San Francisco sales tax to fund homeless response plummets

Earlier this year, San Francisco faced a tens of millions of dollars in homeless funding shortfalls with lower-than-expected new sales tax revenue designed to fund services. The slump in revenue forced the city to tap reserves to avoid spending cuts.

Voter-approved tax Proposition C promises hundreds of millions of dollars a year to tackle homelessness, and officials have used it to buy hotels, remodel housing and other efforts. plug. Over the next two fiscal years, C’s revenue accounted for more than a third of the homeless sector’s $1.3 billion budget, and it also increased health sector spending on addiction and mental health issues.

Last fiscal year, the city budgeted more than $800 million to spend from Prop. C., but actual revenue after 9 months of the May fiscal year ended up being $41.3 million less than budgeted. The homeless department immediately tapped reserves to avoid disruption to services. The city will know exactly how much revenue it received from Prop in the last fiscal year. C December.

The shortage comes after a 45% drop in Prop. Last year’s C revenue fell from $394 million in fiscal 2020 to $217.9 million in fiscal 2021. The number of high-income companies paying gross income tax fell from 518 in fiscal 2020 to 465 in fiscal 2022. It’s unclear if businesses simply lose revenue or leave the city.

The figures were disclosed in a report to the Supervisory Board late last month.

The shortfall portends more damage to San Francisco’s $14 billion budget. The city expects taxes from downtown companies and commercial properties to fall further as remote workers leave empty offices.

The city expects to have to return a total of $2.7 million in Prop, in addition to the $41.3 million in losses from the previous fiscal year. The C money paid 59 businesses that paid taxes but were later found not to meet the threshold.

In 2020, the company paid Prop. C is taxed on a quarterly basis based on estimates for 2019, when their combined income exceeded $50 million. But by 2021 tax filing, dozens of companies ended up earning less than the previous year’s threshold, which the city needs to repay.

City officials are sounding the alarm about falling revenue. Superintendent Ahsha SafaĆ­ called it disturbing at a recent meeting, saying “we have to pay attention to this”.

Mayor London Breed, he doesn’t support Prop. C told supervisors at a meeting last month in 2018 that the downtown tax funded the program to help those in need, and that if the city doesn’t act to increase investment and attract people in downtown, “we’re going to lose this money. “

In a Bloomberg interview published Monday, she acknowledged that downtown would not return to its pre-pandemic reliance on office technicians, and said she was shifting her focus to attracting biotech and life sciences companies.

San Francisco voters unanimously approved tax increases for the highest-income corporations and wealthiest homeowners to fund housing and homeless services, but the delivery of those taxes is lower than promised during the pandemic.

Voters approved the proposal. C levied taxes on San Francisco’s highest-earning companies in 2018, many from the tech industry, but a legal battle dragged the tax in court until September 2020. Just when San Francisco could finally spend that windfall, the pandemic took a toll on corporate earnings.

Revenues from the city’s projects will rebound this fiscal year to pre-pandemic levels of $369.3 million. The refund will affect the budget for the next fiscal year, reducing revenue to $362.8 million.

Treasurers and the ATO cannot say which businesses they refunded because they cannot legally disclose taxpayers’ tax rates and gross income.

Mallory Moench (she/she) is a staff writer for the San Francisco Chronicle. Email:

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