Results of Election for Continuation of School Taxes

By Zach Drucker

In a Presidential election like no other, San Francisco voters came out in full force for the November 2020 election and tied a 1944 San Francisco record in the process with voter turnout at 86 percent . This record-high voter turnout boosted engagement on many of the local ballot measures, which many voters usually leave blank. Maybe it was the mail-in ballots or the litany of unprecedented issues facing the City, but San Francisco voters participated heavily in the local races and played a key role in deciding what direction the City should take. Let us break down the November 2020 election results and explore what the outcomes mean for the future of San Francisco.

Right before mail-in voting started in San Francisco, sf.citi released our November 2020 Election voter guide to detail where we stood on the 13 local ballot measures. Take a look below to see how our recommendations stacked up with the November 2020 San Francisco election results.

COMPARING sf.citi's RECOMMENDATIONS TO THE RESULTS

With all of the ballot measures results officially certified, sf.citi aligned with San Francisco voters on eight of the 13 measures. Voters ended up supporting all four measures we opposed (Proposition B, Proposition F, Proposition I, and Proposition L). They also opposed one of the measures we supported (Proposition G). Ultimately, only one measure did not pass and each of the three ballot measures that needed to surpass the two-thirds vote threshold (Proposition A, Proposition J, and Proposition RR) did so easily—by no means an easy feat to accomplish.

KEY TAKEAWAYS OF THE NOVEMBER 2020 SAN FRANCISCO ELECTION

Increasing Taxes During a Pandemic and Economic Recession

San Francisco voters overwhelmingly supported the three business taxes on the San Francisco ballot: Proposition F, Proposition I, and Proposition L. Combined, these taxes will bring upward of $333 million in annual revenue. That is a significant amount of funding for any city and especially for a city like San Francisco, which currently faces a $1.5 billion budget deficit. At face value, these taxes appear to be exactly what the City needed. On closer inspection, however, some of the unintended consequences of these business tax hikes could worsen San Francisco's economic recovery from the COVID-19 pandemic.

Let us start with Proposition F. This measure will eventually add up to $97 million in new revenue by phasing out the payroll expense tax and increasing the gross receipts tax (GRT) rates for certain industries over several years. The tech industry, for example, could now end up paying double the tax rate of comparable cities, including our West Coast rival Seattle. While an overhaul of the City's GRT was long overdue, the timing of the tax could not be worse.

Already facing an economic downturn and the continued economic volatility of the pandemic, many companies in and out of the tech industry have yet to find their footing. It was only a few months ago that many San Francisco tech companies conducted widespread layoffs. At the end of the day, this new tax increase does not bode well for businesses at every stage—fledgling, struggling, or looking to expand—who now have another reason (among the many that existed before the pandemic) to look for a more welcoming city.

Furthermore, it is no secret that the remote work phenomenon will fundamentally change the tech industry and the future of office space in San Francisco and beyond. With a growing number of tech leaders in the City announcing remote-first policies and a mass "dumping" of office space—including a sublet of 100,000 square feet at Twitter , the leasing of one-third of Dropbox's brand new office , and a nearly $95 million penalty to break a lease at Pinterest—the shift to remote work is real. Doubling down on tax revenue generated by the presence of tech companies in the City at a time when many are moving away from in-person work is not only naive, but willfully blind to the situation at hand. Unfortunately, this threat was confirmed earlier this week when City Controller Ben Rosenfield announced that the City had not met its projected tax revenue targets. San Francisco now faces an additional budget deficit of $116 million due, at least partially, to the continuation of remote work.

With the passage of Proposition I, the transfer tax rate will double on certain sales and leases of 35 years or more of real estate with a price of at least $10 million. While this measure is estimated to bring in—at most—$196 million a year to San Francisco's general fund, that price has been deemed highly volatile as the taxable assets can be difficult to predict. To make matters worse, the City Controller's economic impact report ultimately found that the tax would have a net negative impact on San Francisco's economy, with a decrease of $50 million in the City's GDP and a loss of 625 jobs. The report also found that the increased transfer tax could strain San Francisco's real estate market and stymy new development, thus drastically affecting the construction of affordable housing.

Finally, Proposition L imposes an additional GRT on companies based on the ratio between their highest-paid executive and median San Francisco employee. This tax can add upwards of $140 million to San Francisco's general fund, but similar to Proposition I, the way this tax revenue is raised makes it highly volatile as the taxable companies will be difficult to predict year to year. While this tax tries to shrink the wealth gap, it could also lead to an adverse effect of discouraging companies from hiring entry-level jobs in San Francisco. The City could, in fact, see entry-level jobs outsourced to other cities.

Overall, the common theme between these taxes is that they increase the burden carried by San Francisco's tech and business communities to support the City's ballooning budget. San Francisco continues to tap its "golden goose," the tech industry, for new funding in almost every election. When you add this to the myriad of issues that were plaguing San Francisco before the pandemic—the highest cost of living in the country, exorbitant rent and housing prices, and out of control street conditions, to name a few—other cities start to look more attractive. And with the widespread move to remote work, it appears only a slight nudge—such as increased business taxes—could set off a full-on tech exodus in San Francisco.

Improving City Services Without Increasing Taxes

The November 2020 election also saw voters approve three measures—Proposition A, Proposition H, and Proposition J—that will improve the City in a number of key areas at relatively no cost. The passage of Proposition H will make life for small business owners much easier by streamlining the cumbersome and expensive bureaucratic permitting system. The approval of Proposition J allows the school district to receive much-needed funding by resolving a legal issue with the 2018 School Parcel Tax. And one of the most important pieces of legislation put forth by the City, Proposition A, authorizes the City to borrow up to $487.5 million in bonds to fund services and projects for homelessness and mental health, street improvements, and parks, open spaces, and recreational facilities. We should also note that Proposition A was an integral part of the City's plan to close its budget deficit.

MEET THE "NEW" CANDIDATES HEADING INTO OFFICE

Although San Francisco voters elect their representative(s) to the Board of Supervisors, the California Assembly, the California State Senate, and the U.S. Congress every two years, those elected positions rarely see much turnover. That is due in part to the fact that incumbents tend to perform extremely well at the local level. And that is exactly what happened in this year's November 2020 San Francisco election.

At each level, incumbents handily won their races, while the two open Supervisor seats in District 1 and District 7 resulted in close finishes. On the Board of Supervisors, Connie Chan prevailed over Marjan Philhour as District 1 Supervisor, ensuring the Progressives maintained their veto-proof majority over Mayor Breed and her Moderate counterparts. This means the Board—even with a new Board President come this January—will more or less continue to operate as it does today.

Outside of City Hall, voters reelected the City's well-respected and battle-tested legislators as their representatives at the state and federal levels. With how prominent San Francisco legislators become when they reach higher office, who knows the next time an incumbent will lose reelection. . . including San Francisco's own Kamala Harris in her next endeavor.

The Winning Candidates from the November 2020 San Francisco Election

• District 1 Supervisor: Connie Chan
• District 3 Supervisor: Aaron Peskin
• District 5 Supervisor: Dean Preston
• District 7 Supervisor: Myrna Melgar
• District 9 Supervisor: Hillary Ronen
• District 11 Supervisor: Ahsha Safai
• California 12th Congressional District: Nancy Pelosi
• California 14th Congressional District: Jackie Speier
• California 11th State Senate District: Scott Wiener
• California Assembly District 17: David Chiu
• California Assembly District 19: Phil Ting

PARTING ELECTION THOUGHTS FROM sf.citi

Despite the changing of the guard at the White House, San Francisco residents will experience the most immediate and noticeable changes at home. Voters passed a number of measures that will greatly benefit the City as it recovers from the pandemic, including new support for small businesses and an economic lifeline for Caltrain. Voters also passed a number of tax measures that, while infusing much-needed cash into the City, may end up hurting San Francisco in the long run by igniting a tech exodus.

In the end, the job of San Francisco's leaders did not get easier. If anything, their work became much more difficult with the news that COVID-19 cases are spiking in the San Francisco Bay Area and the City's budget deficit rose by an additional $116 million. City leaders will once again have to go to the drawing board for San Francisco's reopening and budget plans.

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Source: https://sfciti.org/sf-elections/november-2020-san-francisco-election-results-a-referendum-on-taxes/

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