What the Measure Would Do

Proposition L would place an additional gross receipts tax on ride-hail platforms and autonomous vehicle companies. The graduated tax rate would range between 1% and 4.5% based on taxable gross receipts of ride-hail and autonomous vehicle companies for rides within the city. Prop. L would not tax taxicabs, limousines, or ride-hail and autonomous vehicle companies with $500,000 or less in taxable gross receipts. The Office of the Controller estimates that the tax would generate about $25 million in revenues annually.¹

The revenues would be dedicated to the San Francisco Municipal Transportation Agency (SFMTA) to preserve, maintain, or increase services; improve access; or maintain and expand discounted fare programs. The tax would go into effect on January 1, 2025.

The Backstory

SFMTA provides nearly 500,000 transit trips daily on its public transportation system (Muni), or nearly half of all transit trips in the entire Bay Area. Due to the COVID-19 pandemic and its lasting effects on travel behavior, Muni is facing a large and imminent annual operating shortfall, estimated at $239 to $322 million beginning in fiscal year 2026–2027.²

SFMTA pays for its operating costs with a combination of sales taxes, rider fares, parking revenue, operating grants, and support from the city’s General Fund.³ Since the onset of the pandemic, revenues from fares and parking are down. The General Fund, which provides 39% of SFMTA’s funding, has also declined in recent years, and the city’s Five-Year Financial Plan projects that the deficit will grow to $1.3 billion in five years.⁴

In San Francisco, riders are steadily coming back to SFMTA transit lines. Muni has adapted the network of buses and routes while making transit-priority improvements that make the buses faster and more reliable.⁵ These changes have helped ensure that limited resources are carefully managed to better meet the needs of Muni riders. As a result, Muni has one of the highest ridership recovery rates in the state, with passenger numbers exceeding pre-pandemic levels on some routes, and customer satisfaction is at an all-time high.⁶

Muni Ridership Recovery and Revenue Projections

Muni ridership is on track to more than recover from pandemic declines, but the agency must fill a funding gap between then end of COVID relief funds and a long-term funding solution. This gap is largely due to a slowing rate of growth in the city’s general fund, and thus lower contributions to SFMTA, due to post-pandemic economic factors outside of Muni’s control.

SFMTA has few ways to generate operating revenue, in part because operations cannot be funded by bond measures. Two recent efforts at the state level to enable more transit operations funding, Senate Bill 532 (2023) and Senate Bill 1031 (2024), failed. Even if a future regional transit measure succeeds, Muni would still require a local funding source because the size of its deficit is unlikely to be fully addressed in a regional measure. Prop. L is one of few opportunities to raise funds for transit service in coming years.

San Francisco’s fees and taxes on ride-hail platforms are lower than those in other major cities in the country, in part because the excise tax rate was capped by state law in 2018.⁷ Currently, for a $25 ride, San Francisco charges $0.91 per trip, which would increase to $2.04 under Prop. L.⁸ By comparison, Chicago charges $3.00 per trip,⁹ and New York City charges $4.97 for trips in Manhattan and $2.22 for other trips.¹⁰ Most of the existing tax revenue goes to SFMTA for congestion mitigation programs.

Local and State Taxes on a $25 Ride

In early 2023, the Office of the Controller convened a series of meetings and outreach involving businesses, labor, and community stakeholders to revisit the city’s approach to gross receipts taxes. The goal was to create a more resilient fiscal structure that is better adapted to the realities of a post-pandemic economy and that reduces the burden on struggling small businesses. This effort culminated in a broadly supported gross receipts tax reform proposal, Proposition M, which is also on the November 2024 ballot. While Prop. M and Prop. L would each amend the city’s gross receipts tax, both measures could pass without raising legal or administrative issues for the city in collecting both taxes. However, Prop. M contains a clause that would nullify Prop. L if Prop. M receives more votes.

Prop. L was placed on the ballot by independent transportation advocates in San Francisco. To pass, Prop. L requires a simple majority (50% plus one vote) and must get more votes than Prop. M.

Equity Impacts

Cuts to transit service, which might be necessary if Prop. L fails, would disproportionately impact low-income residents and people of color, who ride Muni at a higher rate than the overall San Francisco population.¹¹ Importantly, Prop. L revenues would allow SFMTA to maintain critical transportation services and fund discount programs for people with disabilities, low-income riders, and youth.

If the cost of this business tax is passed on to those who use ride-hail companies and autonomous vehicles, it would marginally increase the cost of the trip for a segment of the population that tends to have higher incomes and more mobility options.¹²

Pros

• This measure would allow SFMTA to preserve transit service and avoid layoffs and other cuts while the agency seeks out longer-term and more substantive funding sources. There are very few viable mechanisms for raising new operating funds in the short term.
• The structure of the tax would not create an incentive for local ride-hail or self-driving car companies to relocate out of the city, because the tax amount does not depend on how many local employees a company has or the location of headquarters and major offices.
• This would be a progressive tax, with graduated rates ranging from 1% to 4.5% based on revenues, a more equitable distribution for smaller businesses and startups.
• If the cost of the tax is transferred to riders, Prop. L could disincentivize car trips and thereby reduce congestion on the city’s streets.

Cons

• Prop. L conflicts with the objectives of creating a more predictable and transparent tax structure under Prop. M.
• This tax measure would not fully close SFMTA’s operating deficit. Muni would still need to pursue additional funding strategies and might have to go back to voters in the future to close the gap.