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Benioff urges city to forge ahead with implementing Prop. C despite legal concerns

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Salesforce CEO Marc Benioff spoke to reporters about Proposition C outside the Presidio Officers’ Club on Wednesday, Nov. 7, 2018. (Kevin N. Hume/S.F. Examiner)

Salesforce CEO Marc Benioff on Wednesday dismissed concerns that a measure passed Tuesday that stands to tax wealthy businesses such as his own to fund services for the homeless could be challenged in court.

Proposition C is expected to raise nearly $300 million annually for homelessness initiatives by allowing San Francisco to raise the gross receipts tax by an average .5 percent for its businesses earning more than $50 million.

The controversial measure passed by 59.91 percent Tuesday — a “landslide victory,” said Benioff at a press conference held in the Presidio the following day. But the measure’s opponents have indicated that a lawsuit over the required vote threshold at which the measure passed may be on its way.

No matter. Benioff, who has supported the Prop. C campaign with millions of personal and company dollars, pressed for the city to fund the services promised in the measure as soon as the tax is collected.

“There can always be legal challenges, but the reality is that The City needs to now go ahead and implement Prop. C — that’s the will of the people,” said Benioff, who estimated that his own company will be subject to a “$10-11 million” tax in the first year of the measure’s implementation, and an even higher tax in subsequent years.

No legal challenge has yet been filed, and No on C campaign spokesperson Jess Montejano declined to state on the record whether one was planned.

However, the legal threat could delay the measure’s implementation.

San Francisco Treasurer Jose Cisneros said in a statement on Wednesday that his office is “well-prepared” to implement “the will of the voters and begin collecting” the tax levied by Our City Our Home, as well as other recently passed tax measures, including the universal child care initiative, on January 1.

But a memo sent by City Controller Ben Rosenfeld to Mayor London Breed that same day expressed concerns over dispersing the funds on shaky legal grounds.

“As you are aware, the City is currently in court to resolve whether two voter initiative taxes on the June 2018 ballot required approval by a simple majority or two-thirds of voters. Should Proposition C receive less than a two-thirds vote, it would likely become part of legal proceedings involving similar issues,” Rosenfeld wrote in the memo.

Citing the City Charter, Rosenfeld wrote that the collected tax money will not be spent, but will sit in a reserve until the legal dispute is resolved, as is dictated by a “voter-adopted safeguard designed to ensure that the City does not enter into commitments only to find itself later without the means to pay for them.”

Benioff placed the onus of defending the measure’s legality on the City Attorney’s Office.

“The City Attorney already said 50 plus one is victory — he has written about that. It’s clear as day and there’s clear legal precedent,” said Benioff. “Let’s enforce Prop. C. There’s no legal question. If anyone is coming after this, the City Attorney’s job is to defend it, and of course we are going to give him our full support as well.”

City Attorney Dennis Herrera, who last year issued an interpretation of a Supreme Court ruling that argued that voter-driven initiatives are subject to a lower threshold than initiatives placed on the ballot by legislators, indicated Wednesday that his office would defend that interpretation.

The city is already fighting a legal battle with business groups over another tax measure that passed by a simple majority in June, also called Proposition C. That measure, better known as the San Francisco Universal Childcare for All initiative, aims to subsidize early education by raising the gross receipts tax on commercial rents by 3.5 percent starting January 1, was narrowly approved by 50.87 percent of San Francisco voters.

“The California Supreme Court clarified in the Upland decision that certain restrictions bind local officials but do not bind the voters themselves,” said Herrera in a statement. “A two-thirds majority is required when local officials – not the voters – place an initiative on the ballot. Proposition C was placed on the ballot by the voters….a clear majority of voters passed Prop. C, and we will defend their decision in court.”

A total of 26 companies in the Bay Area are expected to be subject to a gross receipts tax higher than $1 million under Prop C.

“Those 26 companies that are going to be paying the majority of the tax are perhaps 26 of the most successful companies in the world,” said Benioff.

While Mayor London Breed sided with business groups opposing Prop C. during the election, on Wednesday she appeared to take a more neutral stance on the measure. She said in a statement that she supports building more housing, shelter and adding services to help the homeless, and that “business can pay more to make that happen.”

She added that she has had conversations with both Prop. C’s proponents and opponents over strategies to deliver the measure’s goals, enact “strong accountability measures” and address “legal uncertainties in the measure.”

Coalition on Homelessness director Jennifer Friedenbach, who spearheaded the measure, said that while she is confident that any legal challenge over Our City Our Home would not be upheld in court, it could delay the measure’s implementation.

“That will mean a lot more folks will have to wait. They will needlessly suffer out on these streets,” she said. “Our expectation is once the funds are released we will see some major, viable transformation for San Francisco within the first year, and more year after year.”

lwaxmann@sfexaminer.com

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