November 2008

City Fees, Fines and Charges Rising Rapidly

By Tom Pendergast

Special from the San Francisco Neighborhood Newspaper Association

Through increased fees, penalties and enforcement activities, City departments have been raising a lot more money from San Franciscans in the last few years.  From fiscal years 2006-07 to 2008-09, revenues generated by the Department of Public Health (DPH) jumped 30 percent, from $894 million to an estimated $1.2 billion.  Fast growing revenue sources for DPH include fees from restaurants and other food-serving or hospitality-industry establishments, which rose 22 percent, from $4 million to $4.9 million.  Traffic fine revenues dedicated to the department jumped 79 percent during the period, from roughly $661,000 to almost $1.9 million. And penalty-related revenues are up 60 percent, from $65,000 to more than $103,000.   “All of our fees are based on the cost of [DPH] programs,” said Eileen Shields, DPH spokesperson. “Over the past few years the cost of running programs have been more than [DPH] could recover; therefore the fees needed to be increased to recuperate all costs. The majority of the fees are now projected to be near cost recovery.”

Restaurants and hospitality establishments are also getting pumped for money by the Department of Public Works, which increased its total revenues from those sources by six percent in the last year, from $110 million to $116.3 million. The department raises funds through various permit fees – including those for outdoor sidewalk tables, sidewalk and flower market displays – as well as through penalties and fines for things like improperly dealing with garbage disposal.

Zander Andreas, a third generation San Franciscan and Fillmore Street Boom Boom Room nightclub owner, thinks the City is being too zealous in its attempts to raise money.  “I’ve lived here my whole life. My parents lived here their whole life and so have my grandparents. It’s quite a different place now, with a lot of good improvements, yes, but as far as operating a business, sometimes I have to gasp for breath to see how I’m going to make ends meet when another fee, or a raised fee or a service cost is enacted and put on my shoulders.”  The Boom Boom Room looks a little rough on the outside, sitting on the same block with several closed and boarded-up former retail shops. Step inside, however, and you’re in a swanky jazz-era nightclub, featuring a black-and-white checkered dance floor, plush, dark-red curtains and photographs of all-time great jazz and blues musicians hanging across the walls.

Like many San Francisco businesses, Andreas is still adjusting to a recently enacted fee to cover the cost of providing health insurance to uninsured City residents.  “The health care fee, basically to me it’s a tax because if the employee doesn’t even use it, it still goes to the City’s coffers,” he said. “I don’t know very many employees of my friends’ businesses either who are going to use this fee toward healthcare. I don’t know that they’re going to go to General Hospital to use the City’s health plan. If it’s not used, where does that money go? It goes into the City coffers.”  Andreas said he was recently visited by San Francisco Fire Department (SFFD) personnel, and became acquainted with a fee he wasn’t aware existed:  for a permit to have candles.  “I’ve been operating for 11 years with candles,” he said. “If I don’t use candles, the way that I’ve designed this place and directed my vibe of the place, the decor, vibe and feel would be completely destroyed. It would be a different place altogether. So of course I’m going to use candles. But now I have to go down to the Fire Department and pay a fee, my annual fee for candles.”

According to Kevin Westlye, the Golden Gate Restaurant Association’s executive director, restaurants are already getting squeezed by “aggressive price increases,”  including a recent hike in the minimum wage, mandatory healthcare benefits and rising commodity and fuel prices. Nevertheless, he understands that the City has limited ways to raise revenues.  “Under Proposition 13, the county cannot raise property taxes more than two percent a year, which does not keep up with the rising cost of government services,” Westlye explained. “The obvious solution is either new fees or fee increases. To deal with the budget deficit there has been discussion of many fee increases.”

When Mayor Gavin Newsom’s proposal to tax businesses $80 million to pay for health insurance for uninsured people in the City passed, the association requested its members add the charge to consumer’s checks, resulting in a three to four percent increase in diners’ tabs. At Pasta Pomadoro, a four percent charge is added to customer’s bills, effectively increasing the sales tax to nearly 13 percent to pay for the new charge.

The DPW isn’t just soaking restaurants. The department’s charge for news racks doubled this year, from $30 to $60 per location.  Department staff photograph garbage cans left in “plain site,” and fine homeowners $100 if they don’t properly stow all three of the department’s cans, those for garbage, compost and recycling.  Recently the mayor proposed fining residents $100 if they didn’t effectively sort their throw-aways into the proper receptacle.

Rene Cazenave, a native San Franciscan who’s worked with more than 200 community-based organizations over the last 41 years, believes that it’s unfair for the City to increase its revenues by tapping small business owners.  He’d like to see larger businesses downtown pay more.  “It’s trying to balance the budget on the back of community residents in the absence of considering a more fair system that would also charge downtown developers and big corporations for their fair share of these services,” he said. “They build monster high-rise buildings that demand a whole slew of City services.”

He listed things like Muni, police, garbage and sewage services, all of which will need to be expanded to accommodate more people.  “Sure, department fees make some sort of sense in that the people who pay more are those who use more; the problem is the increases are far too high for regular people. The larger folks aren’t paying at all or if they are paying some more it’s no sweat off their backs,” he said

But Gabriel Metcalf, public policy think tank San Francisco Planning and Urban Research’s (SPUR) executive director, disagrees.  “I think the City is charging big developers every last dollar possible. Every time there is a new neighborhood plan or rezoning they attach huge fees to new development,” he said.

San Franciscans are also paying more for water.  The San Francisco Public Utilities Commission (SFPUC) generates almost all its own revenues, which have increased by more than seven percent since 2006.  The SFPUC recently tried to move to a three-tiered plan to charge its water customers.  Dubbed the “family tax” because it penalized large families living in a single domicile, the plan was scaled back to a two-tier rate system. Critics claim it still penalizes large families who have to use more water for cooking, showering, and other daily needs.  The plan is intended to encourage water conservation, the SFPUC counters, by charging more for water over a set limit.

Since 2006, water rates have increased by 32 percent, and retail wastewater rates rose by 19 percent.  “We have increased water and sewer rates to fund much needed seismic and other improvements to our local and regional water and sewer systems,” he said. “We have an aging wastewater and storm water collection and treatment system. More than 70 percent of our sewer lines are more than 70 years old, and we have flooding in some low-lying neighborhoods. Our main treatment plant is more than 50 years old and in need of replacement. We treat 80 million gallons of raw sewage a day in the City,” said Tony Winnicker, SFPUC spokesperson

The Municipal Transportation Agency, or Muni, recently raised parking tickets by $10 across-the-broad.  Over the next two years, ticket revenues are expected to jump by 20 percent, adding roughly $17 million to the transportation agency’s pot. Revenues from boot fees for ticket scofflaws are expected to rise by 176 percent by 2010.

The Recreation and Park Department is also raising many of its fees, including to gain access to swimming pools, athletic fields and other facilities, such as entrance to Coit Tower.  City revenues from the Ferry Building farmer’s market are projected to shoot up 82 percent, from $696,000 two years ago to $1,265,000 in the current fiscal year, mainly because the City has started charging tenants market rates.  “This year they’re making us pay rent,” said Christine Adams, the farmer’s market manager.  “They never did before.”  She nodded toward the stalls selling fruits and vegetables.  “The City is charging us $6,000. I think we’ll be all right, but if it goes up any more we’re going to have to raise the rates for all these people and they’ll have to charge people more.”

While the City can’t raise property taxes, Proposition 13 allows taxes to rise when a property is sold, by assessing a new tax rate based on the sales amount. According to California Taxpayers Association study, during the last fiscal year county-assessed property values in San Francisco rose nine percent. In the last three years, property tax revenues have risen 21 percent.   During the same period revenues from other local taxes rose 14 percent; business tax revenues were up by 19 percent; revenues from service charges rose by eight percent; fine and penalty-related revenues were up six percent; and revenues from license and permit fees increased by 20 percent.

Despite the revenue increases, which resulted in a record $6.5 billion municipal budget, this year’s budget started with a $338 million deficit, which was closed by service cuts.  Most of the increased revenues were absorbed by higher labor costs, with San Francisco now supporting more than 27,000 employees.  Recently approved contacts with the police, firefighters and nurses unions resulted in $118 million in higher costs.

Between fiscal year 2006-07 and this year, salary-related expenditures for the county sheriff’s office increased by 27 percent, to $82.7 million.  Costs associated with benefits rose by 22 percent.  During the same period salaries for the Police Department rose 26 percent, from $250.8 million to $316 million, with an 18 percent increase in benefits.   SFFD salaries went up 15 percent, from $187 million to $215 million, while benefits rose by 14 percent.  Yet despite the increases in departmental costs, the number of SFFD positions declined by eight percent.  Muni salaries are projected to climb to $353.6 million by fiscal year 2009-10, a $42 million jump over about four years.  Benefits for Muni workers will rise by nine percent.  In the last two years, Department of Public Health salaries increased by 13 percent, from $444.4 million to $500.6 million.

NTanya Lee, family advocacy organization Coleman Advocates for Children and Youth’s executive director, said hikes in the cost of City services and fees are the result of a process that started in fiscal year 2003-04, when San Francisco was facing a $347 million shortfall.  “That’s when all this started,” said Lee. “So now it’s fees that they’ve raised on top of those fees.  The City is in a bind.”

In the past few years middle- and working-class people have moved out of San Francisco – including a dramatic drop in the number of African-Americans – while upper-income people have moved in.  Since 1960 the number of children living in the City has dropped by one-third.  The two biggest reasons for the out-migration, experts agree, are rising housing costs and the perception that the City’s public schools aren’t worth the money it costs to live here.  Higher taxes, hidden or not, also put pressure on lower- and middle-income families to leave the City.

According to Lee, working class families spend so much of their income on housing and an increased cost of living that they can’t always afford their own health care, daycare for their children, or vacations out of town.   “We live in a City where we have this weird tension, a built in tension of being in a hot real estate market City, where the real estate market is really good,” Lee explained. “That means the City government gets the benefit in terms of revenue. But being a hot-real-estate-market City causes social problems. [Middle and lower income] people can’t afford to live here, and families are spending much more of their income on housing and a rising cost of living. The economics are squeezing the middle and lower classes. The City government has a responsibility to fill in the gaps with child care and housing subsidies.”  Other critics say that the City’s tax, fine and fee structures are regressive, hurting poorer residents the most because the charges take a larger, more disproportionate chunk of their income.

Andreas suspects that people like him will have to foot the ever-increasing bills to provide City services.  “I have to raise prices to meet the cost of increased fees and taxes. That alone is a wash for me,” he said. “If I have to raise the cost of a beer $2 to meet the cost of increased fees and taxes, I don’t think you’re going to have many people who are going to buy four or five beers over the course of a night. You’re going to kill the entrepreneur by taxing the crap out of them.”

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