Good afternoon sf.citi member companies,
I hope you all are doing well today.
I’m writing to you today to provide you with an overview of the Gross Receipts Tax (GRT) working group call hosted this morning by the SF Chamber and Committee on Jobs. As many of you know, San Francisco has begun thinking through additional funding options to help mitigate the economic impact of COVID-19 on our City’s budget and has been exploring three possible features that can be put forth for the November election. Below, we’ve detailed the three options put forth by the City Controller, a timeline ahead of the November election, and additional pertinent details from today’s call.
Three Potential Features of a Business Tax Measure
Please note that any feature listed below may move forward as one ballot measure, or, features can be combined in order to move forward as one ballot measure.
- Revise the current tax burden
The first option explores shifting the tax burden, which would reduce taxes on small businesses and increase taxes on mid-large businesses. In reducing small business taxes, the City would increase the GRT small business exemption from $1M to $2M, and increase the Payroll Tax (PT) small business exemption from $330k to $1M. For large businesses that make over $10M, the tax rate would increase by eight percent, creating a revenue-neutral shift of $31M to larger businesses. Both increases and decreases could be temporary or permanent. This could be drafted to sunset in three years and would be immediately implemented in January 2021 should it pass on the November 2020 ballot.
- Unlock current taxes
The second option explores unlocking both Prop C (“Big C” and “Little C”) funding streams. The City currently holds approximately $1B in impounded funds in pending lawsuits on these two ballot measures. An additional ballot measure would create a general fund tax that would kick in automatically if the City lost the Pop C lawsuit. Impounded funds would be unlocked by the City Controller immediately, as the City would have assurances that a future source of revenue would be available to cover the Prop C Lawsuit.This could be a temporary or longer-term backstop, as a four-year tax would be needed to repay three years of collections, and would require use of the unlocked funds for one-time purposes, such as affordable housing, mental health, access to shelter, general funding, childcare, and other expenses. A longer-term tax would be needed to repay refunds using debt, permitting some of the proceeds to be used on both one-time and ongoing purposes.
- Provide additional funds through a temporary, targeted tax increaseLastly, there is an option to increase the tax rate by ten percent on businesses making $10M or more per year. This ten percent increase would generate $40M for the general fund and would immediately begin in January 2021, should it pass on the November 2020 ballot. The City has discussed potentially exempting certain industries such as hotels, retail, or others. The increase could be permanent or temporary.
In order to qualify for the November election, the Board of Supervisors will need to introduce a ballot measure within three weeks in order for the measure to potentially pass at the end of July and therefore move to be placed on the ballot. Please note that we are fairly confident that the Board of Supervisors have enough votes in order to place this on the November ballot. That being said, the business community will have to decide if we want to oppose all features put forth or come to a compromise.
Relevant dates from November 2020 Ballot Measure Calendar
- June 16, 2020: Deadline for the Mayor or four or more members of the Board of Supervisors to submit an original proposed ordinance or declaration of policy.
- July 24, 2020: Deadline for the Board of Supervisors to submit Charter amendments and bond measures to the Department of Elections.
In the meantime, sf.citi, SF Chamber, Committee on Jobs, and other business advocacy organizations are collecting information from our respective members in order to determine next steps. We, as an industry, have begun to think through potential compromising strategies. Should you have any thoughts and ideas concerning the points outlined above, we will need your feedback by the end of this weekend.
Reminder for sf.citi Survey
Lastly, to better serve you and your company, we have created a short 2 minute survey to determine your needs around virtual programming. By providing your feedback, sf.citi can continue to serve you effectively and provide quality programming for you and your company.
Please let me know if you have any questions and thank you for your continued membership.
Jen
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