Let’s face it, San Francisco has morphed and the cost of living has increased exponentially. With an upcoming election for San Francisco…Prop C and D are kind of a big deal as they’re focused on very important topics: childcare funding and the homelessness issue.

Though each Proposition tackles different issues, they are reaching for the same source of funding: commercial real estate rent.

So, what are Propositions C and D? And how will they affect San Franciscans?

Proposition C, also known as the Universal Childcare for San Francisco Families Initiative, is a 3.5% tax increase on commercial property leases with annual gross receipts of over $1 million. The city controller estimates that this proposition would generate $146 million.

If both Prop C and D pass, only one would go into effect January 1st, 2019. In that case, the Proposition with the highest votes would go into effect.

THE PROS TO PROP C

  • Taxing gross receipts on CRE buildings instead of businesses is less likely to push commercial building owners out of San Francisco. Buildings can’t leave the city so it will likely not affect San Francisco economy negatively.
  • Many people have left San Francisco because of the cost of living. Additionally, there aren’t many affordable child care options for families. This measure’s funding would increase providing better and more childcare opportunities. 2,500 low-income families on a waiting list would have subsidized child care.
  • When more money is invested for quality child care, proponents argue that more jobs will be created with an increase in economic stability.

THE CONS TO PROP C

  • Those opposed to Prop C claim that though the intention is great, the plan is not well thought out. 15 % of its revenue could be spent for any purpose because that is the percentage that would be left for General Funding.
  • In 2012, San Francisco’s business tax system was decided that there would be a gross receipt tax instead of a payroll tax. These taxes would affect one industry greatly and the impact of this decision could be even worse with another tax burden.
  • With 1,100% tax increase, commercial tenants may be forced to leave the city as it focuses on increasing taxes on one industry.

Proposition D is the measure that would tax a 1.7% tax on commercial leases from commercial landlords. According to the city controller, there’s an estimate that 22% of San Francisco’s commercial tax base would be exempt under this proposal.

According to San Francisco Bay Area Planning and Urban Research Association (SPUR), this is how the money generated would be allocated:

  • ” 45 % would go to the Department of Homelessness & Supportive Housing (DHSH) for uses that would help homeless adults, families or youth. 
  • 10% would go to the Mayor’s Office of Housing & Community Development (MOHCD) for the acquisition, rehabilitation and operation of single-room occupancy buildings and the protection of extremely low-income and very low-income households (those earning up to 50 percent of the area median income). 
  • 35% would go to MOHCD for two uses: to acquire and rehabilitate existing rent-controlled apartment buildings of three units and larger to serve households that earn on average 80 percent of area median income, and to build and preserve housing for middle-income households (those earning 70% to 150% of area median income). 
  • 10% would go to MOHCD to provide permanent project-based subsidies to extremely low-income senior households (at least one person is 62 years old or older) in income-restricted developments (where residents earn up to 40% of the area median income).”

THE PROS TO PROP D:

  • Most obviously, this additional funding would ease the homelessness crisis currently happening in San Francisco and also aid low to moderate-income families.
  • This would protect households and communities that are currently vulnerable to being evicted.
  • This measure creates a permanent solution for housing without imposing taxes on homeowners.
  • New developments that require low-income housing are shareholders in this measure and this would aid in their funding for affordable housing.

THE CONS TO PROP D:

  • With taxes being placed on commercial landlords, this can cause loss of SF jobs.
  • According to SPUR, “after administrative costs, in the fiscal year 2018–19, up to $1.5 million could go to the General Fund for any purpose, as determined in the budget process…after $3million then the amount may be adjusted from inflation”
  • Only $70 million a year will go towards homelessness and housing affordability which is not enough to solve the housing problem.
  • Prop. D and Prop C are competing, with only one going into effect if both pass, you must compare both measures.

 

Sources:

Ballotpedia: San Francisco Prop C Commercial Rent Tax for Childcare and Early Education

SF Chronicle: The Chronicle recommendations on surtaxes: Yes on Prop D, No on C

SPUR 2018 Voter Guide: Prop D Commercial Rent Tax Housing and Homelessness

 

Note: This is not an opinion post. Since these are hot topics currently happening in our industry, we, Pyramid and Century, want to shed some light on facts about each proposition.

 

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