As the deadline rapidly approaches to submit measures for the November ballot, the City and County of San Francisco is moving ahead aggressively with its effort to reform the city’s business tax. While the city has made significant progress in recent weeks, there are some signs that the complexity and commitment to reform are being further complicated by increasing calls for a tax that would not just replace revenue from the existing payroll tax but bring the city additional funds.

City Controller Ben Rosenfield and Chief Economist Ted Egan have for the last few months been hard at work designing a replacement for San Francisco’s payroll tax. The controller’s office originally modeled two different proposals to replace the city’s current payroll tax: a modified payroll tax that would lower rates and broaden the base of payers, and a gross receipts tax based on rate schedules defined by industry. In the last month, however, that process has narrowed to focus solely on a gross receipts tax proposal. (Read the controller’s latest report on that effort.)

Gross receipts taxes are widespread in California, but they all have one important thing in common: They are extremely complicated. The tax must address dozens of different industries, as well as companies’ differing abilities to pay — and their varying ability to move to other places to conduct business. All this means there are many more levers than with a simple payroll tax. (San Francisco’s existing payroll tax is a straight 1.5 percent of all payrolls over $250,000 per year.)

But with a multitude of levers also comes significantly more flexibility. For example, the controller’s current proposed structure consists of six separate schedules. These schedules group companies that have comparable ratios between payroll (an expense) and gross receipts (how much money a company makes). For example, a real estate management firm may have few employees and high gross receipts from rent and other fees paid by tenants. Conversely, a restaurant might have a large number of employees and lower overall receipts. These two very different operating models are treated identically under the city’s existing payroll tax, but a gross receipts tax would provide different schedules for types of companies with different cost structures.

Another goal of the controller’s effort is to attempt to make the tax structure progressive in order to encourage job growth in small businesses and start-ups. Within these schedules there are a number of different rates (see sample schedule below) so that companies generating more revenue within each category would pay marginally higher rates. Likewise, start-up businesses that are not yet generating revenue — but may have significant payroll as they build products or services — would have more breathing room than they do in the current structure.

While the process to date has been one of the most inclusive in memory — with dozens of industry meetings and numerous iterations — the devil will ultimately be in the details for any proposal submitted to voters. There will be many winners and losers in any transition to a new tax (see below), which means achieving some form of consensus could determine a measure’s success or failure.

The eventual success or failure of business tax reform in San Francisco is only partially dependent on the structure of the proposal itself. The other side of this coin has to do with revenue. By design, all proposals to date have taken a “revenue neutral” approach; they attempt to simply replace revenue from the payroll tax and not generate additional funds for the city. However, that original intent is increasingly in doubt as the June deadlines for the ballot approach. Supervisor John Avalos, officials from Service Employees International Union 1021 and others have indicated their desire for any changes to the tax to generate additional funds. Whether or not those hopes are eventually included in the mayor’s tax reform proposal, it is increasingly likely that a separate measure to increase revenues could also be on the ballot in November. Could the controller’s measure include some additional revenue in order to neutralize these efforts?

The final stretch of negotiations will be critical to the success of the city’s business tax reform efforts. With the multitude of different moving pieces — both within the negotiations over rates and financial impacts, and apart from the negotiations around new revenues — this is still a fragile coalition. We hope a balance can be struck that will allow for the city to successfully transition to the gross receipts tax currently on the table. It would allow for greater stability over time, more equity and built-in incentives for new companies and industries to grow and thrive in San Francisco. But we must be mindful of the delicate balancing act required to get there.

Have you been to Hetch Hetchy Reservoir in Yosemite? Everyone who drinks water or takes a shower in San Francisco should go. It is spectacular: a miles-long placid blue lake nested within towering granite cliffs, from which waterfalls cascade. To visit the waterfalls or Yosemite’s northern backcountry, you walk across O’Shaughnessy Dam. It marks the first catchment in a 160-mile long water system that brings high quality, superb-tasting water to 2.6 million residents of the Bay Area every day.

Standing upon it will give you the chance to appreciate the sublimity of both nature and human achievement. O’Shaughnessy Dam and the waterworks that connect it to the Bay Area are a marvel of engineering. The water shunted through them — about 218 million gallons a day — arrives in most city taps by gravity alone. This is also a place imbued with history: San Francisco’s congressional delegation won the right to build the dam in 1913, to secure a reliable source of water in the wake of the 1906 earthquake. This effort was famously and vociferously fought by John Muir and was the subject of a national debate for years; the loss later galvanized the Sierra Club to successfully oppose large dams in Dinosaur National Monument and Grand Canyon National Park.

It would be almost impossible to build a new dam there today. (In fact partially because it is so difficult and destructive to build large dams, we are running out of new supplies of water in California.) But tearing O’Shaughnessy Dam down now in order to restore Hetch Hetchy Valley would be a disaster.

If their signature-gathering campaign is successful, a small group of environmental advocates, led by Restore Hetch Hetchy, will give you the opportunity this November to vote on a measure that would require the San Francisco Public Utilities Commission (SFPUC) to develop a plan to drain Hetch Hetchy Reservoir. The proposed ballot measure calls for the creation of a task force that would spend $8 million to develop a long-term plan for improving water quality and reliability, remediating environmental damages caused by the water supply system, and identifying new water and renewable energy supplies so that Hetch Hetchy Valley could be returned to the National Park Service.

This ballot measure is so problematic that SPUR has taken early action to oppose it.

SPUR wholeheartedly agrees that planning for water quality and reliability is important. In fact, this is so obviously a good idea that the SFPUC and other end users of Hetch Hetchy water have been doing it for years. In 2007, in approving the environmental impact report for the Water System Improvement Program — an investment of more than $4 billion to shore up the seismic reliability of the Hetch Hetchy water system — the SFPUC gave itself, and its wholesale customers on the peninsula, ten years to develop a plan that would identify reliable alternative sources of water to meet the region’s future growth in demand, rather than diverting more water from the Tuolumne River. The SFPUC and other Hetch Hetchy users are currently implementing plans to meet this demand through recycled water, groundwater and conservation. (Read SPUR’s analysis of this plan.) So the idea of planning for new water supplies need not be on the ballot.

In terms of quality, Hetch Hetchy water is so pristine that it is one of only a handful of water supplies in the country that doesn’t need to be filtered, a process that is expensive and energy intensive. The SFPUC tests its quality more than 100,000 times a year to ensure that it exceeds all safe drinking water standards.

The main problem with the measure is that in spite of appearing to be about studying best options or planning for future water supplies, it has pre-determined the solution: draining Hetch Hetchy Reservoir.

The idea of punching a hole in or removing the dam and allowing the valley to be restored to its pre-development conditions has been around since the late 1980s. Over the last 35 years, the idea has been studied by the Environmental Defense Fund, the U.S. Bureau of Reclamation, the National Park Service, UC Davis, and several state agencies. Some of these studies determined that the idea of draining the reservoir was technically feasible but incredibly costly.

In 2006, the California State Department of Water Resources (DWR) and Department of Parks and Recreation evaluated the cost estimates of multiple feasibility studies conducted between 1988 and 2005. DWR’s meta-study found a range of costs from $3 billion to $10 billion for restoration and replacement of water and power sources. Restore Hetch Hetchy and the Environmental Defense Fund’s own studies support a lower cost estimate, ranging from $1 billion to $2 billion. DWR also found that the planning studies necessary to refine the costs and benefits of restoration would cost $65 million alone.

Even if we could obtain the several billion dollars necessary to carry out this endeavor (neither private nor public sources have yet been identified) some of the tasks involved may not even be possible. Here are just some of the hurdles we would need to cross:

• Identify water supplies to meet about 18 percent of the region’s water demand in dry years (which occur about 20 percent of the time)

• Permit and build 40 to 90 megawatts of renewable power to supply almost all municipal demand in San Francisco

• Build and operate a water-filtration plant, because water stored further downstream than Hetch Hetchy will have to be filtered

• Engineer and design a series of expensive and complicated infrastructure projects to re-engineer major components of the regional water system, then get those changes through the environmental review process

• Somehow convince senior water-right holders like the Modesto and Turlock Irrigation Districts on the Tuolumne River to let us store our drinking water in their reservoirs

• Also convince them it would be a good idea to raise the heights of their dams so we can enlarge these reservoirs with our extra water, flooding anew many miles of the Tuolumne River and acres of currently dry land.

Yes, the plan to drain Hetch Hetchy involves causing new ecological damage. We would be trading flooded acres in one place for flooded acres in another.

At SPUR, we have done a lot of work on climate change adaptation. From this work, we have concluded that it is not wise to reduce water storage facilities considering the realities of a growing population and climate change. A bigger population will increase demand, meanwhile climate change could significantly reduce supply through drought and hydrological cycle changes. Hetch Hetchy, unlike other water storage facilities in California, is relatively buffered from near-term climate change because of its high elevation. And it is the largest single source of water supply for the Bay Area. In the future, we will certainly need diverse supplies to rely on in a prolonged drought, but we will also need Hetch Hetchy more than ever.

Loss of the reservoir would decrease the Bay Area’s water and energy security, requiring new water storage (possibly in reservoirs not owned by San Francisco) and the development of new water and energy supplies. Such new supplies are not guaranteed to have the low greenhouse gas emissions profile that Hetch Hetchy water and power do — and they could worsen climate change while increasing our vulnerability to it.

So visit Hetch Hetchy. Stand on O’Shaughnessy Dam and feel the cool updraft. Appreciate what nature created and what the city built there long ago. Dams, including this one, don’t last forever, and perhaps in a few generations the conversation about a different future for the Hetch Hetchy Valley may be worthwhile. Then, we’ll need to weigh our options for other new large water supplies, all of which will have enormous environmental tradeoffs: think of building a desalination plant, fighting with Los Angeles over the Sacramento Delta, building a peripheral canal or siting new large dams in presently undammed Sierra mountains and foothills.

Fortunately, that time has not yet come, so this November, vote “no” on the “Water Sustainability and Environmental Restoration Planning Act of 2012.” Let’s keep Hetch Hetchy around for the forseeable future.