The nonpermitted use, and the recommendation would be without affecting whether or not that use was permitted, if you did have a lease commitment for a certain type of nonpermitted use that would exempt you for the tax. An example. There is flexible retail permitted in the southern half of the city and less so in other parts of the city. A conditional use will not permit that in many areas of the city. If a Property Owner of the vacant unit had a lease commitment, however, that deserves to exempt them from the tax. It shows they are trying to find a tenant and are on the ball. Whether or not the city wanted to grant a variance as needed is an entirely separate issue. To conclude the main part of the report is the problem ofvay cant store vacant storefronts is not divorced from the general issue of declining retail trade in San Francisco during a period of very strong Economic Growth in the city. It is possible to design this tax in a way that is positive and possible to design a tax in a way to create risk factors for Property Owners trying to do the right thing. That is behind the spirit of our recommendations. I am happy to take questions. Any questions or comments from colleagues . I am happy to make a comment. I want to thank mr. Eagan for the report. The comment is as to additional tailoring and exceptions we have that ability so far as with prop e and other things before the voters there is the ability of the board of supervisors by twothirds vote to continue to refine and tailor it. I want to point that out. I would submit that additional financial risk for Property Owners is in any economy regardless of market fluctuations is leverage for the lessee, for the Small Business. That is one of the fundamental underpinings of this concept. If the landlord knows they are going to get 25,000 a year tax, that might motivate them to lower rents in recession because they dont want to have a vacancy. Supervisor mandelman. Thank you, chair fewer and mr. Eagan. I assume the answer is no, i am under the impression that other cities have tried vacancy taxes. Did you look at those or no . Many Different Things in practice are called vacancy taxes. Washington, d. C. Has a vacancy tax on vacant land. That is a more common approach rather than taxing vacant storefronts. I wouldnt say it was a comprehensivery view. Are you aware of another city that has Something Like this. No. I want to say that i have to push back a little bit about your estimate when it says on page 5. Not page 5 but you quote in page 5 based on the d. B. I. Fee revenue. I think this is a very modest and highly inaccurate number to actually base your assumptions about revenue, that it would how much revenue it would generate because of this. In my district in 2016, i was told i had zero vacancies because of the loophole. As you know, my office wrote legislation to close that loophole, but i myself did crowd sourcing in my neighborhood. I had 165 vacant units, vacant storefronts just in my neighborhood. I request imagine that you crimes that by 11 different districts. Plus i dont have as many commercial corridors as other districts. I think the number i is higher than estimated. When you look at the numbers here, i understand there is no other measure but to see who is registered. When i wrote the legislation last year there were actually only 40 vacant store fronts vacant because of the loophole. What we see in 20182019 is a sharp increase. This is by no means the representation or a true representation how many vacant storefronts this would affect. I believe it is probably at least 3 or four times or more than this. Also, we should keep in mind that it is not just one vacant storefront vacant for a short period of time. In my district they have been vacant for over a decade. I would love an analysis, also, on the impact of other Retail Businesses when there were more than three or four vacant storefronts on the commercial corridor. That would be interesting, quite frankly analysis to see. How much impact does one vacant storefront have on one block . How many is four, five . I have a person that owns five or six on one spy block in the commercial corridor. How does that affect the commercial businesses . That would be a good analysis. I just wanted to say that i think that it is conservative, your amount. We know that because we know that so much i think we can all point to in our own neighborhoods places vacant for a very long time that had never registered as a vacant storefront. Thank you for your presentation. Thank you. I just want to clarify. We didnt actually use the d. B. I. Information for the revenue estimate. We looked at the kind of guesstimate there it is easy to get from brokers the since of overall Retail Vacancy rate. Hohow many have been vacant for 1821 subjec1821 was 182 woult to error. We applied it to the street frontage for the estimate. We have heard from others there are issues inputting too much stock into the d. B. I. Data. Thathat is not why we used it fa revenue estimate. We would lover to work with you further on that. Thank you very much. I would love for this to be San Francisco first. Oakland in 2018 actually did a commercial and Residential Vacancy tax, very different than ours of 6,000 per parcel for 50 days or more and passed with 70 in oakland and is now implemented. Thank you. Supervisor stefani. How will the Tax Collector identify and assess the tax. Will it be selfreported or community reported or will there be a department actively monitoring the merchant corridors . Thank you. Thanks to all of you and the voters we have had taxes implementing new taxes over the last few years. This will not be the first. We have been working hard with supervisor peskin to understand this tax and figure out the best way to implement it. With all taxes our challenge is to do significant taxpayer outreach and education so that anyone who could be subject to a tax understands how it works. That will certainly be at play here should this pass, and, yes, all taxes are selfreported. When you file the taxes in the spring to the irs, yes, they take your employer data. Most of it is generally on the honor system at first pass. That is true for business taxes as well, but we wouldnt be doing our jobs if we just left it up to that and we have a very robust enforcement team. That includes investigators and auditors and everything in between to make sure we understand who should be paying the tax so we dont over burden good over bad actors. In this case, this tax has a number of ways that we think we can implement this quite i wont say easily but without a whole lot of new resources. First, it is a finite list of properties subject to the tax. That makes our job easier. We worked very hard with the City Attorney to craft precise definitions of vacancy, who would be subject to the tax, the Taxpayer Group and then the data sources that we will use to make sure our enforcement is fair and complete. You know, we will certainly utilize information coming from d. B. I. As well as commercial rent databases and our own data from collecting the newly passed commercial rent tax and other tax data. We will rely on continues from the public. I think this will be a tax that businesses in the commercial corridors will say, hey, we think you should check this out. It looks vacant for some time. We anticipate a robust system forgetting continues from the public as well. As followup. When you say finite list of properties, do you know how many . It is rare that we have a geographically defined business tax, that does make our ability to enforce a little easier. Supervisor mandelman. I dont know if this is for the Tax Collector or d. B. I. How is the definition of vacancy in this ordinance different from what d. B. I. Is treating as vacancy now . I would look to my colleagues at d. B. I. To explain the current definition. Good morning, bill strong. Under the current ordinance if you are vacant 30days or more, you must register. That was per the recent amendment. It doesnt really matter whether you have a for lease or for sale sign. Under the previous ordinance if you had that, we werent looking to enforce it. This, obviously, looks at a very different time period. We are currently enforcing anything over 30days. I mean more in the sense of what unoccupied, uninhabited or unused means. Is that the current vacancy standard . When is a Property Owner obligated to declare the property to be vacant . 30days after the vacancy. What is the vacancy . They are no longer occupying that space. Is that a lease . Or someone going in and out the door. Going in and out of the door. It is the same. Do you have any sense of i guess last year we think there were close to 300 vacancies reported. Do you have a sense of how much underreporting is going on . That is a little difficult to speculate about. I do know that since the passage of supervisor fewers ordinance we have gone from roughly 44 registrations to now 283 registrations. The number of people actually coming in to register has gone up significantly. What kind of affirmative work does d. B. I. Do to go out and identify vacant storefronts . Our district inspectors during the normal course of duties in each of the districts gets a notice of vacancy, they report to the Code Enforcement group. As well as we rely on the public calling in and notifying us on a complaintdriven basis. There is tremendous interest on this board to see more vacancy enforcement over the last couple of years. I am curious if d. B. I. Allocated Additional Resources to identify the vacancies during that time. That is correct. Our Code Enforcement aspect has nearly doubled. What does that doubling mean . From one or two Code Enforcement officers to four who are now doing that job. Fully tacked . Focused on the vacant storefront, vacant building aspect. Thank you. You are welcome. Thank you very much. Supervisor peskin a question for you. For clarification if a landlord were to lease out property to a Small Business after keeping it vacant for 180 days, the clock starts over at that time . Thats correct. I wanted to verify the Small Business would not be penalized. That is absolutely correct. If you give me one second i will read you the magic words. I love magic words. Which is in section 2904 subsection d and, of course, there are various definitions at the front of the legislation. It says a person shall be liable for the vacancy tax only if that person kept taxable commercial space vacant in a tax year. When that person leases to another person, it starts over. Thank you very much. Given all of the exemptions for the time periods when a Building Permit or conditional use permit is filed and during construction, how likely is it that a Small Business could be on the hook as a tax for the lessee . Is this real or perceived risk . If you add up all of the timeframes. This would not go into effect until beginning of 2021. If you add all of the timeframes together in sequence, it is 2. 5 years. I think the question that you are asks is what is the likelihood that a lessee who abandons the lease would be liable for the tax, that would be the vast, vast minority of cases. The majority of vacancies you see are not leased. They are vacant and owned by the Property Owner and there is no lease in the ground floor commercial space. It should be uniform. If you are a lessee and you have got a five year lease. After year one you decided to close the business, that lessee would be liable in years two, three, four. Presumably if they couldnt pay the rent and got out, they have probably either filed the chapter or trying to get out of the lease. That aspect is there and would apply in a small number of cases. Thank you very much. Would it be possible to exempt Small Business lessees with a business license while holding them accountability if they lease spaces vacant . A couple of things. I defer the legal question to competent council. As policy matter the vast majority of the colored spaces either do not allow formula retail or only allow formula retail with conditional use, which depending on the Planning Commission in the particular neighborhood are difficult to get. I would say as a policy matter that when it is a small landlord or large commercial landlord it should apply. The incentive is to get Property Owners to get ground floor commercial space. I dont see a difference between one kind of business in formula retail. This is about getting bad actor landlords off their duffs. Supervisor stefani. That example made me nervous in terms of the lessee on the hook. They entered a long term lease with the landlord and the business doesnt make it which happens. I am worried the fear if they know that if they dont make it on a five year, seven year, 10 year lease or something. That fear of having to pay this tax might then impair their ability to even put forth the Business Plan and make something work. I am thinking it through if that is an unintended consequence that we should think about. I just dont want to put any i dont know. Limitations on the business that wants to start off if they fear if they dont make it i have three years of this tax to pay . If they are on a five year lease and after the first year it fails and there is remaining four years left on the lease. I think we would want to put pressure on then the Property Owner to quickly engage in a new contract with a new lessee. Are there things that we can do . Are there mechanisms to put in place to protect the small Property Owners Small Business owners . [please stand by] i mean, generally one what happens when you go out of business if you cant pay the rent anyway. There you go. Does that make any sense . But if they cant pay the landlord. If they are on the hook, though, and they are stuck in this lease and the landlord his not going to at that point, he will be subject to this tax. I am worried that it will be on that business that cant even pay the rent. Yeah, but they are probably out of business is the point. But who pays the tax at that point. I would imagine it would be uncollectible if the business is no longer a business. Supervisor, yes, you are correct. If the business goes through bankruptcy, it is certainly quite difficult to collect. I will say you dont have a warm and fuzzy thoughts about a Tax Collector for a reason, so we would certainly do our best to collect on any debt owed to the city. Another thing i would say is insofar as this entire concept is designed to give Small Businesses and lessees leverage in a negotiation, i would assume that lessees would start negotiating exit clauses, right . Yes, they have a fiveyear lease , but if there is an act of god or they go out of business in your two, that there is an exit clause. Lets ask the City Attorney. If there are mechanisms that we can put in place, i thank you have heard the conversation and the sentiment of supervisors that i think there is we know that so many Small Businesses fail in San Francisco within the first year. So we are looking to relieve the burden of the tax off the lessee and put it right back on to the Property Owner if they are not engaging in a new lease within a certain period of time. Is there going to say his or something, a mechanism that we could put in that actually does that . I think the biggest practical obstacle to that amendment today is that the timing of the process we are placing this measure on the march ballot, but we should start with that. Supervisor peskins proposed amendment took the amendment today. If the Committee Adopts the amendments, that will trigger continuance to another committee meeting, special committee meeting, i believe anticipated for monday, sending the measure out to the board as a Committee Report to pass on the 19th, next tuesday. You cannot make any additional amendments today because our office wont sign off on amendments on the floor to ballot measures because of the nature of ballot measures. You could, in theory, make additional amendments on monday and that would trigger the only way to then get it onto the ballot for march would be for the board to hold a special meeting. Either way it next week or early the following week, we would have to work that out with the Courts Office and the supervisors to figure out what is possible. And the time between today and monday, we can certainly work with your office to figure out whether its possible to shift the tax burden to the landlord in a situation that you are positing. So, im sorry, supervisor peskin, one second for clarification purposes. It would mean then that if we introduce something on monday at our special budget meeting, then we would have to have a special board of supervisors meeting with a quorum. Is that correct . Thats correct. The deadline for the board to place this measure on the ballot is the end of thanksgiving week. The last regularly scheduled word meeting before thanksgiving is next tuesday. Any amendment to a ballot measure automatically under the municipal elections code triggers another public hearing with Public Comment before the board can vote to place the measure on the ballot. If you amend on monday, you would need to schedule a special Board Meeting with a committee as a whole to allow the Public Comment and the board with then, after the Public Co