several hundred to thousands of dollars per month per small business if it is passed on. so i would like you to be aware of that. and you will probably hear that from other businesses. we're waiting to hear from restaurants, other people who have done the analysis and run the numbers according to the nexus study and as the nexus study is conservative, i'm also trying to be conservative because i don't want to get numbers that don't jibe with other companies. so i'm working on that. again, you know, at the current levels, $1.14 for a liter of alcohol, $3 for a case of wine, doubling the c.r.v. on beer and adding over $8 to each keg of beer. if that is passed on only at the current rate, it's significant. missing in the nexus study is

the tax revenue for our industry. there's nothing about the state of california increased the sales tax, you know, 1%, 2009. and i believe half of that goes to public safety. and another half of that percent goes to the public health department, so there was nothing in the study that recognizes the tax revenue that the industry alcohol-only provides to the state or the city and the county. on rough estimates of about $1.5 billion in sales. that's $150 million gross. and then to the city, it's significant and breaks down about 2.5% to 3% but 1% is dedicated to public health and public safety and it looks to me in the nexus study, you know, that those would be applicable to public safety, alcohol-related, as well as other types of harm.

>> in looking at the costs that clurred to the city for alcohol consumption over consumption, to our emergency services and alcohol rehabilitation services, so certainly i would recognize that the contribution that your business makes to the city as a whole and from what commissioner o'connor has to say as well, fully understand the contributions you've made at the neighborhood level, the citywide level as well. that's not something that the nexus study was attempting to measure, nor was trying to discount in any way. also, jobs. my wife worked at vasuvel, my wife worked there and it's a great establishment and i'm not coming down on this because i'm opposed to alcohol in any way but i'm looking at how we can

as a city look at how we can have some cost recovery for, you know, the services that we render, provide for people in our system. and i understand the pass-through. we are not trying to go directly to the bars and nightclubs, retailers, convenience stores. that's not the intent behind the legislation. you know, i was working with the city trying to circumvent that to go above. there's a lot of talk about making sure we are trying to -- when it comes to progressive taxation, when it comes to looking at how we can find revenue for our city or country or for our state, is that we look at the biggest player we can do it from. i think of the oil industry. the oil industry wanted to apply an oil severance tax to be able to fund different things in our education system and make sure we're flush with better reserves with money for our services at the statewide level, the national level.

but we know we tax the oil companies, they'll pass that right down to consumers as well and something that is very hard to prevent it from happening and it's not a piece of legislation we can write where we're going to apply a fee to the wholesale level but can prevent them from passing that on to small businesses. i wish we could but that's something i cannot automatically make happen. >> what i would like you to recognize, supervisor avalos is a nickel a drink is a misleading figure when you're in the retail environment and when you're in the retail onsale environment, a nickel a drink is a very misleading figure and i think we should work on getting you adequate information about what this will cost the small businesses and how much it translates into the cost of goods sold and what it will mean to businesses and their bottom line. i will submit, though, that is

a very misleading figure at this point and we just got the study. >> i just got a letter from the san francisco brewer field that has broken down some of that as well and i'm just reviewing it. so along that lines of that argument, and i think the member of the brewers guild is here and i'll talk about that and be here to listen and really learn more about it. >> great. and i apologize, i actually have a list, so i'm going to go through. we're looking at significant fee measures across our small business community in the current budget, and i'm actually a little disappointed that the budget has such significant fee increases not including this, that is already in the budget. >> this is not assumed in the budget? >> i know. i'm talking about the budget and there are significant fee increases along with a group of tax measures that will be going to the ballot. so one of my concerns is a

double or a triple hit to our hotel industry and restaurant industry depending on what combination tax measures pass assuming they all pass, hotels could be hit very, very hard, again if this fee is passed through and have you thought about that, the cumulative impact of the current slate of, you know, of revenue measures that are facing our industries? >> yeah, i have thought about it. and i thought about it a lot and i thought about also how as a city government, we're doing a lot to restructure, cut services, labor concessions, and we've done a lot already and the next year we're facing another -- it was proposed we have nonongoing, you know, solutions to the budget that we would have a $712 million

deficit. it's probably around $450 million, so we have a lot we're cutting to even get there. but we also have to have that -- we have to know the revenue has to be part of the solution to be able to solve our budget crisis. and you know, i do, i have heard from a lot of people about the concerns about all these measures being on the ballot. i have been proposing -- i did have some background with the hotel fairness initiative and that went off the street to get signatures. i understand the hotel industry is partly being targeted here with costs that could be passed down to them from wholesalers but this is not targeted the hotel industry directly, you know, where they'd buy alcohol from, where it goes. i'm also working on a real estate transfer tax. that's not a measure i expect would affect most small businesses unless they own

property over $5 million. so i puposefully had amended that piece of legislation so it would not have overlapping impact with this legislation nor with the hotel legislation that's pending as well. commissioner clyde: i would like to restate that our industry collects 10% from the consumer on everything we sell, so every drink, you know, every dinner, every hotel room, you know, our industries collect 10% on these brackets on everything we sell, so one of my concerns when i see a fee of this magnitude and it is expensive to us if it is passed on its current form, a fee of this magnitude hitting our competitiveness again in a regional environment is a concern, and the fact that someone can go shop outside our boundaries, can sleep outside of our boundaries and just bike

in, it's a small bay area, but i am very concerned that the loss of the sales tax revenue and the greater revenue will not be offset, and that we will cause significant economic damage if we are not careful, if we are not careful and really, really analyze this. and i'm sure the office of economic analysis will be coming forward with an analysis of this as well. is that right? >> i expect that they will. i actually have not talked to the controller's office about whether they would or not but i think it's something that's part of their role and function to do. commissioner clyde: i hope they will because it affects such a large sector of the economy of san francisco, and it really is the markup that allows us to pay for the mandates, the employer mandates for the higher minimum wage and for several of the important

programs, you know, that have been championed by the board, by you, by the public. so you know, we really don't want to see that impacted but we have to be able to make our costs. >> and again, i really think that it's important to know that we can only cut so much. we can only do so much in terms of layoffs and concessions from labor to deal with government costs. we also have to look at revenue, and every revenue idea has a tradeoff, it has an impact, and it's going to be something that will be difficult i think, but this is to accept, i understand that. i hope there are ways there can be something that can be more acceptable to others and i was hoping that this one, we get to a place where there can be some acceptance. sounds like it's not there yet. but certainly would open the door for greater communication. commissioner clyde: i'm almost finished, so thank you for

bearing with me. i was really -- it was very interesting to read this study because i did have to ask a lot of questions knowing how much we contribute in tax revenue, excise taxes as well as sales taxes to the economy, to the government of the state as well as the city government. and again, i believe it's considerable, and i'm working on the math. with that in mind, i believe the study has great value on a regional level and also at the state level because my first question is wait a minute, we are paying a lot, we are paying significantly. there are sectors of our economy that are not paying anything. there's no cost recovery possible. and yet we have to accept because we're the captive audience, basically. we're the captive group, so it's easier to, you know, kind of get the captive audience and make them pay more or increase the taxes already there or, you know, get sales that are

recorded sales. i mean, there's no way to do cocaine mitigation, i don't think, or, you know, push prescription drug medication. and so i'm hoping the point i'm trying to make is that i'm hoping the study may be used at the regional association of bay area government or at the state level to look at what is adequate reimbursement and appropriate reimbursement for our costs. that's one. the second is the medical inflation rate that this study assumes is 3.1%. so that does -- 3.1% over five years, you know, it's significant, medical inflation always outpaces inflation, and we've been negative inflation. so looking at this study and the way the costs are calculated, i am very concerned about those calculations. and giving the public health department, because they do need to cover their costs, a formula that is a little

wiggley, i guess, to say the least. so thank you for listening. those are all the comments that i have about the study and the proposal. >> thank you. >> commissioner dooley? commissioner dooley: i just wanted to ask about this approach, as i do think it is as important topic. why not consider going the route we did with tobacco and dueling the commol industry? i'm just curious about that because once again i feel this will trickle down to cause the small businesses to take the brunt again. i just kind of wondered about going the other direction with that. i >> i did not at all consider suing the alcohol industry, i'm not a lawyer, i'm a social worker and wasn't something that came to me but perhaps we can look at that as well.

there's a lot of places we can apply that type of lawsuit where it can be conducted from. but really this is looking at what the city does on a daily basis providing services and the services come because there are people that get in our system, our health care system and emergency system who need support and we want to be able to find a way to address those costs and not looking at through litigation but more through the nexus with the cost and people who are providing the alcohol large scale to the city and county of san francisco. >> thank you. commissioner riley: the reason the tobacco industry was able to be held accountable in court is because we, even before the litigation, huge release of documents that showed their

culpability and we don't have that same situation with alcohol but as far as recooping for costs, the way that's done in the state with tobacco is through tobacco taxes largely at the state level. of course there is -- you mentioned the alcohol excise tax which has not been raised in 20 years so there's been a decrease in the real value because of inflation over the last 20 years. so although, yes, those excess taxes are paid the real values that decreased and we haven't seen an increase in 20 years and tobacco is very well taxed at the state level, far more than the relative amount that alcohol is causing -- harm is causing the state. >> i think also when it comes to tobacco, there's really very little, you know, worthwhile about tobacco, you know, moderation, moderate drinking has positive health effects so to be able to just sue the alcohol industry for harm is

not necessarily as strong a case as suing the tobacco industry in a bigger harm. >> thank you, commissioner o'connor? commissioner o'conmajor: just thinking about different points we're all kicking around, and based upon the fact that we are receiving this legislation via work that's been done through the marin institute and if the point is that our industry is taxing the city's health system, then from that perspective, what about you presenting -- not you but somebody presenting, say, if an ambulance does come to a business to pick up an inebriated person or what have you, then that business covers that expense or it's shared between the business and actual person who did it or the person who did it is charged, because

that makes sense to me. this doesn't. because what we all know, i know, i'm sure everybody here, mostly all of san francisco, politics knows that, the city of san francisco does incur a lot of costs because of alcohol-related, alcoholic related injuries, ambulance trips, general hospital bills, etc., and the fact of the matter is that that is due to the revolving door of a small percentage of people who are possibly alcoholic and they're going in and out of the system, and they're using up a lot of money of the system. we know that. and so the way that this is getting pitched to me is that i got to now go raise our fees, raise our prices and cover this cost to basically penalize myself because maybe once a

year an ambulance has to come to pick up some goofball. most the time that's who it is. but the reality is the general hospital is getting hit all the time on revolving door individuals, and i'm sure they even have a list of who they are at general hospitals. of course these individuals are generally low income. so there's no way of raising revenue in that area. but that was why we did healthy san francisco. part of what healthy san francisco was about was creating an insurance policy for san franciscoians. great. i supported that but the realt is it's not really that great of a program. it's not panning out the way it was supposed to which is what i predicted when i was on the task force that created it. it was poorly written. all businesses should be getting taxed, not just ones with 20 employees and above. and the reality is it was supposed to back fill a void of

$30 million that supervisor daley had talked about a couple years prior to healthy san francisco getting put on the table. healthy san francisco was supposed to raise $30 million. that's what we talked about and what we were told and what we agreed to. it's not even raising half of that to cover the program. so the point is, i'm not going back in time. i'm just saying these are linked, like healthy san francisco, we are paying -- my business, the independent with 40 employees, is not only revitalizing the street, not only spilling overtons of business to all the small businesses that don't pay anything for healthy san francisco, and we're paying for healthy san francisco and we're one of the only ones on the street. so we're already taxing ourselves higher once that went in. and paying into it. and so now, this kind of analysis or structural presentation, it's like all right, you guys are creating

harm to the environment and we'll have to pay for more of it. there is a certain amount of truth to that. i'm willing to say ok, if i'm a bad citizen and i'm creating a business and my bartenders are allowing people to walk out of my business drunk and it's hitting the city's health system -- >> just to respond. yesterday i watched the world cup with a doctor who works at s.f. general who has come from working in columbia, now he's working at general hospital providing health care, speaks wonders of healthy san francisco, and that he's able to treat people who wouldn't ever be able to come to him without the program, people who have cancer, people who have brain injuries, people who have not been able to get preventative care and now they have. commissioner o'conmajor: i think the program is great but

the way it was structurally set up was flawed. >> i can appreciate that but what you're providing for this happening is a good thing. the other thing we're looking at for this legislation, we are not interested -- we don't want to target you, small retailers, nightclubs, we're looking at corporate players here. that's who this legislation is targeting, that's what it's about. it's not about saying you're a bad player or the people who sell alcohol are bad -- in the city on the street level are bad players in the system. commissioner o'connor: i came in the meeting under that impression and the presentation i heard is i'm a bad player. that was the presentation. and if we get back to how this money can be raised to help the city and county of san francisco and it is going to hit the corporations and not trickle down, then i'm all ears and i'm willing to vote for that if i really can believe

that they're not going to pass it on, which i find that hard to believe. >> but when we talk about it trickling down, it's not saying we're targeting you and that you're a bad player and your business is a bad business because of that, we're targeting at the corporate level, at the distributor level, at the wholesale level is where this is being targeted. the fact they're trickling it down, passing it through, we have less control over. and i can't -- it's hard for me to think about how we're going to look at all these taxes and taxes that deal with oil companies and environmentalism at the highest level and how we can't make sure those taxes or fees don't trickle down as well. it's a very difficult thing to do. i do hear you. i would like to wish we can prevent it from happening. i can check with the city attorney, ways to try to mitigate that as much as possible. i want to be clear, this is not about, you know, calling local businesses bad players, it's really about the -- you know, the industry at the highest level. look at --

>> to emphasize that, i know you don't like we're from marin, we just happen to be based there but actually do work nationally. and our philosophy is to go upstream to the big corporations that are flooding our communities, and we deliberately actually took a turn in our mission even to get away from a lot of the local policy efforts, other than this one, in order to say the light really needs to be shown on anheuser-busch based in belgium, diagio based in london, all the corporations that aren't even in the u.s. anymore, let alone in california, san francisco. so we totally agree with that philosophy. of course they fight us tooth and nail when it comes to federal excise taxes and state excise taxes and we're in those fights and unfortunately now we're in this one and it's really not where we want to be. it's just that now the city is the one bearing the brunt of the cost and that's why we're here. >> thank you. i do have a question, supervisor. now, what will this fee do to

reduce all this alcohol-related expenses? because it's fine we cover and pay for it but is there a plan? if there's not a fan and then this cost keeps going up, then we'll have to hit the fee again, so is there a plan? >> what would the legislation do to reduce -- i'm sorry, i didn't quite -- to reduce >> alcohol-related problems, the revolving door of the alcohol-related problems? >> essentially it's about getting some cost recovery. there could be, as i would say, an indirect link to this fee towards, you know, less alcohol consumption, at that point there could be another nexus study and we could measure the effect is even lower and the cost of the city is less and that we would, you know, we could amend it down for less of a fee, that's something that is a possibility.

but as the fee itself, we don't have a way to apply the fee, nor is it our intention to apply the fee to reduce the consumption of alcohol, to reduce that -- that's not how the fee interacts. the fee really is about cost recovery of the services we provide as a city, you know, for alcohol consumption. >> of course we'd like to see -- there's some question that current treatment and prevention services are inadequate and why we're seeing the revolving door syndrome, as you call it. but the law limits us to only bringing money to reimburse the current fees. you know, it's possible that could help increase some services to stop that kind of, you know, person who can't get into a treatment program. we need more services, there's no question. there may be other mechanisms to help with that. >> but, you know, the public health department has their own accountability measures to make sure the services they're

providing are effective services. there are people who go through relapse over and over again, and there's a lot of debate about whether there should be services for those folks or not. i would say there really needs to be services for those folks because when they're not using, not drinking, they're in a better state, and that state is something hopefully we can prolong as a city and county providing services, we can prolong as long as possible. those are positive effects for the work that we do on individuals. so i think that, you know, we have -- the city and county does -- the department of public health goes through r.p. policies and if the organization isn't performing at the measure we don't get the contract and there's been a number of cuts over the past year, that organization that did not get the same funding over the past years before their effectiveness and provide proper treatment. >> commissioner dooley?

commissioner dooley: i think it would be really pertinent if we can find a breakdown between the costs of offsale versus onsale, when we're looking at this fee. i didn't see any statistics kind of separating those two. >> in terms of the nexus, you didn't see that? >> yeah, i think that would be really a good thing for us to have. >> i could follow the controller, i'm not sure for purposes of this nexus -- >> to see how the fees might apply, if there's an overwhelming amount of information on one versus the other, or whether they're equal. >> generally, the research shows there's more concentration in any area the more alcohol arms but doesn't seem to be much difference onsale or offsale and it's outlets of either kind that

unfortunately creates more harm. >> thank you. >> supervisor avalos, i wanted to ask you about -- with all due respect, commissioners, i do think it's going to be unrealistic to hope that the city is going to be able to go forward and the budget deficit will be handled with everything coming from labor, as much as i would love to see it directed that way because i think we have an overbloated city bureaucracy and a budget that's far too big for the population and the area we have compared to other municipalities. that said, it's kind of hard to believe there aren't going to be some taxes though we're taxed to the hilt already. i just wanted to find out from you, because i know you're on the budget subcommittee, i

believe. of the budget deficit, what percentage do you think of the deficit that we need to make up is being alleviated by labor concessions and other things like that, and what percentage would be alleviated by the increase in taxes that we're looking at? because as you can imagine, before this commission we're hearing a lot of tax measures that are being proposed, and i'm just curious to get an overall picture. because i know what you're trying to do is the big picture and you come in here and we only see one side of it and we don't see all the conversations on the other side which means we don't appreciate what has happened in there. so of the percentages, you know, if we have a figure of the total budget deficit, how much of it we're alleviating with labor negotiations and concessions and how much of it is with new taxes. i'm just curious. >> i don't recall offhand what