Proposition I - Small Business Assistance Center

What it does

This measure would provide a one-time appropriation of $750,000 to fund the building and staffing of a Small Business Assistance Center with the purpose of providing assistance to businesses of fewer than 100 employees that operate in San Francisco. The funding would be allocated to: (1) build-out of a publicly accessible office within the office of the city treasurer in City Hall; (2) hiring a director, assistant director and three case workers to provide services to small businesses, with staff positions funded for only six months; and (3) outreach to small businesses to educate them about the Small Business Assistance Center and its services.

Proposition I is an ordinance that was placed on the ballot by the mayor.

Why it is on the ballot

There are approximately 106,000 registered businesses in San Francisco. More than 99 percent of those registered businesses have fewer than 100 employees - the target for the Small Business Assistance Center. Ninety-six percent of registered businesses in San Francisco have fewer than 20 employees.

Despite the overwhelming presence of small businesses in San Francisco's economy, there is widespread concern that the City's business permit and licensing processes are not responsive to the needs of small businesses. Permits are time consuming, costly, complex, convoluted and sometimes internally inconsistent. There are some 14 City departments with permit and licensing authority affecting small businesses. While the number of permits a business must obtain depends upon the nature of the business, most business at a minimum will need to receive permits and licenses from the departments of building inspection, planning, fire and health. To understand and conquer the permit gauntlet is a major challenge to a new or expanding established business. In order to navigate the process, businesses sometimes hire a "permit expediter" who understands the intricacy of the process. This is an expense many smaller companies cannot afford.

Over the decades, there have been numerous attempts to reform and streamline the permit and licensing processes, establish "one-stop shop" programs, and improve bureaucratic efficiency. Unfortunately, the problem remains.

In recent months, SPUR has been working through its Municipal Fiscal Advisory Committee on a related project to analyze and reform the restaurant permit and licensing process. The outcomes of this project will provide guidance for reform and streamlining that could be provided to the Small Business Commission and the proposed Small Business Assistance Center.

Through this project, SPUR and MFAC have learned that it is almost as important to assist businesses through a difficult local approval process as it is to educate them to effectively decide whether to go into business in the first place. Many small businesses fail not because of local permitting woes but because their business plan did not anticipate unexpected costs in the first few years and they lacked the capital to weather such changes.

In 2003, voters approved adding the Small Business Commission to City's charter. In this same ballot measure, voters expanded the commission's membership from five to seven, and revised the appointment and tenure structure of commissioners to give the Board of Supervisors three of the seven appointments. Commission staff consists of one director and one secretary.

Because of ongoing challenges facing small businesses, the mayor's fiscal year 2007-08 budget provided for the creation of a Small Business Assistance Center. This center was the subject of numerous public hearings during the budget deliberations. Ultimately, only about $150,000 was appropriated for the Small Business Assistance Center through the regular budget process, a sum that was insufficient to fund the creation of the center. Accordingly, the mayor sponsored the placement of the Small Business Assistance Center measure on the ballot.

Pros

Those who support this measure claim:

• The proposed center may provide some relief and support to a beleaguered small-business community, thereby allowing small businesses to grow, create jobs and enhance the City's financial condition. A major focus will be on established San Francisco companies, especially in their efforts to comply with the City's substantial regulatory environment.
• This is a concrete step toward improving the permit and licensing processes, because data for reform and streamlining will be a product of the center's operation, as will informational materials to guide businesses.
• The measure establishes a pilot program with a non-recurring budget allocation, a built-in effectiveness-accountability survey, and focused program objectives.
• The measure will enable the Small Business Commission to focus on its charter-mandated responsibilities.
• This is an appropriate use of the ballot box to let the voters decide on a measure when political deadlock blocks action.

Cons

Those who oppose this measure claim:

• The measure does not directly address the underlying problem - the City's overly complex and costly permit and licensing process. Instead, it simply provides a bandage by paying for social workers for small businesses. Reducing the uncertainty and cost of the City's permit process would better assist small businesses.
• The one-year appropriation is a wonderful idea, a great way to experiment with a concept, yet the short timeline to a performance deadline (April 2008 for consideration in the mayor's budget) may doom the effort to failure because it might not be able to gather sufficient data to prove itself.
• This is another example of ballot-box budgeting by advocates who could not get their way through the normal legislative and budgetary processes, and burdens the ballot with an inappropriately detailed and small-scale measure.
• This measure, which was placed on the ballot shortly before the deadline for submissions, does not conform with the currently proposed charter amendment calling for increased openness in the ballot-measure process (Proposition C) that SPUR proposed and for which it is now leading the campaign. While the concept was the subject of prior public hearings (at the Board of Supervisors Budget Committee and the Small Business Commission), it was introduced late in the process without prior review.
• The mayor already has sufficient budget and powers to reassign staff to perform the same functions as proposed by the center, because it is essentially a pilot project. This measure exemplifies a tendency toward asking the voters to decide on such minutiae as the specific allocation of a very small sum of money. As such, it has no place on the ballot.

SPUR's analysis

The proposed center would:

• Provide a one-stop shop to assist small businesses in obtaining City permits and licenses from other City departments (permits themselves would not be issued at the center).
• Improve small-business access to City financial and tax resources, and assistance in finding appropriate real-estate locations.
• Help small businesses that wish to bid on City contracts and participate in the City purchasing process.
• Assist small business with compliance with government laws and regulations.
• Support small businesses' adoption of "green" and sustainable business practices
• Strengthen City Internet services that support small business.

The proposal authorizes a single-year appropriation of $750,000 (available from the City's $20 million budget reserve) to establish the center. In subsequent years, the center will have to vie for funds through the normal budget process. The funding would be used for staffing, build-out costs (that is, tenant improvements to the space), marketing of the center's services, and improvement of Internet services. The budget calls for five staff positions, including three "case workers" to assist small businesses. The funds available should enable to center to operate for approximately six months.

The center's staff would report to the Small Business Commission yet would be physically located in the Treasurer's Office on the ground floor of City Hall. It is unusual in City government for an office that reports to an appointed commission to be located within a different elected official's office. This co-location could cause some problems with confidentiality, as the Treasurer's Office works with private information about individual property taxes that the staff of the center would not be privy to.

The center‘s director is proposed to be at the level of a department head, similar to the existing executive director position to the Small Business Commission. It is odd that there would be two similar entities - the commission's two-person staff and the proposed Small Business Assistance Center —that both report to the Small Business Commission. Some have questioned why the existing Small Business Commission could not simply be expanded to provide the services of the proposed center. According to the San Francisco City Charter, the commission, with only two staff members, is involved in development and review of policy, legislation and regulations; obtaining grants to assist smaller firms; and providing information to small businesses. It has had limited success in working with departments on systematic problems, such as the permit and license issue. The proposed center is meant to provide these new and additional functions. The center would focus its efforts on firms with fewer than 100 employees. This is based on an analysis that other members of the City staff work directly with larger firms, particularly on development projects. Further, larger firms also have greater ability to hire professional support to navigate the permit and licensing processes, and in general have greater capacity to operate their enterprises.

The proposed center includes key measures for accountability. On a biannual basis, the Small Business Commission and the Controller's Office will evaluate the center's performance through a user survey. Some argue that the short time frame to demonstrate achievements through the annual survey, and the very low staffing levels, doom the concept to failure because there will not be sufficient time to organize and operate the programs. A pilot program may need more time to mature before it has to fight for funding with established City programs.

We had a tough time with this measure. While we actively support the concerns and needs of small businesses (and are involved with a thorough review of the permit process for restaurants), we do not support the use of the ballot box to gain passage of measures that have failed through the regular legislative process. Further, we believe that the mayor already has the power to assign staff to specific tasks and positions. Nevertheless, on balance this is a first step toward solving the challenges facing small business in San Francisco. The one-year funding and the inclusion of accountability measures allow for a vigorous debate about the efficacy of the center during next year's budget process.

SPUR recommends a "Yes" vote on Proposition I.