Newsom must raise taxes

GAVIN NEWSOM IS the first San Francisco mayor in more than half a century elected to that office directly from the Board of Supervisors. Unlike, say, Art Agnos, Willie Brown, and Frank Jordan, he's had direct recent experience with the city budget. He knows, right now, in his first week in office, exactly what he's going to be dealing with. And it's not going to be pretty.

Already the city's more than $100 million in the hole – and that's before the huge cuts mandated by Gov. Arnold Schwarzenegger take effect. And for all Newsom's happy talk of government reorganization and efficiencies, there are no easy ways out of this mess. The new mayor is going to have to lay off a large number of city employees (with the consequent damage that will do to the local economy) or cut deeply into services provided under contract by local nonprofits – or he's going to have to find some new sources of revenue.

So far Newsom, the supposed rising star in the Democratic Party, has sounded a lot like the new Republican governor (except for the fact that Schwarzenegger at least seems to have some fight in him; Newsom is acting as if politics is all a nice, friendly game with no villains). As Steven T. Jones reports on page 13, the themes that came through in Newsom's inaugural address were either feel-good platitudes that understated the problems at hand or nods to the big downtown businesses that financed his campaign. But as Calvin Welch, a longtime neighborhood activist, pointed out at a Haight Ashbury Neighborhood Council meeting Jan. 8, Newsom can't govern with just the coalition that elected him. He's going to have to make some decisions that infuriate his backers – or he's going to lead the city into disaster.

And the first thing he has to do is start talking seriously about a fair, and substantial, local tax increase.

The bottom line is simple: San Francisco doesn't bring in enough money to pay for the services the public wants and needs. That reality is hidden in boom years, and state and federal support can make the problem less obvious. But with money from Sacramento vanishing fast, Newsom is going to have to balance the budget in part by forcing large businesses and wealthy individuals to pay a larger share.

Downtown will, of course, howl about business taxes destroying jobs – the same theme Schwarzenegger is retailing on a regular basis. But the reality is that the lack of a tax increase will destroy jobs far more directly and quickly, by forcing Newsom to fire hundreds, maybe thousands, of city employees. Remember: The city of San Francisco is the largest employer in town and a generally good one. Most city jobs offer a living wage and decent benefits. Eliminating those jobs will have an immediate negative impact on the economy – and hurt local businesses.

There are all sorts of options Newsom can look at. The city's main business tax is a payroll tax, and Sup. Matt Gonzalez is proposing a shift to a gross receipts tax. That could be combined with a new progressive structure forcing bigger companies to pay a higher percentage and generating increased revenue while lessening the burden on small businesses. An increase in the real estate transfer tax on high-end properties (another Gonzalez proposal) would bring in millions and affect only commercial property owners and those who buy and sell expensive houses. Both Oakland and Berkeley have raised money through parcel taxes, which aren't as progressive but aren't bad either.

There are other possibilities too – in fact, Newsom ought to ask the city attorney to prepare a comprehensive list of every legal option the city has to raise taxes without violating state law. If the mayor won't do that, the supervisors should.

P.S. If Newsom is worried about jobs and businesses, he ought to be talking about the huge sum of money the Pacific Gas and Electric Co. bailout will cost the local economy. He should be demanding a city controller's report on the economic impacts of the bailout and leading the fight to block the deal. And he should announce, now, that he supports a move to bring public power to San Francisco – a move that will cut electric rates, invigorate the economy, and put hundreds of millions into the city coffers at the same time.