revenue. today we are collecting about $400 million. that is an additional burden on the economy. that could be an additional burden in the future on businesses. under our current system the industry burdens are the 1.5% rates on payroll. we can shift the burden to promote job creation. the second criteria is administer ability -- administerability. the current payroll tax is something we know how to do, something businesses know how to pay. this tax is very complex, but we do not want to oversell this

point. there are 40 cities in california that currently have some form of gross receipts tax, including l.a. and oakland, which are comparable high tax city's. and they are able to administer the tax. we can use them as examples. the third criteria is stability. from a budget and tax policy standpoint, better have a stable revenue source said they can ensure the continued services. we have found the payroll tax is extremely volatile. we believe the gross receipts taxes point to much more stable -- additionally, we will have a standard gross receipts tax.

and the last criteria will give us ways to a body weight your tax system based on at wettability. currently, the taxes are paid by less than 10% of businesses. this would double to about 20% of businesses. part of that would be proprietors and full partnerships. you could be a law firm with two employees and making over $2 million and not see any tax burden. under the gross receipts alternative, we would be capturing that. the other place we are capturing new players is a federal enclaves. i'll be happy to take any questions at this point.

>> thank you, jason. >> questions? or comments? commissioners? >> commissioners, jason eliot does need to be. if there are any questions you have of him, now is the time, or we can bring him back up a little bit later. >> any questions for jason? >> ," one question. what was the reason for moving from revenue neutral to revenue generation? >> thank you, mr. president. that is a good question. one that we grappled with for a while. the mayor initiated this process to be revenue neutral.

we were going to replace the tax structure. to answer the question, one of the other major priorities the mayor has is the housing trust fund. without getting into too much detail, i won't even start trying to explain the trust fund. in general, they have set aside $13 million to pay for affordable and low income housing. initially, through another stakeholder working group, they suggested the transfer tax on properties. it would generate an average $13 million per year. but filling the hole the general fund set aside. there have been many, many, many hours. the mayor put forward an idea,

actually raising revenue to the same amount as the transfer tax. this was an idea we proposed to members of the business community, and the business community is not one thing. so, those folks talked amongst each other's and thought, you know, we are going to raise $1 million. i guess i should just pause. they said, ok, if we are going to create affordable housing the $13 million in revenue, let's broaden the basic payers to pay that. you're really talking about commercial real estate and its very rarely presidential. that's one small piece of the business community. our business licensing is progressive.

by raising $13 million for affordable housing through business license fees, we are affectively broadening the base of people contributing to that. it is not really mutual. to some extent, it's providing revenue for a bowl that we have been talking about. >> i agree. thank you very much. >> in terms of what supervisor avalos had been talking about, are you considering anything in that $13 million specifically for the business community, especially the small-business community? in t eight, that type of thing? -- mta, that type of thing? >> the mayor does intend for the $13 million to go to the development of affordable housing. i think it would also put on the table that providing affordable

housing for your work force is a benefit for small business. more than probably any other type of business. you are the ones and fleeing those living in these moderate income places -- you're the ones employing those living in these moderate income places. we're not talking about the housing type side of the spectrum. you are the ones putting those folks to work. i think it does give a benefit to the small business community. >> looking at the two ordinances' is there, it in your opinion, and-impacts, or what would be your outcome? >> thanks, commissioner. supervisor avalos has worked

with the different coalition of stakeholders to come to the $40 million #. he had a process. i think i will withhold comment on that. what i will do is say what the mayor before word with president -- put forward with president chiu represents a consensus. it represents a a consensus among that group. we've got folks under the tent and really talking about the structural issues. and putting this idea for word about the $13 million for affordable housing -- i would say to supervisor avalos, he and his stakeholders with your process. they arrived at the number they arrived at.

we spent months coming to a consensus measure. a lot of work has been done by the controller's office. alternately, i don't own a business, so i am not a direct taxpayer. all those conversations -- i know i didn't answer your question. i only want to talk about hours and not what supervisor avalos did or didn't do. any other -- >> and your comments? ok, we will open it up for public comments. members of the public may address the commission for up to 3 minutes. there are speaker cards on the table. if you could speak yearning clearly, and be mindful of the time -- speak your name clearly, and be mindful of the

time on the podium. welcome. go ahead. thank you. >> good evening, commissioners. i work for supervisor a lot he -- supervisor olague. she is supervisor avalos: supportiv -- she is supportive of supervisor avalos's right now. this is something we went to make sure that is supported for small businesses, especially. they have taken the brunt of a lot of the economic issues, economic impacts, i'd say over the last decade, if not longer. we have seen a lot of businesses close-up over the past year. we wanted to make sure we were

focusing on that. that is why the schedule is so supportive of small businesses. a lot of times in the past, they have carried the brunt of the taxes in san francisco, and i thought we just wanted to have an opportunity that they were elevated and supported. we have been working on trying to get more small businesses hiring locally, especially young people in the neighborhood. they may not have the same educational skills to compete at the work force. we wanted to make sure they were incentivized in that effort to support their own neighborhood. was one of the reasons we were

so supportive. we wanted to make sure that the impact would be acceptable for them. into smaller nominal uofd. i understand these other issues -- it is a smaller nominal fee. i understand these other issues. we are committed to making sure that happens. >> thank you. >> may i ask one question? so, the enterprise zone is in district 5. has supervisor olague made any decision with regard to that? >> we have not. we would have started to talk to

a couple of businesses in our area, but a lot of these did not come out until really the last couple days. we would like to look at this larger overlaid music district the zone. i would love to work with you more directly about that. >> thank you. next speaker. >> welcome, thank you. >> good afternoon, commissioners. supervisor kim and supervisor olague will be using this in their districts.

we recognize and support small businesses and see small- business as being a driving force and the economy. that is one reason why it supervisor avalos and all the other authors are able to generate less revenue from small businesses. the fees are less under supervisor avalos than the mayor's. the difference is that john -- or supervisor avalos has targeted large businesses. we did some joint polling.

we found this was far more popular with the voters, because it takes less from small business in taxes. the company's that can afford to pay more to ensure the services that need, the infrastructure we need are taken care of. to answer your question, i would just say to you over 250 rec directors have been laid off. that has had a huge impact on the park's. rec centers have had to close on weekends. 250 directors. that is a lot. obviously in the nonprofit

sector, they have not had a raise in five years. they are really struggling. there are good policy reasons across the board to support supervisor avalos's measure. i'm saying i think there are good policy reasons for supervisor avalos's measure. thank you very much. >> thank you very much. next speaker please. >> hello. i am michele mendez. -- menendez. one thing i never hear about and deal with on a day-to-day basis is the enforcement.

it makes a difference for a lot of businesses. my experience is a lot of businesses that come and do there business here and consider the minimum wage laws, the payroll tax ordinance, and the sixth -- the sick bay ordinance. if we want to increase revenue -- the need to be addressed. bair currently not registered. secondly, there is the exemption. we have a housing issue because of all the high-tech moving in. i see companies that are exempt from it, but they are adding to our housing problem.

they should be contributing to this, and maybe not be exempt. that's all i have to say. thank you. >> thank you very much. next speaker, please. >> good afternoon, commissioners. jim lazarus. we were very pleased to have participated for months and this process with the mayor and supervisor chiu's office and the controller. the city attorney is going to have to go back and start redrafting again by the middle of july when this will have occurred. we believe the tax measures you should support need to be broad- based, fair, and they need to encourage -- continue the exemptions that were in place to drive economic growth in the city and we need to have a reasonable adjustment to a

business license fees, which, after all, are a form of tax. which is why in recent years they have not been amendable except by going to the voters. a neighborhood resident of parking sticker will cost you $100 and a business license fee at the low-end $25 is clearly not cost recovery. there is the business feet side of the equation -- fee side of the occasion. -- of the equation. we have to come up with our revenue neutral measure.

it is not revenue neutral for everyone. there is going to be twice as many taxpayers. some will pay more. some will pay much more because there's nothing under the old system. you could have $250,000 and pay no payroll today and she will be paying something under the new system. so, we need to balance the rate structure. we need to balance the business license fee structure as well. we're looking forward to working with the supervisors on a package that is fair, as i said, equitable, broad-based, and brings the city some new revenue necessary for economic development of the mayor's office. it should have a dedicated revenue source.

from the business community to ensure we have a viable and active group in san francisco. this would be a way to help find that as well. a look forward to working with this commission over the next couple of weeks and come up with a package that the entire business community can support. thank you. >> thank you. jim, before you sit down -- you brought up an interesting point. fee versus tax. the fact is the fee is a tax. i think there is a huge marketing issue here, this idea that there is a class of businesses that do not pay a tax. you actually get oa fee. that part is covered and you

pay incrementally. i wish there would be disc ussion. this is not about the flat tax. then at some level, you kick into a progressive tax. once you hit an extra dollar of revenue, it generates new prague -- new profit. if you are operating below the profitability, but does not necessarily generate more profit. so, i think that's been a big misconception, and it's been used to try to derail the

progress we're trying to make. if you guys can help us with that, that would be great. >> in fact, that is true in both schedules that have been proposed. and the question is, what should that increment be at the low end? 2000% increase at the high-end seems a bit much. >> i agree. i think there should be plenty of room for exceptions where this was not to be an opportunistic land grab or revenue grab, if you will. to put the hurt on certain companies. the idea is to keep the revenue neutral and to meet the points

you pointed out, making it equitable and addressing -- i mean, it would ability is one of the primary points, and i think it should be. otherwise, people will feel like they're being mistreated in the city. >> i will let you answer the question. unfortunately, and public comment, we are somewhat prohibited in having a back-and- forth dialogue. so, you can ask a clarifying question. so, i will let you have one more response. we have to make sure that -- >> it just goes to the issue of the equity ability of our system and the fact that the payroll- based system is not the most equitable. it is not based at all on the ability to pay. of gross receipts system at least as some relationship, we hope, as businesses get greater, that there is some profit in that increase gross.

there is not always a profit in peril. san francisco has done very well with payroll tax. in the last 10 years, inflation on average has been 2.5% a year. the payroll tax has grown 5% on average, during a time when employment in san francisco fell to 530,000 people working from 600,000 people. by and large, these are high payroll individuals driving this payroll tax instead upper house -- instead of a higher and unemployment. >> next speaker. any speakers and public comment? seeing none, public comment is closed. commissioners? do you have other questions?

questions? comments? on either proposal? >> ok. first of all, i wanted to talk about the difference in the revenue generation. as a business, as a small business commissioner, i would look at supervisor avalos's revenue generation, but i am very interested to see more allocation of funds that more directly benefit. so, they are paying into this. paying for city infrastructure, roads, trees, street cleaning, public safety, generally just

things that would be dedicated to our commercial corridors. i also was very pleased to hear supervisor avalos talk about the possibility of rolling back some of the business fees. i think that would be a way to break some of those moneys. i know that -- i would like to suggest that increasing the funding for small business, to bring it up to $700,000, because we are just so tight for money bikaner really achieve although -- we can really achieve what we could do for businesses. i would support the mayor's continuation of the tax credits. and then in terms of the exemptions, i support the mayor's fees from $1 million to

$25 million. >> ok. commissioner riley: i would like to know -- of course i asked supervisor avalos about the businesses impacted. but here on this flier it has this number. is that accurate? >> we have between 50 million and 100 million -- >> does that add up to 946? >> yes. >> how to our rates compared to

other cities? >> there is not a marginal rate structure in l.a. and oakland's. oakland is a fairly comparable to ours. it is a little difficult to compare. they're not too dissimilar. the other thing is oakland and l.a. have much smaller small- business exemptions. >> would this make us the most expensive city to do business in? >> given that we have the highest income tax in california and we're moving to a rate structure that is going to be revenue neutral