Wednesday, January 8, 2003

3:00 p.m.

25 Van Ness Avenue, Suite 70, San Francisco, California

Explanatory documents are available for public inspection and copying at the Arts Commission office, 25 Van Ness Ave, Suite 60, San Francisco CA 94102 during regular business hours. Tel: 415-252-2581.


Commissioners Present: Kirk Anderson, Andrew Brother Elk, Rod Freebairn-Smith

Commissioners Absent: Denise Roth, Dugald Stermer

Staff Present: Richard Newirth, Director of Cultural Affairs; Howard Lazar, Street Artists Program Director


In attendance were street artists Robert Clark, William Clark, Barbara Michalak, Susan Pete, John Thomey, and Edward Steneck.

Commissioner Freebairn-Smith chaired the meeting and called it to order at 3:12 p.m.


    Program Director Lazar reviewed that on February 4, 2002, the full Arts Commission voted to approve submittal of an ordinance to the Board of Supervisors increasing the street artist certificate fee for fiscal year 2002-03 from $87.50 to $93.40 per quarter or from $350.00 to $373.60 per year. In its vote, the Commission intended the fee increase to be the first of four increases over the next four years while, at the same time, the Street Artists Program would draw down on its surplus fees reserve until the reserve's exhaustion and the annual fee revenue at that time would entirely support the costs of the Program.
    While the proposed ordinance had not yet been heard by the Board of Supervisors, the Program Director was now requesting approval of an amendment to the ordinance which would specify the fee amount for the balance of the current fiscal year and the fee amount for each of the next three years. This was in keeping with a recent directive to all departments from the Mayor's budget office to plan budgets for the next three years. The Program Director, referring to his "Graduated Certificate Fee Increase Proposal", submitted projections of the Program's budgets and revenues for the next three years based on moderate fee increases.
    The Commissioners reviewed charts developed by Mr. Lazar which showed the usage of the surplus fees reserve to cover the Program's recent annual deficits and projected revenues predicated on his proposed fee increases. It was seen that (a) without any fee increase, the surplus fees reserve was projected to disappear in two and a half years; and (b) with four gradual fee increases, the first commencing with the remainder of the current fiscal year, the moderate increases in revenue would allow usage of the surplus fees reserve to continue to a later date of complete depletion, fiscal year 08-09.
    Mr. Lazar reviewed also that, out of consideration of the street artists, it had been the Commission's intent to introduce a gradual fee increase now, while the surplus fees reserve was offsetting the Program's deficits, rather than wait for the complete depletion of the reserve and impact the street artists with a dramatic increase in their fee. 
    The Commissioners observed that the proposed annual fees (7% and 6% increases for 365 artists) ranged from  $373.60 for the remainder of FY 02-03 to $419.20 for FY 05-06, whereby the Program's revenue would continue to receive the benefit of augmentation by the surplus fees reserve. It was further observed that, by FY 07-08, the revenue of a projected $442.00 fee plus the remainder of the reserve would be insufficient to cover the Program's deficit of the following year, and this would then necessitate Board of Supervisors approval of another ordinance to establish a fee to entirely cover the costs of the Program.
    Commissioner Brother Elk observed that, in recent years, the Program's annual fee revenue had leveled off to $128,000 to $130,000 (compared with this year's budgeted expenses of $165,000).
    Mr. Lazar went on to say that, following another directive of the Mayor's budget office for departments and programs to eliminate 5% of their budgets for next year, he considered the Program's "core services" and "discretionary services" (terms used by the Mayor's office) and chose to eliminate a major "discretionary service" instituted by the Program over the last ten years: the Program's hiring of off-duty police officers to enforce the street artists ordinance against unlicensed vendors in street artist areas. This will be a savings of $11,000 or 6.5% of the Program's budget and will allow for a slightly longer continuation of the usage of the surplus fees reserve.
    Commissioner Anderson stated that Mr. Lazar had done a prudent and thorough job in projecting the budgets and revenues. He also said that it was advantageous to introduce a gradual fee increase, while using up the surplus reserve, rather than exhaust the surplus and impact the artists with a sudden and dramatic fee increase.
    Commissioner Freebairn-Smith observed that the sales activities of unlicensed vendors continue in the Downtown area and that, since it was the responsibility of the Police Department to handle this problem, it seemed almost punitive to continue to ask the street artists to pay for such enforcement. The Commission should continue to ask the police to remove the unlicensed vendors.
    Commissioner Brother Elk stated that he felt the proposal's moderate approach would work to the benefit of the artists and their Program.
    In response to questions from Commissioner Freebairn-Smith, Mr. Lazar clarified that the Program is entirely self-supported by its street artist fees and does not receive assistance from the City's general fund. The mechanism the Program has to remedy any shortfall of its revenue is to raise the amount of the fee. Responding to further questions, he explained that 82% of the Program's budget encompasses salaries of two full-time employees, and 7% goes toward compensation of Advisory Committee members for their examinations and monitoring assignments of the artists' wares - all of this represents employee and Advisory Committee implementation of "core services" mandated by the street artists ordinance. The Program Director had made cuts where permitted and saved the Program 3% this year and proposed a 6.5% savings for next year.
    Commissioner Brother Elk stated that, in his survey of City government, the Street Artists Program was one of the best-managed and thriftiest programs he had observed and that, if anything, the Program was under-budgeted. He hoped that the Commission would someday, in a better economy, be able to do more to assist the street artists. For the present, he was personally uncomfortable with how low the Program's budget was.
    Commissioner Freebairn-Smith called for public comment on the item.

    Street Artist William Clark stated that the City Attorney did not answer the question that he had asked which was if, at the end of a fiscal year, there is a surplus remaining in a special fund, whether it is mandated that the surplus be counted as revenue for the following year's budget. The City Attorney's response, he said, was to a different question; the response was that a department was not required to spend all of its surplus while in a present fiscal year. He asked that his question be resubmitted for an answer.
    Mr. Clark went on to state that he opposed the fee increase and the four-year plan. He submitted copies of the Police Code's Sections 2404.2, "Fee Setting Procedure", and Section 2404.1.1, "Street Artist Application/Examination Fee"; the Administrative Code's Section 10.100-1, "Administration of Special Funds" and Section 10.100-32, "Art Commission Street Artist Fund"; and the City Charter's Section 6.305, "Cash Reserve Fund and Supplemental Appropriations". Citing Section 2404.2, Mr. Clark stated that the law required the Arts Commission to plan its Street Artists Program budget and certificate fee on an annual basis; therefore, for the Board of Supervisors to approve an ordinance setting forth fee amounts for the next four years, Section 2404.2 would have to be amended. He urged the Commissioners to seek such an amendment before approving the four-year plan.
    Citing Section 10.100.1, Mr. Clark stated that the Street Artists Program's fund was categorized as a "category four" fund which required that "[A]ny unexpended and unencumbered balance remaining at the close of any fiscal year in fund categories two, four, six, and eight shall be deemed to have been provided for a specific purpose within the meaning of Section 6.306 of the Charter and shall be accumulated in the fund." Section 6.306, Mr. Clark pointed out, provided that "unused and unencumbered appropriations, balance and revenue collections in excess of revenue estimates ... when not transferred to the cash reserve fund ... shall be held as surplus" and "[S]uch surplus shall be taken into account as revenue for the ensuing fiscal year. ..." Because of this requirement, Mr. Clark stated that the Program's remaining surplus, after covering this year's deficit, must be used for the following year - it must be included in considering the fee structure for next year. For example, if approximately $100,000 surplus is left over after covering the present year's deficit, and there is $160,000 budget for next year, the $100,000 would be applied to the budget, and the remaining $65,000 would be divided upon 365 artists which would yield the appropriate fee the artists should pay.
    Commissioner Brother Elk asked that, if , following Mr. Clark's reasoning, the surplus were to be used up entirely for next year's budget, yielding a small fee, what then would happen the following year when there is no surplus? He asked Mr. Clark what he would do if he were in the commissioner's shoes.
    Mr. Clark responded that he would follow the law, seek a lower fee - even a $10 fee - then go back to the Supervisors the following year for a higher fee.
    Commissioner Anderson stated that if this happened, an enormous increase in the fee would be imposed during the year the Program would go into a deficit; this, in turn, would drive away many street artists. It would be more prudent, he said, to inform the artists, when lowering their fee, of the possible advent of a deficit and then slowly increase the fee incrementally in order to not impose a sudden huge increase.
    Mr. Clark responded that if the fee were raised now, artists would drop out of the Program. In contrast, if the fee were lowered for one year, everyone in the Program would be inclined to stay, and the additional 100-150 new licensees entering the Program would also stay; therefore, in the following year, instead of 365 artists sharing the costs, there would be at least 500 or 565 artists, and the necessary increased fee, though a dramatic jump, would not be as high as the present fee. The process, he said, was meant to be simple, to avoid having to make long-term projections of budgets and fees.
    Mr. Clark maintained that the Program was not in a deficit, that it was in a surplus; and that, as the fees go up, more artists drop out.
    Commissioner Brother Elk questioned Mr. Clark's reasoning, and stated that an artist who first pays a $50 fee would not be inclined to stay the following year when his fee has to be raised significantly - and that this could make for a huge decline in the street artist population.
    Commissioner Anderson stated that he felt the worry for the commissioners would be that the 500 artists projected by Mr. Clark would turn out to be only 300, and the Program would again return to a deficit situation. The Commissioner stated that he would like to make the fee increase as gradual as possible.
    Street Artist Robert Clark stated that, after lowering the fee, a possible way to avoid a sudden dropout of artists is to have the Program staff tell the artists that they are fortunate to be paying a low fee now and that next year they should be prepared to pay a somewhat higher fee.
    Mr. William Clark, in closing, stated that he felt that he had already given the Program a substantial amount of money to be used to pay for the Program's expenses; for the Commission to accept the money, not entirely use it to cover the expenses, and then ask him to pay a higher fee would not be proper.
    Street Artist Barbara Michalak stated that she was speaking for herself and two other licensees, her mother and her husband. While they were not in the Program when the surplus fees reserve was created, the surplus was only a small savings that was helping the Program to continue for the people who depended a hundred percent on the Program. For her and her family, it would be a sad story if the Program, without a fee increase, used up the savings and ended in 2005-06. All the energy she had put into her business would be wasted; her moving her family from Cupertino to Pacifica to be closer to the Program would have been for naught.
    Ms. Michalak went on to say that she was doubtful that the Program could attract another 150 license holders to share its costs given the present economy in which (a) people were looking for stable, full-time jobs with benefits, and (b) the difficulty in making a living on the streets. Furthermore, she did not favor the idea of having the fee lowered significantly only to have it rise sharply the next year.
    Seeing the savings as a cushion against certain unforeseeable costs in the Program, Ms. Michalak stated that the staff's requested fee increase, she said, was only seven pennies a day or the equivalent of one Starbucks coffee a month. She would be willing to sacrifice the one cup of coffee to ensure the existence of the Program so that she could continue in business for another ten years. An additional two dollars a month from each of the present artists who make the Program their full-time business was really, she said, not bad. She added that street artists do not pay a lease, security, or utilities for their prime sales locations which, with the fee increase, would cost them only $1.07 a day.
    Street Artist Susan Pete stated that she would be unhappy about the prospect of some 500 artists in the Program, as suggested by Mr. Clark; as it was, with 365 artists, there were not enough spaces to allow an artist to work more than one day out of a three-day lottery period. She urged the Commissioners to not lower the fee. At the same time, she expressed reservation about raising the fee to the level proposed by the Program Director. She said she was having a hard enough time covering the present $350 fee. The economy right now was so bad that she often experienced zero-dollar days. It did not seem right, she said, to increase the fee without increasing the number of spaces.
    Commissioner Anderson stated that he saw a legitimate concern which his committee should address: an increase of artists without an increase in spaces would greatly infringe upon the opportunities of the artists.
    Street Artist John Thomey noted from the Program Director's "Graduated Certificate Fee Increase Proposal" that the Program spends 7% of its budget on compensation for the Advisory Committee and 82% on salaries for two full-time employees, which, he said, represented approximately $128-130,000 for two people. It seemed that the amount, when most of the artists were struggling, did not seem proper.
    The Program Director clarified that the figure comprised total salaries and total fringe benefits and that the rates of the two positions were governed by City and union agreement.
    Mr. Thomey asked that the Program do more trimming of the remaining 11% of the budget.
    Commissioner Freebairn-Smith commented that all prices will rise, hopefully, gently during the present economic period. All retailing in the city was becoming a little more expensive every year - it always does, he said - and Mr. Thomey's income should increase with the rest of the business world.
    Mr. Thomey responded that he attracts customers who ask him to sell his products at half price, and that these are the only customers available.
    Director of Cultural Affairs Newirth stated that when he started working for the Arts Commission ten years ago, there were three staff people in the Street Artists Program; one of these positions, the full-time Art Inspector, was eliminated (to prevent a fee increase). Mr. Lazar, he said, was presently doing an incredible amount of work with the present staff. If anything, Mr. Newirth said, Mr. Lazar and his assistant Toni Worthy were worth much more than they receive. Secondly, during the last ten years there were no fee increases for the street artists - despite the fact that the cost of living went up and people's incomes went up. In essence, the present situation, with the Program being run in a deficit, was that the artists who were enrolled in the Program five to ten years ago were now subsidizing current street artists. What the staff's proposal was intending to do was to try to take this factor into account so that the impact on the artists would be as minimal as possible while gradually making the Program entirely self-supporting.
    Mr. Newirth added that his chief concern was the longevity of the Program, its existence in the future. As an administrator making a policy recommendation to the Commissioners, he stated that it would be negligent on his part to not do something pragmatic in a business sense for the sustenance of the Program.
    Street Artist Robert Clark urged the Commissioners to follow the law, consider the surplus in the fee scheduling, and reduce the fee accordingly. He stated that for ten years the Program had a $150,000 surplus; if it were factored in, Mr. Clark's fee would be lowered to $10 per quarter for the next year. As a result, no one would drop out of the Program, and all the new artists coming into the Program would also stay. With respect to Ms. Pete's apprehension about a possible 500 people in the Program, Mr. Clark stated that when the fees are very low, as they were in the past, many artists come into the Program and keep their licenses as a "safety valve" and do not show up on the streets. An increased base of artists would share the following year's costs, and the increased fee would be only approximately $200.
    With respect to Mr. Newirth's statement about the fee not increasing in ten years, Mr. Clark stated that the artists had not had a fee reduction in ten years, even though there had been a surplus. He himself had paid for part of that money and was told, he said, that it was going to be used to run the Program and keep his fee low. He saw the Commission as holding onto his money until he dropped out of the Program, only to use it afterward to patch up the budget to save the Program. He said he was offended by this. He went on to say that the law dictated that the Program not be run as a business, that the Commissioners were required to consider the surplus as revenue in deciding whether to raise or lower the fee; if the Commissioners chose not to do this, then, as far as Mr. Clark was concerned, they were "embezzling the funds".
    Commissioner Anderson stated that the Commissioners were working in behalf of Mr. Clark and the artists.
    Program Director Lazar stated that, with regard to the issue raised over the possibility of one ordinance of incremental fees being contrary to law, he would ask the City Attorney to again review the matter in light of the information furnished by the Clarks.
    In closing public testimony, Commissioner Freebairn-Smith stated that he was not persuaded by the argument that if the fee were lowered, the street artist membership would enlarge itself and if the fee were raised, the membership would shrink. He favored the moderation of the fiscal planning inherent in the proposal; he saw it as a relatively gentle scale of increase, and it represented a policy which the Arts Commission could change if the economy dramatically changed.
    Commissioner Brother Elk asked Mr. Lazar for his interpretation of whether the Commission may have been in violation with regard to the surplus. Mr. Lazar responded that the City Attorney's office had clarified to him that the Commission had not been in violation in its use of the surplus to shore up the Program's deficit budgets over the past four years, and that the office had expressed that the Program's usage of the surplus was in keeping with "prudent fiscal policy".
    Commissioner Brother Elk stated that for the past year he had heard severe fears expressed by artists regarding the Program's long-term stability. He wanted to see the Program be a well-funded, well-budgeted, stable program so that its artists would not have to feel fearful from one year to the next about what their fee would be. He saw the job of the Commissioners as keeping the Program as stable as possible. He again cited the Program as being one of the thriftiest programs run by City government, and again expressed the view that it was under budgeted - a problem which the Commissioners could not readily address in the current economic climate. He wanted to be assured that, in the current City's deficit climate, the Street Artists Program stayed on sound footing; the plan being offered by staff, he said, did exactly that. It showed careful thought, planning, and attention in moving the Program up gradually from a deficit situation so that one day it would again be entirely self-supported by its annual revenue. He added that he wanted artists to have a good idea of what their fee would be, not three months or six months in advance, but years in advance. His impression from the artists with whom he had spoken was that their Program represented a long-term commitment for them.
    Commissioner Anderson agreed that the long-term commitment and stability of the Program were important to the artists and to the Commissioners and staff. He also accepted what he called an obligation to pursue additional selling spaces in order to increase the artists' opportunities. He saw the Committee's role as that of working with the artists, even though some decisions might be unpopular but would be made in the best interest of the Program.
    Commissioner Freebairn-Smith clarified from staff that the policy implications of the reduction in the Program's deficit was heading toward a stabilized, self-sufficient program.

    Mr. Lazar stated that that had been the Commission's premise when it voted on the initial increase a year ago.
    Commissioner Brother Elk moved approval of amending the proposed ordinance increasing street artist fee to provide for a specific fee for each of the fiscal years 2002-03, 2003-04, 2004-05, and 2005-06; the motion was seconded by Commissioner Anderson and unanimously approved.
    Paula Grundman - Certificate # 5795. Program Director Lazar reported that Ms. Grundman's request for a postponement of her hearing had been granted.
    Kan Wen Chong - Certificate #5777. Alleged violations: (1) Selling in a location not designated by Board of Supervisors, 2nd offense; (2) exceeding display length regulation; (3) exceeding display width regulation; (4) exceeding display height regulation.

    Mr. Chong was not present. In keeping with the Arts Commission's Hearing Procedure of Street Artist Violations (a copy of which had been mailed to Mr. Chong on October 30, 2002), the Committee heard the case. (Mr. Chong had been informed by letter that his failure to appear could result in a Program Committee recommendation of the penalty for the violations of which he had been charged.)
    Program Director Lazar reported on the incident involving the above violations of September 28, 2002. He reported that Mr. Chong had refused to remove his display and leave a non-designated location (next to Franceschi's Restaurant on Jefferson Street) upon the request of the Program Director and the adjacent property owner; he was made to leave only upon the order of a summoned police officer.
    The Commissioners reviewed the Program Director's detailed written report of the incident, as well as photographs taken by street artist Yuriy Bihusyak of Mr. Chong committing the alleged violations. The Program Director described how Mr. Chong's display of clothing and other items took up twenty feet of space.
    The Commissioners also acknowledged that Mr. Chong a year before had served a three-week suspension of his certificate for selling in illegal locations, and that the Commissioners had deferred his suspension until after the winter holiday selling season. Six months later, the Program received a report of Mr. Chong allegedly selling again in an illegal location; the Program Director on July 18, 2002 sent him a written warning against continuing to do so and reminding him of the suspension he had served.
    The Commissioners reviewed the Commission's standard penalties for the above violations: suspension periods of six weeks for a second offense of selling in a non-designated location and three weeks each for first offenses of exceeding the display length, width, and height regulations - a total of fifteen weeks.
    Commissioner Freebairn-Smith expressed that the Commissioners had been compassionate in their previous decision regarding Mr. Chong's violations.
    Commissioner Brother Elk expressed that, in his previous hearing, the Commissioners had a long discussion with Mr. Chong on his violations and the rules of the Program; the Commissioner felt it was impossible that Mr. Chong by now would not know the rules.
    Commissioner Brother Elk moved that Mr. Chong be found in violation of selling in a location not designated by the Board of Supervisors, 2nd offense, and of exceeding the display length, width, and height regulations, 1st offense; the motion was seconded by Commissioner Anderson and unanimously approved.
    Commissioner Brother Elk moved that Mr. Chong's certificate be suspended for a total of fifteen weeks commencing June 1, 2003; the motion was seconded by Commissioner Anderson and unanimously approved.
    Program Director Lazar referred the Commissioners to the September 5, November 1, and November 12, 2002 letters from street artists Robert and William Clark requesting that certain corrections be made to the Committee's minutes of August 14 and October 9, 2002. (The letters had been forwarded to the Commissioners earlier.)
    Commissioner Brother Elk stated his view that the purpose of minutes is to record his Committee's votes in an official manner and that the person taking the minutes has the right to interpret the discussions in whatever way the minutes-taker feels is appropriate. The Commissioner did not see any point to amending the minutes, as a meeting's interpretation was the responsibility of the Program Director.
    Commissioner Anderson expressed agreement with this. He stated that a good job was done of the minutes, and that going back to amend any portion would be ludicrous.
    Director of Cultural Affairs Newirth suggested that at some point the Commissioners and the Program Director might wish to discuss trimming the length of future minutes because of the time commitment involved in their writing.
    Commissioner Anderson agreed and said that the Program Director's talent and energy were best served for his other tasks in the Program.
    No vote was taken to amend the minutes.
    There being no new business, Commissioner Freebairn-Smith adjourned the meeting at 4:55 p.m.
    Respectfully submitted:
    Howard Lazar
    Street Artists Program Director

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January 16, 2003