LWVSF Education Fund: Pros & Cons Guide: San Francisco Ballot Measures

PROPOSITION A – RETIREE HEALTH CARE TRUST FUND USES

Charter Amendment
Placed on the ballot by the Board of Supervisors
Requires a simple majority of votes for passage

THE QUESTION:

Shall the City change its Charter to allow payments from the Retiree Health Care Trust Fund only when the Fund is fully funded or only under specified circumstances?

BACKGROUND:

Currently retiree health care costs are paid, as they come due, from the General Fund of the City and County of San Francisco. In January 2009 the City established the Retiree Health Care Trust Fund to set aside money to pay for future retiree health care costs estimated at $4.4 billion.  A five member Trust Fund Board administers the fund and the City and its employees make contributions.  Presently, only those employees hired on or after January 20, 2009 contribute.  On July 1, 2016 all employees will contribute. SFUSD, the SF Superior Court and SF Community College District can also participate. So far only the Community College District participates and its contributions are kept in an account separate from the City’s.  The current system allows the Trust funds to come available in 2020.

THE PROPOSAL:

To keep the trust fund from being depleted and to bar use of the funds for anything other than retiree health care Proposition A would allow for payments from the Fund only if:

  • The City’s account balance in any fiscal year is fully funded; and
  • The City’s retiree health care costs exceed 10% of the City’s total payroll costs in a fiscal year, after approval by the Controller, Mayor, Trust Board and a majority of the Board of Supervisors.

The Charter amendment would allow other agencies to spend money in their fund accounts only if:

  • The Agency’s account is fully funded; and
  • 2/3 of the Agency’s governing board and a majority of the Trust Board approve.

A “YES” Vote Means: If you vote “yes” you want the City to change its Charter to allow payments from the Retiree Health Care Trust Fund only when the Fund is fully funded or under specified circumstances,

A “NO” Vote Means: If you vote “no” you do not want the City to change its Charter.

FISCAL EFFECTS:

The Controller states:

Should the proposed Charter amendment be approved by the voters, in my opinion, the City’s ability to withdraw from the Retiree Health Care Trust Fund (the “Trust Fund”) would be restricted.  The restrictions would ensure that the Trust Fund more rapidly accumulates sufficient funding and investment earnings to pay for required City retiree health costs and would therefore reduce the burden of these costs on the City’s annual budget.

The City currently pays for the health care benefits of retired employees through the annual budget.  These expenses are now approximately $150 million annually, or about six percent of payroll expenditures, but are expected to grow over time to approximately $250 million, or about ten percent of payroll expenses.  Instead of bearing this cost in the annual budget, as a sound financial management practice, employers can instead set-aside funds during a worker’s career and use investment income from those funds to pay for the benefits.

Through earlier Charter amendments, the City established a Retiree Health Care Trust Fund into which both the City and employees are required to contribute funds.  Deposits are now required on behalf of employees hired after 2009 and, beginning in 2016, will be required on behalf of all employees.  No withdrawals are currently permitted from the Trust Fund until 2020, ensuring that the balance will grow until that time, however no such prohibitions are in place following that date.  The City’s most recent actuarial analysis estimates that the cost of health benefits already earned by current and future retirees as of July 1, 2010 is $4.4 billion, of which only $3.2 million has been set-aside to date.

The proposed Charter amendment would prohibit withdrawals form the Trust Fund until sufficient funds are set-aside to pay for all future retiree health care costs as determined by an actuarial study.  Limited withdrawals prior to accumulating sufficient funds would be permitted only if annually budgeted retiree health care costs rise above ten percent of payroll expenses, and would be limited to no more than ten percent of the Trust Fund balance.  The proposed Charter measure allows for revisions to these funding limitations and requirements only upon the recommendation of the Controller and an external actuary, and if approved by the Retiree Health Care Trust Fund Board, two-thirds of the Board of Supervisors, and the Mayor.

The City’s external actuary has estimated that given these proposed provisions, the Trust Fund would be fully-funded in approximately 30 years.  At that time, the City’s annual costs would drop to approximately $50 million in current dollars or about two percent of payroll expenses.  Current and future projections of the benefit costs and of the Trust’s status are dependent on assumptions of future medical inflations, investment returns, and other trends, which will likely differ from those assumed.  Higher rates of medical inflation or lower rates of investment returns would delay the shift to a fully-funded Trust Fund.

The proposed Charter measure also; (1) further clarifies the required segregation of moneys within the Trust Fund into sub-trusts for other participating employers such as the School District, (2) limits withdrawals from these sub-trusts by other participating government employers until their governing board has adopted a funding strategy by a two-thirds vote, and (3) allows the Treasure, Controller, and General Manager of the Retirement System to serve on the Trust Fund Board, rather than appoint members to the Board.

ARGUMENTS IN FAVOR OF PROP A:

  • Proposition A protects the Health Care Trust Fund to ensure San Francisco can meet its commitment to provide health care for retired workers including firefighters, police officers and nurses who made sacrifices to protect the community.
  • This measure prevents the City from raiding the Retiree Health Care Trust Fund for uses other than paying retiree health care benefits.  It will allow the fund to grow untouched, except under extraordinary and very carefully controlled conditions, until it is fully funded.
  • Proposition A eliminates the City’s $4.4 billion liability for retiree healthcare cost in about 30 years.

ARGUMENTS AGAINST PROP A:

  • Proposition A is a flawed measure that could cost the city employee additional monthly contributions for healthcare benefits during the current “pay as you go” time period lasting until the fund is fully funded in 2043 to 2045.
  • In the event that retiree healthcare costs are not fully paid for by the 2% or less collected in city employee salary contributions, the taxpayer will be required to make up the difference during the 31 years these funds are locked up.
  • Proposition A does not guarantee that General Fund money is saved but gives the Board of Supervisors and Mayor control of these funds and allows them to change their newly created spending rule limitations as they see fit.

PROPOSITION B – 8 WASHINGTON INITIATIVE

Ordinance
Placed on the ballot by initiative petition.
Requires a simple majority of votes for passage.

THE QUESTION:

Shall the City allow a development project at the 8 Washington Street Site that would include new housing, retail, recreational facilities and open space, and would increase the legal building height limits on a portion of the Site?

BACKGROUND:

The site proposed for development as 8 Washington Street is 3.2 acres bounded by the Embarcadero, Washington Street and Drumm Street.  Approximately 80% of the Site is owned by Golden Gateway Center and used as walkways and a privately operated tennis and swim facility.  The remaining 20% is a public parking lot under the jurisdiction of the City and County of San Francisco’s Port Commission.

In 2012 the Board of Supervisors approved a development project for the site involving construction of two mixed-use buildings containing 134 residential units, ground floor restaurants, retail, a privately operated fitness and swim facility, a public park, open spaces, and underground public and private parking.

In approving the development project, the Board also adopted an ordinance to increase the legal building height limits on a portion of the project.

THE PROPOSAL:

Proposition B would create a special use district known as the 8 Washington Parks, Public Access and Housing District.  The district would require the 8 Washington site project to include:

  • Two buildings of residential unit housing between 121 and 141 units;
  • An increase in the legal building height limits on roughly a half-acre portion (16% of the site) along Drumm Street from 84 feet to 92 feet and from 84 feet to 136 feet in another section
  • Privately operated fitness and swim facility, with a two-story height limit;
  • Height limit of 6 stories for the residential building along the Embarcadero;
  • Payment by the developer to the affordable housing fund of the City and County as required by law;
  • New and expanded pedestrian access to the waterfront and enhanced bicycle and pedestrian safety;
  • Ground floor retail and cafes;
  • Underground private and public parking;
  • Increased revenue for the Port and the City.

A “YES” Vote Means: If you vote “yes” you want to approve the 8 Washington Street site special use district development project, which includes new housing, retail, and recreational facilities and open space.  It would also increase the building height limits on a portion of the Site.

A “NO” Vote Means: If you vote “no” you do not want to approve the special use district for the development of the 8 Washington Street site and do not want to allow the legal building heights to be increased.

FISCAL EFFECTS:

The Controller states:

Should the proposed ordinance by approved by the voters and the proposed project at 8 Washington Street be built as currently approved, in my opinion, it would result in near-term tax revenues of approximately $4 million which can be used by the City for any public purpose, approximately $11 million in fee payments to fund affordable housing and approximately $4.8 million in fee payments to fund transit improvements.  The Port of San Francisco would receive approximately $3 million in near-term revenues for the sale of a seawall lot for the project, as well as a percentage of property sales.  In addition, the developer would construct a public park and improve public utilities and infrastructure.

The ordinance provides for the establishment of a special use district on a 3.2-acre site on the northern waterfront and other approvals required for construction of the development referred to as 8 Washington Street.  As noted above, the financial terms benefitting the City and the Port in the proposed project include an affordable housing fund contribution, transit impact development fees, and a percentage of property sales to be paid directly to the Port.

Estimated future revenues that would be generated by the project would vary depending on market conditions and other factors, but certainly the assessed value of the area would increase and result in significant additional property tax and sales tax revenues, added property value and park and open space improvements accruing to the City and the port are projected at more than $350 million, valued at approximately $82 million in today’s dollars.

The above amounts do not include potential operating and infrastructure costs for other City departments. This statement does not address the potential impacts of the project on businesses, private property or the local economy.

ARGUMENTS IN FAVOR OF PROP B:

  • Proposition B creates a new waterfront park, with dedicated open space and a 4,500 square-foot children’s playground on the Embarcadero.
  • This measure will open views and pedestrian access with widened and enlivened sidewalks and better bicycle safety.
  • The project for more sustainable neighborhood housing and sidewalk cafés is environmentally LEED Certified, includes a green rooftop and generates $11 million for affordable housing.
  • It will create 250 new construction jobs, 140 permanent jobs and generate $100 million for the local economy.

ARGUMENTS AGAINST PROP B:

  • Two-thirds of the new recreation and open space the developer promises will actually be private, not for the general public.
  • Proposition B raises waterfront height limits from 84 feet to 136 feet – 12 stories high – a 62% increase. 
  • Engineer experts testify that the developer is building too close to a sewer line that carries 20 million gallons of raw sewage every day.  It’s a risk of rupture during an earthquake, an environmental and fiscal disaster with taxpayers on the hook.
  • The 134 luxury condos built will cost an average of $5 million each.  There is no on-site affordable housing, raising rents and housing cost for everyone else in the neighborhood.

PROPOSITION C – 8 WASHINGTON STREET REFERENDUM 

Ordinance
Placed on the ballot by referendum petition.
Requires a simple majority of votes for passage.

THE QUESTION:

Shall the City ordinance increasing legal building height limits on an approximately half-acre portion of the 8 Washington Street Site along Drumm Street take effect?

BACKGROUND:

In 2012 the Board of Supervisors approved an ordinance to increase the legal building heights on roughly 16% of the 8 Washington Street development site along Drumm Street. Prior to taking effect, a referendum was filed protesting the passage of the ordinance and requires the issue to be submitted to the voters. The City’s current height limits for buildings along the waterfront are restricted to 84 feet tall.

The 8 Washington Street development is 3.2 acres bounded by the Embarcadero, Washington Street and Drumm Street.  Approximately 80% of the Site is owned by Golden Gateway Center and used as walkways and a privately operated tennis and swim facility.  The remaining 20% is a public parking lot under the jurisdiction of the City and County of San Francisco’s Port Commission.

THE PROPOSAL:

Proposition C is a referendum to approve an ordinance passed by the Board of Supervisors.  The ordinance would increase the legal building height limits on roughly a half-acre portion of the 8 Washington Street development from 84 feet to 92 feet along Drumm Street and from 84 feet to 136 feet in another section of the development.

A “YES” Vote Means: If you vote “yes” you want the ordinance increasing the legal building height limits on portions of the 8 Washington Street site to take effect.

A “NO” Vote Means: If you vote “no” you do not want the ordinance increasing the legal building height limits on portions of the 8 Washington Street site to take effect.

FISCAL EFFECTS:

The Controller states:

Should the proposed ordinance be approved by the voters, in my opinion, it would in and of itself, have no direct impact on the cost of government. However, approval of the ordinance would allow the 8 Washington Street project to be built as approved by the City. This project would result in new tax and fee revenues and other benefits to the City and to the Port of San Francisco.

Construction of the proposed project at 8 Washington Street would result in near-term tax revenue of approximately $4 million which can be used by the City for any public purpose, approximately $11 million in fee payments to fund affordable housing and approximately $4.8 million in fee payments to fund transit improvements.  The Port of San Francisco would receive approximately $3 million in near-term revenues for the sale of a seawall lot for the project, as well as a percentage of property sales.  Estimated future revenues that would be generated by the project would vary depending on market conditions and other factors, but certainly the assessed value of the area would increase and result in significant additional property tax and sales tax revenues to the City and the Port.  Over the long-term life (sixty-six years) of the project, tax revenues, added property value and park and open space improvements accruing to the City and the Port are projected at more than $350 million, valued at approximately $82 million in today’s dollars.

The above amounts do not include potential operating and infrastructure costs for other City departments. This statement does not address the potential impacts of the project on businesses, private property or the local economy.

ARGUMENTS IN FAVOR OF PROP C:

  • This measure will open views and pedestrian access to the Embarcadero with enhanced sidewalks and better bicycle safety.
  • Proposition C creates new neighborhood housing and generates $11 million to create affordable housing.
  • It will create 250 new construction jobs, 140 permanent jobs and generate more than $100 million for the local economy.
  • Proposition C affirms decisions by the Board of Supervisors, the Mayor, the Planning Commission, the Port Commission and the State Lands Commission to replace the private club and asphalt parking lot at 8 Washington Street with neighborhood housing and a new waterfront park.

ARGUMENTS AGAINST PROP C:

  • After the Loma Prieta earthquake in 1989, the City tore down the damaged Embarcadero Freeway – a massive concrete wall than encircled the waterfront, blocking views and access.  Proposition C will allow luxury condo towers to soar to the height of two double-decker Embarcadero freeways stacked on top of each other.
  • Two-thirds of the new recreation and open space the developer promises will actually be private, not for the general public.
  • The 134 luxury condos built will cost an average of $5 million each.  There is no on-site affordable housing, raising rents and housing cost for everyone else in the neighborhood.
  • Proposition C is opposed by a diverse coalition representing 48 neighborhood organizations across San Francisco, including the Board of Supervisor President David Chiu, Former Mayor Art Agnos, Former City Attorney Louise Renne, and the Affordable Housing Alliance.

PROPOSITION D – PRESCRIPTION DRUG PURCHASING

Declaration of Policy
Placed on the ballot by Initiative Petition
Requires a simple majority of votes for passage.

THE QUESTION:

Shall the City adopt a policy to use all available opportunities to reduce the City’s cost of prescription drugs and request state and federal representatives to sponsor legislation to reduce drug prices paid by the government?

BACKGROUND:

The City purchases prescription drugs for health services provided as inpatient care at San Francisco General Hospital and Laguna Honda Hospital.  It also provides outpatient health services at City hospitals, clinics, and institutional health services in the San Francisco jail.  Currently, the City spends more than $23 million per year on prescription drugs.

To ensure the City receives the lowest possible price on prescription drugs, City law authorizes San Francisco’s Public Health Department to use outside companies to negotiate prices.

  • For inpatient medications and inmates, the City uses an outside company to negotiate drug prices with drug manufacturers.
  • For outpatient medications, the City participates in a federal program that offers a significant discount on prescription drugs.  To ensure that it remains eligible for this program, the City uses a federally selected company to negotiate prices and purchase outpatient prescription drugs.

THE PROPOSAL:

Proposition D would make it City policy to use all available opportunities to reduce the City’s cost of prescription drugs.  It would also establish as policy that the City continue to negotiate directly with drug manufacturers to reduce its cost for medications.

Proposition D would also establish as policy that the City ask its State and Federal government representatives to sponsor legislation to reduce by one-third the drug prices paid by all levels of government.

A “YES” Vote Means: If you vote “yes” you want to make it City policy to use all available opportunities to reduce the City’s cost of prescription drugs and you want the City to ask State and Federal representative to sponsor legislation to reduce drug prices paid by government.

A “NO” Vote Means: If you vote “no” you do not want to adopt this policy.

FISCAL EFFECTS:

The Controller states:

Should the proposed declaration of policy be approved by the voters, it would not affect the cost of government.

ARGUMENTS IN FAVOR OF PROP D:

  • Proposition D will allow San Francisco to have more control over healthcare policy and drug prices. 
  • It will give the city a mandate to take action in finding innovative and flexible policies to bring down healthcare costs – especially for women, seniors, and working families.

ARGUMENTS AGAINST PROP D:

  • Proposition D reduces the incentive of pharmaceutical companies to continue expensive research and development projects for new drug therapies, especially for rare diseases.
  • This measure could potentially be in conflict with the current federal program eligibility requirements for price negotiations.

 

All League News