Of course, the beloved Corner Market left, and it is a vacant space today. Whether it is clusters of properties on columbus avenue or in the castro left off the market for as much as 10 years in some instances. This measure before us would directly address this problem which amounts to an incentive for bad actors to finally start acting. For properties in the two dozen neighborhood commercial transit districts deemed vacant. The city would be imposing a tax of 250 per lineal foot first year and 500 and 1,000 in year three and beyond. A property would be deemed vacant if it is unused for more than 182 days in a given tax year of the january 1 to december 31 tax year. The fact is i dont really like calling this a tax. It is a misnomer. It is completely avoidable. If it is successful we will collect as little of it as possible. To that end, Property Owners can invoke exemptions by doing any number of things. Those things taken in series could last for up to 2. 5 years. Applying for Building Permit and under amendments i suggest today properties would not be deemed vacant from the period of application of the Building Permit until issuance. Rehabilitating space and performing properties would not be vacant. Leasing the storefront. By entering into the lease, not a sham lease. The vacancy clock restarts to mitigate the concern the assessment might be passed to the tenant and applying for the approval. If it requires conditional use from the Planning Commission, properties would not be deemed vacant for the six months following the application for ceu. I am also offering a amendment to put a deadline. If it is not processed within six months, tax would not be assessed in that year. Other key provisions provide additional flexibility, and a lot of this is the result of Extensive Community outreach. In the event of a disaster rendering the property unusable. The property would not be deemed vacant for two years following that disaster, which would extend further as the Property Owner applies for Building Permits and enters to the lease to reactivate the property. Some concerns are raised about the ability to appeal. That is set forth in article six of our business and tax regulations code which this would be subject to. I note a man freed from the Tax Collectors Office is here available to answer any questions you may have. I want to be frank about our goal. That is to point a finger at a handful of bad actors. We all know them in our respective districts, and we all know their names and these are individuals who refused to offer spaces for lease. We just did a survey of the Beach Association in north beach and found which properties are actively for lease, which are vacant and are not actively for lease at all and the numbers are quite telling. I believe that this will give the city the necessary tools to reduce vacancies and revitalize retail on these corridors. We have met with merchants organizations, commercial brokers, Property Owners, San Francisco chamber of commerce who are constructive amendments. I think ultimately if taken to the ballot this would stabilize represents, prevent unnecessary fluctuations that manifest in untenable rent gouging and speculation and give businesses more leverage in the lease. If they have a choice of this this will allow activation of the storefronts. This is an opportunity for a new Small Business to go in a space and build a lasting presence in communities. With that i am aware that there are representatives here and i want to thank all of the different departments and my staff forgetting this to to hearing today. I want to thank lee and sonny from my office who worked on this. The City Attorneys Office and scott and amanda from the Tax Collectors Office and bill strong from d. B. I. And i believe aaron star from planning who helped us come up with something we believe is administratable and is enforceable and is legally sound. With that all of those individuals are here to answer any questions as am i and ted eagan will present his report. Good morning, ted eagan from the reporters office. I will pass out a hard copy as well assets u as set up my presentation. What i neglected to say is that any funds collected under this tax would be used actually for be put in a special fund to help Small Businesses in San Francisco, whether they are undergoing mandatory seismic retrofits are impacted by City Construction such as vanness. I want to add that. I want to clarify this does not apply to the little nc scattered parcels around the city. Only to the colored places named. Thank you. I apologize for the delay in getting the report going. Our Office Issued the Economic Impact report on this matter. I will discuss some of the highlights of our conclusions. I would first stress this report is on the original version of the supervisors legislation and does not reflect the amendments he discussed this morning. This is also a piece of legislation dealing with an issue about which there is not great comprehensive economic data. Not a lot of number crunching in the report. We did find things in the legislation that we feel are issues of risk that might want to be addressed through further legislative action. Just to jump to some of our concerns. This is a chart that shows retail trade employment in San Francisco along with the rest of San Franciscos private sector employment. This is since 2001. It is a contrast. This is a trend violating one of the basic truisms of urban economics. Retail trade is a local serving industry, going up and down with the local economy. In San Francisco the rest of the economy is done extremely well. Since 2001 the rest of the sector added 32 growth in jobs. Retail trade at bricks and Mortar Stores declined 12 . The number of retail establishments declined 15 since 2001. Since 2015 we have seen 8 decline in retail trade employment alongside 13 growth in overall employment. Despite the incomes growth in population and other industries, retail trade itself has declined. I should be clear exactly what i am referring to. I am referring photo electronic realtors or internet realtors based in San Francisco. I am not referring to nonretail industries in neighborhood commercial districts like restaurants and bars. Their growth has matched the city growth. The retail trade activities, businesses that sell things to people and neighborhood commercial districts in the city that employment declined. It is declined sic and is bad in periods every session. We have access to the revenue that is charged that supervisor peskin alluded to on registered vacant buildings. The number ranges from low hundreds to around 500 at the most. It is worse during recessions. Building vacancy is partly due to the behavior of Property Owners. It is partly a function of underlying economic context. It gets worse when there is a recession. A spike this past year has more to do with increased enforcement than economic factors. We have seen a growth in retail trade. I am taking the d. B. I. Total revenue they collected from the vacant buildings and divided by an average fee to get a rough estimate of the number of buildings. They would not all beep subject to the tax they are not all ground floor retail buildings. The main point. This is a phenomenon with the business cycle. Supervisor peskin alluded this is not a major revenue generator. We dont have a great way to make the estimate. If it works as intended, particularly good times it should be a low number, less than 1 million per year. In the scenario of a deep rescission where a number of buildings are vacant we could see it raising 5 million a year. It is hard to imagine it being bigger than that. In terms of how it affects the economy, it depends how tailored it is. If it is tailored correctly it is positive for the economy. Vacancies reduce the quality of the air. They reduce the opportunities for multistop shopping behind value added of clustering of retail centers. To the extent to which bad acting is interfering with that, disincentivizing that makes other Property Owners more successful. However, the fact that a major driver of demand in these areas has been declining for a long term for reasons that are related to amazon and internet commerce and unlikely reversed in the near future. That suggests there could be reasons for vacancies other than bad acting of the individual Property Owners. It could be because in a recession the previous tenant went out of business and there are no new businesses in the district to be found. The length and severity every session could kick the Property Owner to the 182 days qualifying them for the tax. If that happens and it is a tax that cannot be avoided, that is a risk factor for every commercial Property Owner. That disincentivevises investment in those areas. The first way to mitigate risk would be to consider an exception during a recession. Safe harbor has many exemptions now for example the Building Permit or because the Property Owner is in the process of securing a conditional use authorization, we would suggest also that during periods of official u. S. Recession that period not count towards a vacant period because there could be reasons beyond control of the Property Owner they would be subject to the tax. The ordeals with the exception around the conditional use authorization. I certainly dont think the major reason for the slagging demand in retail generally is zoning controls. This is a National Phenomenon you see it where they dont have the zoning controls we have in San Francisco. You could find a situation in a recession or not a property cannot find the tenant that is allowable even with conditional use but could find a tenant in 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 robus