Dedicating the Prop. K Sales Tax
Funding for Homelessness and Transportation
Dedicates funding from the Prop. K sales tax to fund homeless services and transportation system improvements.
What the Measure Would Do
Proposition J is a charter amendment that would dedicate funding that comes into San Francisco’s General Fund from the Prop. K sales tax measure. Of the funds generated by the three-quarter-cent sales tax increase, this measure would put a quarter cent toward homeless services and a half cent toward transportation system improvements. In the first full year of the sales tax increase, those amounts are expected to be $47.75 million and $95.5 million, respectively. The budget set-asides created by this charter amendment would sunset in June 2041.
The Homeless Housing and Services Fund would fund programs to prevent homelessness, create exits from homelessness and move homeless individuals into more stable situations.
The Transportation Improvement Fund would fund operating and capital transit expenses, street paving, and bicycle and pedestrian improvements. Funding for transportation system improvements would be allocated to the San Francisco Municipal Transportation Agency (SFMTA), the San Francisco County Transportation Authority (SFCTA) and the San Francisco Department of Public Works (SFDPW).
The measure would adjust the transportation funding allocations if new revenues for street paving become available in the future: If voters approve a vehicle license fee in a subsequent election, or if another funding source becomes available, the sales tax money for street resurfacing (paving) would be reallocated to the other five transportation categories.1 In fiscal year 2027–2028, the measure would give the Board of Supervisors the one-time authority to permanently reallocate the paving money to transit and complete streets that better serve all their users.
The measure includes a mechanism that would adjust the dedicated amounts over time in line with General Fund growth or decline, until the measure sunsets in 2041.
Prop. J would provide a “kill switch,” giving the mayor until January 1, 2017, to nullify this measure. This option may be exercised in the case that Prop. J passes but its funding measure, Prop. K, does not.
Allocations for Transportation Improvement Fund
In 2013, Mayor Lee convened a Transportation 2030 Task Force to determine what San Francisco needs to do to improve its transportation system and prepare it for major population and employment growth between 2013 and 2030. SPUR co-chaired this task force. The task force found that the city needed to invest $10 billion in the transportation system between 2013 and 2030 and that it had only $3.7 billion available. The task force then recommended that the city pursue four revenue measures over 10 years: two $500 million general obligation bonds, a local increase to the vehicle license fee and a half-cent sales tax increase. Together, these four measures were projected to raise $3 billion by 2030. Each requires voter approval. In November 2014, San Francisco voters approved a $500 million Transportation and Road Improvement Bond, enacting the first of the task force’s recommendations. (That year voters also approved increasing San Francisco’s General Fund support to the SFMTA by approximately $25 million annually.)
This year’s Prop. K would enact the recommended sales tax increase, while this measure, Prop. J, would dedicate those funds to two purposes. The task force recommended a half-cent increase, for transportation. Due to San Francisco’s acute homelessness problem, combined with state changes that are reducing San Francisco’s effective sales tax rate by a quarter cent, policymakers decided to recapture that quarter cent and spend it on programs to address homelessness.
Homelessness is a long-standing problem in San Francisco, and it has become more visible in recent years as the city undergoes a boom in development that brings residents, businesses and homeless people into closer contact in many neighborhoods. The mayor recently restructured the administration of homelessness programs, creating a new Department of Homelessness and Supportive Housing to serve as a central coordinator for the city’s programs to prevent homelessness, offer exits from homelessness and create and manage more supportive housing. A key priority of the department is to implement a new “navigation system” to track the homeless population and provide individuals the right services and support to get them off the streets. This program builds off the success of the city’s Navigation Center pilot program. In this model, people can bring all of their belongings, as well as their companions and their pets, to stay at a navigation center for up to 90 days while receiving counseling from case managers who can help them access longer-term services. Dedicating a quarter cent of the Prop. K sales tax to homeless services would put approximately $50 million annually toward these efforts, a 20 percent increase over current spending.
San Francisco has dedicated sales tax revenue to specific purposes at the ballot in the past, generally through a special tax, which requires two-thirds voter approval. This year’s Propositions J and K differ in that the sales tax proposed is a general tax, which only requires a simple majority (50 percent plus one vote) to pass. This separate charter amendment would then dedicate the funding from that tax increase to specific purposes: transportation and homelessness. This method has been used by counties around California to avoid the state’s high vote threshold to dedicate a tax to a specific purpose.
Prop. J was placed on the ballot by a vote of the Board of Supervisors. As an amendment to the City Charter, it must be on the ballot and requires a simple majority of voter support (50 percent plus one vote) to pass.
The Transportation Improvement Fund would invest critically needed resources in San Francisco’s transportation system, partially correcting decades of underinvestment. This fund would pay for improvements across those transportation modes, including regional transit such as BART and Caltrain. It would also allow the city to adjust investments over time, as needs and priorities change.
The Homeless Housing and Services Fund would allow the city to serve more homeless residents through its Navigation Centers. SPUR believes that the most effective way to move people out of homelessness is to combine shelter with core services, which is what the Navigation Center approach offers.
Both funds would prioritize services that especially benefit underserved communities. The transportation fund would be used to make service better on the Muni routes that serve San Francisco’s most disadvantaged communities. The homelessness fund would provide a substantial increase in support for the city’s most vulnerable residents.
These two funds meet SPUR’s criteria for budget set-asides: they’d be tied to a new revenue source; they’d provide flexibility over time; they’d fund programs that have been underfunded in the past; and the transportation fund would establish measurable goals.2
The homelessness fund that would be created by Prop. J does not currently offer measurable goals. Proponents are not able to articulate what difference the city should expect to see from increased funding, nor how many more people would be served or in what way.
This measure would not establish a “baseline” of homelessness services and funding against which to measure the city’s investment in these programs over time. This provides no guarantee that the city would spend more total funds on homelessness programs as a result of this sales tax increase.
San Francisco’s health and quality of life depend on a well-functioning transportation system that prioritizes transit, bicycle and pedestrian travel. This measure would establish a clear expenditure plan, ensuring that sales tax money would be spent on projects that make a difference in achieving San Francisco’s transportation policy goals.
Similarly, health and quality of life for all residents demand that the city invest in solutions to homelessness. This measure would provide a substantial increase in support for the city’s best programs for moving its street population into shelters with services and, eventually, into permanent supportive housing. Historically, SPUR has been skeptical of budget set-asides because they lock in future spending and limit legislators’ ability to allocate money differently as the city’s priorities and needs change over time. But we have also supported setaside initiatives when the substance of the measure outweighs our concerns with the mechanism and when the structure of the proposal meets our criteria for evaluating set-asides.3
1 The sales tax money for paving would be reallocated as follows: 10 percent to regional transit; 30 percent to Muni transit service and affordability; 20 percent to Muni fleet, facilities and infrastructure; 20 percent to transit optimization and expansion; 20 percent to Vision Zero safe and complete streets. The Board of Supervisors would not be able to modify that reallocation decision once made. The board would have to approve the reallocation by a two-thirds vote and secure the approval of the mayor.
3 See note 2.