

and it's worth noting that a large percentage of those occupied office spaces are actually JMA, the developer.

So in actuality, it's a very vacant building.

So it is a prime candidate for an adaptive reuse project.

This is also a fully entitled project that is ready to go, save for this funding gap,

and the developer team is very motivated to get started on their construction timeline.

Before we get into the details of the agreement,

I wanted to pause on this picture of the beautiful historic lobby designed by Julia Morgan.

which again will be preserved.

And in terms of logistics,

incentive payments will be based on a percentage

of the transient occupancy tax that's generated by the hotel.

For Hearst, this will be an 89.3% rebate for 20 years,

which we came to after vetting the project's feasibility gap

with our third-party consultants

and running through several different scenarios with them.

As mentioned previously, the city will retain the 10.7% of TOT revenue

that is dedicated to arts and culture per Prop E from 2018.

And because the incentive is based on actual hotel performance,

there's no risk to the city if the hotel underperforms.

And then on the flip side, if the hotel overperforms,

the term is then reduced as there is an upper end cap

for what the developer is able to receive.

We had the developer submit their financial materials

and economic impact report, which we vetted

with our financial consultant BAE.

We looked at net impact of the project both during

and after the incentive period and found it

to have a fiscally positive effect on the general fund,

even during the incentive period.

Some of the highlights from our economic analysis include a more

than tenfold increase in property tax revenue for the city

as a hotel compared to its current use.

As you saw in the previous slide,

positive general fund revenues from day one,

and then revenue of $3.1 million annually for the city from TOT

after the 20-year agreement period ends.

The project would directly and indirectly support about 150 jobs,

with 100 of those on site through the hotel, restaurant, and ground floor retail.

Construction of the project would support about 309 jobs,

259 of those would be direct construction jobs.

And also critically, the project would generate

about $32.6 million in direct annual economic activity.

That number goes up to $42.6 million

when factoring in multiplier effects.

As we see it, this is a win-win for the city

that will grow the city's general fund

and help create a strong and vibrant downtown.

As I mentioned before, this is a highly motivated project team

that is prepared to meet our five-year construction timeline.

Hotel opening is slotted just two and a half years from now,

and the project has been entitled since 2019.

The development team, as Supervisor Dorsey was mentioning,

has secured state historic tax credits for the project

and has an upcoming deadline in April

to remain eligible for those credits.

A timely approval of this agreement

will help support the certainty of the project

receiving those credits.

Overall, this agreement is the missing piece

that will bring the project from entitlement

to construction and completion.

And OEWD looks forward to being part of the shared future

for downtown that the Hearst Hotel will help create.

Thank you.

And our office will be around for questions.

Thank you.

Item four is an ordinance that approves a hotel incentive

agreement between the city and Bespoke Hospitality, LLC.

It also provides a waiver from Chapter 21

G of the administrative code related to grants

and then certain sections of the labor and employment code.

The incentive agreement would allow the city

to repay the hotel owner what they paid to the city in hotel

tax over 20 years, up to $40 million in net present value

Using a 9% discount rate, the city would retain the 1.5% of the 14% hotel tax to use for arts and culture.

We also show on page 6 of our report, there is a benefit to the general fund from converting this from office to hotel use.

That amounts to about $700,000 a year over the incentive period.

That's in part due to a modest increase in revenues and then a decrease in the service population that results in the city spending less in the area because of the change in use.

We know it as a policy consideration that, you know, this is actually quite similar in terms of the deal terms to the 530 Sansom project.

It's different in one key respect, though, that it's not the 530 Sansom project resulted in a hotel and a fire station.

this is just a hotel. So beyond the fiscal benefits of the project, there's no other

public infrastructure as part of this agreement. There are benefits to revitalizing the area as

well, but they're harder to quantify. But we do recommend approval of item four.

Thank you. I mean, look, I think that this is not just about this particular

just colleagues I think it's for me I am again like not just project by project or legislation

by legislation what I am having issue with and taking issue with it's really the overall approach

approach with Mayor Lurie and with the Office of Economic Workforce Development around downtown

revitalization. And that I'm just going to go through sort of what the kind of type of

investments that we have put in for specifically downtown. And of course, first and foremost,

that was what was just actually approved yesterday for the downtown revitalization

financing plan that we know is roughly about $610 million of public dollars tax increments

that will determine how it should be spent just in that area

by the downtown revitalization board directors.

That is Citi's commitment to the area.

But not too long before then, we also have waived both the conversion impact fee

from commercial to residential,

and then we also subsequently waive inclusionary requirements, again, for commercial converting to residential.

So overall, the downtown area has been infused, I would say, in the last two fiscal years,

quite a bit of projected tax revenue in that area.

Now, of course, like we say, there are projected revenues because we can't be sure exactly how much and what yields and what kind of results as well.

And I think what's essentially happening is that we're spending future dollars as if we're on credit card to try to figure out the kind of spending will yield the results of revitalization of downtown, which I recognize is very critical.

This particular one that, again, is another proposal by Office of Economic and Workforce and Development to say,

how do we then also projecting another $40 million over the next 20 years that we anticipate that we will generate

to subsidize very specific one hotel development project,

which I will say it is in a very critical space for the downtown revitalization.

What I do want to sort of remind all of us is we have this approach in the past of giving projected tax revenue

and anticipating that there will be effort to revitalize that space.

And what was done was actually by former Mayor Ed Lee and Supervisor Jane Kim with the payroll tax waiver specifically for a mid-market for Twitter and in the market building.

We see what is happening, you know, almost two decades later or a decade later.

I'm not too sure if we can all say the results is what we're looking for when it comes to the payroll tax exemption.

And that it actually really go back to that area and be able to revitalize mid-market.

And so with the same skepticism that I have, that I carry today with what we're doing here,

is that, again, I can see that let's put some investments.

What I do not see, and I would like for OEWD to answer the question,

is that so if in the events that this really works,

meaning like we are providing this

and that this hotel with the mixed use

really is coming alive and generating profit,

helping the area,

is there sort of like a measure, a threshold to say

maybe the city doesn't really have to give up

all $40 million of public dollars.

instead this is where we're going to stop because you have now

make your profit.

Thank you for your comments, Chair Chan.

I'm Leigh Lutensky with the Office of Economic and Workforce Development.

And yes, you're absolutely right that we've been

very focused over the last few years on deploying economic

incentives and tools to help revitalize particularly our downtown,

but really across the city on a lot of our large projects.

This tool that we are proposing to use with the Hotel Incentive Agreement

is a commonly used tool in municipalities across the country,

and we did a number of case studies in Los Angeles where this tool was used.

And that was instructive to us in how we created a framework for use here.

So to your question, we have elected to apply this tool to new hotels only because we want the benefit of that economic growth.

We have also elected to do a firm cap on the amount of the incentive.

We have actually scaled that cap to actually fill the distinct upfront capital need that the project has today.

So even though the revenues are coming in over time based on hotel performance, the full amount that is limited within the cap, the $40 million, is necessary to advance the project.

And so if the hotel does overperform, we stand to benefit by, number one, the agreement will end early and we will take the benefit of the hotel tax back into our general fund sooner.

and in general we want the hotel to perform as well as it can because of the additional economic

benefits. I will also add that if the hotel underperforms once that 20-year term expires

the agreement does end whether or not that cap has been reached so the city does not bear the

financial risk of underperformance. I would add just one more thing about the way we're approaching

this tool which is that we are really trying to apply it to shovel ready projects. We want this

to be a limited time tool with really strong performance milestones. And so the contract

actually requires the project to get a certificate of occupancy within five years, or the incentive

actually will reduce and potentially be eliminated. Thank you. Sorry, and maybe I don't understand it

because you mentioned a cap, like if they are doing well, what is the cap? It is that $40 million

expressed as a net present value.

And so I think this is my question, right?

Can there actually be a clause or a condition

that is whichever that is lesser?

Meaning if they are actually meeting their profits

and their profitable goal, whatever that is,

and I don't know that, and I look to you

and also BAE, urban economics,

to kind of help us determine that.

is that, again, one more step is to say, well, okay, the city will cap at $40 million,

or whichever that is lesser, in the events that they meet their profit goals earlier.

Yeah, thank you for the clarification and question.

When we did structure the program, I would think of it more like the state historic tax credit program,

where there's sort of a value to the upfront credit,

and in this case there's this $40 million value to the upfront incentive that we are providing,

that overall amount of money allows the project to then leverage that and get financing to move

forward. So if we were to add a clause that were to potentially take that away in year 10,

it would not achieve the goal. It would not be an incentive. It would not allow them to actually

get the financing they need to advance the project. So essentially, we've scaled it to be

the sort of minimum that they need to actually move the project forward. And so I hope that

answers your question. It does. And I think that's explicitly to say we are funding this project,

right? Like we are financing this project. And I think that's exactly why I'm having a problem with

is that this is a private entity and that is a private business that they will be profiting from

it. Clearly, they will then pay hotel tax to the city. What I'm saying is then that is not clear

to me or having a transparent like clause that indicating how is the city will then financially

benefiting in that equation that is more specific in its projection.

Yeah, and again, when we studied other hotel incentive agreements that are used in Los

Angeles and around the country, many of those types of essentially the government saying

we are going to incentivize a hotel project, often those are applied to existing hotels

that are paying taxes already, and they're just used to kind of help the hotel reinvest

and keep going.

Again, we've tried to actually rein in the use of this tool to be very targeted.

We do think there's great benefit to this type of an incentive,

given all of the economic activity it will spur,

plus the significant growth to our general fund revenues from day one.

So that's the way we're framing that benefit.

Sorry, then I must be mistaken.

What is the projection of the general funds that we're going to generate?

From the first year of the project opening, during the term of the incentive agreement,

the general fund will receive a net increase of $577,000 annually.

After the incentive agreement ends, that will be $3.1 million annually.

And then we estimate, through our third-party consultant reports and peer reviews,

that there would be about $32.6 million annually in economic activity.

And that's our projection.

And Sarah, what is the cost would be if they don't meet that projection?

Well, the economic activity is a cost of all of the spending

that comes from the people coming here and the tourism.

The property tax revenue projections are much more based on a metric

of how we think the assessed value of the hotel

is going to be once it's open.

So that one is much more of a straight-line calculation.

Sorry, help me understand one more time.

The projection of $500-something thousand dollars per year is a...

That is the projected net increase in property tax revenue

that the city will gain from the day the hotel opens, essentially,

even during the term of this hotel tax incentive agreement.

Supervisor Sauter.

Thank you.

And one more question for OEWD.

If we were to not approve this,

what do you anticipate happening with the hotel development proposal?

Thank you, Supervisor.

As Maggie presented, this project has been entitled since 2019

and has undergone significant effort to prepare their permit drawings,

so they are poised to move forward.