News & Research Archive

On This Issue City Hall Needs to be Proactive Not Reactive

Apr 28, 2011

 

Since Twitter won a payroll exemption by moving their office into mid Market Street, the city of San Francisco is now debating the subject of revising the payroll tax altogether to avoid losing other high tech startups that call San Francisco their home.  I personally want to congratulate Mayor Lee and the Board of Supervisors for understanding not only the importance of keeping jobs in San Francisco, but also starting a dialogue about a problem that has caused San Francisco to lose a number of firms who, once they grew to a certain size, left the city because of these payroll taxes. However, the problem with our city officials continues to be that they pass anti-business measures and then when large firms threaten to move out, they try to change the law to save them. Often times too late. The firms that once called San Francisco their headquarters and have now left would make up a good portion the list of who's who in corporate America. Bank of America and Chevron are two prime examples of this.

I realize that San Francisco is a progressive political city with very different view points regarding businesses and the needs of the less fortunate. As a result, the city passed another major measure that will have dramatic negative effects on the city's jobs and tax revenue, which could be enough to bring us over the edge financially. That measure is the Eastern Neighborhood Zoning District; the largest rezoning of property in the history of the city that took effect in 2009. It essentially down-zoned properties in the South of Market, Potrero Hill, Mission and Dog Patch areas of the city by severely limiting-and in a number of cases-getting rid of office and retail space in these districts.

Led by the progressives of the Board of Supervisors at the time, this measure was an attempt to bring blue collar and manufacturing jobs back to the city, while preserving the existing low cost housing. The fear was that by allowing tech type firms and upscale retailers to expand, low cost rental units and homes would disappear. Chris Daly made a point of stating that it would be better to leave buildings vacant for 20 years than to have firms chase out the poor.

This will become a major problem starting January 2012 when the city begins sending notices to now illegal office tenants informing them that they have to move. It has already begun to have a negative effect on buildings that are on the market for sale and priced based upon the rental rates that they are getting from office type tenants. This means that, in the long term, property value will be far less. Meaning far less property tax revenue for the city.

Mayor Lee and the Board of Supervisors need to revisit this issue now and find ways to change these zoning issues. It will not be an easy task as plans to implement these changes went through over five years of public meetings and city review to get them into law. However, with the city now facing a financial meltdown and our tech firms growing again, we cannot wait until the first tenant is evicted to react. We need to do something now.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 26 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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