Right Measure at the Right Time

In January, I blogged about the city’s safe drug disposal ordinance and called it the wrong measure at the wrong time. The Chamber is pleased that the Board of Supervisors shared some of our concerns and unanimously voted to send the item back to committee to allow for a pilot project to move forward.

Now, the city has the opportunity to pass the right measure at the right time: the Central Market/Tenderloin Payroll Tax Exclusion (CMTPTE) introduced by newly-elected District 6 Supervisor Jane Kim. This incentive would provide a six-year payroll tax exemption on net new jobs for businesses locating or expanding to a six-block stretch of Market Street (between Fifth and 11th streets) and in an adjacent area of the Tenderloin (bounded by Mason, Geary, Polk and McAllister streets).

After decades of failed attempts to revitalize Mid-Market, a job incentive is the right measure to deliver renewed commerce, pedestrian activity and safety to the once-bustling theater district, which now has a 31 percent storefront vacancy rate. It will encourage businesses to invest in building improvements, creating pedestrian activity along one of the city’s most significant transit corridors. More businesses will in turn attract new retail and commerce to the area – all while helping to create jobs in our city as 41,000 San Franciscans remain unemployed.

This is the right time for a job incentive program in San Francisco. Many businesses are optimistic about long-term economic recovery, but remain reluctant to hire. Some have argued that our city’s payroll tax itself is a disincentive to creating jobs. A temporary 1.5 percent tax exemption for every new employee may provide just the motivation growing companies need to expand and hire now, rather than waiting for more signs of sustained recovery.

Already several businesses have expressed interest in the incentive. Social media giant Twitter is actively considering an office lease in the area to accommodate more than 2,600 new jobs over the next six years. Two hotel chains are reportedly contemplating space in Mid-Market. Black Rock LLC, which organizes the Burning Man Art Festival, says it’s looking to move its headquarters to the area as well.

One important aspect of the jobs incentive is that it is revenue neutral for the city in the short-term with significant upside in the long run. The incentive only provides a tax exemption on net new jobs, so the city will continue to collect payroll tax on all current employees and there will be no loss in tax revenue to the city’s General Fund. In the long run, the city will generate significant property and sales tax revenue from building improvements and expanded commerce in the area. The Mayors Office of Economic and Workforce Development estimated that the city would see property revenues increase $450,000 a year just from improvements to the building that could house Twitter.

Similar incentives have worked in the past. In 2004, there was a single biotech firm in San Francisco. The city offered a seven and one-half year payroll tax exemption to biotech companies locating in Mission Bay and now there are 74 biotech firms and more than 3,000 life science jobs in the city. Since the newly-proposed jobs incentive applies to all businesses – not just firms from a particular industry – it could have an even greater impact on business attraction and job creation.

The Central Market/Tenderloin Payroll Tax Exclusion is the right measure at the right time to create jobs, grow the economy and revitalize the Mid-Market area. The Chamber applauds Supervisor Kim and co-sponsors Mayor Ed Lee and Board President David Chiu for championing this proposal, and we encourage the full Board of Supervisors to act quickly to pass this important business and economic development strategy for our city.

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