Author Archives: mteahan

Managing Success in 2014

As the New Year begins, San Francisco is poised for another year of economic success. Unemployment is holding steady at 5.2 percent, tax revenues supporting the General Fund are at record levels, and the urban life in our city continues to attract residents and visitors. While the technology sector grew by almost 8,000 jobs last year, our city’s economic recovery is also broad-based, with 75 percent of recent job growth coming from sectors other than technology.

San Francisco’s economic turnaround is no accident. It is the result of years of public-private collaboration prioritizing job and economic growth. Since the depths of the Great Recession, business, labor and government have worked together to craft job-boosting tax policies, implement needed pension reforms and approve new housing and redevelopment in key areas of the city.

The focus on economic recovery continued last year, with San Francisco’s Board of Supervisors voting in favor of jobs and the economy on 10 of the 12 most significant issues in 2013 according to the latest economic scorecard from the San Francisco Chamber of Commerce. Overall, the Board received a score of 83 percent, up two percentage points from the year before.

With the worst of the Great Recession now behind us, San Francisco faces real challenges of affordability, mobility and sustainability. We face these challenges not because of our economic success, but because our city has fallen short in creating an adequate supply of housing and due to permitting delays which can take years to bring new housing online. In addition, we have not properly invested in MUNI, and our schools must do more to train the current generation for today’s jobs. These challenges are exacerbated by the city’s across-the-board population growth, reaching 825,000, the highest ever.

As we look ahead, our economic successes will play a key roll in helping to mitigate our city’s challenges. The Housing Trust Fund, funded by increased business license fees and payments from housing developers, will soon bring thousands of affordable housing units online. The Mayor’s Transportation Task Force – including representatives from business, labor and government – is crafting a long-term strategy for transit and infrastructure investment. Employers and residents will be asked in this Fall’s election to provide $3 billion of new revenue over 15 years to leverage tens of millions more of state and federal funds.

San Francisco has always been a “can do” city, and together, we can deal with the challenges ahead. While we must continue to prioritize jobs and the economy, we must also take the necessary steps to manage our success so that our city remains accessible and affordable for both businesses and residents. In 2014, the San Francisco Chamber of Commerce will expand its focus to help address these issues and be part of the solutions that will keep San Francisco prosperous for years to come.

Time to Rethink CleanPowerSF

The San Francisco Public Utilities Commission (SFPUC) stood up for our city’s utility customers Tuesday when it pulled the plug on the CleanPowerSF program. Crafted pursuant to a state law allowing local entities to compete with investor owned utilities, this Community Choice Aggregation (CCA) project was flawed from the start.

CCA came out of the energy deregulation crisis of a dozen years ago and was designed to inject competition in the generation of electrical power, with the goal of driving prices down.  In fact, the stated goals of city’s 2007 CCA ordinance were to “meet or beat” PG&E rates for all rate classes, maintain rate stability, provide at least 51 percent of the power load from renewable sources and find a supplier for a long term contract who would take all the risks.

The program that came before the Commission this week did not come close to meeting these goals. It proposed a premium rate under a short term contract, with no new green power (it would buy renewable energy credits), with all liability resting with the taxpayers and PUC ratepayers. The plan is simply not what it was intended to be.

Another big concern is that the program is not entirely voluntary. Because the city is limited by the state CCA law, residents would be automatically enrolled in the higher-priced program. If they are not informed or don’t remember to “opt out” they are in the program whether they like it or not. This hardly seems fair for low income residents and small businesses that could end up paying more for their energy without even knowing it.

Despite these issues, the Board of Supervisors and organizations such as the Sierra Club have tried to pressure the SFPUC to adopt these premium rates, with all the risks and lack of real green power. Thankfully, three commissioners stood-up for utility consumers and said “No.” The Chamber applauds Commissioners Ann Moller Caen, Vince Courtney and Senator Art Torres for doing so.

However, even with this week’s SFPUC vote, you can be sure this won’t be the last we hear of CleanPowerSF. After nine years and millions of dollars spent trying to launch this flawed project, it’s time to rethink CleanPowerSF. Public and private renewable energy projects right here in San Francisco would go a lot further in creating real green energy for the statewide power grid – a goal everyone can get behind.

A Solution in Search of a Problem

At a time when two-income households are the norm and women make up more than half the workforce, no one disagrees that adopting family-friendly policies for parents and caregivers is important. However, defining what “family friendly” means, how policies should be administered and how they will be enforced has been the subject of much debate in recent weeks.

Last month, Supervisor David Chiu introduced a ballot measure that, if passed in its original form, would have given parents and caregivers the right to request a predictable and flexible work schedule including part-time employment, telecommuting and/or schedule shifts. It would have mandated that employers comply with all requests as long as they did not create an “undue hardship” for the business. It would have created a complicated appeal process, taking day-to-day scheduling decisions away from employers and putting them in the hands of city bureaucrats. And, it could have imposed penalties on businesses the city determined were not in compliance.

Not surprisingly, this proposal – developed with no input from the business community – was met with strong and swift opposition from the Chamber and nearly every other business and merchant group in our city. Business owners are rightfully concerned about the impact the measure could have on their business operations and success. Restaurants, retailers and small businesses were particularly vulnerable to the negative effects of the legislation.

Responding to these concerns, Supervisor Chiu has amended the legislation to lessen its harmful impacts on employers. The latest version enables employees to formally request – up to twice per year – a flexible or predictable work schedule. Employers have 21 days to provide a written response and can deny requests for good-faith business reasons. Employees denied requests can still make a complaint with the city’s Office of Labor Standards Enforcement. However, unlike the original proposal, the labor office can only ensure that employers are following the prescribed procedure, not question the employer’s decision for denying a specific request. The legislation applies to businesses with 20 or more employees, about 8 percent of private employers and 76 percent of private-sector employees in San Francisco.

There is no doubt that if employers want to retain a quality workforce, they must try to accommodate the needs of parents and caregivers. Both flexible schedules and certainty in weekly work shifts are important to families, and most employers in San Francisco are already doing their best to accommodate the needs of their employees. Family-friendly policies are one tool to help retain talent, and that’s good for business.

Supervisor Chiu’s amended proposal is a vast improvement over what was originally proposed from the employer’s point of view. However, as the job-creators in our city, we must ask, is this ballot measure really necessary? Will it help to address the issue of family flight, or just add another layer of bureaucracy for businesses already operating in a highly-regulated environment? Would other policies like affordable housing or school choice initiatives be more effective in keeping families in our city?

As the dialogue over “family-friendly” policies continues, these are the questions that must be asked. In coming weeks, the Board of Supervisors will vote on whether or not to place this measure on the ballot. We hope it will address these complex questions, so that voters won’t have to this November.

Economic Recovery is no Accident

Jobs. Tourism. Commercial office space. By almost any measure, San Francisco is outpacing much of the state and the nation when it comes to economic recovery.  But our city’s economic turnaround is no accident.  Key actions from our city’s business and elected officials have put our city on sound economic footing and a continued path for growth.

While there is no silver bullet in economic development, business incentives have been particularly successful in growing local businesses and employment. During the past two years, with support from the San Francisco Chamber of Commerce, San Francisco has enacted payroll tax incentives for local small businesses that create new jobs; pre-IPO technology companies poised for immediate and rapid expansion; and all businesses expanding in or locating to the long-blighted Mid-Market area. These follow earlier incentives for the biotech and cleantech industries, which have had positive impacts on the new Mission Bay neighborhood.

Today, San Francisco’s economic incentives are keeping businesses and jobs within city limits. According to the Chamber’s foundation partner the San Francisco Center for Economic Development, 13,000 technology jobs have been added in the city over the past two years. Businesses including Twitter, Pinterest, Square, Zendesk and many others have established a Mid-Market presence. And, the Controller’s Office estimates that more than 2,200 life science jobs citywide were created following the availability of the biotech incentive.

This November, the city took an even bigger step forward with the passage of Prop E, the business tax reform measure that will put an end to our city’s payroll tax – a direct tax on jobs – and replace it with a broader, more equitable gross receipts tax system that incentivizes job and economic growth. While the full benefits of this reform won’t be apparent for at least six years, when the new system is completely in place, it should immediately help retain and attract new businesses to our city.

Development is another key ingredient to San Francisco’s economic success. In the past two years, the city has approved major projects including waterfront improvements for the America’s Cup, the redevelopment of Treasure Island and Parkmerced. Together, these projects will create nearly 50,000 construction jobs and 3,000 new permanent jobs. Other major projects still pending city approval will further boost employment and economic activity.

When it comes to San Francisco’s recovery, the numbers speak for themselves. As business and government have focused on growth, unemployment has fallen from 9.2 percent in December 2011 to 6.5 percent today. Commercial office vacancy has declined from 15.2 to about 10 percent over the same period. Hotel occupancy recently topped 80 percent and is expected to remain at this level for the rest of the year. Other indicators also point to growth and recovery.

Come January, a new Board of Supervisors will take the reins in San Francisco. They will either continue to govern for economic growth, or risk slowing our city’s progress.  Key decisions on the California Pacific Medical Center rebuild, the Warriors arena, transportation system expansion, CEQA reform and many others will set the pace of our continued recovery.  As this phenomenal year of growth comes to an end, let’s all keep the focus on economic success.

A Great Place for Business

San Francisco often gets a bad rap when it comes to our business climate. Far too often we are known as a city with many costly mandates, taxes and fees. This may be true. But San Francisco is a great place for business.

As the San Francisco Chamber of Commerce, our mission is to attract, develop and retain businesses in our city. Each year, we work with thousands of local companies to connect with resources and grow the bottom line. Working through the San Francisco Center for Economic Development, we talk to hundreds more seeking to relocate or expand in our city.

What we hear from these organizations helps explain the greatness of our city. These are the real truths behind San Francisco’s economic success, and they deserve repeating for all the businesses that have already chosen San Francisco as their home, and for those considering coming here.

At its core, San Francisco is a great place for business because it is hotbed of innovation. Whether it’s researching medical advances, developing new technology or coming up with the next big thing, San Francisco is a city of thinkers, creators and entrepreneurs.

This innovative spirit has helped make our city home to more than 5,000 creative-industry companies supporting 69,000 jobs, which continue to grow more than 4 percent each year. The biotech and cleantech sectors have created an additional 140,000 and 14,000 jobs respectively, with continued growth still on the horizon.

San Francisco’s culture is fueled by a diverse and highly educated workforce – which also makes the city attractive to business. Recently named as the “Best Educated City in the Nation” by Money Magazine, San Francisco boasts a population in which 51 percent of adults have a bachelors or graduate/professional degree. Reflecting today’s global society, 44 percent of local residents are bilingual, speaking over 112 different languages.

Success begets success, and San Francisco’s people and work ethic attracts a significant pool of capital funding, backed by a strong network of venture and private equity technology funds. The largest concentration of environmental investors is also located in our region. In total, the Bay Area receives 46 percent of all U.S. venture capital investment.

The city’s geographic location opens doors for global commerce. Easy access to shipping, trade offices and more than 75 international consulates has bolstered trade throughout the region. As a result, the Bay Area is now the largest exporting region to Asia and the Pacific and the seventh largest in the U.S. Initiatives like ChinaSF are further bolstering U.S. business abroad, while also attracting Chinese investment to San Francisco. Since its debut in 2008, the initiative has recruited more than 15 Chinese companies creating over 120 jobs in the city.

And let’s not forget about the quality of life in San Francisco. From the climate, to the arts, to the urban landscape, San Francisco’s unique character and lifestyle have made it not only a great place to live and work, but also a top tourist destination attracting more than 16 million visitors spending $8.3 billion every year.

All of these factors are keeping San Francisco on a positive economic trajectory. As many other cities in California and across the nation continue to struggle, San Francisco has held its unemployment rate at around 7 percent, well below state and federal trends. Commercial vacancy has declined to 11 percent. And median Bay Area home prices recently reached their highest levels in nearly four years.

Make no mistake; San Francisco has its challenges. Business must invest in themselves and work hard to succeed in our city, but the rewards are many. At ForecastSF, the Chamber’s annual job and economic summit on October 3rd at 8 am, we will be taking a closer look at what makes our city great, and the economic opportunities coming next for local businesses. We hope you will join us and join the conversation on Twitter with #ForecastSF.

Time to Set the Record Straight

San Francisco is closer than ever to reforming its business tax code to better encourage job growth. Today’s system, which levies a 1.5 percent payroll tax on all businesses with a total payroll in excess of $250,000, has been scrutinized, studied and challenged for a decade, yet no alternative has come close to becoming a reality- until now.

Last week, Mayor Ed Lee and Board of Supervisors President David Chiu introduced a reform measure for the November ballot that will replace the payroll tax with a variable gross receipts tax based on industry-specific rate schedules. Mayor Lee’s proposal is revenue neutral in taxation, but raises the city’s business registration fee revenues from $8 million to $21 million annually to fund affordable and workforce housing. While any change to the city’s tax code will create winners and losers, Mayor Lee is striving to create a tax that is broad based, fair and equitable.

Unfortunately, some members of the Board of Supervisors are trying to hijack the process without any discussion with the business community. Last week, Supervisor John Avalos introduced a competing measure for the ballot. Like Mayor Lee’s proposal, this measure would also transition the city to a gross receipts tax, but it would increase some tax levels as well as raise license fee revenue by a staggering $40 million annually. Supervisor Avalos’ measure would also eliminate existing payroll tax exemptions for biotech, cleantech and Mid-Market companies, just as they are successfully adding jobs to our city.

Under the shroud of the sluggish economy and hoping to ride the coattails of the Occupy Movement, Supervisor Avalos and his SEIU Local 1021 allies have launched a misinformation campaign to further their initiative. They claim that local businesses are not paying their fair share. They say local businesses are costing the city $40 million a year in lost revenue because of “lawsuits and loopholes.” And they are already busy spewing these myths online and on doorsteps across the city.

Nothing could be farther from the truth. Last year San Francisco collected over $400 million in business taxes and license fees, the second largest source of general fund revenues and a 45 percent increase over 12 years, even while employment has fallen to less than 530,000 jobs over the same period. Over the past decade, the city’s tax collections have grown twice as fast as inflation with the Bay Area CPI increasing an average of 2.5 percent per year while payroll tax collections have steadily increased 5 percent annually.

What’s more, San Francisco is collecting more business tax revenues today than ever in its history and much more than most other California cities. In fact, San Francisco collects as much from its payroll tax as Los Angeles does for its gross receipts tax, though its economy is nearly four times larger than ours.

It’s time to set the record straight. San Francisco’s business tax collections are robust by any standard. Local businesses are providing thousands jobs and contributing significantly to our city during these times of continued economic uncertainty. The opportunity for lasting business tax reform is now upon us. Let’s insist that Supervisor Avalos and his allies don’t derail the process.

Time to Green Light California Pacific Medical Center

San Francisco took one giant step forward last week moving the city’s healthcare system into the 21st century. After nearly a decade of planning and months of negotiations, Mayor Ed Lee introduced a development agreement that will enable the California Pacific Medical Center (CPMC) to build two new state-of-the art hospitals at St. Lukes in the Mission and at Cathedral Hill on Van Ness Avenue. This long overdue project will deliver unprecedented safety, economic and community benefits to San Francisco and should be green lighted without delay.

The recent earthquakes in Mexico and Chile remind us of the need to be prepared. Today, San Francisco’s hospitals remain seismically vulnerable and must make improvements to meet California’s hospital-building seismic safety mandate by 2015. The expedient approval of the CPMC development agreement will double the city’s number of seismically safe hospital beds and help ensure adequate capacity in case of a major emergency or natural disaster.

The economic benefits of rebuilding CMPC are enormous. In total, the project will inject $2.5 billion into the city’s economy and create 1,500 new construction-related jobs. At least 30 percent of these construction workers and 50 percent of the entry-level administrative and engineering positions will be hired locally. These jobs are on top of the 6,000 existing CPMC employees who will now remain in San Francisco as a result of the development. As the city’s construction industry continues to rebound from the recession, the CPMC hospital projects will give a much needed boost to the many tradesmen and women still looking for work.

The project’s economic benefits extend well beyond the construction of two hospitals. According to one recent report, San Francisco’s hospitals have become one of the city’s healthiest industries, spending $15.3 billion annually and employing approximately 18 percent of the city’s workforce and growing. Adding new hospital capacity will help ensure that the city can continue to grow its burgeoning healthcare sector and solidify its reputation as a world-class healthcare hub.

It’s hard to imagine how a project of this kind could be criticized. But this is San Francisco and nearly every development sparks criticism. In this case, CPMC critics claim the agreement does not “go far enough” in providing benefits to the community. Yet, beyond providing two new hospitals at no cost to taxpayers, the CPMC agreement guarantees $1.1 billion in added investment for San Francisco.

Unparalleled in scope, these investments include: $63 million for affordable housing; $20 million for transit facilities and service expansions; $13 million for streetscape improvements; and a $20 million endowment to support clinics and social services in the city’s most underserved communities. Above all, CPMC will spend more than $86 million on charity care every year for at least ten years. By any measure, CPMC’s investments are sure to benefit thousands of residents and visitors.
The time to green light CPMC is now. San Francisco needs safe hospitals. The project will give significant boost the local economy. And our communities deserve state-of-the-art healthcare in world-class facilities. The Chamber joins Mayor Ed Lee, the Alliance for Jobs and Sustainable Growth, the Bay Area Council, SPUR and many others in urging the Planning Commission and the Board of Supervisors to approve the CPMC agreement and usher in the 21st century of healthcare in San Francisco.