Proposition C Court Win Delivers Nearly $500 Million for San Francisco's Homeless. But How Will it Be Spent?

San Francisco has $492 million burning a hole in its pocket, and it's about to spend it all on helping the homeless.

That's the amount the city has collected so far in tax dollars from Proposition C, which San Francisco voters approved in 2018. Authored by the San Francisco Coalition on Homelessness, the measure raised taxes on businesses in the city making more than $50 million annually in gross receipts to provide additional funding for homeless services, particularly mental health needs.

Any number of homeless programs may be funded by these dollars, including a new mental health crisis team to respond to non-violent altercations involving unhoused populations, replacing what has traditionally been a law enforcement response.

Programs that offer rental assistance for people on the brink of homelessness, RV sites for those sleeping in vehicles and outdoor "safe sleeping sites" for occupants of tent encampments may also receive much-needed funding.

But although Proposition C passed nearly two years ago, San Francisco hasn't been able to spend a dime of the money collected until just this week.

That's because of a legal challenge mounted in April 2019 that halted spending, forcing city officials to sock away the cash, while waiting, purse strings in hand, for a court decision to come down.

The legal morass evaporated Wednesday when the California Supreme Court declined to take an appeal from the Howard Jarvis Taxpayers Association, which had sued, unsuccessfully, to block the measure, arguing that San Francisco needed a two-thirds majority to pass the tax.

San Francisco is now free to spend that $492 million in taxes already collected from the measure, and is expected to continue collecting, on average, about $300 million annually from it.

So where will the city spend their millions? And who will ultimately make that decision?

The answer is both simple and complicated: The measure states that the funding must be used for certain objectives, like mental health assistance and shelter beds, but determining which specific services should receive funding under those broad umbrellas is a wholly different matter, one that three distinct entities will have to wrestle over: San Francisco Mayor London Breed, the Board of Supervisors, and a Proposition C oversight committee, whose first meeting is scheduled for Sept. 16.

Paying the Piper

The first big spend for Proposition C won't be to buy new shelter beds or fund new homelessness programs — instead, it will be to pay back the city, which has been spending its own money on those things.

Roughly $196 million will repay San Francisco's general fund, and other funds, for affordable housing costs spent as part of the mayor's Homeless Recovery Plan, which proposes 1,000 new permanent supportive housing units as part of this year's budget and 500 more units next year.

Big-Budget Plan

Breed's proposed spending plan for the remainder of the Proposition C funds will go before the Board of Supervisors for discussion this week, with votes for final approval anticipated in late September. Breed must sign the budget by Oct. 1.

Breed's proposal includes funding for the following categories:

• Homelessness prevention ($59 million): While the specifics of this spending have yet to be determined, usually this category of spending includes short- and medium-term rental assistance for people who are housed but could soon become homeless. This category also includes the city's Rapid Rehousing program, which provides housing to people who have recently been evicted.
• Shelter and hygiene ($39.4 million): Funding for "vehicle triage centers" — essentially parking sites for homeless people living in RV's and cars, with wraparound social services; "safe sleeping sites," which are outdoor tent encampments with city-provided social services; and new emergency shelters.
• Mental health ($98.4 million): Funding for the newly formed Street Crisis Response Team pilot program — with teams responding to 311 and 911 calls instead of police; the city's Behavioral Health Access Center; new beds for those with mental health needs and additional funding for the Mental Health SF program.

"This will allow us to move forward quickly to implement units for people on the streets," said Jeff Cretan, the mayor's spokesperson. "It's really about providing more housing and shelter, and mental health support for those who badly need it. This court decision really frees up the money to implement the programs more quickly."

Homelessness Meets COVID-19

Although Breed and the Board of Supervisors have largely hammered out plans for the Proposition C funding, the oversight committee mandated by the measure hasn't even met yet.

And that's a problem, says Jennifer Friedenbach, executive director of the San Francisco Coalition on Homelessness, the measure's author. She's also an appointee to the oversight committee, which has four seats nominated by the Board of Supervisors, four seats nominated by the mayor and one seat nominated by the city controller.

"Basically, what (Breed's) got in there, she's paying back expenditures that already happened that had no community oversight," Friedenbach said. "It's a total setup. Because it creates a hole in the budget if you don't use that funding."

Friedenbach argues that some of the programs Breed wants to fund with Proposition C money already have other dedicated funding sources, ones that homeless advocates have fought hard for. That includes rental subsidies, which were a "budget battle we found the revenue for, got the funding for," Friedenbach said.

The mayor's office pushed back on those claims, and said the budget process was public, with open negotiations between the mayor's office and the Board of Supervisors allowing plenty of time for input.

And while much of the money from the measure has already been earmarked, Friedenbach argues that the realities of COVID-19 have re-shifted priorities for homeless providers. Additional funding, she says, is now urgently needed to create additional safe sleeping sites, buying hotel rooms and increasing rental assistance to keep more tenants at risk of eviction from losing their houses.

"There's a good chunk of people who might need help during this pandemic and become homeless otherwise," she said.

Friedenbach says the mayor and homeless advocates are still very much at odds on how much of Proposition C funding should be spent, and she hopes the two sides can reach some kind of agreement when the oversight committee convenes next week.

"The initiative passed, and she needs to respect that it's a people's initiative with people's oversight," she said.