Newsom and his business allies work to kill proposed revenue measures by any means necessary
"You're trying to create a little revenue here and it's not going to work," said Ken Cleaveland, director of BOMA SF, arguing that big banks and financial services companies — entities exempt from the payroll tax that Chiu is hoping to target with the commercial rent tax — will buy their buildings to avoid paying the tax. "They aren't going to create more jobs and they really aren't going to create more revenue."
Yet Chiu noted that it was the business community and fiscal conservatives who pushed to create the Office of Economic Analysis, whose work they have regularly used to attack progressive legislation. Now that the office has concluded that a piece of progressive legislation is good for the local economy, Chiu told Cleaveland and the Chamber spokesperson Rob Black at the hearing, "I ask you to respect the work this office has done."
Black said the Chamber board will consider Chiu's amended legislation, but said businesses are in no mood to help the city. "How many times have you gone to your neighborhood merchant and had them say, 'Gee, my rent's too cheap'?<0x2009>" he said during his testimony.
Yet Chiu said landlords of small tenants (those paying less than $65,000 in rent per year) are exempt from the rent tax and only 26 percent of SF businesses would pay any city business tax under his plan. "I hope the mayor will support this proposal and the business community will give it a good look," Chiu said as the hearing ended.
At the beginning of the hearing, Chiu framed the dire situation facing San Francisco, citing Controller's Office figures showing this year's $500 million budget deficit (out of a $6 billion total budget) will be followed by a $700 million deficit next year and a $800 million gap the following budget cycle as a result of a deep structural budget imbalance.
"We have budget deficits as far as the eye can see," Chiu said at the hearing. "We have to consider measures that will provide more stable sources of revenue."
He also noted that city employee unions have agreed to give back about $250 million in salary and had their ranks reduced by about 2,000 workers in the last two years. So he and the other progressive supervisors say it's time for the rest of San Francisco to help address the problem.
"We, as a city, should not be trying to balance this budget simply through cutting," Sup. David Campos said.
Sup. John Avalos, the committee chair, amended his transfer tax measure in the wake of Newsom's rejection of the deal by making it a simple 2 percent tax on properties that sell for more than $5 million, and 2.5 percent tax on properties over $10 million. He estimates it will bring in about $25 million per year from the city's wealthiest corporations and landlords.
"That's who we're socking it to," Avalos told us, saying he was disappointed the compromise fell through. "The amendment is going to be more progressive than what was originally planned."
Even Sup. Sean Elsbernd, a strong fiscal conservative who announced early in the hearing, "You want to do that [balance future budgets] by adding taxes, but I want to do it through ongoing service cuts," later told the Guardian that he was intrigued by the amendments Avalos and Chiu made to their measures and has not yet taken a position on them.
Sup. Ross Mirkarimi is also sponsoring a measure to increase the city's tax on parking lot operators from 25 percent to 35 percent, the first change to that tax in 30 years, and will include valet parking for the first time. The measure would bring in up to $24 million per year, and OEA analysis shows it would decrease the number of cars trips by 1.3 percent, another benefit.