first five-year financial plan. we have two-year budgeting starting next year. we've tried to incorporate that thinking in to this proposal. we have also tried to be conscious of the fact that we have a delicate recovering economy, and we do not want to take actions that will be overly burdensome and set us back on our economic recovery that restricts our cities' ability to recover, and grow, and create jobs. he does things in mind. on the financial planning picture, as you know, in our five-year financial plan we have projected that if we take no action even as the economy recovers, we will have an $829 million general fund deficit, due primarily to growing expenditures.

a significant portion of the solutions is on the expenditure side. those components include benefits, cost reduction, and pension reform, which discussed the changes to growth in the capital budget in contractor costs. a widespread attempt to share the burden of controlling the costs over a number of sectors of the city government. there is an additional piece in the five-year financial plan that calls for increasing our revenues. of our $829 million five-year financial plan deficit, about "% of those solutions come from new revenues. -- about 12% of the solutions come from new revenues. this is one of the central

pieces in our attempt to start beginning to take actions identified in the five-year financial plan to bring our budget back into structural balance. this item before you is not simply an attempt to throw a tax out there. it is part of a larger vision that includes pension and benefits reform. it includes revisiting our capital budget, controlling costs grows on other parts of the budget, and a revenue peace. it is part of a larger stretch of the mayor has committed to, and worked closely on this part of the five-year financial plan. this would only go into effect if the state has not taken an action to restore its sales tax rate, and it will only be

effective if our sales tax rate in the continues to remain below the level it has been for the past several years. just to sum up, last late this proposal would still allow us to be a half cent lower in our sales tax rate than we have been for the last couple of years, provides us some certainty against lost revenues from the state government, and given the circumstances and given that we have called for some level of revenue in the five-year financial plan, we have tried to design a proposal that would be economically responsible and will attempt to limit the impact on our economy while still providing some revenues that we need to retain for services in the city government over the next five years. with that, i am happy to answer questions. chairperson chu: into. supervisor mirkarimi: i am a co-

sponsor of this ordinance. thank you to the mayor's office for putting this forward. i think in the wake of fluctuating discussions from the state and with the governor's budget, with san francisco just putting its budget to bed, i think it is welcome in our ability to be able to assign, potentially, additional funds for public safety and human services, while doing something kind of unique. that is, while we in california are certainly experiencing the dial back of the sales tax, for a municipality to maybe have the option of increasing its by 0.5% -- this is an opportunity to work with the small business

community to be able to do so so that the impacts are well entwined in the most positive way possible. so in order to do that and to make all those variables meat well, there is an amendment we are putting forward. i will go ahead and let mr. wagner speak to the amendment if you would like, but we handed out copies. the amendment restructure's the timeline of the implementation so it is sensitive to all sides, stakeholders in this question. >> the amendment, and i have a copy so we can read it into the record if necessary -- as you say, the basic amendment would be to extend the time line that our local sales tax is tied to the state sales tax rate, so that if the state recomposes its

sales tax hours will not be additive to that. instead, ours will go away. currently, we started this proposal with a time line for those to be linked together only leading up through this election, under the thought the state may be calling for an election this year to we extend their tax. a subsequent version extended that to one year. the amendment we have been talking about would extend that now instead through 2016, which is the final year of our five- year financial plan. the idea being that we would lock in over the course of the five-year financial plan the principle that if the state reimpose is there 1 cent sales tax, it will -- the interplay

will last over the life of the five-year financial plan. we will discuss what is appropriate for the city and whether or not it is appropriate to continue to collect our local sales tax. but an automatic link between the two would no longer be in effect. i think there has been a lot of good policy discussion, especially on what the appropriate length of time is to have it in place.

we have had it pretty clearly from the small business community and the small business commission. they have endorsed this proposal with the condition they would like to see this timeline extended. we've heard from others the would also like to see that. we would like to balance that against our own financial planning constraints. i think the date set forward in this are a reasonable middle ground. they are tied nicely to a five- year financial planning process and would give us some financial certainty moving forward. that is the amendment. there are also a couple of smaller cleanup changes that do not affect the principal legislation, but those are the major pieces. chairperson chu: just a quick clarification to the city attorney or to you.

with regards to the provision that it does go away if the state were to reimpose the sales tax, one question i did have -- in a situation where we had the city sales tax that went into effect, our rate would be lower than what it was. if the state came back, the 50 cents would go away, and we would be known -- no worse off than we were before. what happens if the state does not impose a full 1%? say they imposed a 0.75%. would that still impact our 50 cents sales-tax -- our 0.5% sales tax? >> we do address a scenario where the state would impose a partial sales tax. under the current version, that would not cause our have sent to

go away. under that scenario, we could end up with a sales tax a quarter cent higher than we have been over the last couple of years. one of the amendments to the legislation is to change that so that if there is a 0.75% state sales tax imposed hours would go away. so if the state we imposes a sales tax of 0.5% or less, hours remains in place. our sales tax rate would be no higher than it has been over the past several years. if they impose anything greater than that, hours -- ours would automatically be ascended -- rescinded. chairperson chu: we do have an economic analysis from the controller's office and a report from the budget analyst.

>> been rosenfield from the comptroller's office. mr. egan is on a well-earned vacation. i thought i would briefly touch on a couple of the highlights from our report, which we issued yesterday. to start with, just a bit of background on what the sales tax looks like in san francisco. this is one of the more complicated revenue streams statewide, with different components laird on by different levels of government, flowing to

the benefit of different people. if you look at our current 8.5% sales tax rate, as mr. wagner noted, down from 9.5% on june 30 -- almost 2/3 of that flows to the state itself. a small piece is then reallocated back out to local governments. about 1% of it, in a sense, flows directly to the city's general fund, and that rate fluctuates in different jurisdictions, based on choices voters have made. in san francisco, we have about 1.25% of the 8.25% that flows to in part, the transportation authority, and our schools. in effect, this proposal would create a new 0.5% that would be dedicated within the local category to support current the

general fund supported expenditures -- currently general fund supported expenditures. as we discussed in the report itself, our sales tax rate in san francisco is comparatively higher than most other jurisdictions in the state. with this change, we would have the highest sales tax rate of the largest tent cities in california. as you can see from this chart, this proposal would move our sales tax rate in san francisco from kind of mid to high in our peer group in the bay area to the highest, at 9%. this does not make any assumption about other jurisdictions pursuing sales- tax rates increases. i am not currently aware of any impact in the bay area. there are currently no proposals for transportation or other general fund expenditures in

other places. as of today, this is what the world looks like. the issue of equity, of course, arises whenever we talk about different revenue or different taxes. generally, sales taxes are considered to be inherently regressive, because low income families tend to pay a larger percentage of their income on goods subject to sales tax and a wealthy family or a business would. this is somewhat mitigated in san francisco by some unit misses to our sales tax base and our consumption of goods in the city. in san francisco, the greater percentage of our sales tax is generated by non-residents and businesses. about 30% of sales taxes generated in the city -- about 37% of sales taxes are paid by visitors who are tourists or do not live here. about 14% are a result of

business to business sales. so about half of the sales tax is not paid by residents directly. this is further mitigated to a point in california by the fact that california has a state sales tax system that exempts certain types of goods and services from sales tax. food, for example, is largely exempted from sales taxes. that would be one of the more progressive components of a sales tax in states where food is taxed. in terms of the impact on the local economy, there are with the two effect here. they pushed downward on job growth in the private-sector, estimated in our modeling at approximately 150 jobs per year for the duration of the tax. that is offset by more money available for government spending.

the net is an economically positive 59 jobs. i wanted to hit a couple of high points. chairperson chu: a quick question. on page four, the comparison of san francisco sales tax rate compared to the 10 neighboring cities -- is it fair to say, because you have held this data, showing what emeryville and berkeley, the rate card is -- currently is -- this is reflective of the drop state why? >> correct. all of these jurisdictions would have been a percent higher in month and a half ago. chairperson chu: in terms of other actions, we are not sure if other jurisdictions are doing a similar manner. do we have any information about whether some of these other local organizations or institutions are going to be

considering this? >> i am not aware of any on this november's ballot, but have not researched the question. chairperson chu: thank you. >> it is worth saying that this is a dedicated tax year under prop. 218, so other jurisdictions would have to pursue a 2/3 but as well. that might be having a chilling effect on other proposals. chairperson chu: mr. wagner? >> the other piece of the answer to that question has to do with the timing under which the state finalized its budget. so just as we were waiting to hear news about whether the state was going to extend its sales tax while we were going to the process of our deadline to submit measures for the ballot, so were other counties. by the point in time where the state budget was finalized, i

think in a lot of places it was too late for them to submit a measure for the ballot, had they wanted to. we started in this process earlier in the spring, initially with the understanding that we were not certain what the outcome of the state was going to be, but that we would have to spell that measure as a contingency. had we awaited the outcome of the state budget, we would have been late as well. so i think there may be a timing issue. and i think it is possible that you could see some actions by other counties that are similar, going forward once they have the time to develop this proposal. chairperson chu: thank you. mr. rose? >> madame chair and members of the committee, i think both mr. wagner and mr. rosenfield have provided you with comprehensive reporting on this matter. the only thing i would add is that mr. rosenfield has advised

our office that projections of a 1% sales tax would be $120 million, so the half percent would reconcile to $60 million. as you know, if this is divided equally, if the board decides that would be an equal distribution, it would be $30 million for public protection and $30 million for children's services and seniors. we consider approval of this legislation to be a policy matter for the board of supervisors. supervisor mirkarimi: just a quick question to either the controller or budget analyst were mayor's office. is there any city outside of california that has sales tax at the magic 10%? who are those? i mean, it is tangential, but i

know how cities are trying their best because of the obvious, i think -- >> i do not know that i can speak to every jurisdiction in the country. but in the report itself will provide examples of some of the higher tax rates in other major cities in the u.s. on page 3. these include chicago, which has a 9.75% sales tax rate, seattle, which is 9.5% -- supervisor mirkarimi: over town. that was my question. is there anybody over 10? >> not that i am aware of. i think there is probably a psychological barrier. before, prior to the 1% rollback, there were some smaller jurisdictions in california that were a little bit over 10%. none of the major cities. but we would be happy to get you the full list and provide that

to you. there were a couple of them. chairperson chu: thank you, and figure for the reports. all other members of the public who wish to speak on this item? >> jim lazarus, chamber of commerce. there is a state report that just came out. riviera and avalon were both over 10%. another in the bay area was at 10% before the robot. the chamber appreciates the efforts of the city on the amendments regarding the roll back issue should the state go forward with the restoration of their tax rate in the future. we are prepared to support this ballot measure with the rollback language that is before you today. we believe it is important that we not get too out of sync with the other bay area communities. we happen to have some state legislative authority that i think has been around for decades, which is why this measure could be before you today.

communities do not have the authority to raise the tax rates without implementing state legislation. san francisco has had legislation on the books from sacramento and has allowed us to go up three-quarters of a percent. it has never been presented to the voters until now. i do not know whether other bay area communities have unused authority. but clearly there is a competitive issue when you can go shopping in one county and pay an 8% tax at the moment, and if this passes next year you will be paying a 9% rate in san francisco. the san would be true of taxes on restaurants or any recreational activity. it is a concern to our business community that we not get out of line with competitive bay area locations. however, we were living within 9.5% tax rate through june 30.

with the appropriate role back language before you, we can support the legislation. chairperson chu: thank you. are there other members of the public who wish to speak? seeing none, public comment is closed. can we take the amendments without objection? and this item, because it has been amended, does need to sit and allow for additional public comment. can we continue this to a second -- to a meeting on this coming tuesday? that will be the case, without objection. do we have any other items before us? >> that completes the agenda for today. chairperson chu: thank you very much. we are adjourned.

>> san francisco is home to a renowned civic art collection that includes a comic works -- iconic works by local and national artists integrated into our public buildings and six basis. the arts commission has struggled to take care of the priceless collection because of limited resources. in an effort to gather more

funding for the maintenance of the collection, the art commission has joined forces with the san francisco art dealers association to establish art care, a new initiative that provides a way for the public to get involved. the director of public affairs recently met with the founder and liquor -- local gallery owner to check out the first art care project. ♪ >> many san franciscans are not aware that there is a civic art collection of numbers almost 4000 works of art. preserving the collection and maintaining it is something being addressed by a new program called art care. it is a way for citizens to

participate in the preservation of the civic art collection. with me is the creator of the art care program. welcome. the reason we wanted to interview you is that the artist in question is peter volkas. why is he so important to the history of san francisco art? >> he is a very famous ceramic ist. knowing the limitations of clay, he got involved in bronze in around 1962. he was teaching at the university of california, berkeley. >> your gallery celebrated the 50th anniversary of continuous operation. you are a pioneer in introducing the work and representing him. >> i have represented him since

1966. i was not in business until 1961. he made a big deal out of working in clay. the things he was doing was something never seen before. >> it is a large scale bronze. it has been sitting here of the hall of justice since 1971. talk about what happens to the work of art out of the elements. >> the arts commission commissioned the piece. they did not set aside money for repair. it has slowly changed color. it was black. it has been restored. >> it has been restored to the original patina. >> there was no damage done to

its. i do not think there were any holes made in it. they have been working on it for six or eight weeks. it is practically ready to go. i am very excited to see it done. >> over the course of the arts in richmond program, we have added almost 800 works of art into the public space. maintaining that is not something that the bond funds allow us to do. this is why you came up with the idea of art care. >> i hope we get the community going and get people who really like to be involved. we will give them a chance to be involved. if you are interested in art, this is a marvelous way to get involved.

there is work all over the city where every year ago. -- there is artwork all over the city wherever you go. my idea was to get people in the neighborhood to take care of the pieces and let the art commission have the money for the bigger pieces. >> i was talking to the former president of the arts commission yesterday. the 2% ordnance is something he helped to champion. >> it is all over california and other states now. we really were the forerunners. it is a wonderful thing to bring the community into this now. people have seen art being put into the community. this has not been touched by any graffiti. itju