By Luke Thomas
April 7, 2011
The San Francisco Board of Supervisors passed a payroll tax exemption for Twitter, Inc. Tuesday, legislation that aims to “revitalize” a stretch of Mid-Market Street and the low-income Tenderloin neighborhood.
The legislation was passed by an 8-3 vote amid concerns of gentrification impacts and without a promised Community Benefits Agreement (CBA). The legislation’s sponsor, Supervisor Jane Kim, who said two weeks ago the legislation would be continued until a CBA had been formulated and ratified by the Board, told FCJ after the Board vote Tuesday the tax exemption legislation is not actionable until a CBA has been approved.
“Two weeks was not enough time to have a good enough CBA come out of this and we weren’t able to setup all the meetings,” Kim told FCJ. “Twitter is now meeting with our public stakeholders – that was something that they hadn’t agreed to before – and the second thing is the trailing legislation is actually going to set up a process and so even the Twitter CBA is going to have to come to a public hearing before it gets approved.”
“Before Twitter gets the tax exemption, they have to have a public hearing on this CBA,” Kim added.
Kim estimated it would take approximately two months before a Twitter CBA agreement could be vetted by the public, ratified by the Board and signed into law.
Supervisor David Campos, who said he supports efforts to revitalize Mid-Market, opposed the legislation on the grounds that a CBA had not been established or vetted prior to the vote, a misstep, he intimated, that will remove community leverage to eek out substantive community benefits in exchange for the tax exemption.
“My preference would have been to see a Community Benefits Agreement that’s already in place, that’s actually finalized so that we can see for sure what it is that will be provided,” Campos said, adding that community residents will have little or no impact on the final CBA. “For me, that is insufficient and that’s a problem.”
Supervisor Ross Mirkarimi, who voted against the legislation, said the CBA was being used as a “marketing tool in order to really justify and rationalize the advancement and passage of this legislation.”
“We deserve – and so does the public – deserves the right of having a complete vetting of what that CBA looks like in a hearing that does not compromise the process, so that it doesn’t look there’s collusion or that there’s any kind of undue influence because of due process as it relates to how a CBA is developed,” Mirkarimi said
The deal with Twitter, hatched by then Mayor Gavin Newsom while seeking higher office, provides the popular messaging service company a projected $72 million tax haven on future payroll and stock option taxes on new employees for six years. Headquartered in San Francisco, Twitter threatened to relocate to Brisbane unless the City provided the corporation with the tax giveaway – even while the City faces a projected $380 million budget deficit during the worst recession since the Great Depression.
Supervisor John Avalos, who voted against the legislation, said businesses have a social responsibility to the communities in which they do business.
“I don’t believe giving an exception to our payroll tax is the way to go,” Avalos said. “I believe that businesses in San Francisco and around the country should be socially responsible and part of that social responsibility is paying our taxes.”
“Also, if we give these tax breaks, we are aiding and abetting the exacerbation of these disparities in wealth,” Avalos continued. “We should make sure that corporations are paying their fare share compared to middle-class people, working-class people. We’re getting gamed – we’re paying our taxes and we’re losing services.”
With an expectation of increased rents in the area as a result of the job creation incentive, businesses and low-income residents would face displacement and gentrification threats, Avalos said.
“We have to be concerned about displacement of current tenants and businesses,” Avalos said. “During the dot-com era, there were a lot of tenants who saw their apartment rents rise dramatically.”
“I am concerned about gentrification,” Kim responded to FCJ inquiry. “I’ve said that over and over again and that’s why I want a follow-up policy. I want economic revitalization so I want to address gentrification without risking losing a company like Twitter.”
Those Supervisors who voted for the legislation did so with reservations.
Supervisor Scott Wiener said he supports broad payroll tax reform but said any type of reform will create “winners and losers.”
“I’m not an advocate of willy-nilly tax cuts,” Weiner said. “I don’t think that’s the way to go. But when you do it in a focused, well-targeted way, it can work.”
“I share concerns like some of my colleagues of the gentrifying impacts and whether the jobs and the benefits to our city and neighborhoods will materialize with the plan,” Supervisor Eric Mar said.
Mar said he “strongly” supports the creation of a Community Advisory Committee “that gives empowerment to the people in the different neighborhoods to create the strongest possible Community Benefits Agreement to minimize the gentrifying impacts, and I’m not going to deny that this tax break will have a gentrifying impact, but I’ll just say that with Supervisor Kim’s efforts, it will at least minimize and mitigate that and will give some public transparency to the process of creating the benefits agreement.”
Though he said he supports effort to provide Twitter a tax exemption, Mar said he is concerned other corporations would be lining up for targeted tax exemptions.
“I am enthusiastic that we all seem to realize our payroll tax system is broken,” said Supervisor Mark Farrell. “We need to do everything we can in City Hall to make sure that we are on solid footing and create a solid economic environment in San Francisco that does not hamper our ability to create jobs, attract companies and want people to locate here in our City.”
“In regards to this legislation, I do think that it’s unfortunate that is has devolved into a dialogue about one company,” Farrell added. “While I think that has been part of the debate, we cannot govern that way in City Hall. We cannot capitulate to one company time and time again. That doesn’t work for the long haul.”
“This vote is a tough vote for me,” said Supervisor Malia Cohen. “I am extremely skeptical of how the conversation has turned to focus on one particular company and less about the larger issues that of which it attempts to satisfy, which is stimulating Mid-Market.”
“This legislation attracts people to the Mid-Market area which is very good but also could have a negative and unintended consequence of wooing businesses to leave say the South-East, San Bruno Avenue, Mission Street, Ocean Avenue, to go join down in the Mid-Market area to capitalize on some of these benefits. So, yes, it stimulates Mid-Market. Yes, that’s awesome. But, however, it creates a void in the other respective surrounding neighborhoods. So I am very concerned about that. So I am in favor of the legislation – I will be voting for it – but it is with serious reservation and I am very aware of the mixed message we’re sending to our small business community,” Cohen added.
Kim introduced amendments to the legislation including removing several blocks from the tax exemption inclusion zone and shifting contractual responsibility from the Mayor’s Office of Economic and Workforce Development to the City Administrator, a post interim Mayor Ed Lee, who supports the Twitter tax exemption, is expected to return to in January.
“As you know, the City Administrator has the overall responsibility for the management and implementation of policies, rules and regulations, promulgated by the Mayor and the Board of Supervisors and the voters, and this is something that Mayor Lee is committed to and insuring in terms of advocating for our communities and our neighborhoods and the CBA,” Kim said.
The Board will convene for a second and final vote next Tuesday.