Meeting will come to order. This is the july 16, 2020, special budget and finance committee. Im sandra lee fewer joined by the Committee Members walton and mandelman. Our clerk is linda wong who is assisted by brent. I would like to thank sfgov for broadcasting this meeting. Madam clerk, do we have any announcements. Yes, this the board of supervisors and Committee Room is closed however members will be participating in the meeting remotely. This precaution is due to the state, federal, and local orders. Committee members will attend the meeting through Video Conference and participate in the extent as if theyre physically present. Public comment will be available on each item on this agenda. Channel 26 and sfgov. Org are streaming the number across the screen. Committee members have an opportunity to speak during Public Comment meeting, you can call 4156550001, meeting i. D. 1463207645. Press pound twice. When connected you will hear the meeting discussion and you will be muted and listening mode only. When your item of interest comes up, dial star 3 to be added to the speaker line. Best practices is to call from a quiet location and turn down your television or radio. Alternatively you can submit Public Comment in the following ways. Email myself at linda. Wong sfgov. Org. The email will be forwarded to the supervisors and will be part of the official file. Madam chair, this concludes my announcement. Thank you very much madam clerk. Can you call item 1. Yes, chart amendment, adjustment of baseline funding. It will not take in account certain changes in city revenue, resulting from voterapproved business taxes on the november 3, 2020, ballot. The municipal transportation fund, the park, recreation and open space fund, the children and youth fund, the Library Preservation fund, the Housing Trust fund, the Public Education enrichment fund, and dignity fund and street Tree Maintenance Fund at an election to be held on november 3, 2020. Increase the Small Business exemption for the gross receipt test to 1. 5 million and increase the annual Business Registration fee on businesses benefit from this increase, modify the gross receipt tax rate, repeal the payroll expense tax, increase the tax receipt tax for certain taxpayers for 15 years, and impose a general test on the gross receipts, and the commercial rent ordinance and make other changes to the citys business taxes. Item number 3. Ordinance to business and tax regulation code, motion ordering submitted to the voters in an ordinan ordinance amending the business and tax regulation code to modify the gross receipt tax rate, repeal the payroll expense tax, increase the gross receipt tax on certain taxpayers for ten years if a Court Strikes down the homelessness gross receipts tax ordinance, impose a new general tax on the gross receipts from the lease and certain commercial space for 10 years if a Court Strikes down the early care and education commercial rents tax ordinance. Identify number four, business and tax regulations code, business tax changes and item number five, Initiative Ordinance, business and tax regulation code, business tax changes. Meeting i. D. Is 1463207645 and press pound twice. Press star 3 to line up to speak. Please wait until the system indicates you have been unmuted and you may begin your comments. Thank you very much madam clerk. Colleagues, i want to provide a brief overview of how this meeting will go today. I will first be calling items 1 through 5 together as they are all related. Item 1 is the Charter Amendment that would exempt charter mandated set aside funds to taking into account certain changes in city revenue, resulting from voter approved backstop taxes that will be discussed in items 2 through 5. I will move to include this amendment in the business tax measure, rather than leaving it as a separate ballot measure. Items 2 through 5 are different versions of a proposal to change the business tax structure and accomplish a number of goals including providing relief to Small Businesses and industries impacted by covid19 by reducing their tax burden and helping them recover. Unlocking the hundreds of millions of dollars that the city has already collected from business taxes for child care and Homelessness Services but is unable to spend because of the ongoi ongoing litigation that was approved by voters in 2018. Completing San Francisco transition from a payroll tax that incentivizes local hirings to more progressive gross receipt tax where more higher earning businesses pay more. Items 2 and 4 were introduced by the mayor and items 3 and 5 was introduced by president yee, supervisor peskin, supervisor haney and myself . In a few minutes, ben rosen field will be presenting on the similarities and differences on this version. He will include an explanation of the amendment that i will be introducing for item 3 at president yees request. I will introduce these amendments once we had a chance to hear from the controller and members of the public, but first i would like to give president yee a chance to speak about this proposal in todays amendment. I also want to thank president yee and his staff for your leadership and your hard work to make this proposal as strong as it could possibly be. I want to extend a huge thank you to my colleagues, supervisor peskin and supervisor haney for making this happen and Ben Rosenfield for all his experience along the way. President yee, the floor is yours. Thank you chair fewer. Im going to thank you for your ongoing leadership as the chair of the Budget Committee. So, as chair fewer mentioned, i joined not only chair fewer but supervisor peskin and haney to bring forward a long overdue reform to our tax system by repealing the payroll tax and replacing it with the gross receipts system. This is the process that started in 2012 when our city leadership made a decision to move our citys business tax from a payroll system to this gross receipts system. The system was seen as a more equitab equitable, as more municipalities have adopted it. The voters saw the logic in this and passed the Reform Ballot Initiative then. However, the 2012 reform did not completely remove the city out of the payroll system and all parties at the time knew that we needed to address this at a future date. I will have to say that the future is now. We believe that this measure also needs to respond to the unprecedented economic crisis we are in with a fair equitable recovery program, especially for our Small Business community and our most vulnerable residents. This is why were calling this is the Small Business and economic recovery act. You must recognize that this Health Emergency only made existing inequities worse and the economic burden is not carried evenly. Who is hurting the most right now are families, small entrepreneurs and familyowned businesses. When we talk about recovery, it cannot be just for a field. You must start from the bottom up. We need to provide immediate relief to the hardest hit industries and businesses and also provide a responsible sustainable Funding Source for San Franciscos economic vitality. Our initial proposal we introduced weeks ago was a starting point. Today we are making a good proposal to a better proposal. Were offering amendments to strengthen the measure that reflects the numerous feedback that we heard throughout this process, particularly from labor, labor leaders, Small Businesses and community advocates. I want to provide a brief overview of what were proposing in amendments today and then allow our city controller to present further details. One major element to the measure is the ability to unlock funds already collected to the city, our city, our own initiative and also our early care and education for all. As you recall these two were passed by voters in 2018, but these voter backed initiatives are currently tied up in litigation. This measure will free up 300 million for the general funds by placing a stop tax that only goes into effect if we lose the court cases. We are extending this backstop tax to 20 years and well also incorporate the Charter Amendments to ensure that the revenue generates for this is not subject to baseline reductions. This will allow the refund of claims and support the general fund and freeing up the dollars intended for Housing Support and also for early care and education support. We are proposing to exempt more businesses from the tax by excluding Small Businesses making 2 million or less, not 200,000, but 2 million or less. This will benefit approximately 3,100 Small Businesses, many of which are barely getting by right now. Small businesses making less than 1 million. We will also see a reduction in the registration fees. We are proposing to provide significant tax reduction to more industries that are hardest hit by covid19 like hotel accommodations, Food Services, restaurants, and manufacturing. Over the course of the next few years. Lastly, it is clear that the economic the economy recovery is going to be prorated, protracted i mean. Therefore we are proposing that no tax increases are considered until january 2022. There will be a small phased incremental increase to the tax rate for Large Industries. Future step increases in 2023 and 2024 will be tied to economic recovery triggers. If the economy were not recovered yet. The tax Rate Modification will then be deferred to the following year. Our economy is entering what i call unchartered waters. We want to remain nimble and have the flexibility as a city to pause any increases by a reporting requirement so the controlling can provide recommendations to the board if taxes need to be further deferred or reduced due to Economic Conditions. Those are the amendments we are reviewing today and i want to emphasize that the board of supervisors maintain the power to defer or reduce taxes. We did this because recently we did this most recently with the vacancy tax. If Economic Conditions do not improve over the course of the next few years, the board can adjust the tax rates accordingly. You can also take a closer look at industry specific situations to provide a more tailored approach to rate changes. I truly believe that the updated measure is balanced, but brings immediate relief to those who need it the most, while offsetting the cost to many Large Industries that are less cost sensitive. I want to be clear that we will be making difficult budget decisions this year. There is no way to avoid that. With this measure, we can minimize the impact. We can prevent massive cuts to critical public services. Reinvest in jobs and Community Revitalization that is so desperately needed and to lift us all out of this devastating pantoja and pandemic and economic crisis. I dont want anyone to get the impression that this will solve all of our budget problems, but without it were going to be in a much worse place. That is something that none of us can afford. Colleague, i hope i can count on your support on this measure and before i hand it back to chair fewer, i want to appreciate the work of controller ben, ted, our chief economist, and our City Attorney team scott for their work and their creative collaboration. I again want to thank the other sponsors in this, for this measure. The supervisor peskin, fewer, and haney who worked with me on this Small Business recovery economic recovery act since the end of last year. I also want to thank their staff from peskins office, fewers office, haneys office, and my own staff. Are there any comments from the other sponsors before i turn it over to our city controller Ben Rosenfield . Supervisor peskin. Thank you president yee. You have taken all of the words of thanks out of my mouth, but i want to give you actually some words of thanks. This was a very, very complicated endeavor long before covid19 hit. We knew that it was going to be the project for 2020s ballot and we had to take some time off after the pandemic hit. You have really steered this across some really stormy unlikely seas and you done it with elegance. You kept your cool, which i have not. I just cannot thank you enough for the way you managed this and let me concur in my thanks and i will shout out my colleagues, and my staff. Thank you to the incredible staff that double checked everything and kept us on course and to budget chair fewer and supervisor haney, thank you. It was an Unlikely Group of four people, our measured president , our budget chair, and supervisors haney and myself. We brought this all together from different perspectives. To our controller and to ted eagan and the controls team. Thank you so much. To the tax team, way to move it incredibly fast as it changed and morphed in many ways. To people in labor, small busine business, as well as the chamber of commerce. I dont want to put words in the chamber of commerces mouths, but i think theyre coming around to the fact that president yee said, we have a fair and balanced package thats a long time in the coming. Thank you president yee for your extraordinary leadership. Thank you, i echo all of those accolades for you and your leadership. A few months ago, i understandably thought this was going to end and we didnt have the capacity to come together and make this happen, but because of your work and your leadership and your staff and chair fewer and supervisor peskin and the controller and the City Attorney staff, who have been working so hard on this, here we are. This is a really important measure generally for the future of San Francisco and its an essential measure for this moment, for right now. We need this to make investments in our critical and essential services to provide tax relief to Small Businesses and to create a structure that will ensure a strong economic recovery, which has to include investments and services and workers and you know, makes me hopeful for what well be able to do in the near future, not just with this revenue and structure, but as a team and as a board, working collaboratively. This is how it gets done. So thank you again and i know that the prop c, big c, little c, labor, on so days the chamber, were all also a part of providing input into this. I would just say as one of the four supervisors who was most closely connected to it and i shared this with the other supervisors, i really hope this is something we can support unanimously. This is a reflection of the best work that we all did on behalf of the rest of the board. It really should get the unanimous support of this board. Hopefully, ultimately of the mayor as well and of the voters of San Francisco. Thank you again for all your work on it. Its really extraordinary and lets get it done. Thank you chair fewer for your leadership and i know you know firsthand from these Budget Committee hearings that we really need this. You can imagine what it will look like in terms of investments and so many critical things without this measure passing. Thank you Budget Committee for your leadership. Chair fewer, did you want to add anything before we turn it over to ben . No president yee, but i like to give the opportunity for sophia to add questions or comments if she would like. Thank you chair fewer and president yee. I wanted to convey the mayors heart felt appreciation to the four of you for a collaborative process and im appreciative of these amendments today and in particular, as we can work our way through this economic recovery. She is reviewing those now and we do hope that we will be able to support this measure and we will be in touch. Thank you. Thank you very much. So president yee, absolutely. I think it is time to call the controller up. Do you agree . I agree. Great. So if we could have the controller, mr. Ben rosenfield. Good afternoon. [indiscernible low volume] i cant hear you. Thank you for having me here today, im Ben Rosenfield, the controller could you speak a little louder or closer . Is that better . Yes. Okay, thank you for having me here today president yee and chair fewer asked me to walk through the two measures that are here before you today by looking at places where theyre different and where theyre similar. Ill run through the different components of the tax. Its a complicated package that defines our second largest revenue in the city. [inaudible] to start with, the two taxes share a number of the same features, ill briefly highlight those and then run through each in more detail. Both measures fundamentally unlock the revenue that the city has been collecting for big and baby c. Since those taxes were adopted by the voters in 2018. It makes that revenue available despite litigation thats ongoing by creating a backstop tax that would go into effect, should the city lose that litigation and from which refunds could be paid. Secondly, both measures complete the retirement of the citys payroll tax and replace it with a revenue neutral increase to gross receipt rates, getting to a single tax system to the city, opposed to our current hybrid of both. Third,