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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  • paulhogarth

    Yep. Bribing Richard Marquez $100,000 to support a luxury tourist hotel at 5th & Howard (that’s how much was paid to Sixth Street Agenda in 2003, a group that no longer exists) is all “community-driven negotiations.”

  • Right you are Paul Hogarth,

    And using an astro-turf non-profit shield to make the citizens of San Francisco pay for you and Randy’s ‘Beyond Chron’ is cool, huh? You should be ashamed of yourself. Your tax filings list you as working .5 (a half hour) a week on the paper. What are we paying you both, $100 thousand a year each to write propaganda to advance your economic interests? What a crock!

    Throwing stones from a glass house surrounded by a mote full of gasoline is not that smart, kid.

    Go Giants!

    h.

  • Wow, the personal attacks continue. Et tu, Paul Hogarth?

    Now the targets include Jane Kim’s own Field Coordinator!

    And let’s be clear, when Paul attacks Richard Marquez and the 6th Street Agenda (who was doing important organizing in the 6th Street hotels at the time,) he is also attacking Judith Baker and the South of Market Childcare Center, Luisa Antonio and the Veteran’s Equity Center, Jeanne Battalones and SOMCAN, Bruce Livingston and the Senior Action Network, etc.

    But first, a little bit of history… Initially, in concert with these South of Market community organizations, I opposed the Intercontintal. After meeting with representatives of Local 2 (who had already secured a card check neutrality agreement) and taking assessment of their organizational capacity, these organizations decided to enter into negotiations with Intercontinental to try to mitigate some of the negative impacts of the development. It wasn’t a perfect deal, but community organizations who would be impacted by the development got resources to organize their communities. That’s a good thing. And I backed up their decision — especially considering that we probably couldn’t kill the deal.

    Now let’s contrast that process and outcome with the one that Randy and Paul have engaged on the Mid-Market tax deal with the current District Supe. The initial position out of the gate here was yes instead of no. Any community benefits from the deal are an afterthought as opposed to an impetus.

    And proof is in the pudding. So far Twitter has agreed to no mitigations and instead has asked that services be redirected to them. Twitter has yet to offer any resources for their break. No open community process. No card check neutrality. No resources for community organizations. No nothing!

    And did I mention that Intercontinental pays all their taxes?

  • Patrick

    Chris Daly was the Supervisor of D6 for 10 years. The mid-Market area never improved. It may have gotten worse. His ideas for the area thus don’t carry much weight to me. Perhaps it’s time for some different ideas.

  • @Patrick – thanks for taking the time to comment without even having read the post. Cheers!

  • Paul, will your “Uptown Tenderloin” condo increase in desirability and value if the Twitter deal goes through?

    Just asking.

  • dwalker

    Randy Shaw just got handed an $82 million dollar no bid master lease contract for his and Paul Hogarth’s “journalistic activism” and selling out the progressive community. Plus $350,000.00 a year for the SRO collaborative. This giveaway lets them be both the “landlords” and “tenant organizers” of low income tenants, effectively doing code enforcement on themselves. The twitter tax deal is just more of the same as the last Randy Shaw sellout to Willie Brown and the developers that gentrified eastern San Francisco. In this current tax giveaway Randy and Paul are paving the way again. Same result… driving up the rents with the next real estate speculation bubble and then getting the rest of us taxpayers to pay the market street landlords for the overpriced rents. That is where the tax credit goes…right into the landlords pockets. And if anyone disagrees with Randy or Paul (or Jane it seems), they belittle them in Beyond Chron. Or call on their eviction attorney, Paul Hogarth.
    You have no room to call anyone a shill – Hogarth.
    Oh, and be sure to stay tuned to see where all the “community benefit” goes.

  • Patrick

    @Chris:
    I did read the post. I read it in detail. And my point is valid. Your position can’t be that mid-Market improved during your (long) tenure, because it didn’t improve. The post seems to be a litany of excuses and blame casting while documenting your efforts to stand up to downtown. It’s OK for an elected official to make excuses during their first couple of years in office, because there is a certain inertia to overcome on a land use issue such as mid-Market. But you had 10+ years and as far as I can tell, nothing got better. Regards.

  • @Patrick – in your initial comment, you take issue with my “ideas”. As if an idea would be implemented if it was a good one — even if it cost some of the nation’s most powerful people a lot of money.

    In your next comment you talk about excuses and “elected officials.” As if all elected officials have the same amount of power to affect change. Mayor = Supervisor because they are both elected officials!

    Apparently you are no expert at power-mapping. That’s cool– I will leave you alone.

  • Patrick

    @Chris:
    You had 10+ years. Did the area improve?

    Other publications have reported that you are considering a Mayoral run. Would you point to mid-Market as an element of your platform to demonstrate a success? I assume not.

  • seej

    @ Chris

    Thoughtful post – but how does one improve a blighted area without the rents going up?

    Regardless, isn’t this what we elect our officials to do? We are not privy to all the details and we expect them to weigh the costs (as you have presented) versus the benefits- under the assumption they clearly are making that Twitter will not move into this neighborhood without the incentives. I have no reason to question Ms. Kim’s motives.

    While I too am concerned about budget cuts to the Health Department, I wish instead of catching this deck chair being thrown off the Titanic you would have actually done something/ANYTHING about the City employee benefit crisis bankrupting our City. This Twitter deal is peanuts relative to the City’s unfunded pension and health care costs that WILL GUT our City services. You were asleep at the wheel my friend…

    Look forward to a beer at Daly’s Dive soon…Hope your new venture is going well.

  • drrecio

    Not that Hogarth is concerned about reporting the facts, but that deal he speaks of was negotiated by the United Pilipino Organizing Network where ten community groups like the Judith Baker Child Care, FEC Galing Bata/ the New Bessie, Veteran’s Equity Center, Manilatown, UP and a few others were broken off. It wasn’t the proudest moment in our community, but there was a lot of input, discussion and wrangling. This was the best deal that we could strike at the at that moment in time, the Filipino comunity was dealing with the completion of the new Bessie, building the I-Hotel Manilatown Center and opening the doors to the Bayanihan Center that houses the VEC.

    Now, if Paul wants to take isssue with our stand, history and our “get down” in the Filipino community, then you know where to find us.

    As for what role Mr. Marquez had in the negotiations, it was minimal at best.

    Chris was not in favor of the deal, but it took some coaxing by his mentor Bill Sorro to approve of this agreement, and some respect to the community he serves. The Filipino 3 Centers – Manilatown, Bayanihan and Don Marcos’s Cultural Center also got to use the Hotel for three lavish fundraisers – for free. Another agreement was that all pre and post hiring i.e. construction, admin, services, hospitality etc. went through the South of Market Employment Center. The Intercontinental Hotel is a unionized Local 2 Hotel, as well.

    For the record, I know people like to bandy around Bill Sorrro’s name particularly during elections. I wanted to firmly state that Bill disliked and hated Randy Shaw for the exact same reasons as he trying to spew out today. Randy Shaw is solely about Randy Shaw. And for Hogarth to prey on the Filipino community to prove his pointless point is simply pathetic. I served on two boards with Bill Sorro for ten years each in SoMa.

  • gabriel.haaland

    I was astonished at how poor the process was in drafting this legislation At one point a city staffer emailed another staffer and said, “Wow. When did the whole Tenderloin get thrown in?”
    http://www.sfbg.com/2011/03/15/behind-tweets?page=0%2C0

  • How about expanding the SoMa Stabilization Fund Fee to all buildings in downtown San Francisco instead of just the 14 blocks in the Rincon Hill Plan Area? When I say downtown, I mean east of Laguna and north of 18th Street. All new dwellings, period.

  • gabriel.haaland

    I just read the remark about Richard Marquez above.

    Richard and I have had our moments, but I would never, ever, ever suggest that he was bribed or that Chris would bribe someone.

    As I said earlier, at times like these, when people personally attack us, I remind myself that people only resort to personal attacks when their position is weak and when their substantive arguments are weak.
    What’s so interesting about this allegation that Chris bribed Richard is that it does provide an inside window into how Paul thinks and operates. That’s the one beautiful thing that I have learned from my spiritual practice. When people project ugliness in their stories about you, it just reveals their own.

  • @Patrick (last time for me) – Seriously? A Supe is 1/11 as powerful as a Mayor on a good day. Even so, I’ll put my Mid-Market record up against Gavin’s. Trinity. SRO hotel improvements. Community services in 6th Street corridor including the resource center. Bike lanes. Private auto restrictions. Resources for MUNI. City Place.

    What’s Gavin putting up? Nothing. And he’s the LG.

    BTW, thanks for getting me started on my Mayoral platform!

    Cheers!

  • Hope Johnson

    Twitter was obviously always willing to negotiate moving to this area. The false suggestion it might leave SF is a scare tactic to sell the offensive idea of giving a wealthy company as much taxpayer money as possible while cutting services, schools, MUNI, and just about everything else.

    Equally obvious is that, in the long run, the Beyond Chron crew couldn’t care less what people think about their actions so long as it doesn’t block their path to the bank.

    The idea SF’s usual suspect developers and their hand picked politicians intend to ever consider increasing affordable housing is absurd. Even when they contract to do it, they find a way to avoid actually getting it done (remember Lennar’s drastic reduction in the Bayview?).

    While the politicians act irresponsibly and try to hurt each other’s feelings, the only chance average taxpayers have is to hold elected decision makers accountable for their choices. It’s not the abstract concept of “the City” considering this corporate tax break and business subsidy but real people, namely our supervisors. If they approve this give away of our money, they are thieves, no better than common criminals breaking into your car or robbing you at gun point.

    Here is Supervisor David Chiu pushing for a tax break for some of the wealthiest people in our country while running for mayor at the same time mayoral candidate Dennis Herrera is on the radio suggesting an investigation of nonprofits use of city money might help balance the budget. Disgusting.

    We elect these people to act responsibly with our money (all our money which includes not only the general fund but each and every one of their salaries). How responsible is a tax break to billionaires when the politicians claim such economic hardship for the city?

    Kim and Chiu are already criminals for aiding and abetting the corporate fleecing of struggling families without ensuring community benefit. And any of the supervisors who vote for this are, too.

  • After years of writing these things, I’ve picked up on a theme. Our opponents rarely take us on on the issues. Same went in the Board Chambers. I would make a whole bunch of points and then nobody would respond. On the internet you tend to get the personal attack and quarter-baked arguments.

    Notable exception here is seej. How do you improve an area without gentrification? Affordable housing. And it was the basis for the community’s Redevelopment plan. The trick is how do you make it happen, and that answer is political will. In office (and now out) I spent most of my time trying to develop the political will to enact the right answers. Coming up with those answers was the easy part.

    As for pension reform, I believe I was the sole vote against the cop’s contract. If you look at the big salaries and big pensions, that’s where it is. And that’s where any affective reform would need to start. Unfortunately, you’re also looking at one of the only pols who would start there. Adachi didn’t, and that’s why he not only lost, but also lost favor with Progressives.

  • richardmarquez1

    Gabriel, thanks for the defense. Unfortunately I had to leave the country for us to make up. Keep fighting the good fight and fuck Twitter. And yes, spiritual healing helps us all as does, in the words of Marvin Gaye,”sexual healing, too.” As my old therapist you to say, “Richard, remember its always justice prior to love.” Peace and Soldiarity,

    Richard

  • gabriel.haaland

    Peace and solidarity to you, Richard.

    And didn’t Cornell West say, “Justice is what love looks ?like in public” or something like that. I’m sorry that you and Chris had your name dragged through the mud like that. All the best to you.
    Gabriel