Mid-Market Payroll Tax Exemption:
Downtown’s Latest Land Grab

Written by Chris Daly. Posted in Opinion, Politics

Published on March 15, 2011 with 56 Comments

Former District 6 Supervisor Chris Daly. Photo by Luke Thomas.

By Chris Daly

March 15, 2011

For decades, the stretch of Market Street between 5th Street and Van Ness Avenue has been a primary target for downtown special interests and their political allies. The slot between the Tenderloin and South of Market’s 6th Street had grown to be more alike its hardscrabble, adjoining neighborhoods than its past as a commercial destination. However, downtown’s plan to renew Market Street was always driven by their desire to line their pockets. With the needs of the neighborhoods not even a consideration, their grand plans to gentrify the area failed to take off.

Knowing that downtown’s proposal to redevelop Mid-Market into an arts and entertainment district was put on the back burner years earlier, I jump-started a community discussion on redevelopment in my first year representing District 6 with a dozen community meetings. While the theater district plan was forwarded by property owners, developers, and business interests, the new discussion intentionally included the neighborhood’s low-income residents, artists, and community organizations. Not surprisingly, the community’s vision for Mid-Market focused on protecting existing residents, small business, and arts and non-profit organizations, while building new housing – with a high percentage of it affordable to people in the neighborhood. Over the next several years, these competing visions for Mid-Market vied for traction and in many ways were affected by the struggle to preserve the community at Trinity Plaza and over the level of community benefits negotiated in the Rincon Hill development.

In the aftermath of the Rincon Hill deal, downtown powerbrokers like Don Fisher and Walter Shorenstein scheduled an intervention with Mayor Newsom. With the C-3 parking legislation and the Mid-Market Redevelopment plan looming, they demanded Newsom engage more forcefully in development politics and not let progressives drive the agenda. While the showdown over parking grabbed the headlines with the Mayor’s Office forging a change in the Planning Department’s position, it was the details of the Mid-Market Redevelopment Plan that was make-it or break-it for Shorenstein, Market Street’s largest property owner and one of the most powerful brokers in Democratic politics.

Behind the scenes, my office had been negotiating details of the Mid-Market Redevelopment Plan with the Redevelopment Agency’s Jose Campos. Campos and his boss Marcia Rosen were very sympathetic to the cause of affordable housing and were skeptical of the Newsom Administration (both would end up leaving the Agency before the end of Newsom’s first term). By the time of the Shorenstein/Newsom meeting, Campos had agreed to include an affordability level in the plan approaching 25%, just a few points short of the levels that I had asked for. It appeared that the community’s plan for Mid-Market would be realized. But in the days following the Shorenstein meeting, Rosen personally delivered her last, best, and final offer on Mid-Market – which included only 17% affordable housing in the plan. (This was the amount already required under the City’s inclusionary housing legislation and even less than my proposed amendment to the legislation at the time and significantly less than I had negotiated in the first Rincon Hill deal). When I asked about my negotiations with Campos, Rosen responded that her proposal was directly from the Mayor and was not negotiable. As she left my office, downtown’s plan hit my recycling bin and never saw a Committee hearing at the Board of Supervisors.

It is with this history in mind that I have raised concerns about the former Newsom administration’s proposal for a corporate tax break in the Mid-Market and Tenderloin neighborhoods. From a budget and tax justice perspective, this issue should be a no brainer. As we are debating the merits of corporate giveaways, the Health Department is deliberating another $27 million in service cuts. Meanwhile the Department of Human Services has proposed reducing shelter hours, slashing job training programs and housing services, and shuttering homeless resource centers in the Central City. Juxtapose this with the Board of Supervisor’s Budget Analyst Report that cautions that the City could be forgoing over $22 million in payroll taxes from Twitter, Inc. alone. (This is an estimate that does not include any monies lost from any other corporations. The Tax Collector is unable to estimate the number of corporations in the area that could take advantage of the tax loophole).

While any progressive should oppose any corporate giveaway on general principle, the Mid-Market giveaway portends much more than anti-progressive tax and budget policy. Given recent reports that Shorenstein Properties LLC has acquired the proposed home for Twitter, the old Furniture Mart, for about $110 million, San Franciscans concerned about the availability of affordable housing and commercial space in our communities impacted by forces of gentrification should take note:

If Twitter were to go over there, what we will see is a bunch of tech companies move in there, predicted Frank Fudem, a senior vice president and partner with Cassidy Turley BT Commercial. The proposed tax break plans also would be another big incentive.

These market shifts are already impacting District 6’s community-serving non-profit organizations. One local affordable housing provider looking for office space in the Mid-Market has been advised that the Twitter deal will raise Market’s market rents by 20%. And as any affordable housing developer will tell you, site acquisition and control is the first critical step to delivering affordable housing. In other words, the Twitter deal will all but kill any new affordable housing projects in the area. The community’s plan of developing affordable housing in the Mid-Market, scuttled by Don Fisher and Walter Shorenstein 5 years ago would officially be dead.

One of Twitter’s biggest boosters, Beyond Chron, had this to say over the battle over Mid-Market Redevelopment in 2005:

Mid-Market residents, artists and business owners may soon start feeling like strangers in their own neighborhood. The reason? The Mid-Market Redevelopment Area. Without creating any truly affordable housing, it’s going to drain loads of money from the city, provide huge giveaways to big-money real estate interests, and push out low-income people and small businesses from their own homes.

Ironically, we could clearly say the same about the Mid-Market Payroll Tax Exemption. Not only does the plan include no new affordable housing, it will create a de-facto ban on new affordable housing development through making site acquisition impractical. Not only will it not protect the existing community, it will necessarily attract forces that are openly hostile to it. Not only will it drain money from the City’s General Fund, giving the store away to the biggest real estate interests in the West Coast, it will cause services to be redirected from the neighboring low-income communities in need to serve the interests of corporations like Twitter. (Twitter has already asked for increased policing in front of their new building and a new MUNI line to ferry their Peninsula-based workers back and forth to CalTrain!)

As Supervisor Jane Kim’s office tries to save face by negotiating a “Community Benefits Agreement” with Twitter after the fact, (an open insult to the community-driven negotiations that took place at the Intercontinental Hotel, Rincon Hill, and Trinity Plaza) those concerned about the future of Mid-Market should demand that the Board of Supervisors reject corporate welfare and revisit the community’s plan for affordable housing in the Mid-Market.

Speak truth to power. Stop Corporate Welfare! Stop the Real Estate Scam! Stop Tenderloin Gentrification!

The Mid-Market payroll tax exemption proposal is all three. Under the guise of Twitter job retention and area improvement, the City is considering giving businesses locating in a large swath of the Tenderloin and Mid-Market a major tax break. But the real results will be huge and widespread. Property values will rise, giving real estate speculators big profits. The new, higher rents will drive out the poor people of the area along with the nonprofit organizations that serve them. The tax breaks mean the City will be subsidizing business, get even less revenue at a time of budget deficits with no benefits for the community.

Come tell the Board of Supervisors and Mayor Ed Lee this is the wrong development policy for our City.

Board of Supervisors Budget and Finance Committee meeting

Wednesday, March 16 at 11 am

City Hall, Room 250.


District 6 Budget Town Hall meeting with Mayor Lee and Supervisor Kim

Wednesday, March 16, 5:00-7:00 pm

Tenderloin Community School

627 Turk Street (between Van Ness and Polk)

Chris Daly

Chris Daly

Chris Daly is the Political Director for SEIU Local 1021, a union of over 50,000 public sector and non-profit workers. He served on the San Francisco Board of Supervisors from 2001-2011 and owns and operates The Buck, a bar and grill on Market Street.

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