commissioner, for your information, most of these grants have a three-year performance period, which the federal government is then able to extend, so that is -- >> i would make the motion now to accept the grant and line items for three, a free war, and five. president mazzucco: public comment for line items 3, at the war, and five. let's start with public comments on item number three. any public comment? four. hearing none? secretary lt. falvey: for item number three, we had a motion. for the other, you have a motion

and a second. president mazzucco: line item number five, do we have a motion? thank you very much. let's move now to line item number 6 regarding closed session disciplinary. secretary lt. falvey: public comment on a closed session. president mazzucco: do i have a motion? all in favor? ladies and gentlemen, we >> back in open session.

the commissioners present our -- are slaughter, mazzucco, chan, and kingsley. you have a quorum. item nine is whether to disclose anything from a closed session. president mazzucco: please call the next item. >> i contend is adjournment. president mazzucco: all in favor? thank you very much. >> thank you, commissioners.

supervisor chu: welcome to the regular meeting of the full budget and finance committee. i am joined by supervisor mirkarimi, supervisor wiener, supervisor kim, and president chiu will be here shortly. we also have supervisor farrell. mr. young is the clerk. mr. young, are there any announcements? >> please turn off also funds. present a documents to the committee and provide a copy into the file. items they will appear on the

board of supervisors may 17, 2011 meeting unless otherwise stated. >> call item no. 1 and 2. >> regarding the five-year financial plan. item #2, adopting the financial plan for fiscal years 2011 and 2012. intersection 9.119. >> the item before the committee previously, there is a hearing with the comptroller " -- comptroller's office. we want to bring to our long- term financial books to balance. there was an item those introduced by superivsor - - supervisor chiu. there were a number of things to

respond back to us. we also asked the office to take a look at reserve balances that would be present during the five-year financial time. they're still working on that analysis. and like and have the deputy comptroller talk about when that might be ready. >> good afternoon, members of the committee. we are still finalizing the impact of the reserves honda revenues. and also doing sensitivity analysis in the event that the revenues are a little bit higher or lower than what we had projected. we do need approximately a week or so to complete the work. perhaps the easiest thing would be to continue these items to the call of the chair and then

once we are confident that we have the final numbers, the to the calendar. >> if that is not objectionable to the committee, i like to continue these two items that we can have the information before us. why don't we open these items up for public comment? and there any members of the public that wish to speak on item number one or two? and we have a motion to continue these items to the call of the chair? have a motion to continue these items to the call of the chair. and i would like to add my name as a co-sponsor. we can do that without objection.

we do have a number of items before us that included the payroll tax exemption, items #3 and 4. if we could call items 5, 6, and seven ahead of time. my understanding is that there is intention to continue on with these items. if we can go ahead and dispense with them. >> hearing to receive an update on the budget for fiscal year 2011 and 2012. the emergency hearing regarding the closure of the health services impact on a client base and a provision from the city and county of san francisco. appropriating $150,000 for the department of public health to support women and halgbt health

services. supervisor mirkarimi: madam chair, i am going to suggest that we continue to the color of the chair the items related to #six and seven. i know there were some members of the department of public health and the clinic health center that are here, but due to ongoing negotiations between the health center and awhirl other health facilities, their ability to answer some questions right now about us advancing alone are not, i think, timely. i ask that we continue this and hear from the people that may want to speak to this. >> another is a representative

here, but rather than going to the public hearing on the budget of day, if there are any comments you like to make, stepped up. if not, we can do general public comment. any comment? why don't we go to public comment? any members of the public that wish to speak on items 5, 6, or seven? >> i would like to speak on no. 5. i am a little puzzled as to whether this will be continued and i can come back another time. supervisor chu: yes. >> where would i get a copy of the budget? at this time, it is being

updated? so that i can prepare remarks relevant to the present status? >> we have the cfo here right now. if we could, i can ask him to talk about some of the proposals that they have before us. in addition to that, we heard this item previously. we will have future hearings, and our office can make sure that you are aware of when those opportunities will be there. >> are you setting a date today? >> we're going to continue these three items to the call of the chair. what i will do is have the department of talk to you specifically about some of the proposals so that your aware of

them and our office is happy to meet with you. if we have the public schedule on line. we can share that with you as well. i just don't have it in front of me. >> i am just mentioning the topic. you can see how it will fit into one where another, concerned about the city's position as number one the in liver cancer for the whole nation. and having as far as some of free housing, are these things that would be subject to comment, and a proposal for remedy in the budget if i have some proposals for that? >> why don't we go off line and

we will chat about those specific questions. are there any members of the public that wish to comment on the item number five, six, or seven? and we entertain a motion to continue these items to the call of the chair. we can do that without objection. supervisor mirkarimi: we look forward to hearing from the health center that we mentioned earlier, the ball was in their court. they need to complete their financial assessment so that they are in a very clear and confident position of being able to answer the questions of the department of public health and a number of others associated with the board of supervisors with regard to their ability to consider taking on a loan. that is what is spending until

it is returned back to us. supervisor chu: item 3 and 4. >> amending article 12a. establishing a payroll expense tax exclusion that is attributed to stock based compensation. adding section 906.5. inclusions first of based compensation. supervisor chu: and these were brought to us by numerous individuals. i would like to provide the supervisors the opportunity to speak on these items.

>> like to thank the supervisors. i also want an of that it was just of the night before last that the small business commission when they talk about legislation. they identified an economic problem facing the city, and it certainly came on line with regard to the liberations with the tour -- twitter payroll tax exemption. it is the stock option tax. it seems has have significant --

it seems to be a significant reason for firms to leave san francisco. when it was placed on them, then made it clear that they are in a difficult position tuesday in san francisco, and one is to seek some relief. without adversely affecting san francisco in the budget general fund. they often start with limited capital, but expects significant growth. they primarily compensate employees in the stock compensation that has little -- but that has had little value before going public. the huge tax hike in san francisco, a cost that does not exist anywhere else. the comptroller's office includes a handful of sand and

cisco companies likely to issue an ipo in the coming years. we very much appreciate the efforts to of mayor wheat and supervisors that have begun a broad evaluation with the city cozy business sector. the public-private sector discussions with regard to the best approach while maintaining the city's general fund. in this context, in direct response to the recommendations, with regard to what is the best approach in advancing considerations for stock-option exemption, i introduce legislation that is aimed at keeping the pre-ipo companies in san francisco. it features a limited stock options tax incentive.

these companies undertake a public stock offerings while in san francisco. it is a time frame that they can be renewed. a requirement that companies pay that least $750,000 in stock- option is the story -- but before receiving the exemption. and a study to determine the tax exemption's economic impact, including the effect on retaining companies in the general fund. the company in the history would have been eligible for the tax exemption of a proposed. they all paid less in stock compensation taxes. the company would have to issue more to be eligible for my exclusion. there are very few companies located that are expected to come anywhere close to that figure in the next six years. according to the chief

economist, the three companies with sought compensation of more than 50 million annually, the city posed a general fund would be between 500,750 thousand. san francisco can expect to retain robust companies and millions more in payroll taxes simply because of the growth that company's employment -- that there are a number of companies that fit this description as applied when twitter was before us for their exemption. what is important to us is that we have something that is able to be accountable and discreet. since the city treasurer and controller have never been faced with the question of either a limited stock exemption, the

supervisors suggested there be a permanent home at large sleeping stock-option for those that are public. we believe these pieces of legislation are immensely different due to the simple fact that ours is stipulated by a six-year time line. it does not go into eternity or perpetuity. the definition in the universe of those companies that will be affected are minimal at best. it is important that we have the ability to gauge what that impact is based on the information provided to us and through the treasurer's office for their ability to be able to count what that impact looks like. through ongoing discussions with the treasurer and the mayor's office, we feel that this is the right approach in beginning to

explore the possibilities of more sweeping change. but before we understand what that sweeping change looks like, we should start with a more effective and honest in caves that helps us be able to track when it is through the general fund. we believe this is the right solution to do just that. i have amendments. i don't believe they are substantive at all, but i handed these out. i want to make sure that if you don't have a copy, you can take mine. on page 3, language was added to clarify the definition of stock based compensation. these were mentioned last week. these were already submitted last week which was held over. stock based compensation, it makes it clear that it must be

granted prior to when the company makes an initial public offering. page three lines 16 through 19, only compensation a company may exclude from its payroll taxes are stuck based compensation. and also on page 3, it adds language to say that the amount of stock based compensation, a company may exclude from the payroll, the amount of the liability that exceeds 750,000, where the stock compensation liability, whichever is greater. supervisor chu: the first two items change. you mentioned these were made last week. and then would be item number three, hong 19 and 16.

>> that is right. supervisor chu: i would like to take public comment before these things, but i would like to discuss the legislation. >> the issue that the supervisor is going to address, and doing it in a different way. the goals of my legislation were to fold. first of all, after the realization that we're the only major city in the u.s. to tax stock based compensation, to send a statement to the broader community that we actually get it and we will create a solution

to a lemonade or minimize this tax. a second of all, making sure we don't create a budget deficit. my legislation is relatively simple. it states at 2010 or 2011, it will be a company space here. and that will be the maximum payroll tax to travel to compensation. the goals of sending a message to our business community and insuring that we do not create any budget deficit compared to last year is exactly what my legislation does. the protect the general fund and create some jobs going forward. there are differences between supervisor mirkarimi's legislation and mine. i applaud him for providing an amendment that also includes what companies were banned last

year. my legislation capped the revenue growth related to stock based compensation. it has been discussed at great length already, and now that we and everyone else realize that we're the only major city to impose this tax, if we want to create an economically competitive city, we cannot continue to tax this moving forward. it is too easy for companies to move to oakland or out of state. perhaps most importantly, my legislation applies to both private and public companies. i believe that if we're going to create a long-term economic policy here in san francisco, we have to sound viable. as we have learned in the past few weeks, public companies are moving employees out of san francisco. if you only benefit private

companies, who create a huge gap between public and private companies in terms of the cost. it will be adding significant disadvantages, and many ceos are based in located here in san francisco that employ thousands have emphatically stated that they will continue to hire outside of san francisco going forward. that is not something i believe that we should promote, create, or indoors. to not include all companies in this dialogue is a huge mistake. i approve of supervisor mirkarimi and applaud him for his recent amendments. the only way going forward is that we quickly follow up with legislation that applies to both public and private companies. i have no problem waiting on my legislation until our chief economist report comes out so

everyone can feel very comfortable with anything going forward on the general fund. the purpose here is to create a long-term economic solution and protect the public from what is today. it is not to create half- measures. which is why i believe in this is so strongly. supervisor chu: i love you did provide a presentation to us last time you came before us. he did not, i believe, have a study completed, correct? >> he introduced his last round of substantial amendments on may 2, it would be within 30 days of june 2. >> is there anything you'd add to the analysis from last week?

>> i believe the amendments that he outlined addressed all of the recommendations. in terms of the original legislation, i have no more comments. i will speak about supervisor ferrell -- farrell's legislation. supervisor chu: is there anything new that you had at from that meeting to this one? >> members of the committee, office of the budget and legislative analyst. consider items 3 and 4 to be policy for the board of supervisors. we are available if you have any formal questions. supervisor chu: i have a question that can perhaps good of the office of economic

analysis. this simply have think about the impact of the general fund on the legislation. there is not yet complete study, but how would we think about these? >> these are among those of the largest businesses in the city. we believe that many if not most of them have offered stock based compensation that will fall under the exclusion that has been proposed here. what i don't have is a dollar value attached to that cost. in terms of just thinking about it, it would result in a reduction in the payroll expense of these companies and consequently, some reduction in the labor costs.