While the so-called “Twitter Tax Break” was created with Twitter specifically in mind, and the impact of which Supervisor Campos is formally calling into question, the defined area within which businesses can claim the payroll tax exclusion extends well beyond the Market Square building between Ninth and Tenth in which Twitter is headquartered.
In fact, the exclusion area includes 73 office buildings with 3.3 million square feet of office space, both Mid-Market and within the Tenderloin (click the map to enlarge).
This seems to be a map of downtown blight. Was the 6th street corridor left off because there isn’t much office space there?
Progressives like Campos hate success. They want everyone to live in a slum.
Poor people are easier to control and their votes count the same. They are apt to manipulation. Landlords are the new scapegoats.
Sure would be interesting to see a list of the owners of these blighted properties who are now essentially getting a subsidy for keeping their buildings in disrepair all these years.
This is totally a Twitter tax break. The lion’s share of office space is concentrate in Twitter’s Market Square buildings. The rest are spread over 71 buildings and none of them have large office space. The large swath of Tenderloin marked has nothing that fit a good size startup of 50 person or more. I believe Zendesk is the only tech company not in the Twitter building to get tax break.
I don’t know what Campos is looking for. But I blame Twitter for their short-sightedness. Of all the things the they can ask for when the city approach them, they ask for this lousy 1% tax break. This tiny bit of tax was never a real issue for the tech companies. Note that the large office building on both side of Twitter are excluded. And they get fill in by Dolby and Square all the same. Nobody really move into mid Market because the tax break. If they have any vision, they should have ask for more commercial and residential building, which is what help the ecosystem in the long term.
Note how big the Tenderloin area is here – probably 80-90% of the tax break area. That was the result in large part of Randy Shaw lobbying – his firm owns many of the SROs in the Tenderloin. Ironic that the progressive left is fighting this tax break when one of their own lobbied for a huge expansion of this to benefit themselves.
This tax break is great for the city. already helping Mid Market and TL. Would Campos prefer the blight in the area?
“Lousy 1% tax break” is more than you think for Twitter due to stock option compensation and the IPO. Several billion dollars of stock options… so that SF payroll tax bill would be in the tens of millions, which Twitter wouldn’t have to pay if they simply moved to Silicon Valley and joined Google and Facebook and LinkedIn. (You’ll note Google didn’t open their SF office until well after their IPO.)
Zoosk is at 6th and Market and I believe is also in the zone shown on the map.
1% of a billion seems a lot. Except you should expect a tax bill of some 30% IRS and the state that you cannot get away from.
If saving 1% is such a big deal why do all these companies not open outside of San Francisco to start with? Not only do they save on tax that save on many other expenses like rent. Are they just dumb? Or is it because that 1% tax and all other expense buy them a lot of value. Something they don’t get from a cheap plot in Brisbane or East Bay.
Some of these lots include the Nema apartment complex and Fox Plaza (which I guess does have office space).
“Nobody really move into mid Market because the tax break.”
Tell that to Spotify, 21Tech, Yammer, Zoosk, One Kings Lane, Zendesk, Beer Hall, Bon Marché, Alta CA, Mavelous, and so on… and those are just some of the ones on Market street.
The revitalization of that formerly derelict area has been nothing short of amazing, and the effects will stick around much longer than the six-year tax holiday.
@T, the question is if the tax break change their decision? Would they go to other places if not for the tax break? I think not because companies move into the large building on both side of Twitter all the same even through they are excluded from the tax break zone.
People like the narrative of cause and effect. Ed Lee will be happy to take credit of pushing for policy change that keep prestigious like Twitter in San Francisco. Me think the tax is irrelevant. Economy is doing well. Companies need office space. Mid Market with a large inventory of office space is finally getting the love. That’s all.
Would companies like Square and Dolby make the move to mid market without a large established tech company like Twitter planting a flag there first?
I think Twitter set the stage for the others to follow. Without the Twitter deal, mid-market would still look like it did 3 years ago.
“@T, the question is if the tax break change their decision?”
I’m personally familiar with the decision process of two of the companies that I mentioned (though I’d rather not explain how I was involved). In both cases, the answer is a resounding yes — the tax holiday wasn’t the only factor, but it was a significant one. I suspect if you asked people involved in the other decisions, you’d hear similar things.
One of them (Spotify) had somewhat temporary space in the Financial district, and were looking to expand in San Francisco. The tax break was an enormous deciding factor in where they chose to look for office space. If they’d found the perfect office outside of the zone, they were open to moving there, provided the rent+taxes cost was similar rent alone in mid-Market.
They ended up signing a lease in the Warfield building, which is especially appropriate for a music-oriented company, and when you take the (now closer to four year) tax break into account, it was significantly cheaper than similar spaces downtown.
They also rented significantly more space than they were initially looking for, because they’re going to hire more people than they would downtown. I happen to believe that all new jobs are good for the city, even high-paying jobs that won’t be taxed until 2018 — though that is not a universally held opinion.
The other one is a restaurant/bar, opened by someone who has other restaurants/bars in SF. Their choice of location was heavily guided by both the tax holiday, and the large influx of people with discretionary income that has been driven by the explosion of jobs and housing in the corridor (which is arguably driven by the same tax holiday). They targeted “Market street between 8th and 10th” specifically.
Three years ago, when the tax break was being negotiated, you couldn’t sell a $10 cocktail and $25 steak in mid-market outside of a hotel bar. Now you certainly can, and those who open restaurants have noticed.
There are 7,000 people who work in just one building at 9th and market who didn’t work there a year ago. Many of them want a place to have a drink/meal after work. Judi’s Place and the Buck Tavern weren’t going to cut it.
Whether new upscale restaurants are what the area needs is open to debate, but it surely doesn’t need block after block of mostly abandoned spaces, which is what most of these restaurants and other companies are replacing.
Without the tax holiday, some of these companies would have still stayed in the city, sure… but none of them would have signed leases in mid-Market and all of that centrally-located commercial space would have continued to be vacant and deteriorating.
I think that’s a good thing. Blight sucks.
@K&L, this is a counterfactual question. My believe is company will come to mid market with or without Twitter. Like I say economy is good and office space is in demand. Given the right price, why not? SOMA, Potrero and Mission where the tech has emerged last decade are not such great place either. And compare to there transit in the mid market is so much better.
@T, this get me thinking the actual benefit of locating in mid market should be less than 1.5%. If more tenants make the calculation and want to move there to save, it will only drive up the rent. Some of the benefit is going to go to the landlord rather than the company.
Comparing rent in downtown with rent in mid market+taxes saving seems apple to orange comparison. The downtown rent is expected to be higher. Now if there is no tax break and the downtown rent is going crazy and there are vacant property in the mid market available at a good price, do you thing some company will still go there, if only at a slower pace?
Looking at rent+tax break alone can make it look like a good deal. But when you account for all the business cost, wages, taxes, health benefit, rent, marketing, etc, I just don’t see how it would have make any significant contribution to the bottom line. Free lunch alone would have added up to more than 1% of the wages.
I agree mid market is better today with all these companies and workers. I just think the overall economy rather than the tax break is the major cause.
SF payroll tax also applies to stock options. Glad we are phasing it out.
We’ll see if Twitterloin heralds the renaissance. The tax break seems small compared to the prospect.
“My believe is company will come to mid market with or without Twitter. Like I say economy is good and office space is in demand.”
History suggests otherwise. The economy was good and office space was in demand in the mid-late 90s dot-com boom, too. As SOMA went from warehouses and sweatshops to cheap office space to expensive office space, you did not see companies looking to mid-market (or Bayview for that matter), where there was ample abandoned space to be had cheap.
One of the reasons was the ecosystem of internet companies that was growing around South Park (probably initially anchored by Wired/Organic/Vivid at 510-520 3rd St.) The early internet companies settled into that area because it was cheap and available. The next wave came there because there were other tech companies there already.
It took 20 years for the area around Caltrain to go from a trailer park and unsafe masonry warehouses to seven-figure condos and $5k rentals (and don’t forget the taxes that those properties bring to the city). It wasn’t until the T subway line and the ballpark that the City started providing real incentives to develop that area… and then it really took off.
The same thing is happening on Market in 5-7 years. The city’s efforts to make Twitter’s building the anchor has drastically accelerated the process. Other tech companies (and some on the edges, like Dolby) wouldn’t be the trailblazers into a seedy part of town… but Twitter/etc. give the area legitimacy as a place for professionals to go to work (safely) — which is something that’s been missing around there since October 1989 or so.
That the city juiced this so early in the process this time around is good urban planning (that it was possible using primarily vacant buildings/lots is also especially notable), and it’s easily worth a few years of lost revenue.
Good information and good discussion. There are more than a single explanation for a change. I think the idea that tax incentive is catalytic to the revival of mid market is a good point. I’m going to make some more points to argue for the overall economy is more important and we are giving too much credit to Twitter and Ed Lee.
First Bayview is not part of downtown and it never has much office development. Secondly during the dot com boom the tech start in SOMA and not mid market. At that time much of the tech is concentrated in South Bay. San Francisco is only on the peripheral. SOMA with its easy access to freeway and Caltrain is favorable because it has the best connection to the South Bay. Gradually, San Francisco has come out as a tech center of its own. The South Bay connection become less critical. You can see the center of gravity has shifted more toward the core downtown and Market St from this map
http://bizj.us/ueofd/i/11
So Mid market with its excellent transit is now become relatively competitive to other area.
Also in the mid 90s, manufacturing is in steep decline. This opens up a lot of void in SOMA for new industry to take. In the late 2000s, it is mid market’s turn to lose their tradition tenants like SF Mart and State Comp. This opens a void and is quickly snapped up by the new growing industry.
A caveat, my view is largely is focus on tech industry because it is what I’m familiar with and the drive most of the recent grow. But I could be blind to the other sectors.
I find it amusing how many people rage about the perceived evils of the ‘Twitter tax break’, and rail against about how unfair it is, how it benefits the elites and techies.
Do you people ever walk around in those areas outlined in the map? Last time I passed through them, which is in recent days and weeks, most of that area is a real and total s***hole, rampant with people doing drug deals on the corner, looking for trouble, urinating and sleeping on sidewalks, and generally doing nothing better than wasting SFPD’s time and freaking out tourists. Sure, I’m sure it’s got its fair share of low-income folks who are law abiding and doing their best to get by – I don’t deny that at all.
But depriving an ugly, dirty and sketchy area of our city of potential improvement because you have a socioeconomic issue with a temporary 1% payroll tax break that can bring good jobs into the city and improve the area over time, well sorry, but that’s a ridiculously shortsighted viewpoint.
I have been walking down Market Street (from Sansome to Haight) four times a week since August. Market from about 4th and on is being transformed. The worst places are being boarded up and the places that used to be boarded up are becoming holes in the ground and the places that used to be holes are becoming brand new buildings. Lots of new bars and restaruants opening up that are catering to the tech workers.