Free child care tax on South San Francisco ballot

“Child care is very important and I don’t minimize the importance,” said Vice Mayor Buenaflor Nicolas. “However, for anything that we do, there are those unintended consequences and that’s what we’re dealing with.”

The measure envisions free child care for children 2.5 to 5 years old, open to anyone regardless of income.

The city’s study found that revenue produced — estimated at $55.9 million in the first year, rising to $68.2 million in coming years as projects in the development pipeline are completed — would not initially be enough to provide the programming given current demand, but the gap could be closed over time.

To provide for the 1,462 children expected to seek the service initially, it would cost north of $61 million annually, the study indicates, $23.9 million for residents and $19.6 million for non-residents. The other $17.5 million would go to increasing child care worker pay by 10%, something for which the measure also calls.

Average monthly costs for early child care in the city are currently $1,341 per month, according to the report.

And while the city already funds a subsidized child care service that costs significantly less, Mayor Mark Nagales said he had to wait years to enroll his two children in the program.

“I’m living this right now,” he said.

Still, he raised concern that the tax could reduce impact fees, those charged to developers by the city which go largely to providing affordable housing, but also support child care and infrastructure needs. The city expects to collect $173 million from the fees over the next 12 years.

Another concern for Nagales was a finding from the study indicating a special tax district the council has looked to instate would be rendered less likely to pass. The tax would target businesses east of Highway 101 to fund transportation and other upgrades for the area.

He also pointed to limited engagement between the measure’s organizers and stakeholders in the city.

“This was done behind closed doors with a small number of people,” he said.

The initiative is backed by the Peninsula Democratic Socialists of America, among other progressive groups. Last month the county confirmed signatures from at least 10% of the city’s registered voters had been verified, requiring the City Council to place the item on the ballot, where it will require a two-thirds vote.

Proponents, including Councilmember James Coleman, who helped gather signatures, have billed the measure as a way to address gaps in existing subsidized child care while affecting primarily the city’s wealthiest companies.

But the city’s study found the tax, which would apply to the area of a parcel not the square footage of a building, would disproportionately impact low-rise structures, which tend to be older buildings with lower rents, while taller and newer buildings would have a reduced effective rate.

For 37% of properties subject to the tax, building square footage was found to be less than half of lot size, meaning the effective tax rate for the building’s size would be $5 or more per square foot.

For that reason, in newer biotech buildings where square footage can often double lot size, the parcel tax would represent less than 3% of rent, whereas in older buildings with low rent it could represent as much as 25%, according to the report. Because many use “triple net” leases, in which the tenants pay most if not all the expenses of the building, the new tax would be passed directly to tenants.

“I love the idea of having child care for every little one that is in South San Francisco, but quite frankly this ballot measure is a hot mess when you start to dig into it,” said Councilmember Mark Addiego.

Beside the discrepancies concerning who the tax would affect, he took issue with the child care being extended to non-residents.

According to City Attorney Sky Woodruff, the measure would not give priority to residents unless there was a funding shortfall, in which event priority would go to low-income families and those within the South San Francisco Unified School District, which contains pockets of Daly City and San Bruno.

For his part, Councilmember James Coleman pointed to benefits of free child care to both families and employers, including a figure within the city’s recently adopted child care master plan that indicates for every dollar spent on early child care, society gains up to $8 in economic returns over the long term.

Responding to concerns that some businesses could opt to move away, or not move into the city in the first place as a result of the tax, he said free child care would be an incentive to draw in employees, which would also benefit employers.

Joanne Brion, an economist who helped prepare the city’s report, said reliable, quality child care helps create a more stable workforce.

“Tax rates aren’t the only factor in a business decision to look in an area,” said Coleman.

The measure will appear on the Nov. 8 ballot.

corey@smdailyjournal.com

(650) 344-5200, ext. 105