Editorial: Courage Missing in Board’s Budget Approval

by on July 22, 2004

The Board’s approval of a regressive sales tax increase and a minimal gross receipts tax was hardly an act of political courage. San Franciscans opposed the Republican’s federal and state tax cuts, yet our politicians voted as if local tax increases had to be approved by Republican voters in Orange County. The Mayor and Board will soon rue the day they rejected the additional $14.8 million in annual gross receipts revenue that Supervisor Daly sought.

The only reason the Board rejected Supervisor Daly’s slightly higher gross receipts tax was to curry favor with the Chamber of Commerce. The November electorate would have passed the higher amount regardless of the Chamber’s opposition, meaning that the Mayor and Board have unnecessarily deprived the city of nearly $15 million for each of the next four years.

As it stands, the approved budget includes $6.5 million diverted from the Department of Building Inspection to the general fund. A lawsuit will be filed today to prevent this illegal diversion of special fee revenue, and its success will immediately put the city more than $6 million in the red.

The Board is clearly not proud of this $6.5 million heist, as it held a hearing on the diversion in the middle of the night after virtually everyone who came to testify against the action went home. But the Supervisors needed the DBI funds to avoid enacting revenue-raising measures the Chamber might oppose.

Approval of Daly’s slightly higher gross receipts tax would have enabled the city to address this potential budget shortfall, and provided a cushion should 2004-05 revenues be less than expected. Instead, the Mayor and Board have guaranteed a new round of budget trimming next year and into the foreseeable future.

Its nothing short of astonishing to observe how far to the right the Board has shifted in its approach to budget and tax policy.

In November 2002, Board members supported a real estate transfer tax on all parcels selling for at least $1 million. After corporate and real estate interests defeated the measure by focusing on its alleged impact on elderly homeowners, Supervisors Peskin, Daly, Gonzalez and other Board members planned to revise the proposal to either confine it to commercial property or raise the limit to property selling somewhere between $2-5 million.

But there will be no real estate transfer tax increase on this November’s ballot. The Chamber opposes it, so the idea is dead.

Senator Burton and Assemblymember Leno have supported increased income taxes on the wealthy, and the latter tried to get authority for San Francisco to adopt a local vehicular license fee. But neither the Mayor nor the Board were interested in such proposals, both of which would likely be opposed by the city’s downtown businesses.

The gross receipts measure caps potential revenue at $30 million. The Mayor and Board have thus ensured that San Francisco will never make up the at least $30 million in annual revenue lost when downtown corporations successfully sued in 2000 to invalidate the city’s business tax.

While our local politicians congratulate themselves for not following our Republican Governor’s refusal to raise taxes, the budget deal is closer to Schwarnegegger’s approach than of Burton and Leno. Like the Governor, the Mayor and Supes have relied on a series of one-time savings (such as the sale of surplus land and the diversion of DBI funds) rather than solve with the systemic budget shortfall by raising more revenue.

Supervisor Ammiano, who in the late 1990’s sponsored a series of progressive tax measures, joined in the 9-2 majority approving the budget. Renee Saucedo, his chief opponent, would almost certainly have voted with Daly and Gonzalez.

Labor unions have spearheaded prior efforts to raise city revenues, but were virtually invisible during the current budget debate. It appears that once the Board stitched together a way-no matter how tenuous– to increase public health funding, the progressive push for Daly’s proposals dissipated leaving the field clear for Chamber of Commerce lobbying.

Imagine if Board President Matt Gonzalez had used his mayoral campaign lists to mobilize activists on behalf of a progressive budget plan. The dynamic would have been much different, and the outcome may well have changed.

But in the absence of spirited grassroots pressure, the Board took the easy way.

Business as usual has again triumphed at City Hall.

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