are fairly similar. the last piece i will speak to is the tax exclusion. it is important to the knowledge both proposals can get amended as we get feedback from the community. i do not want to speak for other co-sponsors of the gross receipts proposal that have been put forward by john avalos. i am open to continuing until the sunset date. i do want to declare that moving away from apparel textiles generate benefits for the businesses that generate benefits. in the case of midmarket, what we were trying to address was a growing company that would generate jobs for the city, not penalizing them. and secondary to that, was having the move to a corridor. one of the benefits that we have

seen from that is a company that has moved to a building where they have made an investment for 50, 60 years. i have talked with twitter. i think what we would like to see moving forward is what that numerically works out to. if we see a tax declined by a considerable amount, how much would that continued to decline whatever the investment in the city may be? i have questions, but i am open to your feedback. i think all of us are available for any questions you may have. >> thank you very much. >> jay, how long is your

presentation? >> 15, 20 minutes. >> i know you want to hear the presentation, but are there any specific questions you may have to supervisor avalos or supervisor kim? i just went to make sure you had an opportunity to ask the supervisor directly. >> commissioner riley? >> the $25 million to over $100 million -- is there a study of how many businesses in the city would be affected? >> i think the comptroller would

be best to answer that. the comptroller has the information. it's a minority of the people in san francisco. >> 45,000 for the 50 million and up -- >> i think these would definitely not the small businesses impacted by that. >> right. >> again, the comptroller's office, they're the ones who helped us get to $40 million. >> i will wait. >> ok. >> this is for supervisor avalos. the $40 million?

how is that going to be allocated? supervisor avalos: i am looking at this for the mayor. i think servicing businesses in downtown san francisco would be helpful, especially muni. we're looking at all hole in the -- a whole -- hole in the new budget. we could replace it with that to cover muni costs in that would be agreed service to the downtown community, one area i am looking at. hopefully the mayor and i are in agreement on that. also, as supervisor kim pointed

out, 13th furlough days are being probated for next year. the city commitment to the education fund is $15 million per year. perhaps we could be fund less of that, make sure that we are able to support working families, make sure there's not that much impact there. those are at the top of my list. also, moving forward, we are looking at how we might rollback business fees, out where we are nickel and diming businesses. that is something i would look at with your support. no one talked about the fees. every year there are new fees. i'm seeing them over and over again. >> so, would these be special

allocations or general fund? >supervisor avalos: they could be general fund. just as we are looking at the $13 million, that could go to the housing trust fund. that could be an allocation that the new tax would make happen, but it is something that we could choose for it to go. we could use for it to go to muni. we could increase the taxes for the district or both. in both cases, we would be doing a lot to support infrastructure in our business community. >> thank you. commissiner white: supervisor avalos, has your team worked with the small business community regarding this matter?

supervisor avalos: i was actually capitalizing on the role the -- the work the comptroller's office had done. the controller's office was getting a lot of input, but in -- buy-in from the community on the measure. we were discussing this for months. this is before ed lee was mayor, and president chiu was calling for tax reform. i had met david chiu before when we were working on this. that this someone who has come out with a lot of discussion that has been public. i have been working with

departments to do that out reached -- outreach for the business community concerns. >> i have one question. are you willing to work with the mayor's office to come up with one ordinance on the ballot? supervisor avalos: absolutely. >> perfect. supervisor avalos: i've been talking about that since i introduced a. i have been talking about it with the mayor for a few months. >> right. thank you. supervisor avalos: i think consensus within our political community is going to be helpful. and also to make sure that in the future we don't just come back and try to do something new the probably a lot of people we build consensus around will like.

>> thank you, supervisor. ok. i would like to invite jay with the controller's office to make a presentation. thank you, jay, for coming. >> good afternoon, commissioners. as i understand it, this commission is familiar with the business of tax reform and i will refrain from walking you through each of the rate schedules and the schedules, unless you find useful. i can do that. i'm going to talk a little bit about where we are now, the differences between the two pieces of legislation, and i

would like to talk a little bit about the outreach the controller's office is done and a high level analysis of what it means to move into gross receipts tax. we began the process of speaking to the business community and working with them to come up with a replacement for the payroll tax. and start. we issued our reports. -- i'm sorry. we issued our report. we have an out 1. we received feedback from that on june 12. two pieces of legislation were introduced, one by the mayor and four -- and board president, and one by supervisor avalos.

so, the legislation that was introduced on june 12, there are three main differences. the first difference that we discussed extensively is the registration fees. the mayor and the board president's fee structure would raise new revenue while supervisor avalos's rate structure would raise $40 million in new revenue. the existing payroll tax exclusions would be converted to a tax credits that would be equal to the same amount as the payroll tax. and the current dates would be retained. under supervisor avalos's

legislation, there are no changes, and they would be phased out. the third is the changes to the tax rate schedules. under the mayor pro proposal, the receipts would be between $1,000,000.20 $5 million with a tax rate of 3.25%. under supervisor avalos's schedule, there will be a 3.5% rate and on up to $25 million, this is the tax rate that was most recently 5%. there are only three differences in the two pieces of legislation.

so, we began this process in march. we had meetings with 10 different industry groups. and the small business group meeting, we had 25 attendees. there were a handful who did not sign in, so these are low estimates of the people we have spoken to. we have the second round of entry proceedings. at the small business meeting, there work 10 -- there were 10 to 15. during that time, we felt that the representation of small

businesses that are currently not paying the payroll tax was inadequate, so we held a special meeting for that group. so, since the introduction of legislation on june 12, we upheld two meetings. they were lightly attended, and with the second one we had a larger group interested in the issues around the technical legislation. in total, we have heard from 200 local businesses, and of those 200 local businesses come up about 40 were small businesses. so, i'm just going to go through

a quick highlight summary of our gross receipts. as you know, the rate structure of the gross receipts tax generates as much revenue as a payroll tax. the business feed is designed to generate new -- business fee is designed to generate new revenue. this is to ensure that we reach the revenue goals that we intend to reach. the next feature is the tax rates for businesses. they are assigned or rescheduled

when they file taxes. all businesses with $1 million or more will pay the lower rates on the first portion of the gross receipts, and the higher rate on the portions above $25 million. that's how the marginal tax works. i will talk a little bit about the exemptions we have any legislation. the first one is the small- business exemption. so, if you are a business with less than $1 million, you will be excluded from pain gross receipts tax. they are exempt from the tax if they have four or less units.

this is the same as it was 11 years ago. also, the residential pay the tax on building by building basis. the can exclude 50% of the receipts from rent-controlled buildings, recognizing the economics of rent-controlled buildings. we have the rent-controlled properties that are subject to the transfer tax. nonprofits will continue to be exempt, and a number of state constitutional exemptions, too.

lastly, i will talk about the high level impacts. when we look at a tax system. with the four areas keeping stability, equity, efficiency, economic impact. under the economic impact, the impact on the direct impact on jobs, and the labor and the gross receipts tax that would take away from the labor cost. about 10 years ago, we were collecting about $200 million in 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 wantedo