BLA Rpt 032526

CITY AND COUNTY OF SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 1390 Market Street, Suite 1150, San Francisco, CA 94102 (415) 552-9292 FAX (415) 252-0461 March 20, 2026 TO: Budget and Finance Committee FROM: Budget and Legislative Analyst SUBJECT: March 25, 2026 Budget and Finance Committee Meeting Item File Page 1 26-0081 Airport Contract Modification -Hallmark Aviation Services, L.P. -Airport Information and Guest Assistance Services -Not to Exceed $30,403,645 .................................................................................................. 1 2 26-0191 Contract Amendment -Sapient Corporation -Property Assessment System Replacement Project -Not to Exceed $33,912,702 ......................... 7 3 26-0211 Contract and Amendment -Retroactive -San Francisco-Marin Food Bank CalFresh Stopgap Emergency Gift Card Initiative -Not to Exceed$9,100,000 ....................................................................................... 12 4, 5 & 6 26-0170 Agreement Amendment -San Francisco AIDS Foundation -Health Access Point and Capacity Building Services -Not to Exceed $23,832,933 26-0174 Agreement Amendment -Rafiki Coalition for Health & Wellness -Health Access Point Services -Not to Exceed $20,083,870 26-0209 Agreement Amendment -Instituto Familiar de la Raza, Inc. -Health Access Point Services -Not to Exceed $17,087,730 ................................... 18 7 26-0242 Lease and Amended and Restated Loan Agreement -Balboa Gateway, .P. -105 Wisteria Lane -Balboa Reservoir Building A -100% Affordable Housing -$15,000 Annual Base Rent -Loan Not to Exceed $29,280,757 ................................................................................................ 26 TABLE OF CONTENTS BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 1 Item 1 File 26-0081 Department: Airport EXECUTIVE SUMMARY Legislative Objectives • The proposed resolution would approve the third modification to the contract between the Airport and Hallmark Aviation Services, L.P. (Hallmark) for Airport information and guest assistance services, extending the term for one year for a total three-year term from July 1, 2024 through June 30, 2027, and increasing the contract amount by $10,402,226 to a new total amount of $30,403,645. Key Points • In June 2024, the Airport approved a new contract with Hallmark for a one-year term from July 1, 2024 through June 30, 2025, with three one-year extension options and total not to exceed amount of $9,299,429 to provide Airport information and guest assistance services. Since then, the contract has been amended two times. • Under the proposed amendment, services will continue to be provided by Hallmark, which assists the international arrivals passenger process through Federal Inspection Services, and Polaris, a Local Business Enterprise subcontractor that staffs the Airport information desks. The proposed amendment also expands staffing to support guest navigation during major construction projects, including the Terminal 3 West Modernization and Airport Integrated Operations Center, and to accommodate anticipated increases in passenger traffic. • According to the Airport’s January 2026 performance report, the vendor received a score of 100, indicating excellent performance for the quarter. Fiscal Impact • The proposed total not to exceed amount of $30,403,645 includes a 22.6 percent contingency and is funded by Airport operating revenues. • Projected FY 2026-27 expenditures are based on increased hourly rates and fringe benefits for Hallmark and Polaris staff, an increase of 7.49 budgeted FTE positions (or approximately seven percent) from a total of 107.03 budgeted FTEs in FY 2025-26 to 114.52 budgeted FTEs in FY 2026-27, and other direct costs. Recommendation • Approve the proposed resolution. BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 2 MANDATE STATEMENT City Charter Section 9.118(b) states that any contract entered into by a department, board or commission that (1) has a term of more than ten years, (2) requires expenditures of $10 million or more, or (3) requires a modification of more than $500,000 is subject to Board of Supervisors approval. BACKGROUND In June 2024, the Airport executed a contract with Hallmark Aviation Services, L.P. (Hallmark) for a one-year term from July 1, 2024 through June 30, 2025, with three one-year extension options and total not to exceed amount of $9,299,429 to provide Airport information and guest assistance services, following a competitive bid process where Hallmark was deemed to meet all minimum required qualifications. Because the contract was less than $10 million and less than 10 years, the contract did not require Board of Supervisors’ approval. In February 2025, the Airport approved the first modification to the contract, updating the labor rates, increasing the amount authorized for other direct costs, updating position titles and worker classifications, and updating standard contract provisions. There were no changes to the total contract amount or duration. In May 2025, the Board of Supervisors approved the second modification to the contract, extending the term for one year for a total two-year term from July 1, 2024 through June 30, 2026, and increasing the contract amount by $10,701,990 to a new total amount of $20,001,419 (File 25-0338). In January 2026, the Airport Commission approved the contract’s third modification, which is now under consideration for approval by the Board of Supervisors. Controller’s Certification Historically, the services have been certified by the Controller's Office and approved by the Board of Supervisors as work that can be contracted out at a lower cost than similar work performed by City employees (per requirements under City Charter Section 10.104.15). In April 2024, the Controller’s Office determined these services met Charter requirements. In June 2024, the Board of Supervisors approved a resolution concurring with the Controller's certification allowing the Airport to contract with private companies for information and guest services (File 24-0460). DETAILS OF PROPOSED LEGISLATION The proposed resolution would approve the third modification to the contract between the Airport and Hallmark for Airport information and guest assistance services, extending the term for one year for a total three-year term from July 1, 2024 through June 30, 2027, and increasing the contract amount by $10,402,226 to a new total amount of $30,403,645. The proposed BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 3 resolution would exercise the second of three one-year extension options under the original contract.1 Services Under the proposed modification, Hallmark will continue to provide the following services to the Airport: • Airport Information Desk Program: Provide information to the public on airport services, transportation options, visitor attractions, and other services at seven arrival level information desks and nine departure level desks in Airport Terminals 1, 2, 3 and the International Terminal. This includes selling public transit passes, administering lost and found services, administering a Travelers Information Volunteers Program to coordinate volunteer recruitment and support for departure level information desks, and responding to complaints, among other services. These services are performed by Polaris Research and Development, Inc. (Polaris), which is a Local Business Enterprise subcontracted by Hallmark. Polaris currently provides these services to the Airport under the existing contract which requires a Local Business Enterprise participation rate of 35 percent. • Federal Inspection Services and Terminal Area Support: Assist the international arrivals passenger process through Federal Inspection Services with guest assistance, queue management, language interpretation, directional guidance, and other services. The proposed modification also expands staffing to assist guests in navigating the Airport during major construction projects, such as the Terminal 3 West Modernization and Airport Integrated Operations Center, and accommodate an anticipated increase in passenger traffic. Rate and Staffing Level Changes The contract establishes direct labor costs per employee and staffing levels for Quality Standard Program2 (QSP) workers (Guest Services Agents and Guest Services Supervisors) and non-QSP workers (Information Desk – Ambassadors, Information Desks – Lead, and Volunteer Coordinators). Under the proposed modification, hourly rates and/or the number of full-time positions would change as follows: 1 The Airport reports it is not exercising the final option to extend this agreement at this time because two other ongoing capital projects, the Airport Integrated Operations Center and Lost and Found, will impact the need for staff from this contract however the scope of the contract needs are not yet clear. 2 The QSP was established by the Airport Commission and sets requirements for Safety; Health; Hiring Practices; Training; Equipment Standards; and Compensation and Benefits. The QSP applies to any firm, including airlines and service providers, which employs staff that perform services which directly impact safety and/or security at the Airport. BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 4 • Guest Services Agents: Hourly rates will increase in January 2027 from a range of $22.31 -$25.29 to $24.40 -$26.30 for agents who do not waive health benefits. The number of full-time positions would also increase from 46 to 61. • Guest Services Supervisors: Hourly rate will increase in January 2027 from a range of $28.06 -$28.67 to $29.18 -$29.81 for supervisors who do not waive health benefits. The number of full-time positions would remain at nine. Information Desk Ambassadors: Hourly rate will increase from a range of $21.21 -$23.00 to $24.00 -$25.86. The number of full-time positions would remain at 32. • Volunteer Coordinators: Hourly rate will increase from $43.32 to $48.17. The number of full-time positions would increase from three to four. • Information Desks Lead: Hourly rate will increase from a range of $22.46 -$28.50 to $25.00 -$29.64. The number of full-time positions would decrease from five to four. According to the Airport, the hourly rates for the QSP workers3 (Guest Services Agents and Guest Services Supervisors) are increasing by approximately four percent4 to improve employee retention. In addition, as previously mentioned, the increase in staffing levels is needed to provide guest support for major construction projects, upcoming large events in the Bay Area (such as the FIFA World Cup in June 2026), and anticipated passenger traffic. The proposed rates for the QSP workers are above the projected QSP minimum rate of $22.54 per hour (effective July 1, 2026).5 The proposed modification also increases the rates for some fringe benefits for QSP workers, notably in health care. The Airport states this is driven by increases in monthly health costs based on updates to the Healthy Airport Ordinance6 effective January 1, 2027 (File 25-0210). The hourly rates for non-QSP workers are increasing by an average of approximately nine percent.7 In addition, the increase in Volunteer Coordinators is needed to manage the additional information desks at Terminal 1 and 3 and the growth in Travelers Information Volunteers Program participants. The proposed modification also increases the rates for most fringe benefits for non-QSP workers. The Airport states that increases to hourly rates and fringe benefits are based on projected wage and benefits adjustments required under an anticipated new union agreement. 3 QSP workers are not unionized, while non-QSP workers are unionized. 4 This is based on the highest pay rates for each position. 5 The QSP rate changes every year, such that the minimum hourly wage is at all times $0.50 an hour above the current San Francisco Minimum Wage. According to the Airport, the Office of Labor and Standards Enforcement has not published the updated minimum compensation rate for FY 2026-27. The new rate is anticipated to be confirmed in March 2026. 6 For QSP workers, the Healthy Airport Ordinance requires employers to provide certain health benefits, make contributions, or make health care expenditures to or on behalf of employees. 7 This is based on the highest pay rates for each position. BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 5 Other Direct Costs and Management Fee In addition, the other direct costs8 are decreasing by $32,816 from $269,149 to $236,333 annually, with the largest decrease in guest support supplies (from $70,000 to $7,500). According to the Airport, these funds were used to address homelessness at the Airport, including purchasing transportation tokens (e.g., BART and SamTrans) for staff conducting outreach; however, the need for these supplies has decreased over the past year due to increased presence of community outreach personnel and assistance from the San Francisco Police Department’s Airport Bureau. The management fee remains fixed at $1,429,056 annually, or $119,088 per month. Performance Monitoring The Airport conducts quarterly performance audits to ensure the vendor meets service standards and evaluates the vendor using a 100-point performance scoring system across several criteria, including staffing, reporting, complaint handling, language requirements, and uniform compliance. According to the Airport’s most recent January 2026 performance report for the period of October to December 2025, the vendor scored 100 points, indicating excellent performance for the quarter. FISCAL IMPACT The proposed third modification would increase the not-to-exceed amount of the Hallmark contract by $10,402,226, for a total not to exceed $30,403,645. Actual and projected contract expenditures from July 2024 through June 2026 are $15,710,256, as shown in Exhibit 1 below. Exhibit 1. Total Contract Expenditures from July 1, 2024 through June 30, 2027 Actual and Projected Expenditures Management Fee Hallmark Salaries and Benefits Polaris Salaries and Benefits Other Direct Costs Total FY 2024-25 (Actuals) $1,429,056 $3,140,755 $2,475,124 $106,133 $7,151,068 FY 2025-26 (Projected) $1,429,056 $4,220,632 $2,730,202 $179,298 $8,559,188 FY 2026-27 (Projected) $1,429,056 $5,377,141 $3,359,696 $236,333 $10,402,226 Subtotal $4,287,168 $12,738,529 $8,565,022 $521,764 $26,112,484 Contingency (23% of projected) $4,291,161 Total $30,403,645 Source: Airport As shown above, the proposed one-year extension is budgeted at $10,402,226, which is an increase of $1,843,038 or 21.5 percent from the previous year’s projected expenditures of 8 Other direct costs include expenses such as communication devices and license fees, guest support supplies, employee recognition and reward, staff uniforms, and printing, among other costs. BUDGET AND FINANCE COMMITTEE MEETING March 25, 2026 SAN FRANCISCO BOARD OF SUPERVISORS BUDGET AND LEGISLATIVE ANALYST 6 $8,559,190. The Airport states that projected FY 2026-27 expenditures are based on increased hourly rates9 and fringe benefits for QSP and non-QSP workers (as described above), an increase of 7.49 budgeted FTE positions10 (or approximately seven percent) from a total of 107.03 budgeted FTEs in FY 2025-26 to 114.52 budgeted FTEs in FY 2026-27, and other direct costs. Contingency and Source of Funds Actual and projected spending from FY 2024-25 through FY 2025-26 is $4,291,161 less than the existing not to exceed amount ($20,001,419). According to Airport staff, this is due to cost savings in salaries and benefits resulting from vendor staffing adjustments based on actual operational needs, as well as reductions in Other Direct Costs. The proposed amendment maintains these projected unspent funds as a contingency to accommodate potential increases in staffing beyond the currently budgeted amounts and the uncertainty of future labor and benefit costs. This contingency is equal to approximately 22.6 percent of projected expenditures through June 2027 and is in addition to savings that may be generated from paying employees less than the highest pay rate (which was the basis of the proposed budget). According to Appendix B of the contract, the Airport will reimburse the vendor for actual costs, supported by documentation, with the exception of the management fee which is a fixed monthly payment. The source of funds for the contract is Airport operating revenues. RECOMMENDATION Approve the proposed resolution. 9 The Airport accounted for the highest pay rates for the QSP and non-QSP workers to calculate the budgeted expenditures and determine the potential maximum cost impact. Individual pay rates may vary within the range based on experience, tenure, and shifts assignments. 10 The number of budgeted FTEs is greater than the number of full-time positions listed in Appendix B. According to Airport staff, budgeted FTE reflects total labor hours as a proportion of a full-time schedule and includes additional part-time staffing to meet operational needs.