Proposition B, placed on the ballot by Public Defender Jeff Adachi, lost 57.6 percent to 42.4 percent, according to complete unofficial results from the Department of Elections.
The measure could have saved the city an estimated $120 million annually, but public employee unions waged a fierce campaign to defeat it, arguing higher health care costs would hurt working families.
Another controversial item, Proposition L – which would ban sitting or lying on public sidewalks during daytime hours, with certain exceptions – was approved by voters by 53 percent.
The measure was backed by merchants, particularly in the Haight-Ashbury neighborhood, who complained of aggressive street youth harassing passersby.
Homeless advocates worry police will use the law to target all homeless people on the streets.
Police have said enforcement of the law would be complaint-driven. Violators could be cited if they fail to heed an initial warning from officers.
Proposition M, which would have required police to beef up their foot patrols and which also could have invalidated Proposition L if it received more votes, was rejected by 52 percent of voters.
Voters also rejected a proposed two-percent hike in hotel room tax rates, but approved raising the tax rate on the sale or leasing of real estate valued at $5 million or more.
A $46 million bond measure to finance earthquake retrofits on affordable housing in the city, which required a two-thirds vote to pass, lost narrowly.
Also losing was a measure that would have allowed non-citizen residents to vote in school district elections.
About 64 percent of voters approved Proposition G, eliminating a provision that Muni drivers be the second-highest-paid public transit operators in the country.
Ari Burack, Bay City News