Students. To inform Kindergarten Readiness practices when students transition from prek to kindergarten. Im available to answer any questions regarding these services. John sutikawa can also answer questions regarding the contract process. Chair fewer thank you. Lets hear from the b. L. A. , please. This is an extension to the contract approved between the department and the program preschool for all. For two years, the annual expenditures would be about 3. 4 million per year. There is a 10 contingency over the twoyear intention of the contract. Because the residents do provide for a contract amount of 17. 9 million, our budget shows a contract of 17 million. Therefore, we request amending the contract to 17 million, and we recommend approval. Chair fewer mr. Dobson, you are aware of this recommendation . Yes. Chair fewer and you are in agreement . Yes, we are. Chair fewer thank you. Id like to open this up for Public Comment. Are there any members of the public that would like to come forward . Seeing none, Public Comment is closed. [gavel]. Chair fewer id like to make a motion to move this item to the full board as amended. Can we do that without objection . [gavel]. Chair fewer madam clerk, please read item 14. [agenda item read]. Chair fewer thank you very much, and with us, we have today supervisor gordon mar to speak on this issue. Supervisor mar yeah, thank you so much, chair fewer. Sorry. This came up a little sooner than i thought. But yeah, thank you so much for allowing us to actually hear this item today. I just wanted to make some brief sort of opening, framing remarks. So this conversation has always been about wealth inequality, the driving force behind the multiple crises facing our city. All of the greatest challenges we face are rooted in economic inequality, Housing Affordability and homelessness, gentrification and the exploitation of workers whose labor creates the immense wealth in our city but who seldom share in it. We do have a moral obligation to create a more economically just city. San francisco has the highest income gap in the nation, the highest housing costs in the nation, and the highest concentration of billionaires anywhere in the world. The majority of people, our constituents, feel the negative impacts of this every day. These are not problems unique to our city, but here, they are uniquely urgent. For decades in our country, weve seen a massive redistribution of wealth from the working people towards the top 1 , exacerbated by divesting from social services, attacks on the labor movement, and tax breaks from big corporations at the expense of every day people. And here in San Francisco, weve seen the result. Wealthy corporations receive big tax breaks while Small Businesses shutter, and new industries seek to redefine the nature of work, to cut pay and benefits while working People Struggle to get by, and young people, families, seniors, and entire communities worry about their future in our city. In the face of an inprecedent unprecedented number of wealthy individuals of large corporation, we held a hearing, and through that hearing, we learned that i. P. O. S have a measurable impact on these crises, significantly increasing income and wealth inequality, which is why i introduced a payroll tax for stockbased compensation to recapture the wealth San Francisco helped to create. It is in fact not a new tax but a restoration of a tax that existed prior to 2012. In the coalition that was build around this measure, it came clear that the stock compensation tax should be one part of a broader strategy to build a more just city but is not itself a comprehensive solution. So today, im announcing that we are committed to developing this comprehensive solution. I will be making a motion to table this legislation. In the coming weeks, we will be tabling the stock compensation tax on the 2020 ballot, and i would like to invite ted conroy to make a presentation ted egan to make a presentation on the Economic Impact analysis. Mr. Egan . Good morning, supervisors. Ted egan from the controllers office. Our Office Issued an economic report on this item this morning, and if i can bring it up on the screen, ill walk you through some of the highlights and conclusions of that report. As supervisor mar indicated, this tax, which is a tax of 1. 12 on the stockbased compensation of businesses subject to the payroll tax in the city would effectively raise that tax to 1. 5 , which is the rate that it was at prior to the Business Tax Reform efforts the city undertook in 2012. The tax is a dedicated tax as currently introduced and would require a twothirds approval. The tax was intended to be devoted to lowincome workers and Small Business stablization. I would want to point out that while Small Business stablization is often discussed in the initial Public Offerings of companies, this is broader than that. It would cover all stockbased compensation, which is payment or compensation made to employees in lieu of wages and salaries and consisting of rights to own the company or options to own the companies. Its in i. P. O. S, but not exclusively restricted to i. P. O. S. Some other companies also offer stockbased compensation. This would cover all stockbased compensations that was realized on or after may 7, which is a few days after ubers i. P. O. Uber was the Largest Company to have an i. P. O. In San Francisco that were aware of. Earlier, companies from 2019 would not have made that deadline and would not have been covered. Subsequent ones from companies such as slack and any future ones would be covered. Its also important to keep in mind that the taxbased compensation is a tax on the business. Its not a tax on the employees that receive the taxbased compensation. So on the uber i. P. O. , we expect therell be millions of dollars flowing into the oakland economy. This would increase the tax on uber as a result of the taxbased compensation stockbased compensation that they pay to plyys. Stockbased compensation is largely associated with the Tech Companies, and its believed this is to create incentives for employees to achieve growth goals for the companies morning cashbased wages and salary. So because of this reason, in San Francisco, given our economy, its likely that the bulk of the burden of this tax would fall on the tech sector. And because of that, i think its worth considering some of the impacts that the Technology Sector has had both positive and negative on the citys economy during this decade. Its very clear that the citys economy has been transformed in the past 15 years by the growth of the tech sector here. As recently as 230 2004, technology accounted for only 2 prs 3 of the jobs in the city, and now, its 15 , so a 500 increase. The tech sector has been rapidly growing across the country, and other communities have had their communities impacted by the tech sector. One of the major impacts that the Technology Sector has had is on housing including rent. This is a chart showing rent trends this San Francisco and in california and in the United States going back to 2011. San francisco already had housing back in 2011 that was 50 higher than the statewide average, but our rent since 2011 has already grown 40 faster than the state. Our rent has grown faster than the state and much faster than the United States since 2011. On the other hand, the tech sector is also associated with a period of Economic Growth in the city in which incomes have risen. This is the per capita income trends in San Francisco, again, comparing it to california and the United States. Per capita income has grown from 2011 to 2017, which is the most recent year we have data for, 60 of the nations Income Growth in that period. So in one hand, he have a very rapidly growing sector. Its growing much faster here than it is in other places, and thats led to rising costs and incomes. So what does that mean . That means youre increasing the enumeranumerater and the denominator both. San francisco is a city that has always had a high rent burden compared to other cities. If we go back to 2006, which is the first year the a. C. S. Started collecting this data, over 40 of San Francisco households were rent heavy at that time rent burdened at that time. That percentage of houses actually peaked in 2012 at the end of the recession and has actually gone down since the end of the recession, so the number the percentage of San Francisco renter households that spend more than 50 of their income on rent is lower than its been in any Previous Year that the a. C. S. Has done that, and thats true for households that spend more than 50 of their income on rent. So the net effect on renter households is theres generally been an improvement in housing. One of the things that impact that is in San Francisco, not everyone is paying market rate for housing, but wages and Income Growth tend to Effect People every year. So for example, if you are a San Francisco renter and you rented a unit, and youve been stable in that unit since 2011, its likely that your rent has been growing slower than your wages. Of course, thats not true for everyone in the city but its a fairly large swath of households in the city. Another way to look at the experience of the citys economy as it affects different parts of the workforce is looking at peoples trends after they pay for housing. So this is a chart that breaks down the income that households have after they pay for expenses in San Francisco. This comes from census data from the 2012 record data that allows us to subtract housing costs from household income. That widespread of occupations reflects the inequality in San Francisco which has been pronounced in San Francisco as long as weve had statistics. But it shows that the real incomes after paying housing compares to the same jobs in other cities. I compared San Franciscos incomes to a sample of other large cities like new york, los angeles, washington, seattle, etc. And San Francisco households in occupation after occupation generally make more here after paying for housing than they do in other cases. So again, the general trend among San Francisco households is that the growth and income in the city has outweighed the growth and housing costs that people actually experience. So as a general rule, their housing burdens are going down, and as a general rule, theyre better off here in occupation after occupation after paying for housing costs as a result of the growth and wages and Economic Growth in the city. Let me just now return to the policy under consideration and mention some of the criteria by which we have in the past used to assess tax policies and over the years that our office has been involved in assessing basis taxes in the city. The criteria that we and others suggest looking at go beyond just looking at Economic Impacts, but also evaluating tax based on how administratable they are. So ill walkthrough each consideration in relation to this tax, and that will conclude my presentation. This tax, like every tax that the city was imposed, creates costs and benefits within the citys economy. It would raise the cost of labor on businesses that use stockbased compensation and on the other hand, it would raise revenues for purposes explained in the legislation, so the net Economic Impact is the net of that. Weve estimated, and its very difficult to statement because the city does not collect data directly on stockbased compensation, and the federal statistics we rely on similarly do not break out stockbased compensation for payments to workers, but weve estimated somewhere between 10 and 30 of all compensation paid to San Francisco workers in the Economy Today did and dependin the year is stockbased compensation. So at the proposed rate of 1. 12 , that is suggested this tax could raise between 50 a million and 100 million a year. Its also very likely a cyclical tax because compensation is tie todd to th stock market. So we would expect lower revenues when the market is down, and higher revenues when its up. We used our remy model of the citys economy as we do to assess the Economic Impact of the legislation, looking at the tradeoff between the higher cost of labor and the higher spending. We found that it would lead to a midpoint range of 100 million, would plead to about a negative impact of 125 million on average over the next 20 years and 675 fewer jobs. This is taking place in the context of a city economy that is 175 billion in its g. D. P. And has 175,000 jobs. Now, that does not speak to the sufficiency of the tax. In other words, what is the economic harm that youre imposing on the economy to get every dollar of revenue. But we have done other analyses over the years that suggest there are labor taxes that do not focus on stocks and payroll that could get you to more of a revenue with less economic less than this particular tax. I wont speak directly to administerability issues but its ae clear that because the city doesnt levy a tax on stockbased compensation. We also believe that this tax is likely to be more unstable than other business taxes, as i said before, this has to do because its benchmarked essentially to the stock market, which is more volatile than the stock base of our other business taxes. And then finally, equity issues. When people study the equity of tax proposals, they often ask questions like how closely does the tax required payment match to the taxpayers ability to pay. Thats one common question, and a second common question is how equally does it pay the tax payment of two different taxpayers who are otherwise equal. Thats known as horizontal equity. These classes in dealing with business taxes are always difficult in california cities because the thing that we would like to tax and treats businesses equally is an income tax, and were prohibited by doing that by state law. In terms of this tax, in comparison to the proposed business tax, probably does reflect better reflect a businesss ability to pay in some ways. So if a company was valuable and it had a lot of highly paid employees, it would pay more in taxes and it would pay more under this proposal, so it is getting to a more progressive payroll expense tax. However, it is not necessarily the case that every stockbased company will have a large compensation. A tax like this might encourage a same behavior. Its getting towards a more progressive payroll tax than the one we have now, but i would say its not perfectly reflective of income, which is difficult to do in the context but its a situation where were not allowed to charge an income tax. The stockbased compensation was even much smaller than Central Market and the shift to growth receipts, at the time, we projected, you know, 1500 to 2,000 jobs might have been created as a result of that switch after it phasedin after 20 years, and we still have a payroll tax that is 25 of what it was and we only just finished phasing it in. I would say those three proposals, which i would agree are the three biggest things this city has done probably had relatively little impact on most of what we are talking about what have happened had we taken those policies or not. Thank you. Just to clarify, i was asking what your assessment was on the impact, not on the overall Economic Growth of San Francisco over the past 15 years, but just astounding growth of the tech sector. You said by more than 500 . That has taken our economy to the point where they are dominating the economy at this point. Do you feel like these tax breaks and the tax changes were really directly or indirectly on target to growing the tech sector and played a role in that and were they successful . I dont think they played a great role because the amount of savings they generated to the tech sector as a whole is relatively small in the context of the growth. For example, again, i think we founded all of the tax exclusions that were taken over the years of the Central Market amounted to about 70 million. That sounds like a lot of money in the context of the citys budget, but in the context of one hundreds of the 5 billiondollar economy, who is fastestgrowing, that is the tech sector. It is not very large in the context of the growth of that sector at that time. What exactly were the tipping points and what changes in San Francisco you maybe would see in 2,010 or 2,011, in that period, something is happening and i cant put my finger on it, but it would be hard to attribute it to city policies just given the size of those policies relative to the size of the economic changes that we saw. I think that is my only reason for being hesitant in saying it probably wasnt that because the amount of tax savings were talking about simply wasnt that great. Okay. I appreciate that. I had a followup question. Were the other sectors of our economy, nontech sectors that had a converse experience during this period . In other words, other sectors that did not benefit as much from tax breaks or tax policy that we enacted, and also, as a result they have seen a declini