general feedback. those are primary issues. obviously, happy to answer other specific questions. supervisor kim: 1 other follow- up question in terms of process. if the city moves in this direction, it is a significant and major change and i imagine that we would live by this even in terms of the phase in. there was a longer time to phase in this new system. it is something that we will be with quite some time. i want you to speak a little about the level of engagement with the business community that either you or other folks have been part of. i think that is significant in terms of try to understand whether there was feedback. >> kind of the process we have

undertaken over the last six months? certainly. over the last six months we have been engaged in a process with many industries in san francisco, working at the request of the sponsors. we have been holding regular workshops with probably 10 different area groups,zp:ç induy area groups, and during that time we have been sh9es÷a different possible ways to treat some of these issues, seeking feedback. we have gone through four rounds of those, an initial proposal to feedback from a broad set of companies, made amendments, brought it back, and we went through four rounds of that, prior to arriving at the introduction of legislation. a kind of represented -- wea#d'e not been able to reach every business in san francisco. there are 15,000 payers, but we

have endeavored to find a key contacts that represent a broad cross-section of san francisco businesses big and small, geographic diversity, businesses by type, and engage them that feedback. it is probably a couple hundred different meetings at this point that we have participated in, either groups of businesses, industries, or individual businesses on this subject. a lot of feedback has come here, but public process is never perfect. supervisor kim: for small businesses, that area i am a little concerned about, in terms of the current exclusions. this copperplates going to a million dollars gross receipts level, irrespective of the kind of industry that you are in.

going back to profitability, what we are saying is across the board, no matter what industry you are in, $1 million, you are exempted from the gross receipts tax. number of folks from the small business committee on this topic. i wonder what your thoughts are about how this message gets out to the broader small business committee forward, and what we really think the impact to existing small businesses are. right now there are small businesses that currently do not pay. we expect 50% of those to now have to pay a gross receipts tax, even with the million other exemption? what is the impact to the small businesses that we think is theng >> i brief;y touched on process. we have obviously reached out

to various small business representatives to bring them into the process that we have gone through over the last six months. we have been successful in solving many. i believe that we have had three hearings on this subject at the small business commission, trying to pick up available avenues for feedback and discussion. we have generally try to work through networks available of the small business advocates to solicit feedback. scott has been very helpful in taking proposals, developing them, and pushing them out through his network of email contacts, synthesizing the feedback, and getting it back. it is not generally speaking as -- is a much larger and therefore not as consolidated in

this kind of business network, as certain other parts of the city. there are not readily available single trade association groups to go to to make this process. but we have endeavored to kind of reach out through the group. the impact, one of the inequities on this, that we have endeavored to try to address, is the fact we have such a narrow base of taxpayers. less than 10% of registered businesses are currently paying the payroll tax. this is broadening the tax base and a number of different ways. we're picking up sole proprietors.

regardless of even very large or more lucrative sole proprietorships. and we are pickingx,cn up exemd small businesses in san francisco. a number of them. we're trying to be sensitive to that impact and the structure. it is the reason we have a very lowq?ix tier rate on each of the schedules, typically a fraction of what the higher rate is. it.iból is broadening the base significantly and diversifying at any way that we think makes tax policy cents. >> the current system, through our discussions with businesses, we heard not just the importance of preserving the principle that small businesses have less ability to pay than larger businesses, but also there is an element of on fairness with current small-business exemption

that economic consequences. the way our system works, if you have a quarter million dollars in payroll, you pay pay. if you have one more dollar more, you are suddenly pang. we have heard anecdotes of businesses that are near that edge, closing down the week after christmas. that kind of incentive to not be in business and that kind of unfair ness simply for being on one side of what is the arbitrary line or another is something that we wanted to address in this. that is by combining the business fees with the small exclusion from the t, we have done is create a rate of payment such that a business with this is paying $75 with the

mayor's proposal and $50 with supervisor avalos proposal, which is, equivalent to 0.07% gross receipts tax. what we have kind of dawn, although it is progressive under the $1 million level but to have all businesses make it lee some contribution reflective of their ability to pay as best as we can. that is part of what the controller is referring to. in terms of the actual amount of revenue, it is not a vast amount of money that has to be collected for businesses, because over $1 million in gross receipts, the business fees

actually go down. it is simply, i think, another source of bringing some additional their revenue into the picture, along with tapping the industries that pay relatively little in a pair roll tax -- in a payroll tax. supervisor kim: thank you. supervisor avalos: the difference in the number of jobs between the mayor's and my version, other distinctions in the kinds of jobs that are in either, government jobs? >> aside from the government/private sector split, a quick snapshot of the industry breakdown of the mayor's proposal and of yours, i don't see big differences. it seems like relatively less professional services in years,

but it is roughly equivalent. supervisor avalos: okay, thank you. i think it is important to note there is a higher number for government jobs in my version. relativity your position, not yours, but one's position on larger amounts of government jobs or not, i think what i'm trying to get at in terms of revenue in the city is one we see a growing economy, there are impacts on the city. there are impacts on government, there are impacts on community. i think it is important that we look at how we address those impacts as we see greater emphasis on job creation at in the downtown area. that puts strain on the public services, to make sure that we're able to get people to work, the streets are in good repair. that costs money. that is one reason why i am looking at how we expand, the

flexibility in the budget with new revenue. also, as we see in mid market in terms of the changes we have seen, in terms of a tax break, in terms of decreasing vacancies in offices, we're seeing an impact in terms of small businesses where there commercial space is leased out at a higher amount. the city we seeing leases increasing, a major increase as well as people who have money are paying more to pay rent, we're seeing people being priced out of homes and displacement being an important thing. the need to have and i believe in having richness of government.

where we have -- they disparities are great. we have to make sure we build that flexibility into the budget. that is why i have been promoting that so we can have a budget that will be flexible enough to do that. that is why -- the reason i am moving forward with support of colleagues which -- with a venture that is generating revenue perhaps beyond what many people in this room and outside the room might not feel comfortable with. the reasoning is sound in terms of wanting to make sure our city can have the robust economy and to be able to do with the impacts of that as well. i want to add that for food for thought. supervisor campos: thank you. there could be a difference of opinion. -- 92:supervisor chu: thank you.

there could be a difference of opinion. there's a split between the scenario is 1765. we're talking about the difference between 13 and $40 million being potentially a loss of the 285 job growth basically. and so a question for you, in a scenario where this is not going to affect and there is the economy moving on, if we were not to go down the path of changing to a gross receipts tax, there is natural growth in the economy in different sectors, i am imagining as we're experiencing. does this change anything? does it harm growth in many sectors? there is job growth in every sector as a relates to this gross receipts proposal but is there any sort of negative impact on an industry as a relates to imposing this as opposed to a payroll tax? >supervisor avalos: no.

ffr.ju faster but every industry experiences growth at this level as a result of the tax. supervisor chu: ok. finally a question for the treasure's office. this is a much more complicated tax structure that district payroll tax structure. is that treasured tax collector office's available? >> they office had a medical emergency. greg was here to speak but he had to leave and asked me to inform the board. >> the comptroller's office and probably has conversations with a tax collector about this. there is different industries and different rates be applied so it is much more complex than

strict payroll tax levels. what do you anticipate in terms of the resources that are receipts tax and our ability to do that and do it well? >> i think -- we have hadxl the treasurer's office has been involve,c and you can fault the payroll tax on many fronts but simplicity is not one of them. it is as simple as a tax gets. it is a flat tax on payrolls. it is not without its v)u complex than the gross receiptsl tax. the growth will create more administrative burden for taxpayers to pay. it is one of the cons of the shift.

this is the prairie -- primary conn. -- con. that is in terms of folks available to provide counselor -- counseling to taxpayers aren't -- and also after the fact. that is because we have more pairs and those that are paying and more complex tax. the measure and mission are increased administrative costs in the formula that you see in the legislation. those costs had no more of an increment of to% of the tax collected. our conversations is a phase i and their implementation. it seemed to indicate that the costs will be between $3 million to $6 million would be the current working estimates. that is envisioned in the former

was and the net revenue numbers we're talking about. that is a high-level summary. while the gross receipts tax is certainly more complex and challenging for the city to administer and taxpayers to pay, it:-#dd is the norm in californ. many other governments have grown used to collecting this tax and often taxpayers are paying this tax in other places. that provides some comfort that there are places to go when questions come up. because others are dealing with these legally and administratively that we do not have with the payroll tax. the rules are developed by dess and applied to us. iwe're t that way. >> ískrwe have exhausted the

presentation. on the transfer tax item, why do we go to that quickly so we can take public comment? -- don't we go to that quickly so we can take public comment? >> good afternoon, again, supervisors. we have done an analysis on the impact of the transfer taxes that are before you. as -- the cityóz9kñ charges a tx

on real property equal to a percentage of its sales price. pmñit is a progressive tax which increases with the value sold. there are two measures that would place an increase on the tax. one is sponsored by supervisor, raising the rates between 2,000,025 million. the other would raise the tax rates by a smaller amount. but this is a general tax and any proceeds would go into the general fund. this is an outline of the proposed rate increases. this would increase the tax from about 2% 2.95% 4 1 million to 5 million and from 5 to 10 and 2.4 to 2.7 for $10 million and above. this would increase from 1.75 to

2.25. in terms of the economic impact, this is a tax that falls on the seller of the house or property. what it effectively as it gets -- is it gets passed on to the buyer. the reason for that is the virus cannot avoid that process -- the buyers cannot avoid that process. these are fairly defined sub- markets. the impacts of that are higher housing prices for residential properties which leads to higher wages and a higher commercial real estate price which leads to high commercial red. this is where the negative economic impact on the private sector comes from in increasing the transfer tax. as with the gross receipts tax, the increase in revenue is positive and the fact is a

result of the interplay of the negative and positive factors. our estimate of the proposals is their economic impact is virtually identical in the context of an economy the size of the city which is $100 billion. 150 jobs will be lost, upset -- offset vw24&h(ublic sector jobs. we are modeling these as a float to the general fund, not as if it was modeled to any particular use. a subsequent policy decision directs these to housing or any other purpose, that could change the economic impact. this is a proportional increase of city government. the essential net economic impact of this is about 140 jobs in both cases. i would be happy to take any questions.

supervisor chu: why don't go to the budget analyst report? no, at. -- no report. i have a number of speaker cards before me. gordon mar, and gabriel holland. >> please line up on the right side of the room. >> and another speaker. if you heard your name call, please line up against the wall. that is the preference of our cleric. -- clerk. first speaker, please come on up.

>> good afternoon. i am the owner of world motors in san francisco and i have the honor of san francisco mercedes- benz with me. the average car dealership has a 2% return on sales. i am here today to urge the committee and mayor's office to understand the impact of an increase to of tax burden. agribusinesses -- our business is one of eight car dealers left. there is eight of us left. we provide the city and county of san francisco with nearly $9 million in sales tax revenue and employ more than 1500 people. more than 80% of the jobs are considered blue-collar and are in the parts repair or technician side. our coalitionrs7 need to change to gross receipts

tax and appreciate the hard work that has gone into that but we urge you not to increase the tax burden so we can compete with our auto dealers in the region. we're proud to sell cars that provide good paying jobs in san francisco and urge the committee to ensure that our tax burden does not increase. >> i am the owner of mercedes- benz in san francisco. mark -- smart car as well. on this issue we are family businesses. we have been around for 50 years and just celebrated2 anniversary. harbison said!@

model in comparison with our other partners dealers or our competitors. there is so many things in this city that make that harder to do and what of the things that we learned really well in the last three years is how to run a business efficiently or what we think efficiently. and my father and i take pride on how --6úçaç having a tenured staff. the first thing that happens when we're looking at how to run this business with an operating margin of less than 2% over the last three or four years, if you look at our financial statement, these blue-collar jobs tend to be the first ones to go away. we tend to reduce staff which we learn to do very well in the last three or four years. that is something that hits close to home. these are blue collar workers, people i have worked with. i have been with the bus -- business for 20 years and these are people that i do not want

to -- i want them to keep working. thank you for your time and thank you for getting to understand our business. supervisor kim: thank you. kraska afternoon, everyone. i am an insurance broker. i am sure 800 small businesses in san francisco, including some of the auto dealerships and i have lost some of the auto dealerships because they could not afford to do business in san francisco, or they have gone out of business. i want to thank the comptroller's office and think the economists but also you supervisors, understanding the stakeholders and all the people involved in trying to make this equitable. some of the numbers i see is my business can live with. i am concerned about people like the automobile dealers like mercedes and audi.

because of the gross receipts. their margins are very little. it is either 1% or 2%. we really need to look at that gross receipts and make it equitable so there will stay here. i know there are automobile dealers that have made huge investments like the infinity store. we'reylju encouraging try to get auto world back in san francisco. equitably, they're not going to come here and invest. or they may leave here because it may not be profitable for them to be here. i am asking the board of supervisors and the economists and everyone to look at that particular stakeholder in the city that brings us a substantial amount of revenue that we cannot afford to lose. i want to thank all the parties for being sensitive to small businesses. thank you. supervisor campos: thank you. i have a few more cards.

-- supervisor kim:, i have a few morchu: thank you, i have a few more cards. >> i am the director of jobs with justice and here as part of the progress of revenue coalition which is a -- includes a broad range of labor groups that are working together to support good public sector jobs. in 2010, our coalition was involved in a campaign to pass proposition n, a transfer tax. it mitigated the budget deficit. we have been working on new revenue strategies including the

tax measure campaign and the city college parcel tax and we support the housing trust fund effort. we will be speaking to -- there's a clear and urgent need for additional revenue, to restore the painful budget cuts and fee increases that have happened over the last 10 years. om that better than we do. in april, ted egan came and did a presentation on the different business tax proposals that were being considered and we fully supportui%by framework shifting from payroll tax to gross receipts tax. we are disappointed to find that the proposal is being considered -- the proposals being considered did not address the city's need for new revenue. we