organization called labs, have discovered -- promulgating now standards -- standardized set of standards for good practice for these types of corporations. organization is called ic alliance. they have published standard setting codes, impact codes, assurance coats, and credibility principles for third-party vera fires. consequently, we can adopt rules and regulations which includes these types of alamance into the requirement of the third-party verify your peer that way, if the organization -- we verify a given third-party verify error has verified the benefit corporation good, then we know they are all applying

the same set of international standards to that evaluation. with those amendments, we think it is a very solid piece of legislation. our lbe's are protected 100% in this legislation, as our san francisco corporations and nonprofits. we support this 100%. happy to answer any questions. supervisor chu: i do have a number of questions, but i would like to ask the budget analyst if he wants to present on any changes made to the reports. >> members of the committee, madam chair, in response to the committee's questions, we had initially looked at construction contracts and give you the estimated impact of that. we also have now looked at professional services contracts

and concluded that you really cannot tell what the impact would be by granting discounts, whether the lbe, benefit corporation, or whatever. of professional services contracts, cost is just one factor. therefore, the city cannot track the result of granting any discounts specifically related to what the additional cost would be because of the various other factors that were determined in a sporting professional services contracts. we also, at the committee's request, looked at various commodities. the only one that was applicable -- we did a small sample of automobiles and found in this small sample there could be an additional cost of about $17,108, 2.9%, based on this sample that we did.

our recommendation, we certainly consider this legislation to be a policy matter for the board. with respect to the involvement of the hrc, presidentchi chiu has incorporated that into the legislation. supervisor chu: for commodities and professional services contracts, this impact contract between $100,000.10000000 dollars -- $100,000 and $10 million. generally, a lot of commodities were purchased below the $100,000 threshold, except for the purchase of vehicles. i am also wondering what the impasse on the muni is. would this apply to muni? i would imagine they purchase more vehicles or replace them with parts that are more expensive compared to what we do generally. so this is perhaps a question to

the sponsor or hrc. does it apply to muni? >> i do not know. let me ask nicole to come up. she is our senior contract compliance officer and acting manager of the division. >> good morning, supervisors. a lot of the contract law to not apply to muni. there are several exceptions. we would have to consult legal counsel if this is one of them. supervisor chu: did we consult with muni in the process of developing this legislation making sure that apartments new with this was? >> we reached out to a number of departments. we had a meeting with you see. i was conferring with staff whether we touch base with muni. vehicle contracts are generally significantly larger than $10 million.

assuming that, this would not impact that. happy to also touch base with you one more time to verify that. supervisor chu: i also believe relative to the purchase of vehicles, muni has replacement parts that are probably higher ticket items, especially with our light rail vehicles. i would hate to add an additional burden on the muni system. >> as you know, hrc does not oversee implementation with muni. they have their own implementation department, and oversee their own implementation. they actually oversee their own chapter 12 of implementation as well. so we have a limited contact with muni. supervisor chu: with regards to the benefit corp., in terms of being a california-registered benefit corp., would this discount applies only to california-based companies, or one other registered benefit corporations outside of the state qualify as well?

>> you would have to register with california. supervisor chu: if a corporation registered with california, it is a requirement to be a california-based company? >> there is not a requirement to be a california-based company, but you need to get this agreement with the state. supervisor chu: so we could be registered with california but it may not be a california benefit corporation? >> correct. again, that is why it was important for us to make sure we have protection for our local san francisco businesses that i described before. supervisor chu: i appreciate that. i know both your office and ours has worked hard to make sure that we have additional lbe programs available, in particular for micro businesses. the one area where i am still concerned about this legislation from a fundamental point of

view, what the legislation would do, we are conferring an economic benefit to a corporation which does the necessarily have a benefit there confirm back to the city and county of san francisco, so we are saying, if you are a registered corporation, registered with the state of california, regardless of whether you are in or out of the state and would you put benefits into california or nevada, we are still going to give you an economic benefit. there is no tie in to the city and county of san francisco. while i appreciate the benefits, making sure that we are not disadvantaging local businesses, i am not sure why we would provide an economic benefit to a company that is outside of our immediate area that is not confirm benefits to the local area. the one example i have with this that makes me feel uneasy is, for example, if we had b

corporation that might be located somewhere outside, whether in a different state or not, that corporation could potentially win out over an employer that is not necessarily san francisco-based, not considered a local business, but could be right across the bay in oakland, which is employing regional employees and perhaps san francisco residents. i am not sure that we would valley that b corporation status as a benefit to the city as i would accompany partner at is employing san francisco residents. that is where i am fundamentally grasping on whether or not this is a good idea. if there is a way to tighten the legislation to do that, where the benefit does confer to san francisco, i would be much more open to it. right now, i do not see how it is we are making sure that we are delivering an economic benefit to a company, wherever

they might be located, and that there is a benefit back to san francisco. i do not see a benefit. >> we have certainly thought about how we end up certify these benefit corporations and how we think about verifying the benefits they are providing. as the director can attest to, it is a very challenging the administrative process to go through this. i do understand the idea of thinking about where this benefit will go, but -- supervisor avalos: we are supposed to have those turned off. >> thank you, mr. rose. supervisor chiu: i know that is difficult from an administrative standpoint. how do we ensure that there is -- if there is a california company that is not a benefit corporation, that you have

preference to provide or allow that to win a contract over a benefit corporation that could be doing business in a different way. we could potentially consider an amendment to again tier who gets to win and when the discount is provided. i asked the director about any thoughts on this specific concern. >> we have discussed it in the past. we have looked at more of a generalized benefit to anyone and to any organization, whether they be san francisco-based or not. our commission raised that as well. that is still one of the remaining issues, and i think, the coalition still has that issue as well. there may be a way to regionalize it. i do not know of the top of my head how that would work. we would defer obviously to the supervisor for his thoughts. again, we have not looked at it from that perspective.

supervisor chu: i would be open to taking a look at how you might be able to narrow it so that you would be able to tie back in the corporation -- b corp. -- that does confer some type of benefit, whether employing san francisco for bay area residents. we know there is a cyclical impact, folks across the bay coming here. they shop here, they dine here. to me, that feels more probable -- palatable than opening up to any corporation, regardless of where you are appear that would be something that i would be interested in exploring. the other thing that i am also wondering about is -- the issue of having a third-party verify your verifying whether the b corporations are providing a benefit. i do not think that addresses which corporations do get

conferred as economic benefit. hopefully, they are a b corporation that infers that benefit back to san francisco or the region. the other thing i wanted to know about was whether you consider it a time limited approach on the legislation. right now, there is a two-year window where we do and the vibration process every six months. given we do not know how large this will balloon, b corporation status is something that is relatively new. we saw 21 corporation that we think have registered with the state. we did a quick search and showed 144 corporations in california. so i did not know what the right answer is and how quickly that will grow and what impact that will mean for us. i wonder if there would be -- if you would be open to a time limit approach, given a few years' worth of history, and then the board would have to affirmatively act given evidence

to react to this bid preference. is this something that you would consider? >> just as a point of clarification, this is something that took us a couple of weeks to figure out. there is a difference between a certified b corporation and a california benefit corporation organized under the state of california. i thing there is only 21 or so organized as california organizations under the california corporation code as benefit corporations. there are many more b corporations, and these third- party vera fires certify companies as b corporations, even though they are not certified benefit corporations. so there are out a large number of those, but the standards upon which they are based are buried. that is why supervisor chu said to make sure that these a california corporation never benefit corporations organized

under the california corporation code, rather than what is being termed as a b corporation. those are two different things. the point is well taken. we did not know how many of these corporations will become benefit corporations in the future years. supervisor chu: i understand there might be a difference between what you find on google and what is actually certified by the state. given that it is relatively new , and now we would expect additional companies to join in, we do not know what impact would be dead and how large it would be. even from the budget analysts report, we are not able to put a book and what the financial impact would be. i wonder if you have figured out a time limit approach to go into effect for a three-year period of time, and then based on reports, demonstrations of success of the program, the board may reup it.

have you considered that? i am considering it right now. supervisor chiu: and that is something that i'm willing to consider. it is likely we will not see a single award to benefit corporation at a minimum. we know for at least nine months or longer. two years is probably too short. three is probably enough to get a sense of where this is going. i am open to that. if that is what other committee members would like to see, if we could do that today, i am open to that. responding back to your first issue about bay area businesses. looking at the legget proposed and how we protect san francisco businesses. i think it could be used as a model for what i would define as bay area non-san francisco businesses. the application of this discount and not adversely impact a bay area non-san francisco business,

unless the benefit corporation is also in the same region. does that make sense? supervisor chu: it does. i suppose i would like to think about how that works out, in terms of the legal language. it sounds right, like it is getting to what i'm interested in. supervisor chiu: ok. i want to take a step back to talk about the thrust of this legislation, why we are doing it. we have had a international debate about the social responsibility of corporations. this field has been a response to insure we have companies that are not just doing well, but are doing good. it is important for san francisco to say we want to encourage this. i am concerned the more we would all this away, the more it does not become a real signal to the benefit corporation world that san francisco is a city that actually wants to inspire these

businesses, wants to see these businesses grow and thrive, and wants to do business with these businesses. i hope we can take a step back to understand that is what we're trying to do. i appreciate the points around ensuring our lbe's and nonprofits are taken care of, that we are not providing these benefits to the chevrons is to reduce subsidiary, for example. at some point, i think we need to make a decision on whether, as a city, this is the type of company we want to help foster. i hope that people focus on the bigger picture. supervisor chu: thank you. the two points i have laid out -- i appreciate you being open to working on how we define the benefits and companies that do that and work. having a regional entity that the not lose out is important for us. in terms a bit time-limited approach, i am open to working with you on that. taking a step back, it is one

thing to say from a lofty perspective, i want to support a company that offers a benefit. who would say no to that? but if you actually took a look at what the budget analyst says, what ab 31 says, b corporations -- that is a very broad definition. what does that mean if i. a product i market to underserved communities? does that make me qualified? i suppose there is just a desire for me to better understand, are we capturing a beneficial corp.? the discomfort for me is why we are providing this economic benefit on an organization where i do not know if the benefit is necessarily as tight as we would like. at the very least, let's deal with benefit corporation that are regionally impact all. that is just my thought on it.

supervisor chiu: i am happy to suggest, if we could, if the committee wants to move forward with this, to put in those amendments to limit this to a three-year program that would require another affirmative vote by the board of supervisors to continue at the end of three years. i think i would suggest that the three-year time period, three years after the effective date of this, which cannot be 90 days until after passage, and then the additional language around the bay area non-san francisco businesses, as i described. i am happy to work with you and your office on specific language to address that. by the time this gets to the next hearing, we have language before us. supervisor chu: i think that makes sense. i do not know what the other committee members think about those suggestions? supervisor avalos: i think those

makes sense. supervisor chu: if we can, i will make the motion to amend the language of the legislation to create time limit approach where the preference sunsets after three years after the effective date of the legislation, pending affirmative action of the board. of course, all the provisions of provide reports to make sure we are detailing how the program is working out will be the same of what -- as when you have now. and then to make an amendment to indicate we are talking about regional -- it does not bump up a regional partner. supervisor chiu: when you say regional, you are referring to the nine bay area counties. do you have a sense of what regional means? supervisor chu: i'm open to that, but the region being the employer generally who would

live in san francisco. it is possible we have employers, individuals or residents that are being serviced by those way outside of the area. i am open to that definition. supervisor chiu: are you thinking l.a.? i want a good understanding as remove ford. supervisor chu: i do not have an answer. supervisor avalos: i kind of like the nine bay area counties. that makes sense. willing to throw in sacramento. they are a major player in the region as well. that is just off and what i am thinking. i was thinking more regional government. looking at in nine bay area counties, like the abag. supervisor chu: perhaps we can make an amendment -- supervisor chiu: why don't we generally stayed the amendment and american mark and the

language. that will be put on the board of supervisors website in time for the hearing. supervisor chu: generally, we are looking for regional companies, so that would be the amendment, it if you could work with us and 0 cbd, to come up with a good definition of what regional might mean. that would be helpful. >> just in terms of logistics, madam chair, getting back to the clerk, i do not think it will be possible to come up with specific language for you. perhaps this is the kind of thing that you could work through and have your language repaired it and make the amendment at the full board. i do not think that would be something substantive, just for clarifying what you want this to be. without a language today, i do not how you can give a product to the clerk. supervisor chu: if it would be amenable to the sponsor, i think

we would benefit from a one-week continuance. make sure that we put in all the correct language and schedule it for the next budget and finance committee hearing and then see with the definitions are and then send it out. supervisor chiu: let me ask this city attorney through the chair. will that be enough time to get an amendment? i've been we would probably needed by today -- supervisor avalossupervisor chue narrowing the scope of it, it would not be sensitive. >> you are just clarify what the definition means, right. supervisor chiu: so the idea is to have it sit? supervisor chu: perhaps we could continue the item for one weekend and work on the language to dispose of those issues. then they would not be sensitive, so then we could forward it out that week. supervisor chiu: and i would love to hear from other

colleagues to make sure there are no other issues. supervisor avalos: i do not have any other issues. i will be taking another look at it before next week. i actually appreciate the work you have done since the last meeting. clearly, you took a lot of our input and concerns, and made amendments based on that. i appreciate that work. supervisor chu: thank you, supervisor. >> if we are going to continue this for one week, i need the amended version by tomorrow afternoon. i do not know if that is possible or not. >> i think the plan is, over the course of the week, to come up with the right language and then you would make the amendment during next week's committee meeting. that would not be a substantive amendment. but you do have an amendment as a whole in front of you incorporating some different issues. supervisor chiu: we will work as hard as we can over the next day to incorporate something that

can get into a version that we can provide to the clerk by tomorrow. supervisor chu: that would not be necessary either because you would be narrowing the scope of the legislation. if we made those amendments next wednesday, it could not be substantive and would not cause a continuance. we have an amendment as a whole that supervisor chiu has brought forward and described. can we take that without objection? supervisor chiu: the deputy city attorney made one small change about probably have to change again at states the ordnance becomes effective 30 days after the passage but becomes operative nine days after the passage. this was something advised our deputy city attorney. i want the record to reflect what the language states. supervisor chu: colleagues, can

we take the motion to accept the amendment as a whole? without objection. to the amended version, can be continued for one week? ok, we will do that. thank you, supervisor chiu. i do not believe we have any other items before us. my apologies. why don't we reason that vote. without objection. we will take public comment on the item and we will also hear this item next week. any members of the public that wish to speak on item 10? >> good afternoon. thank you for having us. thanks to supervisor chiu and theresa sparks from the human rights commission. i work on community development. i would like to speak briefly and then passed over to the benefit corporation behind us to speak to other companies and how this impacts them.

first off, we are a nonprofit. we are in support of this proposal. just to answer a few of the questions brought up earlier, yes, there are 160 certified b corporations in california. that does not mean they are incorporated in california. also does not mean that there benefit corporations. theresa spoke on this earlier. she nailed it. what we do. we require within two certification terms for b corporations, that they consider becoming benefit corporations within four years. still, this does not apply to all certified b corporations, depending on their structure. i would also like to go over what the benefit corporation is quickly. benefit corporations are given for three elements. their purpose-driven. there transparent. 3, they are accountable to maintain its impact. they are purpose-driven and that they must create material policy

impact on both of society and environment. two, that they are transparent, so the report on their overall social and environmental performance, as look at by third-party standards, and finally, accountable to that impact. that means they expand fiduciary duty to require consideration non-financial interests, such as a society and the environment. thank you. i look forward to speaking with teresa and diving deeper into our assessment. supervisor chu: thank you. next speaker please. >> good morning, supervisors. thank you for the our opportunity to speak in support of this legislation. my name is alexia. i am the co-founder and vice president of darma merchant services. we are a san francisco company. all of our employees are from the bay area. the reason we registered as a

benefit corporation is, as many benefit corporations do, we support nonprofits with the% of our gross profits back in the community. we registered as a california benefit corporation to protect that commitment, which is not protected by other corporate structures available to us. we are in alignment with -- in support of this legislation for three reasons. we believe this is an alignment with san francisco's commitment to sustainable and responsible social businesses. we think this is a strong stand for the type of businesses san francisco would like to work with company san francisco on the map as a progressive, socially responsible city that 6 do business believe the same. we also believe this will incurred more businesses to register as california benefit corporations because they will see the benefit to doing so through these contracts with the city and discounts. also with the ability to contract top