Restaurants and other businesses in this food-loving tourist mecca collected almost $14 million dollars in extra fees last year from their patrons, as they sought to comply with the progressive city's landmark universal health-care ordinance. But an Associated Press analysis of records show that roughly 40 percent of that money hasn't been spent on their workers' health care.
The surcharges, which range from 3 to 5 percent and often appear in fine print on receipts, are one result of San Francisco's five-year-old health care program, which includes some of the most far-reaching such requirements mandated by any U.S. city.
The law applies to more than 4,000 businesses with as few as 20 part-time workers, from nail salons to international banks with local branches, requiring them to set aside for workers an extra $1 to $3 an hour for health care.
The city's mandate is unrelated to the federal health care law that takes effect in 2014 and will apply only to companies with 50 or more employees. They could face fines if they don't provide coverage. And the IRS will collect the money, minimizing the chances of gaming the system.
In San Francisco, the fees have become a vexing issue for local officials, labor leaders and restaurants, whose owners say they are doing their best to comply with what many consider to be a confusing law with an admirable goal.
City officials say the vast majority of businesses in San Francisco go beyond what's required to make sure their workers have health care. But Donna Levitt, who is head of the city's Office of Labor Standards and Enforcement, said self-reporting by the 5 percent of businesses with surcharges last year confirms the city's suspicion that the money doesn't always go to health care.
There was nothing on the books in 2011 that required businesses to spend all the health surcharge money they took in. But a new law took effect this year requiring them to use the money for its intended purpose, or face a consumer fraud investigation.
In July, the San Francisco Civil Grand Jury raised concerns about abuse of the surcharges after looking at about three dozen restaurants jury members had patronized. It concluded many businesses were misleading customers into believing that every dollar was going to the health and well-being of workers.
"Most residents are socially conscious and embrace social changes, and paying a surcharge for employee health care is something we would readily agree to," said Mark Busse, a retired real estate agent who led the investigation. "But to discover they would make profits off surcharges really turned our stomachs."
The AP, through a public records request, later obtained names and health care expense breakdowns of the 172 businesses that reported imposing surcharges. There are likely even more that didn't file their numbers, city officials said. The records showed that 14 businesses collected at least $100,000 more than what they paid out for costs such as doctor's visits, medication and insurance. A third of the businesses spent less than half of what they collected from customers for health care.
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