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City girds for lawsuit over homeless tax

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City controller says not so fast, but Marc Benioff urges SF to collect

San Franciscans passed Proposition C by nearly 20 points on Tuesday, but now the city’s chief accounting officer says that SF may have to hold off on enforcing it in anticipation of an incoming lawsuit.

Proposition C levels an average 0.5 percent gross receipts tax on San Francisco businesses that pull in more than $50 million annually. City Hall economist Ted Egan predicts it could generate up to $300 million annually, which the proposition earmarks for homeless-relief programs.

But on Wednesday, City Controller Ben Rosenfield sent a letter to Mayor London Breed and the Board of Supervisors (a copy published by the San Francisco Chronicle) warning of stormy seas for Proposition C now that it’s passed:

The city is currently in court to resolve whether two voter initiative taxes on the June 2018 ballot required approval by a simple majority or two-thirds of voters. Should Proposition C receive less than a two-thirds vote, it would likely become part of legal proceedings involving similar issues. [...]

Should Proposition C fall short of approval by two-thirds of voters [...] my office would not be able to certify these funds given current legal uncertainties associated with the measure.

The legal haze stems from California’s constitution, which includes arcana about certain types of taxes and designates some as requiring two-thirds of the vote to pass and some as needing a simple majority.

Rosenfield’s letter refers to an ongoing suit over a June ballot measure (also called Proposition C) that put a tax on commercial rents to fund education.

That law passed with barely more than 50 percent. In August several local business entities sued the city, claiming that it should have needed to make the two-thirds threshold.

Although no legal action has happened yet around the latest Proposition C, the No On C campaign released a fairly transparent statement on Wednesday predicting that City Hall won't “see a penny” of the projected funds and citing the two-thirds rule.

Salesforce CEO Marc Benioff, whose loud public advocacy and multi-million investment in Proposition C likely did a lot to buoy it to a Tuesday win, continued to cheerlead the initiative, dismissing legal threats at a Wednesday press conference and urging the city to start collecting.