Budget Panel Advances $22M MEDA Loan Despite Watch-List Objections
Budget & Finance Committee • San FranciscoOctober 28, 2026
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San Francisco's Budget & Finance Committee voted Oct. 28, 2026, to keep 39 affordable Mission District homes on track, sending a roughly $22.1 million loan deal to the full Board even though the nonprofit behind it remains on the city's highest-risk monitoring tier. The 3-0 vote capped a marathon session where all 13 items advanced unanimously, and it exposed how unevenly the city tells supervisors about nonprofit red flags.
- $22.1M MEDA loan advances 3-0 despite the nonprofit's Tier 3 risk status and Connected SF opposition.
- Hetch Hetchy tunnel engineering grows $2M after a contractor refused siphon work over safety concerns.
- $3.94M tenant right-to-counsel appropriation now needs a 2/3 full Board vote after a procedural redo.
- $70.9M state grant for 50 locked mental health beds advances, but $10M–$15M yearly operating costs are unbudgeted.
- Two homelessness contracts extended with strings attached: shorter terms, added security and Good Neighbor Policy standards.
MEDA Loan Clears Committee, Oversight Gaps Exposed
Why it matters: The Mission Economic Development Agency (MEDA) loan preserves 39 affordable units at 2059–2065 Mission Street under the Small Sites Program. It also tests whether the city will keep lending to a nonprofit it has flagged as financially troubled.
Where things stand: The item returned after a one-week continuance. Mayor's Office of Housing and Community Development (MOHCD) staff reported lease-up progress, quarterly performance reporting and 99-year affordability restrictions. The city requires a 15% cushion of building income over debt payments, known as debt service coverage.
"This project actually exceeds that requirement not by 15%, but by 37% in this first year of operations," said Aaliyah Gage, Preservation Program Manager, MOHCD.
A MEDA representative said the organization has followed a work plan and coaching plan since July, has addressed its Tier 3 issues, has paid off its credit line and has 12 months of cash on hand.
The other side: Griffin Lee of Connected SF urged rejection. He cited MEDA's financial struggles, its watch-list status and its treatment of tenants, and said the city should wait until MEDA demonstrates responsible money management.
Supervisor Connie Chan, District 1, pressed MOHCD on who enforces nonprofits' corrective plans. MOHCD acknowledged it has communicated those designations to supervisors inconsistently. "I would love to see a more clear responsibility," said Chan.
Decisions and stakeholder impacts: The extra week moved votes. "I do feel a bit more assurance and confidence in this," said Danny Sauter, Supervisor, District 3. "It means a lot to me when I hear confidence from the city controller," said Matt Dorsey, Supervisor, District 6, the committee chair.
Vote: For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0. Tenants keep their affordable homes, and MEDA gets a financial lifeline. Watchdog groups got a public admission that the city's risk-flag system has gaps.
What's next: The loan goes to the full Board with a positive recommendation.
Hetch Hetchy Tunnel Fix Gets Costlier, Later
Why it matters: The Mountain Tunnel carries Hetch Hetchy water to the Bay Area. Amendment 2 adds $2M to the Jacobs Associates (Delve Underground) engineering contract, bringing it to about $30.8M.
Where things stand: The construction contractor refused to build the South Fork siphon over safety concerns, so the San Francisco Public Utilities Commission (SFPUC) pulled $15.7M of that work from the contract. The new engineering money covers re-modeling and interim sensors. Rebuilding the siphon around 2030–31 may cost about double the amount removed.
"Did the PUC attempt to reprocure the descoped work to begin with?" asked Chan, who also questioned the city's remedies, the cost and any effect on water quality.
"We could have enforced a breach of contract on this," said Randy Anderson, Project Manager, Mountain Tunnel Improvement Project. He said enforcing it would have delayed completion, and that the change would have no water-quality impact.
The other side: Dorsey asked whether the city itself helped create the safety problem, and about change orders. "This isn't virgin earth that we're — this is a 100-year-old project," he said.
Decisions and stakeholder impacts: Vote: For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0. SFPUC ratepayers face a deferred and likely larger bill.
In a related SFPUC item, the committee also approved about $1.45M for tunnel and restricted-development easements at 1398 Bryant Street. The easements serve the Folsom Area Stormwater Improvements Project, a 3,800-foot, 12-foot-diameter flood tunnel. The price exceeds appraised value, so the Board must find a proper public purpose. Wastewater ratepayers will cover the cost. The project responds to chronic flooding and a 2021 Regional Water Quality Control Board order, and negotiations with two other property owners continue. Dorsey called it a prudent use of dollars. Vote: 3-0.
Tenant Legal Aid Hits Procedural Speed Bump
Why it matters: The $3.94M general reserve appropriation would expand tenant right to counsel to about 400 more households. Rents have risen 25.6% and vacancy stands at 2.2%, according to figures cited at the meeting.
Where things stand: MOHCD said $3M funds full-scope legal representation at about $7,500 per household, and $940,000 funds a Know Your Rights outreach campaign. The Budget and Legislative Analyst recommended adding outcome measures to grant agreements and noted the reserve must be replenished. Dorsey asked that information on the state's AB 1482 rent cap be included in outreach, and staff agreed.
Decisions and stakeholder impacts: The committee first forwarded the ordinance 3-0. Late in the meeting, Controller's Office staff flagged a Charter Section 9.113 problem: a supplemental appropriation like this one "would require a 2/3 vote of the members of the board to approve," said Devin McCauley, Citywide Budget Manager, Controller's Office.
The committee rescinded its vote 3-0, amended the ordinance to state the 2/3 requirement and re-forwarded it 3-0 (For: Chan, Sauter, Dorsey; Against: 0; Absent: 0).
What's next: The full Board must now muster a supermajority. Tenant advocates will need broader support than a simple majority.
50 Locked Psychiatric Beds, Unfunded Operating Costs
The basics: Behavioral Health Continuum Infrastructure Program (BHCIP) bond money comes from Proposition 1 for treatment facilities.
Where things stand: A $70.9M award would fund 50 locked subacute beds and six psychiatric beds at UCSF Health Hyde Hospital, 900 Hyde St., opening in late 2030. UCSF builds the facility, and the Department of Public Health (DPH) procures an operator. The state's nonstandard terms include a 30-year use restriction, state receiver rights on default and city indemnification.
The other side: The beds match Controller findings of need, but they carry $10M–$15M a year in DPH costs starting in fiscal 2030–31. "What is the plan to make sure that we have the $10 and $15 million in the budget to serve these groups of people?" asked Chan.
"We are still working on the budget projections," said Yoon Jung Kim, Director of Residential System of Care, DPH, who cited savings compared with acute hospital beds.
Decisions and stakeholder impacts: "I only wish we could get there faster," said Sauter. Public commenter Jonathan Ellis backed the investment but urged discharge accountability across UCSF, DPH and the Department of Homelessness and Supportive Housing (HSH). Vote: For: 3 (Chan, Sauter, Dorsey), Against: 0, Absent: 0.
Shelter and Housing Extensions Come With Conditions
Where things stand: The committee extended Conard House's grant for the Allen, Aranda and McAllister hotels, about 250 supportive housing units, through June 2029. The extension lasts 31 months, with a $32.8M total ceiling, and serves as a bridge to re-procurement. The Budget and Legislative Analyst said Conard House improved from Tier 2 to Tier 1 corrective status.
Five Keys' Baldwin Safe Navigation Center contract was cut to a 24-month extension through Oct. 31, 2028, at about $55.6M, with expanded private security. The 180-unit site runs at 94% occupancy, but the contractor met 7 of 11 objectives.
Why it matters: Both sites sit in or near Dorsey's District 6, where neighbors have complained about sidewalk conditions. The city's Good Neighbor Policy now sets perimeter checks and response deadlines. Dorsey credited the SoMa West Neighborhood Association and called for geographic equity in re-procurement.
"People living in permanent supportive housing deserve a safe and decent home," said Dorsey. On Baldwin, he added: "Shelter is supposed to be a path forward, not a place where people get stuck."
Deputy Director Emily Cohen of HSH described a proposed policy that "offers people in crisis a 90-day shelter placement with extensions based on continued engagement in case management."
The other side: Connected SF's Lee asked why the Conard House contract lacks behavioral health specifics. Ellis said the core issue is getting people into treatment and housing, and he wants police to address unlawful activity.
Decisions and stakeholder impacts: Both items were forwarded as amended 3-0 (For: Chan, Sauter, Dorsey; Against: 0; Absent: 0).
Minor Items
- DA victim grants: About $640,000 for elder abuse and $591,000 for underserved victims over three years advanced 3-0.
- India Basin cleanup: A $4M EPA Brownfield grant for soil remediation at India Basin Shoreline Park advanced 3-0, after Dorsey asked about federal reliability.
- SFO contract: A five-year, up-to-$38M Professional Business Providers contract covers boarding bridges and Terminal 2 baggage systems.
- City trucks: The Town Ford Sales contract rose $20.5M to about $30.5M, driven by the Airport, SFPUC and SFMTA.
- District 7 participatory budgeting: $540,000 funds projects chosen by 1,800-plus residents. "I am a big believer in participatory budgeting," said Sauter.
Looking Ahead
All 13 items now go to the full Board. The tenant appropriation needs a 2/3 vote there, and DPH still owes supervisors a plan for funding the Hyde beds' operating costs.