analyst payroll taxes. supervisor farrell: correct. >> that is correct. you are right. the reduction in payroll taxes. supervisor farrell: so it is $10 million? thank you. supervisor campos: on that note, another way of looking at the $50 million is to the extent that the money is not being accessed by the worker, that is $50 million worth of health care benefits back somehow someone has to cover, and that someone is going to be the tax payer. >> just to discuss the results of our economic simulation, essentially, what our simulation finds is that the impact of higher labor costs outweighs the benefits of higher health spending that we are -- over the two years we are looking at. again, it is a maximum because of the that the million dollars being a maximum number. a maximum of 290 fewer jobs in

the first year an additional 190 fewer jobs in 2013. clearly, again, the industries where we feel the employer impact would be felt the worst, which is the accommodations, food services, and retail trade industry -- accommodations and food services together will lose between 170 and 240 jobs over the next two years -- supervisor campos: my apologies. i wonder if you could speak up a little bit. i know that some folks are having -- the sound system is a little strange here. >> a cake, i will just reiterate that what we found was an excellent job loss of 290 fewer jobs citywide in the first year, 2012, and an additional 100 in 2013. among the specific industries we look at, we saw the job losses between 170 and 240 fewer jobs in retail trades and accommodations, and 50 to 70 fewer jobs in retail trade. because of health care spending,

we expect health care to have about 15 jobs more. it is true that this legislation is occurring during a time of an accelerating economic recovery. based on the economic projections that we have, we are projecting the years 2012 and 2013 to be growth -- job growth years for the city. this chart shows the dow declines associated with the legislation in the context of job growth that the city would expect to see during that time. the city under our projections will gain about 20,000 jobs in 2012 and 16,000 in 2013. the job losses attributable to the policy are about 1% to 3% of that, although, the differences are different for different industries, but that is the city wide net. we did some further sensitivity analysis because several of the elements in our simulation are subject to some uncertainty. we look at, as i indicated

before, but splits of the $50 million between different industries. our assumption, the 20% of the cost was covered by employees might be low. we raised that to 50%, assuming that workers might be forced to pay for more of it. we also adjusted potentially if the industries were changed, the percentage of the local work force was changed, and we tried different simulations at 50%. the net effect of these changes was not significant in terms of the ultimate findings of our analysis. annual and employment differences a tribute to the policy under six alternative scenarios range from 230 to 460 jobs in the year or around 1% to 3% of the city's projected job growth. just to conclude, the existing ordinance has created a situation where there is an imbalance between those who fund the stand-alone hra vs take

other options available under the ordinance. the cost of addressing the loophole could range to as high as $50 million annually. most of that will be borne by employers. like any labor costs increase, that will discourage hiring and create fewer jobs in cities than would otherwise see. on the other hand, it will create benefits, but tangible that are easily measurable in terms of increased health care spending, and also longer-term and less readily quantifiable benefits around improved health and worker productivity. the net employment impact of that which is measurable in the next two years is negative for the city as a whole. it is occurring in the context of an economic recovery for the city, and the losses in of associated with the policy represent a small fraction of what the city could expect to grow overall during this time, and i am happy to take any questions. supervisor campos: colleagues, chiu and the questions? chiu? -- colleagues, any questions?

president chiu? supervisor chiu: i think what has been troubling me about the issue, and i want to thank supervisors campos for raising this, is that it does seem to be providing perverse incentives for employers to make sure they get health care costs. this incident on usage and the tenants and notice. have you thought about other ways to kind of reverse this that may not be, i guess, the specific solution we have here. from my perspective, i think we all agree there's a problem we are trying to address. what i'm trying to address is the right solution that will make sure that employers are incentive to do the right thing but also have the most minimal impact we can on job loss. >> i am kind of constraint in writing the report in providing recommendations because of the legal issues that surround it. as a non-attorney, i am hesitant

to even offer concrete suggestions in that context. again, in a closed session, i am happy to offer ideas on ways to do that. i agree with you that there are ways to address the concerns you had. >> i appreciate that statement. one thing i would say is that i know we have all had individual conversations with the city attorney's office that we should not go into at this time, but it might be good for us to have the session so we can share the different ideas we have on how we can address this. a different question -- basing your -- based on your calculations, it seems as if assuming that there are, say, anywhere from 230 to 460 jobs lost in the year, and building on olse's presentation that there are about 700 companies affected by this, we are talking about job loss of about half an employee per company. is that accurate? >> i have not affected the number of employers into the analysis. it is not clear that the gap is

evenly spread across the 700, but simply, i agree with your averaging. let's put it that way. supervisor chiu: 80 in number. i am just trying to get a sense of what the job loss is. i think it is a good thing for us to provide more health care, but on the other hand, it will lead to obviously some job loss. the last question i have is the way the ordinance is currently drafted allows the money to sit in an employee's account indefinitely, including after the employee leaves the job, so it's it's in the account until it is used. again, i am just trying to think about other compare robles of how these types of systems work and whether that is the most efficient way to use those monies -- other comparables of how these types of systems work. >> the only thing i would say is that the reason we have health insurance is because individual savings is not a good way to pay for large health-care costs, which everyone inevitably has. hra's are helpful to pay out-of-

pocket expenses that healthy people have. they are not the best solution for paying for catastrophic expenses that everyone eventually has. i guess i would simply make that point. that the insurance allows people to -- everyone contributes for the few that need it when they need it because everyone eventually will. supervisor chiu: i would certainly agree with that point. i think we would all agree that health insurance is by far the better way to take care of send franciscans, as opposed to money to deal with the emergency after the fact. ok, thank you. supervisor campos: mr. egan, thank you very much for your hard work. i know that you had to spend a lot of time working on this, and we really appreciate your professionalism and the thoroughness with which you approach the task at hand. so, thank you very much. >> thank you, supervisors. i have to run to a meeting in five minutes, but i will come

back if there are any further follow-up questions. supervisor campos: great, thank you. colleagues, unless you had any specific things to add, i do want to turn it over to public comment. but let me simply say this, and it is actually something that i was thinking about as we were going into this meeting today. i see the office of labor standards enforcement, donna, and map -- matt, and i have to say that for me, my involvement around health care issues and the way in which the impact businesses and workers, came out of my interaction with the office of labor standards and, in fact, one of the first conversations i had as a supervisor was with the individual who was first charged with implementing the health care security ordinance, and i just want to mention her -- joannie chang, who is no

longer with us. i was just thinking about the conversations i had with her and trying to understand the challenges of being the first city to doing something like this and what it meant for someone in her position to be charged with implementing a piece of legislation that was so critical and so important, and anyway, i was just thinking about her because i know this is something that was important to her, and i think she is the one who, i think more than anyone else in city government, helped to educate me about the importance of these issues. so i just wanted to mention that. why don't we turn it over to public comment? i know there are many people who are here to speak today. because of the size of the crowd, i am going to limit

public, to two minutes per individual. as i call your name, please come forward. [reading names] if you could just line up in the center aisle so that we are not obstructing. good morning. >> i am professor of health economics at the university of california at berkeley. for the past three-plus years, i have been conducting a research investigation of the effects of the health care security ordinances -- order this's employer spending requirement -- ordinance's employer spending requirements.

according to my research earlier, we have done analysis of how employment has been changing, before and after the ordinance was implemented, comparing employment changes in san francisco to employment in surrounding counties, comparing it to other cities around the country. the bottom line is that we have found no discernible adverse employment impact of the ordinance in san francisco over the first two-plus years of implementation. that is true in the private sector overall, and it is true in a potentially higher impacted industries, such as the restaurant industry. there is, of course, a lot of concern about potential adverse employment effects due to the important types of models that mr. egan presented today, which attempt to project in advance what possible effect might be. what we are finding is that there has been, particularly in the restaurant sector, quite a

bit pass through of the cost of this to consumers, as you have mentioned. approximately half of the cost of the increased spending in san francisco has been absorbed by the consumers, and that is one of the reasons why we have seen very small to know labor market impact. mr. egan's analysis today suggested very tiny impact as well, impact well under 0.1% of employment of san francisco, so it is not really inconsistent with the overall analyses that we have found, and when you further factor in the potential price passed through is that we have been taking into account, they are not included in his analysis, but i believe we will not see serious impacts. supervisor campos: i wanted to just follow up -- i had a couple of follow-ups for you. i wonder if you could say a little more about -- i know you look at the issue of the surcharge that some of these restaurants, you know, how that

works. can you expand a little bit more on that. what is that -- what did you see in terms of job creation because of that? >> what we are finding is that in the absence of surcharges, you would expect that the cost of this would eventually get passed through to employees, but in certain industries such as the restaurant industry, it is possible to pass some of these costs on to consumers because of the demand for these types of products when it is affecting 2/3 of the employee is in the restaurant industry in san francisco, actually in restaurants with more than 20 employees. so the vast majority of employees are in restaurants which are competing against other restaurants which have the same ordinance, said they are able to pass this on. we found that about 25% of the restaurants we surveyed had instituted some type of surcharge. the median surcharge is about 4% of the bill.

at thatat that level, a restaurt could fully fund the required employee's spending requirement for health care in san francisco. supervisor campos: you indicated that usurp businesses, in terms of their view of the health care security ordinance. what did you find in surveying those businesses? >> we surveyed hundreds of businesses in san francisco in 2008 and 2009, and found in both years, two-thirds of the misses surveyed are in favor of the health care security ordinance. the same is true for the restaurant industry. two-thirds of restaurants tell us they are supportive of the ordinance. supervisor campos: finally, do you agree with the conclusions in mr. egan's impact report?

>> my reading of it is that there would be potentially thousands of jobs lost in san francisco. supervisor campos: 270 the first year, 105 in the second year. >> that is a minimal impact. furthermore, his analysis did not take into account, to the best of my understanding, at the restaurant industry has passed on the cost of the increased expenditures to consumers. that would further mitigate the effect and further reduce his estimates. thank you. next speaker please. -- supervisor campos: thank you. next speaker please. >> i work for a technology company that contacted me with a larger company. they were basically paid by the

company to pay me and to pay for my health spending account. last year, december 27, they made a quarterly deposit of $900 into a account. i was not notified of that and i was not aware that the account was in existence. when i found out about it and went to use the money, it had already expired. it was the use it or lose it option. i had over $900 from prescriptions that i needed to use, which i had to pay out of pocket. this loophole needs to be closed, so that people like myself can use the money that this ordinance has put in place to use. it is just kind of a hardship on me, someone who lives paycheck to paycheck, to have to pay that money out of pocket when it is supposed to be a benefit

supervisor campos:. supervisor campos: thank you. i do want to thank the workers there are coming out, sharing their stories. i know it is personal. let me read a few more names. [reading names] >> hello, supervisors. i have been a nurse at san but this could general for over 20 years -- san francisco general for over 20 years. i am here to refute the perception that young people do not need health care and do not get sick. [laughter] >> in terms of preventive care, women's health issues, men's health issues, tuberculosis care, screening. those are the kinds of things addressed by having access to preventive care.

as a post-anesthesia care nurse, i see many examples of unexpected trauma. young people are usually walking or bicycling, the victims of pedestrian auto accidents. they are usually the victims of the unintended crime,. usually, the criminal is not the one thing for their bills. it is something that we see. in closing, i just want to ask that you close this loophole so that our constituents in san francisco will be covered, and not at the cost of the taxpayer. supervisor campos: thank you. next speaker please. >> it is convenient to come after the others that just spoke because -- sorry, i am jennifer pilas.

we have had a 27-year-old with appendicitis. $20,000 for one night in hospital. we had a waitress hit by a car, $30,000. all of this was covered because we had full insurance. even if they had hra that did not zero out at the end of the year, it would not even come close. i would also like to say, as one of the restaurants turning a $1 per person surcharge, it offends me that there are so many restaurants that are putting a percentage on to the bills that we are paying and thanot providg the service. it is fraudulent and misleading. i love when people ask me, what is this $1 for? i can say that everyone has full health insurance, benefits and a

401k match. [applause] we have full benefits. i would just like to thank you, supervisor campos. i would love to see the day when the playing field is leveled and every restauranteur -- i also want to appreciate everybody who comes to my restaurants, for writing everybody with full benefits. supervisor campos: one thing that i keep hearing, it is impossible for restaurants and businesses to comply with this and still survive. what is your reaction to that? how do you do it? >> when i waited tables, i believe restaurateur's had the hardest job ever. that is not true. it is the dishwashers.

i think you can do good and still do well. i have never made as much as i do in my lifetime, and i have been in restaurants for 25 years. i also never had health insurance until i took over. i do not hold the party line and do not believe we cannot make it work. with the help of san francisco and our customers, who have been generous with their $1 payments, it is doable. supervisor campos: thank you. next speaker please. >> [speaking spanish] >> good morning. i work for the restaurants.

i am here because me and my co- workers, we are eligible for hra's, but most of us do not know about it or do not know how to access it. for a lot of us who do have money, the employers keep it at the end of the year because they do not let us know about it, or they make it complicated for us to access it, especially when our first language is not english.

for example, where i work, they told us about our account. when i asked them how to access it, all they told us was to call this number, and then they would help us figure it out. >> [speaking spanish] >> i had to pay some costs out of my own pocket. when i inquired about these accounts, i was told that i no longer had the money.

>> despite all this, my restaurant continues to charge customers this feat. -- fee. some customers ask what it is for, and it is for health care, even though we do not have it, and even some customers refuse to pay the fee. thank you for listening. supervisor campos: thank you. next speaker please. i have a few more names to read. [reading names] >> good morning. my name is edwin escobar. this loophole is unjust and unfair. i am a restaurant worker, here

in san francisco. three months ago, in april, i was in a bicycle accident in the city. if it was not for this health care ordinates, i would not be able to pay off the emergency bill. i got my bill from sf general, and it was $3,300 for a four- hour visit to the emergency room. i got some stitches, some painkillers. this year alone, i have been working part-time. this health care is really beneficial. it would be much better to close this loophole. supervisor campos: thank you. next speaker please. >> good morning, supervisors. we are here to support the closing of the loophole. the chinese workers association have been serving the chinese

community for 40 years now. our members have high rates of poor health because they are working long hours. i have heard of some people working 17 hours a day, sweat shop conditions. low wages lead to bad housing conditions in sro's, and that leads to bad health. my aunt was a low-wage worker. she was denied treatment. one day, she died in her sleep. she is survived by her two sons. for folks who do not get treatment, that cost would then be on the taxpayers.

also for the chinese community, a lot of people do not speak english. people get for notice. when people get health care, they do not even know if they provide health care, even though they have over 20 workers in their workplace. in one case, a worker wanted to testify, but she is afraid because of her workplace. her employer changed to the health spending account. you need to close this loophole. supervisor campos: thank you. next speaker please. let me read a few more names.

>> my name is paul carey and i work at a hotel in downtown union square. since 2009, when we implemented this health care system, we were not informed at all, like most people here, what it was for and how we could use it. the first year i find out about it was 11 months later, december 2009. we implemented in january. we figured out what this was about. by the time i figured it out, i had already lost $900. some of the workers who work 40 hours, and a half x-