asked for a subsequent meeting and to create a partnership about what you think would be the appropriate support services. do you happen to have a draft of some of those ideas? anybody who could see the draft would be able to formulate on the city side how they could potentially supports such requests. we could have a much more robust conversation around that when the meeting gets scheduled. >> you will see a yellow paper. we will be spending the rest of this month to finish this. >> thank you. >> we are going to be going through an extensive process to go down to san jose unified school district and talk to education experts to identify what students supports are considered quality when it come t sito a-g.

we are waiting to do more research. what we do more research, we would be glad to report it to you all. >> thank you. >> are there any other members of the public who would like to make a comment? at this time, public comment will be closed. is there one more comment? >> [inaudible] >> sure. ok, i need you to announce that all mic so that people at home know what is going on. >> people want to do eight unitsclap with the -- do a unity

clap with the city leaders. marco santiago is going to lead us. [clapping and cheering] >> thank you. on that note, colleagues, and do you have any other comments, questions? thanks again c comeolem -- thanks again, coleman, for coming out. i ask for a motion to continue. call the chair.

thank you. so moved. do we have any additional business? thank you very much. we are adjourned.

supervisor chu: welcome to the subcommittee of the budget and finance committee. my name is carmen chu. i enjoyed by supervisor kim. supervisor mirkarimi will be joining us shortly. mr. clark, do we have any announcements? >> please turn off all cell phones and pagers. if you present any documents to the committee, provide a copy to the clerk for inclusion into the file. items acted on today will appear on the board of supervisors agenda on march 29 unless otherwise stated. supervisor chu: i would like to

wait for the full complement of the committee before we get on to item one. let us go on to item two. >> resolution authorizing the department of emergency management, for the city and county of san francisco, as fiscal agent for the bay area region, to retroactively accept and expend a fy2008 buffer zone protection program grant in the amount of $579,090 from the u.s. department of homeland security through the california emergency management agency to fund critical planning and infrastructure protection needs. supervisor chu: thank you. we have someone from the department of the emergency management. >> good morning. and the item before you this morning is a five under thousand dollar grant from the u.s. department of homeland security for a program called the buffer zone protection program. this will provide additional security for sensitive infrastructure in the bay area,

through things like improvement to strengthen and fortified the physical plant of the site, by installing barriers or blast walls, installing security systems. the grant will provide additional security at three sites selected by homeland security officials, in consultation with the sfpd. the board has seen the script before. one of them was approved unanimously in 2008. the two main points is that there are no local matching funds required for the grant and no new positions created. i am happy to answer any questions you might have. supervisor chu: thank you. i do not believe we have a budget analyst report for this item. supervisor kim? supervisor kim: i have two questions. i was just curious as to what examples of infrastructure needs we may be able to fund through

this grant. >> one of the challenging things of this grant is the department of homeland security does not like to publicly discuss where these things are, so it makes it difficult, but the board did approve some security steps for parts. you can think of different vulnerabilities around the bart system, which the board approved a $1 million, to strengthen and fortified different aspects of that system and improve security. transit systems, other things that you might consider critical infrastructure that might either fail during a disaster or be targets for a terrorism attack. those are the kinds of things that are targeted by this grant. supervisor kim: in light of what has happened recently in japan, has there been any other recent analysis, areas of weakness that we may not have thought of, that could have unintended

environmental consequences? for example, the nuclear breakout in japan. they were well prepared, in comparison to other countries. i am thinking, in light of what has happened in japan -- >> that is a great question. every two years, we update our hazard mitigation plan, where we do exactly what you're asking, we tried to think ahead. we tried to think about lifelines, utilities, bridges, transit systems, things that might be vulnerable during a disaster that we ought to think about ahead of time. we update that every two years. certainly, we are monitoring events closely in japan to see what can be done to improve, and what lessons we can take for our own city. supervisor chu: thank you.

why don't we open this up for public comment. is there anyone from the public that would like to comment on this item? seeing none, public comment is closed. can we send this item forward with recommendations? without objection. thank you. back to item one. >> ordinance amending article 12-a of the business and tax regulations code by adding section 906.3 to establish a payroll expense tax exclusion for businesses located in the central market street and tenderloin area. supervisor chu: thank you. this item came before the budget and finance subcommittee last week. there was an amendment that was made and the item was continued to this meeting. before we start, supervisor kim, supervisor chu, would you like to make any opening comments? supervisor chiu? >> i just want to make a brief

comment. this is a proposal that i have been strongly supportive of from the beginning. last week, when we spoke about this, i talked about the importance of how we need to move beyond the status quo. part of what i also think today's discussion is about, this piece of legislation is about, is about building san francisco's 21st economy -- 21st century economy. we are exceedingly good at attracting people who want to start things, start companies, but we are not good at helping these people grow their companies and broke into a significant economic forces that will allow us to continue to put san francisco on the map, as a beacon of innovation. i really think that this legislation, certainly with twitter's announcement last week that if we were able to pass, it would allow them to stay here. as our city economist has pointed out, we will be able to

use that to grow our innovation and economy, in part, around this mid market area, in ways that will revitalize this neighborhood for, hopefully, many years to come. colleagues, unfortunately, i will not be able to stay for the entire discussion, but i hope the commission can support this today and move it forward. supervisor chu: thank you. supervisor mirkarimi. supervisor mirkarimi: if super the representativsupervisor kimo first, being part of this legislation -- supervisor chu: i believe she is reserving her comments. i believe we had some comments from staff last time. harvey, did you do the report? >> i have two additional comments if you would like me to make them now. supervisor mirkarimi had asked

if there would be any additional costs regarding the mta. we did contact the mta and did a report on page 8. it would be a cost of $234,000 annually. finally, at the request of the tax collector, we have a recommendation on the bottom of page 8, to allow the tax collector to disallow the payroll tax exclusion, and if businesses do not maintain the records and documents in a manner acceptable to the office to objectively substantiate any payroll tax exclusion, claim, and provide such records when requested. so we have added that recommendation. we think that is a reasonable request from the tax collector. supervisor chu: thank you. i believe supervisor kim had a follow-up question regarding the tax collector.

supervisor kim: i believe the treasury tax collector might have a few things to say to us. >> my name is david augustine with the treasury tax collector's office. we appreciate the recommendation. we think the recommendation was made perhaps prior to when 0906 .3 was added in, which would determine who would get a tax exclusion. we think that would be sufficient, for our purposes. for instance, if we did not receive books of tax and record, we could deny the exclusion. in addition, we have a technical amendment on page six, line 2, no later than the effective date of this ordinance. we propose removing the lid and the effective date of this

ordinance and inserting the word "shall" adopting rules and forms. the process takes time pursuant to the business and tax codes. we want to be able to issue those regulations. in addition, we would have a final technical amendment to page 4, the definition of base here. we would propose adding the word "full" online the a 11nd 15, so that it reads, the full tax year. in that way, we could avoid any particular business coming in for a short period of time, incurring peril expense, but then deciding that that would be the entirety of their baseline calculation for working in san francisco. inserting the word "full" would obviate that concern. supervisor chu: and what was the

change? >> page 4, lines 11 and 15, the word "full" would be added. supervisor kim: first full tax year for line 15? >> that is correct. we think that is in keeping with the sponsors and budget analyst's recommendations. we want to make sure it is clear. supervisor chu: thank you. to the city attorney, when these changes be substantive? they would not. it would not require a continuance. any other questions? supervisor mirkarimi. supervisor mirkarimi: 2, maybe the comptroller, but analyst -- to maybe the comptroller, budget

analyst, this would allow for a mid market deal in hoping to recruit, incentivize, anchor companies like twitter. what was reported today in "the chronicle, " zynga, a company like twitter could also come. that would build the rationale that if we build it, they will come. but when i met with the company on monday, that was not the case. i was informed by the cfo, they would not come to mid market. i am trying to understand how this lines up. are we talking specifically about twitter or other companies? just so that we can take some of the hearsay out of this discussion. number two, i want to ask the

question, was there any consideration by us, looking at a moratorium on the stock options? if, in fact, the goal is to localize the incentive in the area of mid market or tenderloin, why not do it for other companies who would like to benefit from a similar break, like twitter, but who are not going to move to mid market, but maybe to do, but in a more sweeping way citywide, so we are not favoring one district over another, so that we are doing something over all foreign industry that can benefit from a deal like this. this is part of the discussion that has not come up yet. supervisor chu: why don't i ask the office of and work force economic development to take a shot at this. >> thank you. with regards to clarify whether or not this is a tax breaks targeted at twitter or extended

beyond, the answer is emphatically the latter. while we have known for several months that twitter is interested and considering moving to the sfmart building, and the exemption here is to have twitter anchor what would hopefully the a zone of the market that has been challenging and with a high level of vacancies. over the next eight years, the idea would be to attract other large tenants, hopefully, digital media and tech-type tenants who would want to relocate. really, any type of business that can benefit from that locale. the idea is to revitalize this area and create jobs and create the ancillary economic benefit of having storefront retail once

again flourish on that neighborhood. we think twitter is an incredibly important anchor, but we would be here before you today even if they were not in the mix. we would be hoping to attract another anger tenant -- anchor tenant. supervisor mirkarimi: i get that, i like the intent, but i am confused on the policy side. what i am wondering about is, what has now come out of the woodwork are other companies who are looking for -- and understandably so -- a similar kind of benefit. structurally speaking, what i am concerned about is, for a lack of better phrase, do we spot zoning a certain benefit to one particular company? for in a corridor of companies, without knowing whether they will return and be in mid market

-- in this case zynga -- i understand that is inaccurate. >> certainly, i do not know the accuracy of what is reported in the paper. since this policy was first proposed, talked about by the members of the board of supervisors and mayor, our hope has been -- because this is a net new tax exemption, existing companies in their existing space, a even if they were in mid market, would not be eligible for a tax break. we are trying to say, here is a you have an equal opportunity to grow come as twitter does. companies that want to take advantage of this potential tax break can join us in the revitalization effort of mid market. for some companies, it will not make business sense to them. we hope that we can learn

companies in from out of town and out of state, if they want to grow. we feel like it is a pretty level growing -- playing field. we are looking for companies that want to make this move, should it be advantageous to them. we do not want something that would just sit twitter's business model, but a wide swath of other businesses models. if they want to come to mid market and grow. an existing company could keep their work force wherever they are in the city, and choose, if it makes sense to them, to have another office that encapsulates their growth on the market. that would accomplish our goal of having jobs in the area as well as having a tax break for them to grow. supervisor mirkarimi: i am still not convinced that a company like twitter, with their hip,

urban image, wants to move to the suburbs. i am not sure that we are capitalizing that negotiation as well as we may want to appear well that is up for interpretation, why not move the discussion to a larger reform? why not get into the question of a moratorium on stock options? if san francisco wants to attract companies and retain the companies, then why not use that more as a templated strategy that will help these companies relocate to mid market, but does not confine them to mid market. other districts, like district 10, who is also struggling to get some attention out there, should benefit from that as well. >> i would welcome a conversation on stock options

and the way the city treats stock options as a form of compensation and whether a more wholesale reform is needed. my understanding from talking to city attorneys and the treasurer and tax collector is that when businesses pay a payroll, there are many different elements we consider to be part of payroll, traditional compensation, stock options, and all of that is aggregated. it is not a disaggregated number. to say let's eliminate stock options from what we consider to be compensation has an unknown impact to the general fund. this is me talking, but based on my understanding of having other conversations, until more understanding and analysis is done, we do not know because it's an aggregate number, what the impacts are of reducing the definition of compensation. but i think you're absolutely right that a more holistic conversation is necessary, given

the changing world we live in, in which many companies are compensating employees with stock options as they have limited resources to compensate them traditionally. i think it is a conversation we should have. and i welcome it if the office of economic analysis wants to add any thoughts to the conversation. >> good morning. in response to your question, our report did include as a recommendation that the city look two ways to modify the payroll expense tax to remove the specific expense tax that the largest and most valuable companies have to leave san francisco simply because of the value of their stock and stock options. we did not, however, suggest such a policy would in any way replicate what the current policy is doing. there are two things to keep in

mind about what is different with this current policy verses a wholesale policy of payroll tax to deal with stock options. the first is that this policy, particularly as it has been amended, is a highly targeted tax cut which is in effect aimed at one company or will primarily affect one company which based on our best analysis is very much on the bubble as to whether it makes sense to say in san francisco or not and says it will stay if the policy is enacted. as i indicated in my comments last week, that's an ideal tax incentive situation because it is focused on a company, it seems to clearly be affecting their behavior and not subsidizing behavior that would happen anyway, particularly with the amendments introduced last week. if we were to, on the other hand, a wholesale reform of the payroll tax code to address all

stock options, there are some technology companies that have grown in san francisco and have not been motivated to leave san francisco despite the fact we tax stock options. if we gave them a tax break, we would be giving them that effective subsidy in that we did not have to do. even if we did save some companies from leaving outside of san francisco. question of how to properly target a reform of the stock options issue so you are excluding companies likely to stay in san francisco even with our tax treatment is a future conversation. the second thing this legislation does, that a reform of the stock option does not do is address the specific neighborhood. twitter, by moving to the central market area, is in effect helping the city to solve a problem of economic development localized to that

area. if we gave a tax break on stock options or some other modification to a company in a different part of the city where the neighborhood they were at already had very low commercial vacancy and they stayed in san francisco, that's great, but they were not helping to anchor the formation of a new cluster, they are clearly not doing as much for the city's economy as twitter is by moving into a long-vacant building and anchoring a cluster that would fill up other long-vacant buildings. that clarifies the difference between the two policies from our perspective. supervisor mirkarimi: so you would be in favor if we did something for another company who would want to locate itself in the quarter of district 10 or western addition of district 5? >> the way we would answer the question in that case is how likely is it with the company

move without this break? what is the likely impact they stay on surrounding properties and overall employment in the area? supervisor mirkarimi: but you see the slippery slope that opens the revolving door of this discussion, correct? >> yes, i do see that. >> want to respond to some of the things that supervisor mirkarimi just brought up. there are two sets of issues that are this in sending companies to grow in the area. first is we have a payroll tax of 1.5% of payroll that does not exist in any other city in california. for a company like twitter or other similar the-situated, creates an enormous incentive for them to grow their peril in the immediate future here in san francisco. what we are trying to do with

the legislation we have in front of us is to in send these companies to locate in a neighborhood that has potentially some of the most significant blight of any neighborhood we have had in this city. in my mind, that's different from the situation confronting a lot of tech companies and other companies that rely on stock options as part of their conversation -- part of their compensation, which is something i've been looking into and as has been rightfully pointed out, there are nuances and a bit of information the city is still trying to understand as we figure out whether or not this makes sense. in my mind, those are two different obstacles to companies trying to make business decisions and what this legislation is doing is addressing the first piece, which is a necessary piece. it's not an issue of either/or, there are two issues we have t