presentation. the you want to introduce the discussion? i believe we have a representative to discuss the committee's physician -- position. >> i would like to have them provide a portion and any additional updates to legislation at this particular time. for the commissioners, the committee heard the matter. on principle, i am very supportive of doing what we can to increase jobs, because jobs are an important economic indicator. they did provide some unique situations in relationship and to how they may be affected, and

the recommendation was to do a phased in in relationship with this particular legislation. i think there might be other things, but i would like to have him present, because they have looked at the affect of this ordinance quite extensively. >> i managed the local business enterprise program. we support the legislation and the small business commission and support the idea of the legislation. the idea of san francisco

working is important. there were a couple of concerns with the different legislation's that would be implemented, so we have been working with supervisor of a los -- avalos's office to express concerns we have relating to small businesses in san francisco. as a precursor and sharing some of our concerns, i will provide an overview as best as i can. i will provide you with that overview and give you an update as to where we are at right now. the proposed legislation, and i am sorry if it is stirring up a bit small -- the city currently

has legislation that if you are a contractor trying to do business with the city and you are working on public works or a construction contract that you must make a good-faith effort to secure at least 50% of your employees to be a san francisco resident. the community has generally disliked the good faith effort and provisions and have for years been advocating as a mandate, so that is really what this ordinance does. it goes to more of a mandate. it grows to 20% and would have

to be local, and over seven years it would be wrapping up to over 50%. this would apply to all city projects. there is an exemption for residents, and the reason is because of constitutional reasons, the city or the state cannot navarro -- cannot bar out of state workers from coming in and benefiting from out of state workers. for closer proximity for someone coming from new york and new richard c. and things like that, i do not think it would not -- from new york and new jersey and things like that, i do not think it would be too

much of a problem, but that provision was put in for constitutional reasons, and it seems to have withstood constitutional scrutiny of the same model that is currently in place for cleveland, ohio, and they have the same exception for out of state and for residents. the one difference is that rather than providing for 50% across the project, it is allowing a contractor to balance for plumbers and different trades involved. this actually mandates the requirements across each trade.

residents going forward. hopefully, it will build across a broad range. the legislation also provides incentives, so there will be incentives bake in to the terms of the contract, and it will depend upon the amount they exceed and the goal for each of those trades. lastly, if the contractors do not meet those goals, one of three things will happen.

one will be penalties that will basically translates into damages, and that would create a sense so the contractor can use to offset so if you have a job in vauquelin but are using san francisco residence, you may be able to count the to your shortfall in san francisco, and you could bring in contractors as apprentices to offset your infrastructure. that is the basic framework for legislation. where we do have concerns is the way it would be applied to understanding the nuances of the

legislation and specifically the penalty is and off ramps often referred to do. the first concern is the possible costs associated by any small business trying to manage zero local higher. if you are a small business, we see you have less overhead. you do not have the event it as a payroll person. the person is also the payroll person, and that same person does a lot. the thing we are projecting his that there are a lot of costs that could easily be involved if

you are a small business, and we are concerned that would make it difficult to manage without additional red tape. the implication is if they do not do it properly, there could been liquidated and bandages. if you do not reach the local higher numbers, you may be able to offset that. we are concerned that those are not viable solutions. did the first one being that if you are working on a non-covered project, you could use those to offset any shortfall. if you are a small business and you are struggling, you probably do not have those contracts outside of the city.

those non-covered projects only apply if you are paying the wage, and typically if you are a small business, you may have one or two jobs during renovation, but if you are doing this, that same person has probably renovated a kitchen, and you are probably not pain a living wage on the job, because the bid would be too high. they will not be able to be used because the bidding structure is not going to make sense to them. that is the one concern we have that there is a viable off round -- ramp that is not there

for the current legislation. the current legislation does not really provide for an incentive to promote for small business. everyone agrees they tend to hire locally. they have done a study that was somewhat informal, and we found corp. people tend to be local. you have your main group of people, and they are often san francisco residence.

our concern is once they do that, they are having to compete to bring in local businesses. it will probably be a lot less attractive to a potential san francisco resident, because of the packages that will likely be offered to a larger company. based on those concerns, they have proposed several solutions. the first thing we have proposed is the implementation. they do not want an exemption that provides a leg up on a

feeding. they agree local businesses have every of legislation, but we are not too sure what the impact this would have on local businesses and concerns. what is being proposed is to give us some time to evaluate what impact this will have on local businesses. if we find out they are using this as an unfair advantage, then you take it away. if we find they can negate the

impact on local businesses, they can give it some time to figure it out. i do not think we have a clear indication of what impact it will have. i am just as concerned. the second thing we are proposing is because of the anecdotal belief, we have done some studies showing businesses to hire locally, and they provide incentives to actually promote the use of small local businesses in the contract. we already are in oakland or on an oakland project, you can count them.

what several organizations of small business have proposed and the h.r.c. endorses fully is if you provide incentives to if you exceed the goal by 50%, you can use that to offset some shortfalls. just providing ways or one more alternative so it's not just resulting in a penalty or financial damages to the contractor. so i think everyone is somewhat in agreement that if the more we can promote local businesses and the better for the city generally because what we found is there's about a seven-time multiplier effect of those dollars being recycled because if a business hires locally, that person, their payroll person or receptionist is going to go out to lunch. when that person goes out to lunch they're going to probably go to a local restaurant. so that's creating jocks at the

restaurant, that's creating jobs for the supplier that provides the pro duce. so those dollars get recycled in some -- so many different ways. that's the kind of thing that wasn't into the legislation that we're optimistic in the future we'll have those kind of opportunities baked in, if you will. and just to give you a time line of where the legislation is at right now, about a month ago there was an information hearing before the land use committee where this legislation was introduced and the public had its first chance to comment on it, at least in a public setting and before the board of supervisors. it was, later there was a formal hearing before the budget and finance committee on the first of december that went

through the first reading with the boofs -- board of supervisors last tuesday and is scheduled for second reading before the board of supervisors tomorrow afternoon. so there's not too much we can do at this point. and there were some amendments that were as adopted by the board last tuesday before the, after the first reading, the proposed amendments that the h.r.c. has put forward i think were supported by the -- the and the policy -- or the policy -- or were supported in part by the small business commission, they weren't as adopted but we're optimistic that going forward with them we will be able to work with supervisor avalos and the rest of the board of supervisors that if we do see negative impacts on l.b.e.'s or more broadly on small business in san francisco

that the board of supervisors and supervisor avalos will be open to those amendments. that concludes my presentation. so if you have any questions i'd be happy to answer them. president yee riley: thank you. solt board of supervisors already approved this last tuesday? before we had a chance to -- >> well, the board, in the first reading last tuesday, the second reading is scheduled for tomorrow. president yee riley: oh, ok. so you continue to work with the supervisors to express some of your concerns? >> yes. i just got off the phone with supervisor avalos' office in the last 30 minutes and emphasized that we do support the legislation, "we" meaning h.r.c., but we do have concerns and we're optimistic we will be able to work with them. if we do see negative impacts going forward, that we can reach some conclusion or some

answers to those problems. and the response i got back was the supervisor's office is certainly open to proposed amendments. i mean not for tomorrow but more after it passes. president yee riley: ok. well, our committee, the legislation and policy committee, heard it on the 22nd. but the full commission didn't get a chance to hear it until today. so we did instruct staff and the directors to send a memo to supervisor avalos stating our concerns. so did we get any answer for that? >> we did not get a response to the memo. and i think as alaric has mentioned, that both staff from both departments worked to try to, before it got to the full board of supervisors, to see if we could do an amendment that

would wait for, you know -- we were recommending a three-year period to not include the l.b.e.'s but to phase them in at a later date. i think for the legislation and policy committee, what you heard from your presentation was that was said, well, if there's a problem, we can correct it later. i think our concern and alaric has just mentioned that the supervisor's office has said that they're amenable to amend legislation later, but what does that mean to the cost of a small business and how long will it take for us to calculate the problems to amend something later? as opposed to phasing it in and waiting to see that -- how the ordinance is implemented, the results of it, and then working the l.b.e.'s in to become part

of the local hiring initiative. president yee riley: thank you. >> which is a good point. i mean that's -- that's something that we've talked about that, i think everyone is in agreement that, everyone is open to changing the legislation if need be, but unfortunately, if one round of lick quidated -- liquidated damages to a restaurant, a small business, say $100,000, i'm just making that up, but that's enough to break a small business because they don't have these large cash reserves and things like that. that could be their payroll for months at a time. a degree completely that everyone is open to change, but unfortunately because there is -- it takes time to get amendments through any piece of, or through any agency or

through this, through san francisco or san jose or oakland, and again i think everyone is open to change. i'm just concerned that because it's not there, we're not -- it could be too late for some businesses. vice-president clyde: and i just want to point out the other matter that in relationship to the l.b.e. portion, both human rights commission, which is, that's the body that really governs the l.b.e.'s and this commission which represents small businesses, both commissions were not able to, full commission were not able to hear this piece of legislation until after the first reading at the board of supervisors. president yee riley: commissioner clyde? vice-president clyde: yes, i will just want to say with -- for the record that i am concerned with the speed with which this is going forward.

i'm not confident it's had a thorough vetting. there are many issues in here, like verification -- how long does a person have to be a resident of san francisco? where are people going to live? how large is the labor snool all these questions that the reason we're asking for a phase-in is because i don't think we know the extent of our labor pool or our local training initiatives. i mean, you know, if -- you can't -- you can't, for instance require city employees to live in san francisco, ok? so we have these local hire mandates. what prevents someone from just getting an address in san francisco and, you know, with their cousin or their friend and being then, being then eligible under this ordinance but not really living here? i mean i just find that there are many details that haven't been vetted, so i'm really concerned, commissioners, that

they are not. i'm also concerned with legislation that advantages the largest businesses because they are equipped to manage these programs where our l.b.e.'s and smaller businesses, it takes them more time. but i think my biggest concern is the local workforce and the time it takes to ramp up the apprenticeship programs to develop our own skilled labor from our own neighborhoods. and also, where will they live? because one of the challenges for skilled labor is housing, you know, and for a working family to have a quality of life and housing, we've had a tremendous loss of skilled people to the east barkse the north barkse the south bay. you know, they make good money, but they don't make enough. so we don't have the workforce housing for the labor and i would just argue that, again, you know, i think that there should be some concurrent work.

and i understand that the supervisor feels that, you know, it is time to mandate, people feel that, i understand that, but the devil is in the details. so i am concerned with the rushing. thank you. president yee riley: yes. any more questions? commissioner o'conner? commissioner o'conner: how can we apply this to the city's workforce to assure that a certain percentage of the workforce of the city and county of san francisco lives in the county of san francisco, spends their salaries in this county? i'm opening up a kettle of fish, but i'm curious about that. is that conversation going to come up? i would love to be a part of that conversation. >> it's my -- i mean i think what you are asking is how are they -- are you asking about the verification that people who are saying they're local

are actually flol commissioner o'conner: i believe that's what commissioner clyde was al lewding to because it's safe to say that people will fake their addresses as we know people often do in the school district system. >> it's my understanding that within the legislation that they are going to possibly be requiring proof of your -- that you have a san francisco resident. some of that could be verified with things, i think, if i'm not mistaken, but i'm not versed on it completely, on the same type of -- on the voter registration type mechanisms and things like that. but i'm not too sure exactly what the enforcement providers are going to be. i can tell you that the office of workforce and development is going to be the body that is solely responsible for the

enforcement of this new ordinance. but again, i at this time haven't had a long or drawn-out conversation with that office to understand the way they envision that process working. president yee riley: well, we have some letters here from some of the business owners. i read the one for asian american contractors association. you know, and they are suggesting that the ordinance be structured so the prime contractors can comply either by fulfilling the local hiring requirements or by meeting double the l.b.e. participation goal set by h.r.c. on projects. so is it a good option? >> i mean i think it's a great option. again, because what it does is it provides avenues for both

the contractors to not result in liquidated damages, which frankly don't result in anything for the local residents. i mean it's great for the city because those are dollars coming back into the city coffers, but those damages, those penalties don't create jobs. but i think by providing an alternative for and -- for doubling the l.b.e. subcontracting goal, what that does provides incentives to use more local businesses and that creates nor -- more jobs based on the evidence, anecdotally that local businesses tend to hire locally the you are achieving the same objective but doing it by increasing or encouraging larger contractors to use a local business more often than they would. president yee riley: so it

accomplishes the same thing? >> it accomplishes the same thing. and if you are an l., -- l.b.e. it encourages you to even use other l.b.e.'s for your sub contractors. it achieves the same goal but just does it a bit differently. so to get that implemented it would just require the h.r.c. and the office of economic and workforce development to have a series of conversations as we proceed through a contract. but that's something we could manage without too many problems. president yee riley: thank you. commissioner clyde? vice-president clyde: yeah, first i'd like to thank you for your work on this project and also the advocacy for the l.b.e.'s, and just thank you. so i would be, you know, very much supportive of the position of the human rights commission on proposed mendenhalls -- amendments but i woud