San Francisco is discussing a variety of tax proposals to bring before voters next year, including a vehicle license
fee increase, a carbon tax and a 1 cent soda tax.
The discussions come as San Francisco deems many of its services underfunded — everything from Muni to parks. The City also faces budget deficits in future years, driven largely by burgeoning retiree pension costs.
The City is facing a $99.8 million budget deficit for the fiscal year beginning July 1. In the next four years, the deficit is expected to increase to $538.4 million, according to the City Controller’s Dec. 7 Five Year Financial Plan.
The slew of taxes has some in the business community wary.
“The problem with many in the business community, there’s a feeling the taxes just keeping going up,” said Scott Hauge, a longtime small business advocate.
Hauge admitted he is “averse to taxes,” but he said he isn’t taking a hard anti-tax stance at this point. However, he said it is “hard to get you arms around a $9 billion [city and county] budget” and the main question is “is the money being used as effectively as possible? It’s hard to understand.”
Even as San Francisco’s local economy is booming, revenues are not keeping up with the pace of city government spending, according to the Controller’s financial plan.
“As a result, a gap remains despite continued economic growth. The City currently projects revenue growth of $434.6 million, or 9.5 percent, over the four-year period of this plan, and expenditure growth of $972.9 million, or 21.2 percent,” the report said.
The largest contributor is the unanticipated city pension costs, with pensioners living longer than expected, investment returns coming in lower than expected and the court’s striking down a cost-of-living provision in the 2011 voter-approved Proposition C pension reform measure.
The City Controller’s report does not assume an economic downturn, which would worsen the deficit projections, although it does suggest there is a high likelihood of a slowdown. The average length of time between the nation’s recessions is 46 months, but the current economic growth since the last recession has persisted for 72 months.
One expected tax hike on the November ballot is an increase of the vehicle license fee to 2 percent. That would generate an additional $75 million for road repaving, Muni and pedestrian safety projects.
Two years ago, Supervisor Scott Wiener wanted to place the vehicle license increase on the ballot, but faced opposition from the mayor. The two came to an agreement to bring it to voters in 2016. Wiener said Tuesday he remains in support of the fee increase.
The City is making progress on street repaving using existing tax revenues, but Wiener said his concern is “if we go into an economic downturn that will be harder to do.” He added that the fee revenue for Muni will help carry more riders.
“We have to expand Muni capacity,” Wiener said.
Both Supervisor John Avalos and Wiener are drafting separate proposals to require The City to take back the care of street trees from property owners.
Wiener’s proposal would only do so if voters approve a parcel tax to fund the expense. Avalos is proposing a charter amendment to prohibit the transfer of street trees and would couple the proposal with a carbon tax.
Wiener said he will do polling on the parcel tax early next year to decide whether to move ahead with the parcel tax for the November ballot.
A signature gathering campaign involving Supervisor Malia Cohen and a coalition of health advocates is underway to bring before voters in November a 1 cent soda tax per ounce of sweetened beverage. The tax wouldn’t apply to businesses whose revenues fall under $100,000 and would go into effect July 1, 2017. It would require a simply majority.
A 2014 effort to impose a 2 cent tax failed despite garnering more than 50 percent of the vote.
That measure required a two-thirds vote because it would have dedicated funding to health and recreation programs.
Supervisor Jane Kim recently announced her support of increasing the current 14 percent hotel tax, which applies also to short term rentals like Airbnb, to 15 percent to generate about $28 million annually.
Other tax discussions include a halfcent sales tax hike on the existing 8.75 percent tax to generate $100 million more a year, and an increase in the tax on the sales of homes valued at more than $5 million or commercial property in excess of $10 million.
One tax hike going into effect on Jan. 1 is the litter fee on the sale of cigarettes, which doubles to 40 cents. That didn’t require voter approval.
Since the November presidential election will turn out voters in larger numbers than at other elections, Wiener said the discussion of multiple proposals is expected. But at this point, Wiener said, “It’s a contest of ideas.” He added, “We will see what happens.”