Sweet Melissa

Goddammit, Ross...

Constant Readers,

I'm trying to make sense of the Twitter/stock option tax/payroll tax debacle for a piece in The Examiner on Tuesday. I want to understand what is going on here, and I bet y'all do, too.

As part of my research for the piece, I'm watching last week's Board of Supervisors meeting so I can check out out all the proposals by the Supes. And Ross Mirkarimi is a truly nice man. A lovely soul. But just...just...LOOK at what I am dealing with here...

Here's his introduction of legislation:

There has been much attention placed over the last few days on the issue of us advancing legislation in providing for growing technology companies the exemption of their stock compensation as they are routinely required to pay to San Francisco. This idea, which I think has been floating for quite some time, and how we might be able to retain, grow, nurture businesses in San Francisco has now I think reached an appropriate juncture as a result of the deliberations on the Twitter proposal. I think the Twitter proposal, as many of us may opine, publicly or privately, has taught us that there is something very uneven and I have to say clumsy about the approach and us trying to do everything we can to marshal the resources of helping a company stay in San Francisco while it certainly threatens to leave, while at the same time, we want to see the double benefit of relocating a company or incentivizing that they relocate to an area that is distressed.

There are a number of technology companies in a number of districts that are also claiming a very similar point as Twitter has, too, and I think many of us knew that this inevitability was just a matter of time. And with the discussion that I think has been very critical for the question of overall city-wide reform that both President Chiu just referenced and I know that Supervisor Farrell and I know Supervisor Campos and Avalos and others have mentioned at one time or another, I think is coming to its natural head where it gives us an opportunity to laser in, in the most effective way possible, what are those remedying strategies. In my opinion, one of those strategies perhaps is a law that we’re submitting today, and I’d like to thank Supervisors Campos and Mar for the co- sponsor ship, that provides two years moratorium for technology companies that may soon go public.

Companies with more than 100 employees, 100 employees or more, companies founded after 2001 that are not currently traded on the stock exchange. We believe this is a unique period in history where there are a number of growing tech companies that may soon go public, making the timing here I think extremely important of our impending deliberations on this and other laws. Requiring that every company pay at least $1,500 per employee, even with the exemption; only applies to companies affected by the SF payroll tax. Those that have payrolls above $250,000. SF as it has been already mentioned is the only city with a payroll tax bundled with the stock option.

The city' s taxes are some of the highest in the state and in the nation. I believe there is a more progressive approach that helps answer the question that all of us want to see realized, and that is -- how do we retain companies in San Francisco, at least in this genre of industry, the technology companies? How do we incentivize that those companies be located and be host in neighborhoods that we also want to see benefit, I think, from their presence so that a wave effect is extended to other neighborhoods that would like to certainly I think, certainly enjoy that particular dividend, whether direct or indirect? And for us not to be triaging by happenstance every time a tech company says they’re about ready to leave San Francisco unless we react in a way that is not fluid or consistent with existing practice.

And I think what has been called into question is exactly what that existing practice is. I believe there is probably more wholesale reform in the making, but at least in the short term, our legislation specifies two years, I have already talked to a number of colleagues here who have asked and inquired about the legislation. That I am certainly pliable that we may be able to negotiate what those years may be. But I think it is important though that we do everything we can to look for the win-win to communities that may feel the double bang adversely by the potential gentrification that could be constituted by well- intentioned policies that are being discussed right now but might have the unintended consequences of not being able to help communities in which we hope that they serve.

We’re thinking that companies that exist, such as in District 10 or District 9, and other companies that I know would like to come to, say, District 5 – technology companies -  we are looking to find a way to incentivize them. By spot firing the potential remedy, I think of course we are at that particular intersection where we are able to institute hopefully some citywide reform that provides that particular incentive. I look forward to the deliberations on this and the others over the next few weeks and months.

Watch it for yourself at about minute 53 of the March 29 BOS meeting.

Now, if you'll excuse me, I've obviously got to unscramble these Legislative Poetry Magnets before my deadline...

-Melissa

In case you thought there was a chance in hell that this would pass...

(Before we get into this, let me just say that there is no amount of money you could pay me to constantly deal with parents. School Board members are angels of mercy and the ones I know are damn fine people.) 

Last Tuesday, the Board of Supervisors voted to put a measure on the next ballot (whenever that is) that would allow the Board of Education to increase their pay from $500 per month up to half the regular salary of a first-year teacher in San Francisco – or about $25,000 per year. Only Supervisors Carmen Chu, Sean Elsbernd and Mark Farrell voted “no.”

There are many, many problems with this proposal, but today let us discuss one issue conceded by Supervisor Ross Mirkarimi, “The timing of this is a bit funky.” (Never one to be afraid of funky town timing, Mirkarimi voted in favor of the measure.)

Voters are generally in no mood to give raises to anyone, especially people who ran for office knowing they would be paid $500 per month, but the real killer will be the other measures on the next ballot and the voters they will inspire.

The major measure to look out for is a tobacco tax proposal set to be voted on whenever the next statewide election is held, which optimists still believe will be June. The proposal would assess one dollar on every pack of cigarettes sold in California and use it to pay for cancer research. Tobacco companies have defeated similar measures 14 times, mostly by drowning the opposition in millions of dollars. (They spent $66 million on the last one.) Guess who big tobacco is going to mobilize to get out and vote? Hint: it ain't people who like giving money to government employees.

Incidentally, this is also bad news for Governor Jerry Brown’s tax-extending budget proposal.

But the tobacco measure isn’t the only one that will be a problem: the Students First initiative has gathered enough signatures to be on the ballot at the next local election. (November unless there is a statewide special election before that.) That measure is a policy statement that says students should be guaranteed a spot at a school near their home unless parents want to send their kids elsewhere. The whole thing is a Bronx Salute to the Board of Education’s current student placement “system” and it will attract voters who are angriest at the board.

Add to all this the fact there are no real makings of a campaign in favor of increasing the pay for Board of Education members, and you have a recipe for one big funky failure.

Pension action shifting location. (I hear they gave Hellman a fireman's hat! Fun!)

Today the Board of Supervisors will enter into closed session to review The City’s position on reforms to the pension and health care benefits of city employees. Attending the meeting will be Mayor Lee and members of his labor negotiations team.

Take note of this first of several meetings between Mayor Lee and the board, because this is officially where the real reform action is.

Unless a group wants to gather thousands of signatures, getting six votes at the board is the only way to put a Charter amendment on the ballot to change the system of retiree benefits. Whatever proposal the board endorses will be voted on in November.

But it may not be the only proposal for retiree reform before the voters. Once a proposal has six votes at the board, we’ll have to see whether Public Defender Jeff Adachi will be satisfied with it or if he’ll move forward to gather signatures for his own proposal. (He's got the money to do it.) We may be looking at two reform measures in November.

Then there is the council of union representatives commonly referred to as “the Hellman Group” – after Warren Hellman, its singular member who is a wealthy businessman. That group is slipping from relevance. Ostensibly, they are waiting on the Controller’s office to cost out the savings from several proposals. In reality, neither Mayor Lee nor the board is limited by the group’s ideas. Don’t let Lee’s lofty cooperative rhetoric fool you; he has been openly meeting with Adachi. Remember, his background is non-profit, not union. And I don’t doubt that he’d risk angering unions to prevent cuts to city services.

Warren Hellman is also primed for defection from the group that bears his name. Hellman recently stated that we need to save $300-$400 million per year in pension costs, which is more than double the figure that would have been saved by last year’s Proposition B. The massive changes required to achieve that level of savings are not going to come from a group of union representatives. (Their little list of proposals so far proves as much.) Any anything less than lasting structural change is hardly befitting what Hellman likely sees as his legacy in San Francisco.

For these reasons, the Hellman group seems weakened and the main players in the retiree reform debate are now the Board of Supervisors, the Mayor and Jeff Adachi. If all three can agree on one proposal, I doubt any amount of union spending could defeat it in November.

Fee to be, you and me

Legally, a fee doesn’t need voter approval, but taxes do. So what is the difference between the two? Mainly, a fee needs to directly result in a service to the person paying. For example, you pay a fee for a marriage certificate, and you get the document. Apparently, The City’s cigarette fee needs to be more tightly related to the street cleaning service it is supposed to pay for. On Wednesday, the Budget and Finance Committee endorsed some small amendments to the gcigarette fee suggested by the city attorney.

I can think of another fee that might be too far removed from the services it is meant to provide. Indeed, at Tuesday’s Board of Supervisors meeting, Supervisor Sean Elsbernd flatly said that the city attorney had issued a cautionary memorandum on the alcohol fee because the people paying the fee generally aren’t the ones receiving alcohol treatment services. Not that the prospect of costly litigation ever stopped the board before. The alcohol fee passed by a vote of 7-3 opposed. That’s the only math that matters at City Hall.

Shake Shake, Shake Shake, Shaky Budget...

When Moody’s Investor Service downgraded San Francisco’s lease revenue bond rating to “negative” in June, it did so because The City’s current budget is balanced on rather shaky numbers. “There are substantial uncertainties associated with some of the revenues included in the proposed budget, both one-time and ongoing,” the report said. (Pdf of report here: Download Moodys Report.)

It also recognized that “key expenditure cuts are a decrease in the general fund subsidy to the hospital, though this relies upon receipt of federal and state revenue which is not yet assured, and cuts in social service spending.”

Last month, Congress passed a supplemental update to the federal budget. So I called City Controller Ben Rosenfield to inquire about our budget expectations versus the reality of recent federal funding numbers. While the City Controller’s Office will be issuing a formal budget update in October, he was able to tell me that federal funding will be $30 million to $40 million less than we thought.

Specifically, The City expected $25 million in federal Medicaid reimbursements, but will only get about $17 million. Furthermore, $88 million in anticipated federal money for other hospital cost reimbursements will probably end up being $68 million.

Rosenfield explained that The City has already instituted a hiring freeze and halted equipment and materials purchases. While that is a good start, I suspect our city’s budget will still end up in the emergency room.

November 2010 Ballot: Prop N

I know the November election seems like an eternity away, but since this is a weekly column and there are 15 measures on the ballot, we should start looking at the proposed measures. In an effort to ease us all into the position of citizen legislators, I’d like to begin at the end of the ballot and work backward, which means today’s contestant is Proposition N, the property transfer tax increase.

Prop. N was proposed by Supervisor John Avalos, who, as chairman of the Budget and Finance Committee, had to tell everyone that they would not be getting a pony on Christmas morning. Under Prop. N, real estate transfers worth more than $5 million but less than $10 million would be subject to a 2 percent tax. Transfers worth more than $10 million would be assessed a 2.5 percent tax. Currently, these transactions are taxed at 1.5 percent.

According to San Francisco Chief Economist Ted Egan, if Prop. N passes, it will bring in $35 million.

But that’s a very tenuous estimate.

You see, the property transfer tax is the youngest sibling of all taxes. It’s rebellious and unpredictable, and smokes unfiltered cigarettes. OK, I made up that last part. But the rest of it is true. Egan explained that the amount of property transfer tax we’ll get in any given year is very hard to anticipate. For example, in an effort to estimate how much money Prop. N might generate, his office ran the numbers on how much extra money the proposition would have brought in had it been in place nine years ago. His analysis showed that the amount yielded would have varied between $6 million and $90 million a year. Egan’s office averaged those numbers to get the $35 million estimate.

Egan also explained that, contrary to common San Francisco ideas about where babies and money come from, the $35 million won’t be brought by a benevolent stork. Buyers won’t take on the extra expense, so owners will pass on the cost to renters. And while it won’t apply to a large number of renters, it will apply to a few important ones. (He didn’t specify which ones.) As a result, the analyst’s 20-year forecast estimates 250 private sector jobs lost per year if Prop. N passes. While those job losses would initially be offset by gains in public employment, by 2014 we would just have a loss of employment positions.

Don’t get me wrong: Prop. N is basically guaranteed to pass. San Franciscans have no sympathy for storks or the kinds of companies and people who are party to multimillion-dollar real estate deals.

But with a projected budget shortfall of $712 million next year, it’ll take a lot more than Prop. N to prevent another sad season of budget negotiations.

On Not Helping the Case Against Prop 26

‘I heard that Avalos is trying to start taxing my consumption of alcohol. Is that true?” one of my civilian friends asked.

I call him a civilian because he’s not generally interested in local politics. He’s a fancy lawyer whose e-mails usually relate to our shared love of offensive cartoons. However, Supervisor John Avalos’ proposed alcohol tax, er, “fee” has made even the most disinterested San Franciscan sit up and take notice of the Board of ­Supervisors.

The proposed fee, plus administrative costs, will amount to about $1 per drink, according to a recent calculation by the San Francisco Brewers Guild. Technically, the fee is levied against the manufacturers and wholesalers of alcohol sold in The City, but even Avalos admits the cost will be passed on to consumers.

The proceeds from the fee are supposed to cover the $18 million per year The City spends on alcohol treatment facilities and transportation to said facilities. The full board is set to vote on the proposal Sept. 7, and the stakes are higher than just adding a buck to your beer bill.

Proposition 26 on November’s ballot is a statewide initiative that would severely limit the ability of local governments to impose fees to pay for heath, environmental or social issues. If Prop. 26 passes, fees like the one proposed by Avalos would have to be submitted to voters for approval, not just passed by a simple majority of a city’s leaders.

The prospect of Prop. 26 passing is, I suspect, one reason Avalos is pushing to enact his alcohol fee before the election. However, should this fee become San Francisco law (assuming Mayor Gavin Newsom doesn’t veto it, which he has hinted he might do), you can bet proponents of Prop. 26 will make it the poster child for why we need to rein in the ability of local governments to impose fees without voter approval — “Vote for Prop. 26! Don’t pay a fee on your Chablis!”

That’s just the kind of political ad that would appeal to civilians throughout California. According to one friend at City Hall, “If Prop. 26 passes, county and local budgets will be devastated forever ... thanks to Avalos.”

Final Budget Vote: This Looks Like Some Nonsense Right Here

‘I congratulate the mayor of San Francisco,” Supervisor Chris Daly said at Tuesday’s final budget vote. And he was right. Two of Mayor Gavin Newsom’s pet projects — Kindergarten 2 College savings accounts and a home for Homeless Connect facilities — were restored to the budget, and the rest of the $44 million that the board managed to put back in the spending plan was for “mom and apple pie” items like violence prevention and children’s services. 

What’s more, according to Daly, the mayor got supervisors to drop two proposed charter amendments that would have diluted the mayor’s ability to appoint members of the Recreation and Park Commission and the Rent Board. 

Taking “items that are unrelated to the budget without a monetary impact and mak[ing] them part of a deal on a budget agreement is not only illegal, but the wrong course in terms of good government,” Daly said, referring to an old memorandum issued by the city attorney. Daly reiterated, “It is clear that it is illegal for members of the legislative body to be doing this.” 

So, did some members of the board agree to nix two charter amendments in exchange for a budget deal? Doubtful anyone would admit such a thing, but the vote smells fishier than Pier 39. 

For starters, the amendments were listed early on in the agenda, but one by one they were continued until “after the budget discussion.” Daly and Supervisor Sean Elsbernd expressed disbelief. “I am wondering why we would continue several charter amendments until later in the meeting,” Daly said. 

I was wondering that myself. Why wait, unless the goal is to use them as leverage? 

Then, after hours of Sooper Secwet Budget Negotiations, Supervisor John Avalos announced the $44 million in add-backs that included funding for Kindergarten 2 College and Homeless Connect — both of which had previously been cut. 

The budget passed by a vote of 10-1, with Daly voting no because “based on the best intelligence that I have,” the mayor held the charter amendments hostage during negotiations. Once the budget vote was over, supervisors moved on and voted on those charter amendments that had been continued — the ones Daly predicted would be sold out. 

Mirkarimi stood in support of his proposal to have split appointments to the Recreation and Park Commission. Then, David Chiu said he had never been crazy about the idea and voted against it. The final vote was six against and five in favor of the amendment, so it failed. 

Thereafter, Supervisor David Campos voluntarily tabled his proposal to change the way the Rent Board is appointed. 

Tartar sauce, anyone?

PS: Both Chiu and Campos have told me that the Charter amendment votes and budget votes were unrelated. Thought you should know that. 

Quotes of the Meeting: Don't Make Me Choose!

“If there is a real estate transfer tax god that is out there, I want to thank you for helping us close this budget.” 

— Supervisor John Avalos, acknowledging that higher-than-expected transfer tax revenue helped balance the budget this year. Sadly, there’s no such deity, only real people and real companies who pay real money in transfer taxes. You can bet some of them are really praying to their own gods that Avalos’ proposed increase in the transfer tax does not go on November’s ballot. 

 “We are becoming quite skilled as a body of legislators in navigating around the trends of boom and bust nationally.” 

— Supervisor Ross Mirkarimi, speaking as if the continued functioning of San Francisco is the fault of City Hall. 

 “Notwithstanding the fact that it is something the mayor has indicated that he likes, I think it is a good program.” 

— Supervisor David Campos, refusing to cut the Kindergarten 2 College program. Grinning as he said it, I appreciated his acknowledgement of the knee-jerk politics so rampant at City Hall. 

Adachi to Supes: Cut My Budget and I'll Sue (Basically)

Constant Readers,

Your old pal Melissa just got my grubby little hands on a letter from Public Defender Jeff Adachi to all members of the Board of Supervisors. (Here's a pdf: Download Adachi Letter)

Allow me to summarize if for you thusly: If y'all take money out of my office's budget in retribution for the pension reform I am sponsoring, I will have grounds to sue you for impinging on my First Amendment right to free speech.

See, public employee unions are pissed that Adachi went out and got signatures for pension reform that will require public employees to pay more into their own retirement funds. Those unions have lots of pull at the Board of Supes and there is a rumor that Supervisor Chris Daly will move to take $1.2 million from Adachi's budget as punishment.

The inimitable Luke Thomas over at Fog City Journal wrote all about this and quoted Supervisor John Avalos as saying, “I’d rather operate to keep the function of the public defender intact rather than apply retribution, although if my colleagues want to apply retribution, I’m not going to cry.”

Retribution? Oh shit. That's the magic word! A screenshot of that quote on FCJ has already been marked Exhibit A in Adachi's lawsuit against the City.

According to Adachi's letter, the government (Board of Supes) can't try to penalize Adachi in this manner because the act of advocating for pension reform is "politically protected speech" under the umbrella of the First Amendment.

So, what can we learn from this: (1) if Supes DO discuss cutting Adachi's budget, they will bend over backwards to say it has NOTHING to do with pension reform - at which point I will give the side-eye so hard I may lean to the left until I fall out of my chair, (2) if you support pension reform, consider using your Vegas Name because public employee unions are out to punish folks who speak up in favor of the pension ballot measure.

-Melissa