Good morning sf.citi members,
I am writing to you this morning with an update regarding yesterday’s Budget and Finance Subcommittee meeting. As you are likely aware, the Budget & Legislative Analyst (BLA) department presented on the impact of past IPOs, as requested by Supervisor Mar. The BLA made policy recommendations which I have included below and discussed several economic changes that have taken place in San Francisco since the early 2000s. I have also included highlights from the hearing at the bottom of this email, as well as each of the presentation documents as attachments.
At the tail end of the hearing, Supervisor Mar introduced a proposal to tax wealth generated by IPO’s and fund income inequality in San Francisco. With the intent of taking this to the November 2019 ballot, Supervisor Mar intends to tax stock-based compensation at 1.5%.
Additionally, with the ~$100M raised by this proposed tax, he plans to establish a “Prosperity Fund” to protect and stabilize families, affordable housing, support middle income workers and small businesses, amongst other efforts. This will be further discussed at the April 30th Board of Supervisors meeting, where Supervisor Mar announced he will disclose more information.
We are working diligently on this issue on your behalf. Please reach out to me if you have any thoughts or questions. As always, thank you for your continued membership and support.
Jen
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[Hearing – Impacts of Expected Initial Public Offerings of San Francisco Based Companies]
Sponsors: Mar; Haney, Ronen, and Peskin
Hearing on the impacts of multiple San Francisco based companies reportedly planning to hold initial public offerings in the near future, including impacts on business tax revenue, housing costs, and gentrification; and requesting the Controller, Treasurer and Tax Collector, and the Office of Economic and Workforce Development to report.
3/12/19; RECEIVED AND ASSIGNED to the Government Audit and Oversight Committee.
3/20/19; REFERRED TO DEPARTMENT.
4/17/19; TRANSFERRED to the Budget and Finance Sub-Committee.
INFORMATIONAL PRESENTATIONS
- Possible Policy Options:
- Enhance funding for existing City workforce development, economic development, affordable housing, and subsidized childcare programs, particularly those aimed at the low and moderate income workforce
- Enhance City programs aimed at financial empowerment, such as Treasurer-collector’s Kindergarten to College, Bank of SF, and Smart Money Coaching.
- Enhance taxes such as the City’s payroll or gross receipts tax for companies above a certain size and/or gross receipts level; proceeds for affordable housing, childcare, workforce development.
- Establish a gross receipts surtax on companies with differentials between CEO and average worker pay above a certain level.
- City of Portland, OR
- Establish other taxes on large or high-value companies
- Parcel Tax (East Palo Alto – $2.50/sf of commercial space
- Annual per employee tac (Mountain View, with larger companies paying a higher rate)
- Provide incentives or assistance to households under a certain income level to enroll in retirement plans
- Lobby for changes to federal and state tax policies
- Currently, stock option compensation in San Francisco is taxed at 0.38%. Until the passage of Prop E in 2012, stock option compensation was taxed at 1.5%.
- This tax is imposed once an employee exercises this compensation, which can happen either at the time of the IPO or at a later date.
- The primary tax for businesses is the Gross Receipts Tax.
- While Uber is the largest of the companies that are to file for IPO, it is also the company we know least about.
History of Local Tax Policy
- Repeal of the City’s GRT – 2001
- Reform Efforts – 2002, 2004, 2010
- Biotechnology and Cleantech Payroll Expense Tax Exclusions – 2004, 2005
- Central Market Payroll Expense Tax Exclusion – 2011
- Pre-IPO Stock-Based Compensation – 2011
- The new Gross Receipts Tax and Payroll Expense Tax Phase-Out – 2012
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