>> good evening. welcome to the july 11th, 2011 small commission -- small business commission meeting. public comment will be taken on each item. speaking card are available at the front table.

>> item two, approval of the march 11th minutes. expiratory documents. >> i move. >> to we have a second. >> all in favor. >> we see no objections. >> commissioners, item three, approval of the may 9th, 2011 meeting minutes. >> i moved. >> i second. >> next item. >> you are now on item number

four, general public comment. this allows members of the public to comment on items that are within the commission's purview. >> do we have any members of the public that would like to comment on the matter that is not in the agenda? seeing none, next item. >> item 5. >> discussion and possible action to make recommendations to the board of supervisors on board of supervisors file number 110749, business and tax regulations to fund the public safety programs and services to children and seniors. the ordinance amending the san francisco business and tax and religions code by adding article 16-a to provide funds for public safety programs and services to children and senior citizens in the city at a rate of one-half of 1% for a time of 10 years.

>> we have a presentation here. i will try to be brief and leave time for discussion. i am the mayor of's budget director. i appreciate your time inviting me here to speak with you on this measure. what i am here for today is to ask your support on behalf of the mayor for a proposal that he has submitted to the board of supervisors with the intent of placing it on the ballot this coming november. the essence of the proposal is that as you all know, the state sales tax rate effective july 1st declined by 1% bringing the

tax rate from 9.5% to 8.5%. this was done over the objection of the governor. we would like to get the sales tax at the existing rate. we would like to offset some of the deeper cuts that were on the table absent that extension and the extension of some other revenues at the state level. as this discussion was playing out at the capitol in sacramento, in the mayor's office, we were developing the mayor's budget proposal and looking at some of the proposed cuts that were on the table and ultimately made the decision that the uncertainty about what was going to happen in sacramento and what the implications of that work for the city which were unacceptable and we did not want

to wait and see what happened, we wanted to take matters into our own hands. as a result, the mayor has proposed the measure that is before you. essentially, what it would do is that it would replace half of the 1% reduction in the sales tax rate with a local sales tax. again, our sales tax have just decline from 9.5% to 8.5%. we would still see a reduction in our sales tax rate compared to where we have been over the past couple of years. at the same time, that will enable us to bring in some revenue that we can use to protect the city and protect the city's budget against the cuts we have been seeing over the past several years and we anticipate seeing over the past -- over the next several years.

the proposed sales tax measure is a special tax as required, we cannot put a general tax on the ballot unless there are legislative seats also on the ballot under the california constitution so this requires a 2/3 vote of the people. the tax needs to be dedicated as a special tax. what is proposed are a couple of things. this falls into how the mayor has been talking about his priorities for the budget over the past several months. some of you have heard the mayor may be one or too many times about how you'd like to see a budget that is solvent. a safe part of that equation is what we're talking about today with this measure. when he talks about having a

safe city, he talks about two things. he talks about public safety which is the core police and emergency response services and that is obviously a key component of safety. he also means a basic social safety net, a minimal level of social services that help people in our city feel a sense of personal safety about their future, about their health care, about their economic stability. so, the proposal that is before us would be dedicated to a fund that can be used for both of those purposes. this could be used for public safety programs and i believe you might have the expenditure plan in front of you. that gives you more details, it can be used for both of those types of services. also, a social safety net programs for seniors and children including child care that is significant a factor for

a lot of the workers and employers in our small businesses and in the city. in terms of the mechanics of this budget, there are two critical pieces i want to point out. the first is that there is a 10- year sunset so that this would not be a proposal that goes on in perpetuity. the second is that there is a piece of this legislation that if the state and of extending their 1% tax rate, this would invalidate this local sales tax. the idea here is we did not want to put the tax on the ballot, only to see the state restore their full 1 cent and then the effect is that our net tax rate goes up by half a cent. we would like to keep the tax rate at or below the level that was over the past several years.

if the state does impose the sales tax rate, this tax will cease to be collected for the first year of its operation. after the first year of its operation, the two would be decoupled from one another and our tax level with no longer be dependent on the state. there is that trigger which is an attempt to protect us from having our tax rate inadvertently escalate beyond where it is right now. the purpose of this legislation is to provide us with a source for offsetting the impact of cuts. you have no doubt been hearing about what some of those potential impacts are. in the currently adopted budget, there are several significant impacts of the past

three years, we have had literally hundreds of millions of dollars in reduced revenue from the state government. of course, those include basic social safety nets that provide health and social safety services for our residents. a lot of the employees of businesses small and large. child care adoption's which were a significant issue this year and are of a very significant economic issue for the city. then we have some significant changes coming both in the current year's budget and in the next year's budget that will have a real impact on our city's operations and the services that we see on the streets. the biggest ones that we are grappling with his public safety realignment. under that proposal which has been approved by the legislature and governor, the state prisoners from the people who

are currently in state prisons will now be sentenced to county jail. we will have a large increase in our county jail population. people that would otherwise be going to state prison. secondly, people on the state parole will be transferred to the jurisdiction of the local probation department. again, we will see hundreds of former state parolees under the jurisdiction of the city and county of san francisco and our adult probation department. that will put a significant strain on our criminal justice resources and on our public safety and we're working on how we will have the resources to try to keep ourselves in a stable position so that we don't see an impact on the streets of our city and on the clements that small businesses are operating.

the state will transfer services to state governments and local governments. to city and local governments. we have the legislature's proposal to eliminate or condition the redevelopment agencies which is not directly addressed by this measure. there is an overlap. a lot of the economic activities have an impact on our economic climate in the city. within the current state budget, there are a number of figures in the budget and what the state did to balance this budget as i am sure you have heard is rather than actually does make all the cuts that it needed to get to balance, the state made an aggressive assumption about the revenue that will be coming in over the next year but essentially said

that if that revenue does not command, there will be triggered some place said that if we don't see the revenue, these cuts will go into effect. despite the fact that the state has passed a budget, we are potentially going to see additional cuts to public safety, child care, other services in the city. i know that the issues of government service are certainly relevant to this body, i want to put this in perspective in terms of why we took this approach and how the impact on businesses in the city is going to be felt relative to other people who are sharing the solutions of this budget. the mayor as he was developing his budget was very concerned about not trying to put a proposal in the budget that was

going to inhibit the recovery of our economy and he understands that it is critical and you cannot generate a little bit of revenue at the expense of killing the businesses and the economic activity that supports our budget and that supports our economy. he is very mindful of the implications of any revenue proposal that he is making. within our current approach to the city budget, the mayor introduced the city's first five-year financial plan and as a result of this, there was an approval by the borders which requiring us to do and look at the physical condition and proposed policies for how we will address any budgetary shortfalls. in that five-year plan, we project that over the next five years, if we do nothing, even as

the economy recovers, we are going to see our general fund budget deficit grow to $829 million. this is a big number, but of course that is if we do nothing. in response, the mayor has also proposed several financial strategies as part of that plan. those financial strategies include one piece of those financial strategies and revenue. those opposed to be about 12% of the solutions to that problem in the five-year financial plan. this proposal that is before you is an attempt to provide a solution to that piece of our problem. the rest of the solution was coming from the expenditure side which means reducing city costs and pension reform, which the mayor has been working very hard to implement.

it means reducing the size of our work force and the cost of doing business as city departments and reductions to the amount that we're able to allocate to the contractors, a wide range of policy approach is designed to close that gap and bring this back into sound basic structural financial balance over the next five years. the approach that the mayor has tried to take is to spread those -- the burden of those solutions out over multiple participants in our cities government and our budget. the idea is that we know there will be sacrifice in order to bring the budget back into balance and the idea is to have an approach that depends on shared sacrifice where we are asking to have revenues be part

of the component of that shot agee and we're asking labor to participate in that strategy. we're asking our city departments to participate in- energy. it will not be easy but i think it is a balanced proposal and three court proposals -- core proposals. i think another point that i want to make sure that i can indicate to on behalf of the mayor is that he does not take any tax proposal lightly and he would like to be conscious the impact this has on our economy. that said, we think we have chosen very carefully here in that we know that there are multiple revenue proposals that

were floated around the city hall that could have ended up on the ballot. many of which could potentially have been significantly -- could have proposed a significant hardship on the city. we thought that this was an appropriate and measured approach. this allows our sales tax to still be lower than it has been over the past several years by half of a point and it will allow us to protect some of those basic services that we rely on to provide the economic climate that attract tourists. this will provide us as i said with some more stability and uncertain about what our financial condition looks like.

we are trying to take a long- term approach and i think this will allow us to distance ourselves from being constantly at the whim of the policy decisions that are happening in sacramento. this will give us a revenue source that we can use to make some of the decisions about our budget and our services more independently and help us do a better job and predict what our finances are and respond appropriately. i am happy to answer any questions and i really appreciate your time and i think you on behalf of the mayor. >> thank you. we definitely have some questions for you beginning with commissioner -- >> i have two questions. do you know what the other bay area cities are doing right now? are there proposals to raise

their sales tax also? >> that is a great question. i have heard talk about proposals, people floating the idea of the proposals. my expectation would be that we will see more concrete proposals start to emerge over the next couple of months in anticipation of next november's elections. november 12th is an election where there are two issues. the first is the timing of the state budget, by the point that the budget was finalized and it became clear that the governor would not able to get republican support for the tax extensions. it was late for a lot of local boards to get the measure on the ballot. we would have been out of time to place this measure on the ballot in time for the elections. we submitted our measure with

the mayor's budget not knowing what is going to happen at the state and that is why we have a trigger to allow for this measure to either go into effect or not going to affect -- not go into effect. we are waiting for that contingency. by the time that they have a final outcome, it was too late. in addition for a lot of governments, this will not be the freedom to place a general tax measures on the ballot. a general tax measure is a 50% threshold as opposed to the 2/3 threshold. i would expect that you would be more likely to see other governments propose a general tax.

this is a non answer to the question. the real question is we don't know what everyone is going to do. >> this makes you wonder if this would expire if this goes up to the state. >> we have had a lot of discussions with other business community stakeholders about that. that.