Mayor Lee's business tax reform will include new revenue

City workers have pushed hard this spring for the business community to help prevent cuts in city services.

Mayor Ed Lee has acquiesced to labor's demand that the business tax reform measure being negotiated for the November ballot raise tens of millions of dollars in new revenue, rather than being revenue-neutral as Lee and business leaders had previously insisted, according to Guardian sources in both the business and progressive communities who are involved in the ongoing negotiations.

As we previously reported, SEIU Local 1021 had demanded that the measure – which must be submitted to the Board of Supervisors by Tuesday – raise $30-50 million in additional revenue to prevent cuts to city services and to recapture money the city lost when the largest downtown corporations sued the city in 2001 to invalidate its gross receipts tax. If not, the union threatened to qualify a competing ballot measure that would raise the money, something neither side wants.

Sources say the Mayor's Office has agreed to structure the tax to raise at least $25 million in new revenue, and some believe they will settle on $30 million, which is being supported by the big technology companies and is probably enough for labor to sign onto the deal.

But a complicating factor is the fact that Lee's representatives are simultaneously negotiating another ballot measure to create an Affordable Housing Trust Fund that will also need to generate revenue, most likely through an increase in the real estate transfer tax, something the commercial landlords are opposing.

The business community has opposed any tax increases, but it is split between the big technology companies who helped elect Lee and more traditional businesses, including the FIRE (Finance, Insurance, and Real Estate) companies that all observers say are likely to get hit with a higher tax burden whatever the outcome of the current negotiations.

There is an urgency to get this deal done now because of the fast-approaching deadline to introduce ballot measures to the board, and the fact that under state law revenue measure can be passed with only a simple majority of voters only in presidential election years.