All right. Good morning, ladies and gentlemen. I want to welcome you back to the regularly scheduled budget and finance committee. My name is malia cohen, the chairman and to my priet is supervisor sandy fewer and to my right is Catherine Stefani and we have a special guest with us today. Supervisor norman yee. Thank you to our friends at s. F. Gov tv for assisting us with todays broadcast. Jim smith as well as michael balthazaar and ms. Linda wong is our clerk helping us with todays meeting. Madame clerk, any announcements . Yes. Please silence all cell phones and electronic devices, completed speaker cards to be included as part of the file to be submitted to the clerk. Items acted upon today will appear on the february 20th board of supervise source agenda. Could you call item one, please . Resolution retro actively authorizing the department of the environment to accept and expend grant funds from the association of bay area governments in the amount of approximately 500,000 to perform energy efz Si Programme Implementation from the term january 1, 2018 to december 31, 2018. Great. Supervisor yee is a sponsor. Ill let him have a chance to speak. Well hear from peter galota from the department of the environment afterwards. Supervisor yee . All right. Thank you, chair cohen. Ahem. So as an executive board member, im happy to sponsor this accept and expend resolution that will help our department of the environment and bay area regional and Energy Network with bayron. To implement Effective Energy saving programmes here in San Francisco. Bay ren has been doing this work since 2013 and this is the latest installment of a series of ongoing grants. There is going to be a small technical amendment that needs to be made on page two, line 18. States that the board previously approve a grant by resolution numbers 161248. This enactment number is incorrect. It should be changed to resolution number 2517. And right now, id like to ask peter galato from the department of environment to make a presentation to answer questions and well come after your celebration from last night, celebrating the San FranciscoGreen Business project. Thank you, supervisor yee. Good morning, supervisors. Thank you, chair cohen. Peter galato, departments of environment. And thank you, supervisor yee, for sponsoring this item today. So before you is an accept and expend from the association of bay area governments in the amount of 511,017 and as supervisor yee mentioned, the grant funds for this programme will provide Energy Efficiency upgrades for multifamily apartment buildings in San Francisco as part of the Bay Area Regional Energy Network or the bay ren programme and the department has been participating in this programme since 2013 and the real benefit of this Grant Funding is its helped us deliver Energy Efficiency retrofits to a diverse array of multifamily dwellings in the city from Affordable Housing as well as s. R. O. S. Since 2013, we have assessed 22500 units and over 300 multifamily buildings. Weve completed can retrofits in over 7,000 units and currently have 1200 units that are in construction for retrofits currently. And the programme really leaves a real impact in the lives of san franciscans by approving essential Services Like hot water, lighting and building safety while reducing the energy costs. So, the grant before you today will help the department to continue to deliver the free energy consulting, financing and the rebates for these multifamily building upgrades as well as provide the Technical Assistance to Property Owners to help them prioritize their needs and qualify for these rebates. The department will conduct this work through existing staff position over the oneyear life of the grant and were here today to ask for your support and happy to answer any questions. Thank you. Thank you. So, this is a pretty straightforward resolution to accept and expend a grant for the Energy Efficiency programme implementation. Pretty straightforward. Ok. Supervisor yee, do you have any other questions . If not, we can go to Public Comment. Ok. Great. Thank you. If you aides like to speak on item number one, please come on up. Youll have two minutes at the podium. Seeing none, Public Comment is closed. Colleagues, is there a motion for this . Supervisor fewer . Yes. Thank you, chair. Id like to make a motion to recommend this to the full board with a positive recommendation. We have to make an amendment. Absolutely. Thank you for bringing that to our attention. Ill make a motion to accept the amendment and well move it to the full board with a positive recommendation as amended. Thank you. And well take that without objection. Thank you. Item two, please. Item number two, resolution authorizing the potential threeyear renewal and amendment of a lease at 1390 Market Street for use by the department of Public Health at the initial cost of approximately 1. 8 million and 3 annual increases thereafter for a threeyear term from december 1, 2018 through november 30, 2021. Ok. So the department of real estate has requested a oneweek continuance to hear this item so its paired on the hearing with the entire civic centre portfolio. So, what i would like to do is to make a motion to continue this item. For one week. To be heard february 15. May i take that without objection . Can we please have Public Comment . Of course. Is there Public Comment on item two . Seeing none, Public Comment is closed. All right. Ill make a motion to send to continue this item one week to february 15 and ill take that without objection. Thank you. Item three, please. Item number three, resolution authorizing the lease of approximately sorry, at 901 fairfax avenue, hunters view phase 2b block 10 at the Monthly Base Rent of 0 with reimbursement up to 100,000 for land lord for tenant improvements, furniture, fixtures and equipment and additional 2k4rr800 charge for utilities and services per months for a 15year term with options to extent for one year. All right. Thank you. So i am the sponsor of this and weve got rhea bailey from the department of Public Health that will be speaking and Claudia Gorham from the department of real estate. Claudia, are you here there you are. Ok. Got it. So, please, rhea, the floor is yours. Good morning. Good morning. Thank you, supervisors. And thank you for your support, chair cohen. We are here today ask for your approval on our lease for our Community WellnessProgramme Space at the hunters view hope s. F. Site. I will speak a little bit about our actual programme, our health and Wellness Programme that which will reside inside of this Community WellnessProgramme Space. We are at the core of our works, we are part of the hope s. F. S fourprong strategy to improve the Living Conditions as well as the quality of life of the residents who are residing in the hope s. F. Public Housing Communities and our approach in terms of the department of Public Health and d. P. H. Is to really focus on the health and wellbeing of those individuals, the mental, emotional, physical, and even spiritual wellbeing. And so we do that in a way that is sort of a threepronged approach. The first is with primary care provided by nursing staff that focuses on chronic disease management, preventive care, and health education. We values a Behavioral Health component that is focused on the, you know, longterm emotional healing of generational trauma that we see every day as well as ongoing crises that are having to endure, again, for generations over time. So, our Behavioral Health specialists are really helping to support both individual and families and also on a societal level and collaborating with residence denlszes for social cohesion activities. And then incorporation incorporate into all of that are also healing what we call Healing Services that are complimentary type of supports that really support the overall wellness and are really culturally responsive to what the needs are of the community so that is drumming, that is movement classes, those are healing circles, nutrition and fellowship and coming together to really improve the overall wellness and feeling of the residents in their own communities. So ill stop there and answer any questions you may have about the programme. All right. Thank you. Again, colleagues, just to be clear, this is a resolution to authorize the lease at hunters view phase 2b which is specifically block 10. The department of health will use this space for the Wellness Centre as you heard and this is a part of the larger hope s. F. Programme, which is about rebuilding and reconnecting with folks that are living in public housing. Specifically were looking to create a meeting room, a gym, a Community Room as well as a common kitchen. I want to see if the department of real estate would like to come up and talk about the technical amendment. Claudia goerham, director of real estate. On page three, lines nine and 10, we have a deletion and an insertion beginning at line 10 through line 13. Quote, part of a larger project developed by h. V. Partners, block 10, l. P. For which an Environmental Impact report 2007. 0168e was prepared pursuant to California Environmental quality act and certified by the San FranciscoPlanning Commission on june 12, 2008. Also a deletion on line 15, same page, page three, of our exempt from environmental review. And i apologize. That is a technical error on my part. And we corrected it. That is ok. Thats why we aer here to catch these little things. Not a profnlt not a problem. Colleagues, do you have any questions . This is in my district and im hoping to have your support. Seeing there are no names on the roster, ill open up to public xhefnlt any member of the public that would like to come and comments on this particular item, item number three, please come up to the podium. Ok. Seeing none, Public Comment is closed. Thank you. Supervisor stefani . Id like to move forward to amended to the full board with positive recommendations. All right. Great. Well take that without objection. Thank you. All right. Moving along. Id like to call item six, out of order. Could you call item six . Yes. Hearing to provide an update on the Business Tax Reform plan, its affect on revenue levels and their impact on business and job growth. All right, ladies and gentlemen. This is the season of the tax. Im excited. Im the sponsor of this. Today well be hearing from ted egan from the office of the controller. This is the first part of a hearing to understand our business tax framework in San Francisco. In 2012, the Business Tax Reform was designed to broaden the tax base and bring more businesses into the tax system. While transitioning from a payroll to a gross receipts tax over a fiveyear period, the city was expected to maintain revenue levels. Well, in october, the office of controller annual Business Tax Reform report indicated that the gross receipts are nots on track to cover all of the payroll revenue. As you can imagine, this is a particular problem so i called this hearing so we can begin to better understand about why our revenues are failing falling short. How the burden is being fell by different sectors and particularly paying attention to the Small Business sector. Given the number of business tax measures that were introducing over the next several months, im particularly interest ined how this will impact the commercial real estate. Im hoping this hearing provides some context for some of the tax measures that were examining both here in this committee, the budget committee, as well as in the rules committee. We will continue this hearing to a later date in the year so that we can hear from the Small Business commission and go further in exploring options for streamlining streamlining and stabilizing the growth receipts mixed. But for now, id like to invite up ted egan from the Controllers Office to give us an overview and probably a refresh earp for many of us in this chamber and watching at home. But this is going to be an overview on the business tax framework and where our revenues are derived. Thank you for being here. The floor is yours. Thank you, chair cohen. Ted egan from the Controllers Office and good morning, supervisors. Ill share with you briefly highlights from our most recent report that chair cohen alluded to and start with a little bit of background about what is the general topic of tax reform. It was something starting in 2012 and was in implementation mode. Since then, a little bit of a reminder might be helpful. This tax reform is something that really emerged out of a legal controversy that affected the city in the late 1990s. Until the late is the 90s, the city had a hybrid business tax in which some businesses paid a payroll expense tax and others paid a gross receipts tax. In 1995, the city of los angeles, which has a similar tax, lost a lawsuit and was forced to abandon its hybrid system. As a result of the the city of los angeles losing that lawsuit, San Francisco elected to abandon its gross receipts tax. Again in the late 1990s or 2000. The effect of that changed the business tax across industris so that businesss that had been paying gross receipts tax basically received a tax break. That was not a consequence of a legislative decision. It was the consequence of a judicial decision. It reduced the citys revenues because of that tax break and retained only a business tax that was derided and with some justification as probably the worst local tax you could pick from a job creation and Job Retention point of view. During the last decade from 2001 to 2010, various attempts were made to replace the payroll tax. Our office was involved in some of them in the later part of the decade. None of those moved forward. 2012, however, we did develop a Business Tax Reform measure with the support of mayor lee, the unanimous support of the board and it was approved by 70 of the voters on the november 2012 ballot. The highlight of this reform measure from 2012 as chair cohen indicated is that it brings back the gross receipts tax. Creates a new gross receipts tax which was designed to be a revenueneutral replacement for the payroll tax. It creates a fiveyear transition period. Were now in the last year of the transition period now. During this period, the gross receipts tax was gradually phased in. The payroll expense tax gradually phased out. The most important part of Business Tax Reform is that the tax which is intended to be and is turning out to be a revenueneutral switch to the city and the way we ensure that was that we only phase out the payroll expense tax to the extent that the gross receipts can revenues are coming in as expected. So, essentially we look at the gross receipts revenue in one year and then once we see how much that is, we reduce the payroll tax the next year by an offsetting amount. What that means we couldnt guarantee to anyone that we could have said in 2012 gross receipts rates that would fully retire the payroll tax, but did create a system that would protect both business taxpayers and the citys finances from a shift. Essentially if we had not done that and said in 2013 well switch to a gross receipts tax with the rates we have now we could have cost the city several hundred million. It is good that we did it this way. One consequence of that, though, is it looks like until further legislative action is taken, well have both a payroll tax and gross receipts tax. Ielt also mention that the way it is structured now, there is none of the legal issues surrounding the old tax. It is not a legal issue that we have two tax. It may be an administrative burden. It may not be a desirable economic policy. Another thing that the measure did was raise the business license fee so it generated another 28 million a year. The tax which was revenueneutral, but the overall package involved raising revenues and also accomplished the goal of broadening the tax base and more areas of the city including, for example, federal enclaves which had not been paying the payroll tax. Broadening the tax base. So, ill share with you some of what weve learned about the implementation of the tax and how its affected businesss that pay it. This is a chart that basically shows the business tax burden and business fee burden in red. With the old system on the left and the new system on the right for different classes of payer. So, Small Businesss are shown on the left two bars. The biggest businesses are shown on the right two bars and it is showing what percentage of the tax do they pay and what percentage of the tax would they pay had we not switched and the Small Businesses i believe that is businesses less than 1 million and businesses less than 2. 5 million in gross receipts pay less. As we had intended, the larger businesses pay a larger share of business tax and business fee revenue, over 40 is paid by businesses with over 100 million in San Francisco gross receipts. As i said based on our projections for this upcoming year, the payroll expense tax will likely not be fully phased out by the end of implementation period. With the assistance of the treasurers office, ours office has been computing the payroll tax rate using formulas in the legislation since 2015 and we have a projection for 2018 that the final payroll tax that well be computing is about. 49 , which is about two thirds cut of the original payroll tax, but not fully phasing it out. Again, though, the good news from a financial point of view, this is showing overall business tax revenue under the new system in yellow and what would have been the case with the old 1. 5 payroll system. Of course, weve had a lot of Economic Growth since we passed this and both measures are growing. The old system and new system both would have led to a lot of growth in revenue. But what were mainly interested in is that by the time were done with the phasein at the end of 2018, that the old system and new system are what they meant to us and that will be the case within 1 . One of the reasons that theyre not phasing out is we need that payroll tax revenue to make sure that the citys finances are protected. These are the main points of implementation. Im happy to take any questions that you may have at this time. Thank you. I appreciate you framing this conversation. This is a very serious and Important Information for the health of our city. I do have a couple of questions. But before i get started, i wanted to see if my colleagues have any questions . Anyone . Not sglet ok. Not yet . Ok. Thank you. Im going to ask a series of questions and then seeing that we have two comment cards, let me go to Public Comment and well hear from the public and that way you will be hearing what some of the comments of the public and maybe we can incorporate them in my questions and answers to be fair. Ok . So lets go ahead and open up Public Comment. I have two cards in front of me. John bozeman an michael wineberg up from local 10to1 and speak. Public comment is open. Thank you very much. John bozeman with bozeman building owners association. We represent commercial real estate here in San Francisco. Specifically Highrise Office Buildings but we go into retail and other forms of real estate. Our members represent a lot of great middle class jobs. We employ janitors, security guards, engineers within our buildings and represent companies that represent construction firms. Thousands of jobs. I want to thank the chief economist mr. Egan for his report. I was very timely. Thank you, supervisors, for your time. When it comes to the Business Community in bomo, were concerned about this blend of gross receipts tax and payroll tax. In 2011, the Business Community got behind this particular Tax Programme and supported it. To give the city annually a certain amount of money from various sectors including commercial real estate. We are concerned about the future of this as mr. Egan alluded to because the payroll tax has exceeded the gross receipts tax. That was supposed to be phased out this year but we are looking at probably a twoyearplus extension, which is something that i think the Business Community could meet with any supervise source and the Mayors Office to talk about. And our larger concern is that that is number one and number two, these gross receipt taxs that target our industry on the ballot, what i prefer [bell ringing] and i think if i could just finish this comment what i think for the Business Community is key is handling this particular gross receipts tax and payroll tax first before we move forward with targeted and dedicated gross receipts tax. Thank you. Thank you. Next speaker. If there is anyone here. Is there a michael wineberg . [inaudible]. Oh. Youre absolutely right. My apologies. We will still hear those items. Ok. If there is no one else here that is interested in speak on item six, ill close Public Comment. Thank you. All right. Mr. Egan, i have a couple of questions for you. I want you to do me a favour. Could you lay out all the taxes that affect the businesss . Im talking about gross receipts, real estate gross receipts, payroll. Could you just talk about them . Ill do my best. Its a fairly long list. It is. And my colleague michelle at the Controllers Office will add to them. Certainly businesses pay what we call the business tax, which is now two taxes. The gross receipt tax, the payroll expense tax. Part of the business reform package that i didnt mention was also established in 2012 is an Administrative Office tax which headquarters pay in lieu of the gross receipts tax. So those businesses dont pay the other two. Hotel businesses pay the hotel tax. Businesses pay the utility user tax. Commercial property accounts for the property tax revenue. I would venture the commercial sector and industrial sector counts for the bulk of the property tax revenue. Not correct. A substantial amount, lets say, of property tax revenue. Sales tax is remitted by businesses. It is not legally owned by businesses but we ask businesses to collect that for us. Anything else . Utilities that i mentioned. I think those are the big ones. I appreciate that. Thank you. Great team effort. In the report you issued yesterday regarding the proposed edition of gross receipt tax on commercial real estate, specifically on page 10, you spiffed a passthrough percentage which im pleased to see is limited and the burden will primarily go to the plot owner. However, you also mentioned that there may be effects on renewed leases. Do you have do you anticipate this would at all contribute to our plague of vacant or abandoned commercial propertis . South carolina we projected in the report that the bulk of the tax would fall on the commercial real estate sector but that could exacerbate the problem of vacant properties. It can be a demand issue but also can be a supply issue. Whether or not the tax exacerbates the problem, really depents on the types of property thats experiencing those vaiz can sis. For example, theres some parts of the commercial real estate sector where vacancies are currently very low and the economy is very strong. There are other types of property in the city where the vacancies are quite high. It would be, i think, a mixed effect across the different types of commercial real estate, retail for example. It sounds like its hard for you to give a generalization. I think thats fair. Specific. And its specific to market con strainltzes. Is it specific to where neighbourhoods are. Im just trying to it is really a function of whats the overall strength and demand for that particular type of space and that particular type of location. If you are talking, for example, about Downtown Offices, Downtown Office employment is extremely strong. It is really a stage where Office Supply constraints and the vacancy rates are pretty low. On the other hand, if you look at specific Retail Properties or certain corridors in retail and areas of the city that have not grown as much as some others, there is vacancy and there is reason to believe that changes may exacerbate that in the future. I think those types of properties may be more affected. So, it is really a question of whats the demand picture that different parts of commercial real estate are facing. Ok. So sticking with commercial real estate. In 2012, this body passed a vacant building registration fee. Will this be counteracted at all or complement each other . I believe, based on my reading of the just so i can clear the question. We have a problem, southeast sector has a problem about vacancies. And so i am just trying to understand. We passed this out of support of the vacancy, basically if there is a if your building is vacant and you register and there is a fee with the hopes to entice and inspire Property Owners to minimize vacancies and to get tenants in there. So, im just trying to wonder if the vacant or abandoned commercial property is going to counteract in any way with this with the building registration fee. My reading of the taxs that have been introduced relating to commercial gross receipts that there are no language about exempting any property that pays a vacant building fee along the lines of what you are talking about. Obviously if a Supreme Court vai cants and generating no gross receipts, it wouldnt be paying the tax. On the other hand, the tax could inhibit getting a tenant in there. It would increase the cost of providing the space for the tenant and as we suggested in the report, some of the tax likely would be passed on to tenants in the form of higher rentses as leases are renewed or entered into. Ok. My final question. It is really going to come from your opinion. Your professional opinion. You are a city economist and so youre processing mass amounts of information and data. I would love to hear your recommendations, if any at all, i hope you do have some recommendations for us at this stage on how we can stabilize and streamline our business tax code. Well, i will speak from the experience of someone who was involved in the 2012 business reform effort. I think as we tried to say in our annual report, a lot of the goals that we had in business reform were meeting. The Small Business exemption and tax rates worked 2012 was a little bit not well thought through. If you had 249,000 in revenue, you paid nothing. If you had 251,000, you paid 1. 5 of your payroll. So, weve now moved to a system in which both the business license fee and the gross receipts taxs are progressive. You only pay the highest rates once you get over 25 million in gross receipts. There was objection that i think was legitimate that only 10 of the businesses in the city were paying the business tax. We roughly doublged the number of businesss that paid the business tax and we also have a Greater Alliance on business license fee thats paid essentially by all businesses in the city than weve had in the past. I think the only fling the outstanding policy agenda is the question of the payroll tax. Were in a much better position now from an informational point of view from a projection point of view. Than we were then. Were now confident to say we could provide a set of gross receipts rates, increases that could fully retire the payroll tax and be pretty close to revenue neutrality without another phasein implementation period. I definitely did not want to say that in 2012. Which is why we set it up the way we did. I think the economic objections that people made about the payroll tax before are probably still valid. Although we have a very different unemployment picture today than we did then, i dont really think that the best way to deal with low unemployment is to pick a tax that without getting you more revenue is more damaging to the economy. I think there are smarter ways to deal with that issue. I think it is what do we do with the payroll tax going forward. All right. Thank you t. I appreciate your expertise and comments. Would you like to speak . Supervisor stephani. Thank you, mr. Egan. Id like you to address mr. Bozemans concern about the blend of gross recreamses and payroll tax. It seems there were expectations that are not now being met. If you could just address his comments. Yeah. I mean, i completely agree. I think in my last answer to supervise source cohen, i continue to think thats the big, outstanding policy issue. It was certainly clear to it think everyone involved in the 2012 process that we were always going to err on the side of financial caution and that retiring the payroll tax was something that we would like to see happen. But we werent going to do it at the cost of potentially soaking business taxpayers if we picked receipts that were too high or shortchanging the city if we picked gross receipts rates that were too low. We knew in 2012 that we just didnt have any good data on how much revenue and gross receipts tax package would raise and thats one of the reasons why we devised this kind of elaborate phasein period. I would certainly agree with mr. Bozeman that its economically, you know, less than opt mall that we have two business tax. Its onerous for taxpayers and for the city, frankly. I think that there is many good reasons to try and do that again to finally retire the payroll tax in the future. Thank you. Supervisor fewer . Yes. Thank you very much. I just have one question. You mentioned that there is the passthrough for the proposed commercial tax is limited. Limited at what are the limits sort of . Can you just just a layperson here. Sure. Essentially what happens when anybody is faced with a tax is or any business, for example, is faced with a tax is they try to say, well, can we get our customers to pay for it . Can we get our suppliers to pay for it . And you have to do a lot of statistical moulding of Economic Data to get a reasonable estimate about how much someone who is charged the tax can get away with passing it on in the case of the commercial real estate their customers. What we know from economics is that your ability to do that really depents about how sensitive you are to rents. If you are as a customer highly sensitive to rents, so as soon as your rent increases you start looking at a neighbouring city, for example, well you are not going wind up bearing the cost of any tax because youll move. Because of your sensitivity. Now it turns out, as we analyzed it, that San Francisco office te fanls in particular are not that cost sensitive. They really like their San Francisco office location. It provides a lot of advantages. They will take a lot of rents increase before they move out of the city. But Property Owners, which face a similar issue, my rents are going down, effective rents after taxes are going down. What do i do . Do i move out of offices . Sell the building. Do i switch it to housing . That sensitivity is much less. The data suggests that base economy the supply of office in San Francisco doesnt go up and down very much regardless of what happens to rents and weve seen big swings in rents over the 20 years that we looked at it. So on that basis, we concluded that the tax would primarily fall to commercial real estate sector and i would point out that in our 2012 Business Tax Reform, it was raised that under the payroll tax, the real estate sector doesnt pay a lot of tax. And under the gross receipts tax, they do pay more. Like they were it was sort of an intention that the commercial real estate or expectation that the commercial real estate sector would pay more in gross receipts tax than they do in payroll tax and they do. Now these taxs that primarily or directly affect that sector would change that ballot substantially. I think my question was more of what is the limit that they can pass through . We projected that 12 of the cost of the tax would be able to be passed on to tenants. 12 of the tax. Ok. Thank you. Thank you very much. Ok. Supervisor ye, e . Thank you. I think when cohen asked the question about some of the current proposals that will be looking at commercial tax rents and you mentioned well, i guess in one of them that ill be talk about later, theres actually exemptions on certain types of commercial property. And the three main ones are the nonprofits running. Were not charging a surtax on that government renting. Were not charging a surtax on that. And also the biggest piece for us that we included in there was the nonformula retail spaces to make sure that we protect the Small Businesses. So, i just wanted to correct it sounded like what you said was there was no assumptions. Ok. And the other thing, we just had a hearing on i forget which committee it was. Probably the rules committee. Well, it was a hearing on vacancies and store front. Which committee values. Le vas, im sorry. And so supervisor cohen, that was actually an interesting hearing because it really talked about what is wrong with what were trying to do in terms of addressing the vacancy problems. Certain corridors are fine. Certain corridors, as you mentioned, are not fine. And theres many reasons why what the cause is. A partenederly it could be that there are some Property Owners that justs have walked away and havent paid much attention or maybe some certain Property Owners are just waiting to get the biggest rent they could get. So, theyre willing to leave it vacant for years. And we already have some regulations that we pass on the board to address that through charging a fee to these are that would remain vacant for nine months. But it seems like the enforcement of that has not been very good. And were talking to d. B. I. To improve that. So hopefully thats going to help a little bit with some of the issues youve seen in your district. Yes. Thank you. I appreciate that. I certainly was here in 2012 for the discussion and i supported it. And its nice to be still be here years later to evaluates whether or not we were successful or not. And also it is a privilege to be here to continue the work, thats finetuned and buff out the edges that we were unsuccessful in doing in 2012. So, i suspect we were going to continue this discussion. As you know, there are several measures that are coming to the ballot that are dealing with tax revenue. So well continue this. What id like the do now oh, supervisor fewer, you would like to speak . That is ok. I just wanted to piggy back on what supervisor yee said about the hearing. I think what we learned from the hearing is that, yes, there is a 711 fee but that is after 270 days of being vacant and sals complaintsdriven. It is a much larger, but in my district i have a lot of vacancies also and i think the oewd has actually contracted with a company that can actually look at some of the things that would encourage, i guess, more Small Businesses. But also for them to be much more successful and im hoping that we can implement some of their ideas. And i suffer in my district from many empty store fronts also and a concentration of them in certain areas so i completely empathize with you. Thank you. Ok. So, colleagues, what id like the do is weve already taken Public Comment on this item. Id like to make a motion to continue this to the call of the chair. If i may take that without objection. Ok. Well take that without objection. Thank you. Thank you, mr. Egan. I appreciate it. Madame clerk, the next item is item four. Notion ordering submitted to the voters at an election to be held on june 5, 2018 and an ordinance amending the business and tax regulations code and administrative dozed impose an additional tax of 2 on the gross receipts from the lease of commercial space in the city to Fund Transportation operations and infrastructure. Ok. So, this Initiative Ordinance was would establish a 2 growth receipt tax on all commercial rents not excluded as nonprofits or under the Small Business exemption clause. I understand that supervisor peskin would like to table this item. Rather than continue this item. So id like to table this item. I dont see sonny was here earlier. I dont think she is here to speak. But colleagues, im going to call for a motion after we take Public Comment. All right. Well open up for Public Comment for item four. Yes. Good morning. Supervisors, my second queen over there on the southeast side, this is going to be recalled back. I guess it gives me a minute to reflect on whats happening here on the city by the bay. I got an article yesterday in the examiner and went over to talk to the news media people. But i want supervisor cohen and fwraoeds know im stand on their side on this one because it is getting a little racist around here. Do i have to pull out my race card . The press is now bugging the queen over there, cohen. They want to know what they want to know . Oh, they want to take from her, they already took the mayorship from her and took this from her and now they whoever they are in the paper says they want to have a level field. Now they want to try to strip her and take the name what the hells going on in the city . Im all for whats right and whats wrong when theres no colour there. But right now its starting to get a little racist right here. This is black History Month and ill be damned if im going to stand by and let the press, the progressives or anybody try to undress her. Thats the queen. Of the city and counties and particularly for our young blacks and theyre reading the paper. They done took that, they done took that. Wlaels they going to do now . They want her to strip theyre going to say are you really black . Are you really from the fillmont . Yall better step back and do the right thing in the city by the bay. You know . Dont play this racist card here in black history. Because you dont want to hear from me. Because im trying to put my black Community Together to show em what we got here in city hall. And now i seen the paper here yall stripping the girl. Leave the queen bee alone. Unless you want to hear from me. Thank you. So, what id like the do is make a motion to table this item. May i take that without objection . Thank you, colleagues. Without objection, this item is tabled. Madame clerk, could you call item five, please . Yes. Item number five, motion sub mitting to the voters at an election to be held on june 5, an ordinance amending the business and tax regulations code and administrative code to impose an additional tax on the gross receipts from the lease of commercial space in the city in the amount of 1 for warehouses and 3. 5 for other commercial uses to fund the babies and Families First fund for quality early care and education for children from birth through 5 years of age and the general fund. All right. Thank you. So, the sponsors of this ordinance, supervisors kim, yee, ronan, fewer and peskin. We also will hear from supervisor yee as well as ted egan again from the Controllers Office. The ordinance before us is a revenue measure for the june ballot calling for a gross receipts tax on commercial real estate. There is something important to note and that there is an additional version identical to this, what were going to hear today. That is being put on the ballot by voter signatures. And i want and i believe that particular item will be heard in the rules committee next week. However, given that the discussion that weve had about the Business Tax Reformerier today, i have a few questions about this proposal before we move on. At that this point, id like to give supervisor yee an opportunity to speak. And then well hear from ted egan. Thank you, chair cohen. As you mentioned, theres actually a couple of versions of this, going through the process. And the latest one that was supported by i guess 18,000 voters was submitted to the department of elections in which there was some confusion whether how quickly they can validate everything. But that particular version is moving forward on his own and in a way it was actually a miracle that in two weeks there were hundreds of volunteers that went out and there were parents or people from the field that supported that version. Was able to do this in two weeks to collect 18,000 signatures. But today is really the ordinance that has been sponsored primarily from supervisor kim and myself and then cosponsors being fewer, ronan and peskin. So i wanted to let me step back and give me a couple of minutes here. I want to step back a little bit and why all this is happening. It wasnt that long ago when we passed the Childrens Fund, the reauthorization of the Childrens Fund in which almost everybody agreed that we needed to focus on our children and our families. Thats why during that particular Ballot Initiative to reauthorize, the mayor and many of the supervisors agreed that we needed to have a focus on our children and our families so they created that council. And the council became sort of the focus piece for families and discussing the goals and our vision of what the city should look like. That report has been drafted, updated and continues to move forward. The beauty of that is it got many departments in one room to discuss these issues. So when i brought up the issue of the lack of focus on our new Residential Development for appropriate units that house families with children, the report that they came up with really supported that and i also asked for a report that we need to focus on our children and our families. From that, we were able to push forward with the City Planning Department and say that, yes, we dont have any definition of what the heck were talking about when it comes to Family Housing. Now we do have it. Since then, you know that you were here to vote on inclusionary housing. And there was a lot of discussion around Family Housing. So, now that were moving forward with the housing piece in terms of family units, then lets talk about the infrastructure thats also being presented as a very necessary part of Family Housing in terms of what we we need to have in the city. And there is a lack of it and people are understanding that piece also because all of a sudden many of the big developments, whether its in the what is im sorry, supervisor cohen. The development out by the dog patch. The big one. The public housing, you mean . Forest forest city. Pier 70. Theyll have Child Care Centres built there. The giants agreed to put a 25,000 squarefoot child care centre. So people are begining to recognize that. And one of the things i learned from decades of people leaving the city, theres two main reasons that they come up with. One of them, everybody knows, is the cost of housing. The others one that maybe not everyone knows is they cant find quality Early Education in San Francisco. That is affordable. And theyre getting priced out. What do you mean priced out . How expensive can it be . The average cost for fullday Early Education programmes in San Francisco range from 18,000 to 20,000 a year. Compare that with a u. S. C. s tuition which is 13,000. Were basically finding that our working families are leaving. A lot of it because of not being able to afford the quality of Early Education that their kids need while theyre working. And last year was probably a great year in highlighting the need because mayor lee recognized that and wanted to work forward with a strong initiative. He and many of the supervisors supported the 2 million to help the homeless families for their child care needs. And then during the budget process, we were able to support a Pilot Project that i created with the office of e. C. E. S e. C. E. S what is that . Office of early care and education. I asked them to what we had was a great model for 4yearolds called a preschool for all that was created over 15 years ago when i was pushing for it in the community. And that programme has been highly successful and even the federal government when obama was the president , really wanted to dupely indicate that at the federal level. Within a few years of implementing that programme, the uptick of children, of 4yearolds, entering a preschooltype programme was 57 to 70 something within a few years. And so whats missing in this picture . Well, we have a Great Programme until 4. Familis can not wait four years before they go back to work. Basically we have a very big gap when it comes to working families from 0 to up to 4 years old. For instance, ill give you a data point here. Of the 2500 children, babies, waiting on a waiting list for low income, waiting for subsidies, abouts two thirds of it are children, babis from 0 to 3. So you see whats missing in support of families is at that age bracket. So, what were proposing is that with the growth we see in San Francisco, with family units finally being built, with very large child care and Early Education centres being built also, we need provide services, we need to support our families. And this is what it does. For the first time in probably the u. S. , were asking voters to support not tonight lower income, but the middle income. Were asking voters to support families that make up to 200 of a. M. I. And a family of three for 200 of a. M. I. Is about 207,000 which you said 200a. M. I. . 200 . 200 of a. M. I. So, in other words, families that would qualify up to the yeah, i understand. I understand. I just wanted to make sure i heard the a. M. I. Level correctly. With a family of three is about 207,000. On top of that, this Ballot Initiative will also deal with really a longterm issue of how do we keep our professional, Early Education workforce, the teachers, in the field when theyre the lowest paid educators around. So, were losing a lot of those people. What this Initiative Also does is it starts addressing that issue for the first time. Were asking that a big chunk of the fund willing go towards increasing the salaries of those that are serving these programmes. How many people . What is that population of child care providers . There is a bigger world of child care providers and then the city contracts with many of the centres and Family Child Care providers. So, this is a subset that is within the city sort of family. And do we know that number . I used to say 2,000 to 3,000. Because, for instance, theres about 700, for instance. Family child care homes. 700 of them are the larger ones, which are the 12 kids. They would help to have staff. Just the Family Child Care alone is about 800 to 900 individuals working in that view and then you have the centre base ones and im not even counting the School District which serves a lot of the lowincome state subsidies. They have over 1,000 workers just within the School District. The centre base programmes easily have 200,000 workers. You are impacting a lot of workers that are also leaving San Francisco and impacting the families here. So, this really is a free for all. One initiative that helps lowincome families, that helps the middleincome family and helps the quality of what is provided in San Francisco for our children, and hopefully we will start addressing in a big way the salary, the lack of salary for our early educators. I could go on and on about the benefits of this because this is what ive been doing over 45 years to build up this system. The 4 million that we received to pilot the project for the 0 to 4 is going to infanls and toddler, e. C. E. Scholarship programme is well on its way n. Many ways, this is very Unusual Initiative where were not trying to start something brandnew where lit take us five years to get us up and running. We have it up and running and we have to have the resources. As we roll it out in terms of