Controller: City—s six-month financial picture about $27 million better than December estimates

Todd Reitstrom, director of budget and analysis in the Controller—s Office, told the San Francisco Board of Supervisors Budget and Finance Committee on Feb. 14 that the city—s second-quarter financials are roughly $27,000,000 better than the assumptions in the Mayor—s December budget instructions. "At the end of the day, for this current fiscal year, we would project that fund balance to be $126,000,000," Reitstrom said. "That net impact would be roughly $27,000,000 better than what was assumed."

Reitstrom said the improvement comes from prior-year adjustments and stronger-than-expected current revenues: about $24 million above budget in property taxes and roughly $6.5 million from hotel room taxes, with occupancy up about 1 percent. On the expenditure side, he attributed about $14.79 million of positive variance to departmental savings, while cautioning that litigation costs—specifically for County Jail No. 3—could require a supplemental appropriation. "We're thinking we're going to be going to court this year," Reitstrom said, estimating roughly $4.4 million in potential litigation costs.

He also summarized how additional revenue growth would be allocated under the charter: after meeting a 5 percent deposit threshold into the economic stabilization account and other reserves, only a small portion of incremental growth would remain available for baseline uses. The Controller—s report projects rainy-day reserves at roughly $103 million at year-end after anticipated uses.

Supervisors pressed staff on timing and contingent costs; committee members were told an additional report will follow in the nine-month and three-year projection reports. The committee filed the controller—s six-month report without objection and said it will revisit items including potential supplemental appropriations for litigation and departmental baseline impacts in coming budget reports.

The report recommends using part of the positive variance for targeted, one-time needs, and flagged that the city is still tracking salary and MOU negotiations (police, fire, public-health nurses) that could affect multiyear projections. "We often fall back on CPI growth," Reitstrom said, "I would expect this year's negotiations would result in higher than CPI growth wages."

Next steps: the Controller and budget staff will update the committee in forthcoming budget reports and coordinate with the mayor—s budget office on the three-year joint projection.