Port Commission reviews biennial budget priorities as capital needs top $2.6 billion

Acting Executive Director Michael Martin and interim Deputy Director Megan Wallace presented the Port of San Francisco’s high‑level priorities for the FY2026–27 and FY2027–28 biennial budget, framing the work as informational and a first step ahead of a detailed budget return on Feb. 10.

Martin told the commission, “The budget that we're bringing forward to you over the next few meetings is coming forward at a really unique point in the port's history.” He described a post‑pandemic recovery in revenue but said the Port now faces operating expenditures growing faster than revenues because of factors such as inflation, tariffs and a downturn in international tourism.

Wallace said the city faces a significant general‑fund deficit while the Port’s operating budget remains balanced. She told commissioners the Port’s most recent 10‑year capital plan identified $2.6 billion in needs, of which about $1.9 billion is unfunded. She said the Port’s operating revenues historically support capital set‑asides, but those funds are now strained.

Why it matters: Commissioners and staff framed the budget discussion around core tradeoffs — investing to generate new revenue (for example, tenant improvements and lease efficiencies) versus directing scarce capital to state‑of‑good‑repair and life‑safety projects that preserve existing revenue streams. Wallace said resilience and seismic and flood risk are major drivers of capital choices.

Details and responses: Staff highlighted a set of near‑term strategies to bolster revenue, including expanded broker‑managed leasing, targeted tenant improvements for smaller users, and pursuing public‑private partnerships. Martin said staff are studying feasibility work for a Pier 80 cruise terminal upgrade but noted shore power remains a major cost and is important for air‑quality mitigation.

Commissioners pressed staff for clarifications. Commissioner Ken McNeely asked whether interdepartmental work orders (payments the Port makes to other city departments) are delineated differently in the budget; Wallace replied these appear as expenditures called work orders and that the receiving departments show recoveries on their side. Commissioner Steven Lee asked whether rising operating expenses reflect deferred maintenance from the pandemic; Wallace said operating increases are largely inflationary and are distinct from capital escalation in the 10‑year plan.

Commissioner Lee also urged the Port to pursue subdivision and tenant‑sizing strategies so smaller entrepreneurs can occupy waterfront space. Lee said, “Our spaces are so big. We can only attract corporate ... to afford the rent,” and recommended that scheduled repairs be used as opportunities to create smaller, more affordable units. Martin and Wallace said the real estate team has asked for funding for tenant improvements and that staff will provide line‑item detail in February.

Staff noted the Port’s role in the larger city fiscal context: Wallace said the Port will submit its budget to the mayor’s office on Feb. 23, then go to the Capital Planning Committee in April before the mayor’s budget reaches the Board of Supervisors in May. Wallace encouraged public participation in the upcoming detailed sessions.

Meeting outcome: The presentation was informational; no budget measures were adopted at the meeting. The commission had earlier approved the Jan. 13 meeting minutes by unanimous vote.

Next steps: Staff will return with the line‑item budget and additional informational items, including the Port strategic plan, the rapid structural assessment update and a facility‑condition report at upcoming meetings.