What Prop. H Would Do
Proposition H would create an annual parcel tax on residential and commercial properties in San Francisco for 15 years to close the San Francisco Municipal Transportation Agency’s (SFMTA) annual deficit and avoid significant cuts to Muni service. The tax rate would scale with the property’s size and type to ensure fairness and affordability. As a result, larger residential, multi-family, and non-residential properties would contribute proportionally more based on parcel and building size.
Prop. H is expected to raise approximately $160 million per year. Revenue from the measure would fund only Muni’s public transit operations and the cost of administering the tax. It could not fund capital projects, bicycle lanes, or other non-transit initiatives. Tax rates would adjust annually to keep pace with inflation. Combined with the passage of the regional transit measure (Proposition RTM) and ongoing fiscal management and cost controls, Prop. H is expected to close Muni’s operating deficit.
Parcel Tax Structure and Rates
Parcel Type | Base Cost | Additional Charges | Maximum Annual Cost |
|---|
Single-Family Residential | $129 | - Parcels between 3,001 square feet and 5,000 square feet of building area add $0.42 per square foot over 3,000
- Parcels over 5,000 square feet of building area add $1.99 per square foot over 5,000
| No cap; most households will pay only $129. |
Multi-Family Residential | $249 | - Parcels over 5,000 square feet of building area add $0.195 per square foot over 5,000
| $50,000 |
Non-Residential | $799 | - Parcels between 5,001 square feet and 50,000 square feet of building area add $0.76 per square foot over 5,000
- Parcels between 50,001 square feet and 250,000 square feet of building area add $0.84 per square foot over 50,000
- Parcels over 250,000 square feet of building area add $0.99 per square foot over 250,000 square feet
| $400,000 |
Rent-Controlled Units | NA | NA | $65 |
Source: San Francisco Municipal Transportation Agency via legal text of Prop. H
The measure would include the following provisions:
- The city estimates that 95% of single-family residences would pay $129 annually.
- A typical mixed-use building on a neighborhood corridor, with ground-floor retail and two stories of apartments above, would pay less than $1,000 per year.
- Landlords may not charge rent-controlled tenants more than $65 per year.
- Seniors (65 and older) would be exempt from paying the parcel tax on their primary residences. However, seniors who own income-generating property, such as a multifamily rental or commercial building, must pay the parcel tax on that property.
- Owners of single-room-occupancy buildings would be exempt from paying the parcel tax to keep units affordable.
The Backstory
Muni’s operating funds come from three primary sources: fees from people who park in city-owned garages, a portion of the city’s General Fund, and fares that riders pay. The COVID-19 pandemic caused major, lasting changes to travel and mobility, leading to significant drops in fare and parking revenue. The city’s budget is also facing an unprecedented deficit and slower growth. One-time emergency funding from the federal and state government helped to backfill Muni’s lost fare revenues, but that funding runs out at the end of this calendar year. Even if fare revenues grew significantly, they would not fully offset declines in Muni’s two larger revenue sources: parking and the General Fund. Muni faces a severe economic deficit projected at $307 million in 2027 and growing to $398 million by 2030.
That deficit could trigger Muni to cut up to 20 routes entirely, cut the number of buses and trains per hour in half, and scale back the pass programs that make Muni free or low-cost to youth, seniors, and people with disabilities. Without new funding, Muni may be forced to end service at 9 p.m. and eliminate historic cable car service.
These service cuts would be devastating for San Francisco residents. Families that use Muni for at least some of their transportation needs have lower transportation costs. For many riders with disabilities, seniors, students, and low-income workers, Muni is the only way to reach a job, a medical appointment, or the grocery store.
The cuts would harm the city’s economy, particularly the sports, entertainment, tourism, hospitality, and food and beverage industries. In turn, this would damage the city’s budget, downtown’s recovery, and the city’s attractiveness for large events.
In the fall of 2024, SFMTA and the city Controller’s Office convened the Muni Funding Working Group, which included SPUR, to provide recommendations to address the near-term and medium-term funding gap. The group recommended a parcel tax package to provide stable operating funding, alongside strong fiscal management.
In addition to seeking new revenues, Muni has made strong financial management and efficiency a top priority, resulting in more than $250 million in savings since 2019.1 Fare compliance strategies, including increasing onboard fare inspectors, new educational campaigns, and changing fare tagging policies, as well as reliability, cleanliness and speed improvements, have led to customer satisfaction reaching an all-time high.2 Further, SPUR’s research brief Taking Muni’s Vitals found that Muni performs well in efficiency, productivity, and effectiveness compared to its peers.3 Despite significant cost-saving efforts, Prop. H alone would not be enough to fill the funding gap. Voters in San Francisco will see two measures on the November ballot for public transit: Prop. H and a regional sales tax increase (Prop. RTM) levied in San Francisco, Alameda, Contra Costa, San Mateo, and Santa Clara counties. Prop. H is projected to raise about $160 million annually, and Prop. RTM is projected to raise $155 million annually for Muni. Both measures must pass in order to prevent devastating service cuts to Muni.
This measure qualified for the ballot through a voter signature initiative and requires a simple majority (50% plus one vote) to pass.
Equity Impacts
The revenues from this measure would be used to maintain and improve Muni service. More than half a million trips are made on Muni every day.4 Muni riders are more likely to be low-income or to identify as a person of color, a person with a disability, a senior, or a youth relative to the city’s population. These populations will be the most disadvantaged if service cuts occur, and they are less able to switch to costlier alternatives such as driving or ride-hail services. If Prop. H does not pass, Muni will need to increase fares and cut service.
While Prop. H imposes a new tax, it uses a tiered rate structure to ensure fairness, as detailed above.
Pros
- Prop. H would avoid catastrophic service cuts that would otherwise leave San Francisco without reliable and affordable transportation, stall downtown’s recovery, worsen traffic, air quality, and respiratory illness, and undermine housing production.
- The measure includes protections for seniors, rent-controlled tenants, and single-room occupancy units to avoid overburdening vulnerable populations.
- Unlike other tax types whose revenues vary from year to year, a parcel tax provides stable funding, making it ideal for the ongoing nature of operating funds.
- The measure would support San Francisco’s economy. If the measure does not pass, Muni warns it would need to cut special event service, limiting the city’s ability to host marquee events that depend on transit.
- Prop. H would help reduce traffic congestion and related greenhouse gas emissions and air pollution. If it and Measure RTM don’t pass, SPUR estimates traffic congestion would more than double on the Bay Bridge because of cuts to Muni, BART, and Caltrain.
Con
- The city has no legal authority over how a parcel tax is passed on to commercial or other non-rent-controlled tenants, so the rates they are charged would depend on individual lease agreements between tenants and owners.
