Supporters of Proposition 10 and Proposition C rallied across from the California State Building on Golden Gate Avenue before a Board of Supervisor committee meeting on Monday, Sept. 24, 2018. (Kevin N. Hume/S.F. Examiner)

SF to offer financial incentive for businesses to pay homeless tax caught up in litigation

While the revenue from a voter-approved tax on big companies in San Francisco to fund homeless services is held up by ongoing litigation, The City is poised to ask businesses to voluntarily pay now in exchange for a 10 percent discount.

The Board of Supervisors Budget and Finance Committee approved legislation Wednesday that would create a discount program for the voter approved Proposition C, the “Our City, Our Home” measure, which taxes businesses’ gross receipts in excess of $50 million.

The tax would generate $300 million annually for homeless services and housing.

Litigation, however, has cast it and two other taxesinto jeopardy, with opponents suing over the question of whether a tax measure can pass with anything short of two-thirds of the vote. Prop. C was approved by 61 percent of the voters in November.

The legal decision on the measure may take three years to resolve, according to Mayor London Breed’s policy director Andres Power, and in the meantime the mayor wants to encourage businesses impacted by the tax to voluntarily pay now.

“If we do prevail in court, we will have been able to use 90 cents on the dollar for each company that participates in this,” Power said. “Ninety cents on the dollar today is better than a dollar in three years time. And if we don’t prevail in court we will have been able to keep those 90 cents that we would otherwise have had to return.”

The tax break would last until the legal issue is resolved or Jan. 1, 2024, whichever comes first.

Power said that while they have had conversations with companies about the proposal, no one has committed to it.

“We have talked to a lot of individual taxpayers,” Power said. “People are looking at it, there is interest. No one has committed to participating yet but we hope that once this legislation passes, it becomes effective and that people will come to the table quickly.”

Budget analyst Severin Campbell said the cost impact is dependent on knowing how many participate, but if everyone did, it would mean a $30 million tax break annually, 10 percent of the estimated total tax revenue the measure is expected to generate.

Jennifer Friedenbach, executive director of the Coalition on Homelessness, which drafted the tax measure and led the campaign, said those behind Prop. C are meeting Monday to discuss an official position on the legislation, which was introduced by Breed and Supervisor Vallie Brown, but she suspects there will be support.

She also noted Breed’s apparent change in her position on Prop. C. Breed had sided with large tech giants like Twitter’s CEO Jack Dorsey, Zynga founder Mark Pincus and Stripe CEO Patrick Collison in opposing the measure.

“After initially opposing, it’s great to see the mayor is now finally on board with an initiative that promises to tax wealthy corporations to address the homelessness crisis,” Friedenbach said. The Coalition on Homeless campaign for Prop. C was supported by Salesforce CEO Marc Benioff.

Power noted that the tax is being collected from businesses “but the controller is not authorizing the use of those funds given the litigation risks. So funds are sitting in a bank account while people in our streets suffer.”

He added, “The individuals experiencing homelessness today need our help today and they cannot wait for three years.”

The full board will vote on the proposal next week.

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