SF Voter Guide 2016: Small Business Edition, Part 2
Welcome to Part 2 of our exclusive guide to the SF Elections, focusing on issues relevant to small businesses. Out of the 24 ballot measures coming before voters on November 8th, 2016, there are seven propositions that, if passed, would clearly have an immediate impact on the San Francisco small business community. In Part 1, we focused on Propositions E, R, T, and X. Here, we’ll take a look at the more complex and contentious Propositions K, and Q, as well as Proposition V, which address sales taxes and the homelessness crisis.
Currently, there are two mechanisms by which a measure can be placed on the ballot: an initiative and by the Board of Supervisors.
Since 2016 is a Presidential election year, voter turnout is expected to be higher than usual. Many groups and elected officials have taken advantage of this expected increased and gotten their measures placed on the ballot for what is going to be a very big year in local San Francisco politics.
Proposition K: General Sales Tax
Proposition K puts before the voters a general sales tax increase of 0.75 percent for the next 25 years. Currently, the sales tax rate in San Francisco is 8.75 percent. However, 0.25 percent of that will actually end this December, lowering it back to 8.50 percent. (That 0.25 percent was a temporary statewide increase voted in by Proposition 30. The money went to schools and safety programs.) Thus, if Prop K passes, beginning in 2017, the effective tax rate on general sales would be 9.25 percent.
This is a tough measure for small business owners. On the one hand, it will raise the price paid by customers for the goods and services small businesses sell. On the other hand, the funds that are raised from the tax will go to improving City services. If voters approve Prop K, the City will have an additional $150-155 million in the budget.
Here’s the thing—there’s another measure, Proposition J, which dictates where the funds from the general sales tax increase would be spent. Prop J proposes that the money from Prop K go specifically to transportation and homelessness services.
Essentially, if voters vote yes on Prop K but vote no on Prop J, the tax goes into effect and the money goes into the general fund for the Board and the Mayor to allocate as they see fit. If both Prop K and Prop J pass, then the tax increase goes into effect and the funding must be spent on improving transportation services and services for the homeless.
More information on Proposition K here.
Proposition Q: Prohibiting Tents on Public Sidewalks
Proposition Q is a ballot measure that has already generated some strong divisions in San Francisco. That’s no surprise, since homelessness is one of San Franciscans’ top concerns. Nevertheless, there’s been no consensus except that the homelessness crisis negatively affects all parties concerned in the debate: homeless individuals, residents, businesses, and the City departments dedicated to providing services.
Prop Q, if approved, would give police and the Department of Public Works the power to notify street encampments 24 hours prior to removal and confiscation of anything left on the sidewalk and legally enforce that. San Francisco police essentially already have this power; Prop Q would create a process around how the removal and confiscation is carried out. It would also clarify the rights and responsibilities of the individuals in an encampment with regard to their possessions, if confiscated.
For small business owners, homelessness is an especially thorny issue. From a business perspective, encampments affect busy commercial corridors in terms of sanitation and sidewalk obstructions. The obstructions often mean lost customers and sometimes both employers and employees have safety concerns—for themselves and those who live in the encampments. San Francisco small business owners are compassionate and understand that criminalizing homelessness is not a sustainable solution. Small business owners want to work together with the City to find long-term solutions to the crisis. Motivated by this, a group of small businesses created Street Reports, a place where owners and employees can keep each other updated and safe. Those using Street Reports hope to work closely with city officials to identify long-term, sustainable solutions to the crisis.
This issue is so fraught that research group SPUR (San Francisco Bay Area Planning and Urban Research Association) was unable to come to a consensus on whether or not to support this measure. The SPUR Voter Guide’s summary offers a balanced perspective:
“This measure responds to widespread frustration and attempts to create a framework for addressing one of the most visible manifestations of homelessness: tent encampments on public sidewalks. There is little disagreement that tent encampments are hazardous for both their occupants and the residents and businesses nearby, and it must be a priority for the city to help people transition out of these situations.
But this measure does not offer a lasting solution. The city already uses existing law to move people off of public sidewalks when they are creating a health or safety hazard. This measure could actually impinge on the city’s ability to remove an encampment because it requires that housing or shelter be provided (and such shelter is often not available). The measure’s wording does not specify the quality of shelter that must be provided or whether people need to be accommodated for any length of time. Enforcement of Prop. Q could create a circus wheel where people are in shelter for a night, then back out on the street in a new location.”
It’s unclear whether or not Prop Q would have the effects its proponents hope for, but the desire to feel that something is being done to address the crisis may convince some to vote for it.
For more details on Proposition Q, go here.
Proposition V: Tax on Distributing Sugar-Sweetened Beverages
Proposition V is better known by its nickname, “the soda tax.” This is another high-profile proposition, and an important precedent is at stake. Years ago, proponents of taxing sugary beverages fought this battle on a statewide measure. Opponents to the tax, including soda companies, poured millions of dollars into the election, and the measure lost. Since then, proponents have turned to local ballot measures to tax sugary beverages, taking a ground-up approach.
In fact, San Francisco’s Oakland neighbors have a similar measure on the ballot, Measure HH, the Sugar Sweetened Beverage Tax.
The rationale behind the soda tax is based on two things. First, medical research demonstrating the corrosive effects of sugary drinks, which are the “single largest source of sugar for American adults and children,” and play a part in the increase in obesity and diabetes. Nearly “one in 13 San Franciscans are living with diabetes,” for example. Of course, it’s not just that people are sick; treating diabetes and obesity costs money. SPUR notes, “The San Francisco Budget and Legislative Analyst estimates that each year sugary drinks cost San Franciscans $41 million to $61 million in public and private health care treatment, including $6 million to $28 million incurred by city agencies.”
The second rationale is the same as that behind the tobacco tax: the idea that people can be encouraged or manipulated into making healthier choices by making the unhealthful option more expensive.
Ergo, Proposition V proposes a 1 cent-per-ounce tax on drinks that have added sweeteners and contain more than 25 calories per 12 ounces. The funds from this tax would go to the General Fund in the City of San Francisco, and then from there would go to City health services.
For retailers and restaurants in both San Francisco and Oakland, it’s important to know that the tax would be paid by the sugary beverage distributors rather than you or your customers. And Oakland’s HH would exempt small distributors from the tax.
Of course, distributors will probably pass these costs on to vendors. This raises the question of how vendors, from larger grocery chains to mom-and-pop stores, would cope with the increase.
The soda industry has claimed that the tax on sugary beverages is actually a “grocery tax,” based on the notion that vendors will raise prices on everything in the shop to compensate for the increase in soda prices—and, as a whole, has spent about $14 million in order to convince voters that this is the case. The industry recruited owners of corner grocery stores for their ad campaigns, and the American Beverage Association even challenged the wording of the Oakland measure’s campaign materials, which say that “the tax is not paid by your local grocer.” The Alameda County Court commissioner rejected the challenge, saying the wording was accurate.
The notion that vendors would raise all prices undermines the goal of the legislation, of course. But there are a variety of facts that suggest this won’t happen. To begin with, as the SF Chronicle reported, “California law prohibits taxing many items in grocery stores, including unprepared food.” Furthermore, most vendors say they wouldn’t raise all prices, just the price of the sugary beverages. And, in fact, in Berkeley, which passed a soda tax two years ago, grocery prices have not gone up.
A study done in Berkeley found that, of the vendors surveyed, none had raised the prices of anything other than beverages since the tax went into effect. A few had raised prices on both the targeted beverages and diet sodas, which aren’t subject to the tax. And some hadn’t raised prices at all. Thus far, Berkeleyans have indeed been buying fewer sugary drinks and more untaxed beverages.
According to Sam Mogannam, owner of Bi-Rite in San Francisco, “No retailer would ever” raise prices on everything. “Nobody’s going to want to raise the price of a loaf of bread or a box of cereal to offset the cost of soda” because then “the price of cereal wouldn’t be in line with the competition.”
There’s no getting around the fact, however, that passing Proposition V is likely to make soda more expensive in an area where everything is already expensive, and there are grocers’ and restaurant associations opposing the tax.
For full details on Proposition V, go here.
And last but not least, it’s still the most important part of any election season: It’s your vote! Get out and use it!