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Supervisors hear plans to restore city’s small‑business bond guarantee pool; working group set
Summary
The committee held a hearing on the citywide bond‑guarantee program that helps local LBEs secure bid and performance bonds, heard multiple department and contractor testimonies about an inadequate guarantee pool, and asked staff to form a working group and return in roughly 45 days with funding options.
The committee held Item 12 on July 21 to examine the citywide bonding and financial assistance program administered by the Human Rights Commission, which guarantees bid and performance bonds for local and disadvantaged businesses. Chris Iglesias (Human Rights Commission) said the program has been successful in enabling local firms to bid on and win city contracts but currently lacks a sufficiently funded guarantee pool; as a result, multiple requests were recently denied for lack of encumberable funds.
City Administrator Ed Lee and Risk Manager Matt Hansen described options to make the program sustainable: an actuarial study to determine the appropriate pool size and leverage, negotiating with insurance partners to expand capacity, department‑earmarked reserves, or a revolving citywide pool. Peg Stephenson from the Controller’s Office explained that, under city rules, the cash that backs a guarantee must be encumbered in the city’s financial system for the life of the contract, which creates a significant cash requirement.
Program administrator Meriwether & Williams and many small contractors testified in favor of restoring a robust guarantee mechanism. Contractors and trade groups described examples where access to bonding enabled local firms to win larger contracts, hire local workers, and save the city money by increasing competition. Ingrid Merriweather described how other jurisdictions have used unfunded lines of credit (backed by department reserve agreements) to avoid tying up cash while protecting against defaults.
Supervisor Sophie Maxwell asked departments to collaborate and return in about 45 days with concrete funding proposals; the Controller’s Office and the risk manager signaled willingness to participate. The committee set a follow-up hearing to review options, including an appropriated revolving fund, department earmarks, or a line‑of‑credit/insurance hybrid.
Next steps: Departments will form a working group and report to the committee in roughly six weeks with proposals for funding the guarantee pool, including an actuarial approach to determine required capital and possible sources of revolving or reserved funds.
