sf.citi member companies,
I hope you are well this morning.
As promised, I want to provide you with an update on what transpired at the Special Budget and Finance Committee meeting where the Mayor’s GRT proposal, Board of Supervisors’ GRT proposal, the Overpaid Executive (CEO) Tax, and the Stock-Based Compensation (IPO) Tax were discussed.
In short, the Board of Supervisors’ GRT proposal included amendments and passed unanimously, the Mayor’s GRT proposal was tabled, the CEO Tax included amendments and also passed unanimously, and finally, the IPO tax discussion was filed as it was a hearing on the matter. In terms of next steps, the amended versions of the Board of Supervisors’ GRT proposal will be heard at a special Budget and Finance meeting ahead of the Board of Supervisors meeting on July 21st. The CEO Tax will be heard at the upcoming regular Budget and Finance committee meeting on Wednesday, July 22nd. Of course, we will monitor these upcoming meetings and provide you with notes accordingly. For reference, please find recent coverage on the negotiations in SF Examiner here.
Please find additional details as discussed during yesterday’s committee meeting below.
Supervisors’ GRT Proposal (Legislation and slide deck of amendments made are attached)
The amendments listed below were made in an effort to come to a consensus with Mayor Breed, and were adopted unanimously during the committee meeting.
- Increases small business exemptions to $2M
- Expands industries subject to temporary tax relief including the addition of hospitality, food services, arts, entertainment, and recreation
- Reduces the level of an ultimate tax rate increase and delays them
- Ultimate rate increases reduced from 30% to 15-20%, varying by industry.
- Phases increase between 2022-2024, rather than a full increase in 2021
- Add a trigger to delay 2023 and 2024 increases if receipts don’t recover.
- Extends the duration of backstop tax from 10 to 20 years
- Merges the Charter baseline change to the measure
Mayor’s GRT Proposal
As the Mayor and Board of Supervisors are currently in negotiations regarding the GRT proposal, the Mayor’s version has been tabled.
Overpaid Executive (CEO) Tax
During the meeting, Supervisor Haney discussed the economic impact COVID-19 has had on San Francisco and described the difficult decisions the City is faced with making during this time, including cuts to essential services. If passed, this measure would impose an additional gross receipts tax or an administrative office tax on businesses with a greater than 100:1 ratio of the compensation of the business’ highest-paid employee to the median compensation paid to the business’ employees based in San Francisco. According to Supervisor Haney, this tax would raise $141M per year. There was a strong showing of support by organized labor during public comment.
Adopted Amendments:
- The addition of “managerial” to the definition of highest-paid employee.
- Capping the tax tiers at 0.6 percent instead of 1 percent. For the administrative office tax, it will be capped at 2.4 percent instead of 4 percent.
Stock-Based Compensation (IPO) Tax
The IPO tax was discussed briefly and a general overview was provided. This measure is only applicable to public companies and is projected to raise between $50M-$150M annually. Additionally, this measure would restore a 1.5 percent rate on stock-based compensation and would go into effect regardless of the outcomes of the other GRT proposals on the ballot. Please note, as the IPO tax measure has already been sent to the ballot, the deadline for the Board of Supervisors to withdraw the measure is July 28th.
Next week is going to be a very busy week. We will provide more information and connect with you on next steps shortly. Please review these details and provide any feedback from your teams as soon as possible.
Thank you for your continued membership and have a nice weekend.
Jen
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