City Controller Ben Rosenfeld, speaking before local businessmen gathered Tuesday at the San Francisco Chamber of Commerce described San Francisco as a city that is “skirting the edge” of the worst of the national recession.
Rosenfield said this downturn has had less of an impact on the city than the dot-com bust in the early 2000s, but back then the city was at least able to rely on rising property values. Those are projected to drop more than 30 percent before bottoming out.
With a city budget passed – for now – Rob Black, vice president of public policy for the San Francisco Chamber of Commerce introduced Ben Rosenfield to the chamber, to provide “a very quick overview, from 10,000 feet” of the annual budget. Rosenfield was appointed and confirmed as controller in 2008 to a 10-year term by both the mayor and the Board of Supervisors.
Distilling the 306-page annual budget into 10 PowerPoint slides, Rosenfield highlighted where the city was hemorrhaging money that lead to the $440 million budget gap and where the city wasn’t doing so badly.
Of prime concern was the state’s financial mess, which according to the city budget comprises 15 percent of the city’s general fund income. In addition, the city was hit hard in business, hotel and sales taxes, which fund roughly another 25 percent of the budget. Sales taxes dropped a full 15 percent in the last quarter of 2009.
While the general fund budget decreased by $70 million overall, the city actually saw an increase of $160 million in fixed costs including wage and benefit increases to city employees and pension fund costs. The latter lost lost 21 percent of its value, the controller said.
A full 70 percent of these fixed wage and pension costs come from the Departments of Public Health and Human Services and the Police and Fire Departments.
While Mayor Gavin Newsom’s office and the Board of Supervisors went through some much reported-on wrangling during the budget negotiation process, he said he “hasn’t seen this level of cooperation” in his 12 years of working with city government.
Rosenfield said he’s “never seen as many meetings” between the mayor, a board president and a budget chair, singling out Mayor Newsom, Board President Chiu and District 11 Supervisor John Avalos for their work on the budget.
The good news in all this is San Francisco has not fared as badly as the rest of the state. Employment is only down four percent, compared to six percent statewide, and declines in tax receipts are similarly better than statewide results. It’s not clear, however, whether this means the city is doing better, or simply lagging behind the rest of the state and will soon descend into a deeper recession.
Despite efforts to fill gaps in the budget, the city will still see a cost, mostly in the reduction of 1,000 full-time equivalent positions – the largest drop the city has seen in 20 years.
While most of these are through eliminating open positions, or not filling positions that come open during the year, the Department of Public Health will bear the brunt of approximately 200 layoffs, coming November 15.
“Even with reductions the city’s going to be able to provide a comparatively rich” array of services, compared to similar-sized cities in California, Rosenfield said.
Of course, all of this depends on the state budget, which is borrowing $120 million of local property tax money from the city, as well as cutting another $30 or $40 million to health and human services.
“There’s a lot of uncertainty at the moment,” Rosenfield said, adding that protests and possible lawsuits against the governor’s last-minute budget cuts, among others, could result in the budget being renegotiated. This would result in corresponding mid-year cuts to the city budget.
And next year? Due to the projections of a slow economic recovery, we can expect to repeat the process, as next year’s budget is expected to be short $350 million.
During the meeting, Rosenfield was asked by attendees about the richness of public services that San Francisco provides, and whether this could lead the city into a financial quagmire like that faced by Vallejo or Oakland.
Even though San Francisco tends “to be a bit more service rich than we can afford,” Rosenfield said, “people don’t need to worry about the city going bankrupt.”