Twitter San Francisco Tax Breaks Debate - Now In 140 Characters or Less

Juan Carlos Sanchez's picture

Let me try to explain this in 140 characters or less: SF wants 2 keep Twitter from leaving the city by giving them a 6-year payroll tax exemption on new jobs created if they move 2 Tenderloin!

That was harder than I thought. Anyways, you can read more about it here.

I used to work for a non-profit that managed a federal rural empowerment zone program - which included tax incentives for companies that moved into the underserved area AND hired people who lived within the empowerment zone. This tool was very effective - as rural communities don't have the social infrastructure - educational levels, colleges, etc - or social attractions to attract/promote businesses.

San Francisco, on the other hand, has EVERYTHING going its way: universities, a young, educated, and highly motivated workforce, the views, hipsters, as well as the spillover benefits of our concentrated new media / high-tech industry cluster.

If you ask me, this money can be better spend on improving MUNI or other crucial social services rather than lining the pockets of our good friends at Twitter.

Ben Shore's picture

Bottom line - SF needs revenue

While the notion of attracting businesses to a blighted area of the City is something we can all get behind, giving away money in a time of ruthless deficits isn't. I read a few articles today that cited supporters claiming the Twitter plan is "deficit neutral" because it only freezes the tax on new hires. While that may be true, it doesn't account for the potential "deficit alleviation" that a company like Twitter could bring by paying the fair amount of payroll taxes.

Twitter is (was?) "threatening" to move out of San Francisco but I'm fairly convinced it was probably just a way to leverage themselves against a city desperate to make something good happen. And now look - we're being held hostage. Gives us tax breaks, or we flee. There has to be some middle ground.

Do we need to revitalize Mid-Market? Yes. Do we need to keep strong and growing companies like Twitter in SF? Yes. But the bottom line is that this city needs more revenue to reduce our deficit, make government work more efficiently, and avoid having to add extra "fees" onto San Franciscans. No free $ for u, Twtr.

Bernadette's picture

Twitter Tax Break- A Double-Edged Sword

The Twitter Tax Break situation is definitely a difficult issue. On the one hand, it would be terrible to lose a business that is growing so quickly. However, it might also be hurting the city to give tax breaks to keep Twitter.

We need to see if the good outweighs the bad. While San Francisco is going to lose a lot of revenue from the tax breaks, we should also consider how much revenue will be brought in by having that portion of the Tenderloin revitalized.

Will more people frequent that portion of the city if it is cleaned up by the businesses that are going to move in? That might bring in revenue from sales tax. Maybe real estate developers invest in that section of the city if it is improved. Will that bring in more revenue?

I think it really depends on what money could be made by the loss of that other form of revenue.

I still do think it's a scary prospect that might get out of hand because, as the SF Examiner article that Juan Carlos posted states, more and more businesses might take advantage of the tax break that the SF Supervisors are offering Twitter.

Alyssa Sittig's picture

SF: Too good to care?

The San Francisco Financial District is often called the "Wall Street of the West." We have a large base of businesses that supply a fairly steady number of jobs for college grads looking to enter the corporate world. Looking just outside, the Downtown shopping area sustains a significant number of retail shops to keep tourism up and revenue flowing into our city.

Question: Why do you think San Francisco can boast of these successes? Is it perhaps because we have ever-growing and stable companies like Twitter that bring economic stability, job opportunity, innovation and a certain it factor that makes SF an attractive place to conduct business?

Now let's think about what would happen if we begin to lose large cornerstone and progressive companies like Twitter... almost certainly we would risk a domino effect.

And, if San Francisco is a "city desperate to make something good happen" - as user Ben points out - why would we risk losing such an influential company?

In a global economy that encourages a race to the bottom, minimizing all costs and maximizing all profits - why shouldn't our government work to ensure that our city maintains its stability, prestige and corporate appeal? Thank you San Francisco - sometimes protecting our city will cost us, but it is most certianly worth it.

NoeValleyRes's picture

Bang for your buck

Although I agree the payroll tax breaks may not the best best approach, I do think that we should definitely attract businesses like Twitter to be in SF. So, if a nominal tax break is what brings them in, then so be it, because the return of investment from Twitter being in SF will be more rewarding that a short term tax break. Also, the idea of rejuvinating mid market is greatly appealing and has yet to be actually done, so if Twitter was going to be somewhere else in the financial district...by all means, do what it takes to get them to market which will help increase value as well day to day life.

Kate Maeder's picture

Twitter - A Good Idea on Mid-Market

Ok.

But if you read the article closely, you can see potential long-term benefits. If Twitter survives 6 years (the length of the temporary tax-break), then it will bank $4 million a year for the city in payroll taxes every year thereafter.

In the first year alone, it'll create 1,800 jobs - and 3,500 in 6 years. And with unemployment nearly 10% in the City, we need to focus on creating jobs so people can pay their bills and feed their kids.

I understand Supervisor Avalos's argument that other important companies may also "threaten" to leave in order to evade taxes - but let's focus on this tax-break as a geographic incentive. Does Wells Fargo really have the courage/cojones to move to mid-Market?

So many San Franciscans are afraid to even walk down that street. And I'm sorry, but I refuse to be afraid to be in any part of our city. Let's work to revitalize this part of town.

Kate Maeder's picture

Classy Profile Pic

@Bernadette: Forgot to mention that I love your profile pic.
adpostal's picture

A Good Deal

I feel that this move could be great for the City, and especially it's most down-and-out residents in the Tenderloin.  That district of the city is one of the roughest of any city in the country.  By relocating to the Tenderloin, there may be a domino effect of investment in this blighted section of SF.  In addition, keeping a prominent company like Twitter within City boundaries would help keep jobs in San Francisco, something the city desperately needs.  I say this would potentially kill two birds with one stone.  SF Would also have found a way to make money off of Twitter, something Twitter hasn't totally figured out how to do yet.  

CJC's picture

Subsidizing profits in San Francisco!

So, the consensus seems to be: Give Twitter the tax break, keep it in San Francisco, create more jobs and still reap significant tax revenue.

It is a point well made and if this were purely an issue of cost/benefit analysis it would probably be the sensible, pragmitic option. However, is there not a more philisophical point to be found in this?

We are essantially talking about a public subsidy to a company who, since 2009, has been making profits in the millions. As a company that has existed for under 5 years, it is doing very well. Typically subsidies exist to support industries that could not survive otherwise and have, for one reason or another, been supported in the public interest. And yet, here we are talking about giving government money to a business which has shown it can stand on its own two feet.

It is not enough that San Francisco provides well educated workers, a fantastic infrastructure, a prime location and more street cred than any other city in America - Twitter also wants a handout. Twitter is the spoiled child who threatens to throw a tantrum in the middle of a gracery store if his parent don't buy him a candy bar. Is the city going to be the embaressed parent and relent to the child's demands?

Why does it matter? If the city will clearly benefit by retaining the company, can't an exception be made?

It matters because it sends a clear message about the relationship between government and private business. It shows that city councils are so desperate to retain businesses that they are willing to subsidize profitable companies rather than require these firms to pay a reasonable amount into the system that provides them with a platform for success. It sets a precedent for other buisnesses to made similar demands.

Lets let great companies come to this great city for its unique opportunties. Lets compete on quality, not by allievating companies of their financial responsibilies. 

Eric Jaye's picture

Don't Be Evil, Twitter

If you look at the value of Facebook and the IPO moving forward on LInkedIn, you can get a pretty good idea of what Twitter is worth.

Billions.

Many, many billions of dollars. That means the people looking for a city handout are some of the richest individuals in the world.

So let's be clear, even though this is a small amount of money, it is essentially taking money from some of the poorest people in San Francisco and giving it to some of the richest people on the planet. 

The City wants to create this tax break because Twitter is threatening to move to the suburbs. There is plenty of empty office space in San Francisco – office space that would allow Twitter's largely San Francisco based work force to walk, bike, take BART or the Municipal Railway to work. But Twitter – which postures itself as cool and green – is seriously considering moving where employees are going to be forced to drive. 

Let''s take another approach. Instead of giving some of the richest individuals in the word very precious tax dollars to do the right thing, let's simply ask the people at Twitter to do the right thing on their own. If they are what they claim to be – they wouldn't need a handout to be environmentally and economically responsible. 

Kate Maeder's picture

Re: Don't be Evil, Twitter

"Let's take another approach. Instead of giving some of the richest individuals in the word very precious tax dollars to do the right thing, let's simply ask the people at Twitter to do the right thing on their own."

@ericjaye: Let's just ask them to move to mid-Market. I actually think that's a great idea. Large corporations have the potential to do a lot of social good. So yea, don't be evil Twitter, indeed.


P.S. The Chronicle published a story today supporting the tax breaks:  http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/02/10/EDMQ1HKUM1.DTL

dmwinterhalter's picture

Urban Development & Job Creation

 

“The tax exemption would apply not just to Twitter, but to businesses that relocate to the a portion of the Tenderloin and the mid-Market Street area, which city officials hope to revitalize”. – The Examiner

 

I would be very interested in a cost-benefit analysis that compares the potential revenue influence from twitter (its capital, its infrastructure, its employees, etc.), as well as other businesses that would be enticed to relocate to a struggling section of our 7x7, against what it would cost the city to invest in development and urban renewal in the very same area... 

The city doesn’t have the money to invest in renewal-and it won’t for a very, very long time. Meaning that the problems and the poverty of the tenderloin/ mid-market area will continuously perpetuate. Let’s let billion dollar industries do it for us –with this city’s planning commission, San Francisco will still have full control over corporate development projects.

Also, with "jobs" as the new buzzword in the current political climate, 1,800 jobs in a year - (and 3,500 in 6 years) isn't too much to complain about. 

 

The tax exemption wouldn’t just apply to Twitter, it is intended for businesses that relocate to an area in desperate need of revitalization. We are gaining jobs, gaining business, and stimulating urban renewal.

 

I know that the idea of a tax break is difficult to stomach, but if we think through the benefits- it is a proposal deserving of our consideration…and our support.

SophieT's picture

Twitter Redevelops SF, 140 characters at a time

 

@ericjaye: Though I agree with your points and do think the wealthy twitter execs should be good samaritans and pay taxes they can afford, we all know that this is not the way the world functions.

 

If we do not buy (pun intended) into their demands, we may risk losing the revenue they will most certainly generate for SF in a few years time. We also will lose the opportunity to create 1800 jobs. 1800 jobs in a city that has 10% unemployment...now that's huge! Also, if they move to the Tenderloin and the mid-Market street area, we will redevelop the area. Instead of tax payer dollars going directly to redevelopment, tax payer dollars would subsidize Twitter and in essence, fund improving a deteriorating part of our city.

 

As user bernadette said, it's a "double edged sword." Though we will be setting a bad precedent and make other businesses and wealthy CEOs think they can come to SF and get a tax break, in the long run, this initial tax break may be very beneficial to our city--job creation, increase city revenue from future taxes, redevelopment.

 

With the cost benefit analysis as I see it, keeping Twitter in SF will be very beneficial to SF over time, though maybe morally painful to watch. To put it in terms that the head of Twitter will understand (and is definitely using), making a profit means making the initial investment. Spend some money, generate more.

CJC's picture

A Dangerous Precedent

Yes it will be beneficial as an isolated case. Yes it will create jobs, yes it will bring in some tax revenue. But the government's role is not to plough money in to every venture that may result in public  good. We don't pay drug dealers to stop selling drugs. We don't pay parents to make sure their children attend school. And, we shouldn't pay profitable companies - and that's what this is - not to relocate.

It would fundamentally change the relationship between government and firms, suggesting that the city owes something to productive business, rather than the other way round.

It would be a shame if Twitter decided to leave the city, but such is the nature of modern, mobile business. The city can invest in attracting new businesses in to the area, giving them the opportuntity to be successful. But giving handouts to already profit making companies? Not a good idea.

 

 

Juan Carlos Sanchez's picture

The Tenderloin's Newest Panhandler - Twitter

Yeah - I said it.

If Twitter was looking for the cheapest place to do business, they would leave the country. But, these potential billionaires are looking for a highly-skilled workforce and - not to sound like a douche - members of the "creative class" that San Francisco has to offer.

Not to belabor the point but, Twitter, stop panhandling San Francisco at the expense of people who could really use the handout.

SophieT's picture

We do pay farmer's to NOT

@CJC: We do pay farmer's to NOT farm

JoshuaJames's picture

Is the Twitter "Domino Effect" Worth it for San Francisco?

I read an interesting article some months back that was centered around the fact that businesses actively wanted to locate near twitter in order to suck up some Twitter "mojo"...or something to that effect.

It's worth considering the fact that business attracts business.

However, it seems like these other "Mid-Market" businesses now have an incentive to ask for tax breaks as well. Local business is great, but Twitter's sweetheart deal will cost the city upwards of $10 million and it doesn't seem like they'll have any more incentive to stay in the city than they do now after their tax exemption ends. Who's vital social service is going to be cut as a result? How much longer are you going to wait for Muni train to get to work? How many teachers are going to be cut from your kid's school? What do San Franciscans, especially those located in "Mid-Market," really gain from this?

All questions to ponder on this issue.

San Francisco is a special city, one that I feel is worth investing in and contributing too. I hope Twitter agrees.

Don't be evil Twitter, be an actual part of the city that fostered your growth in the first place.

Eric Jaye's picture

Brother, can you spare a billion?

The market value of Twitter was estimated last night at $10 billion.

http://www.wired.com/epicenter/2011/02/twitter-valuation-10-billion/

gcotter's picture

Yes, a tax break is a good tool

When trying to improve a city we need to use all the available tools.  Same as a medical problem - sometimes you use one treatment but for serious illnesses you need a range of treatment options - drugs, chemo, surgery, acupuncture, etc.  Mid-Market is one of the city's many blighted areas and needs help.  A tax break for any company (not just Twitter) moving in to any blighted area (not just mid-Market) is good medicine.  

As with any good medical treatment it needs to be watched closely and other interventions should be used as appropriate.  Translation: get rid of the drug dealers and re-locate the homeless from the neighborhood.  

As for Twitter's net worth, who cares?  If they were a poor company, why would we want them?  We need a mix of businesses in SF - small locally owned shops, stores and restaurants, but also big financially secure businesses that are not run on a show-string budget.  These large successful companies bring in employees who will shop and dine locally and help support the small businesses.  Again, I think tax incentives should be available to all businesses in a targeted area, not just just the big guys, but big successful companies must be part of the mix.

Tax incentives should and do have a limited life span - usually just a few years - but long enough to help the business get established. Tax breaks are more than offset by the additional business it brings into the city, and far cheaper than having the city (our taxes) pay for redevelopment projects.

Big companies become successful because they are managed by smart businessmen.  Smart businessmen look for ways to maximize profits - that's their job.  If they don't make a profit, they lose that job and employees lose their jobs.  So, of course any big company is going to consider tax incentives and any city courting business will offer tax incentives.  The cities always make up lost revinue through ancellary local sales taxes and other benefits brought by those companies.

Yes.  Give Twitter the tax break.

 

 

 

#betternow?

Twitter promotes its Better Now campaign with a video showing a guy holding a sign that says, "I will buy a hungry person a meal #betternow." But they want to take millions of tax revenue from San Francisco homelessness programs, libraries and other vital programs in exchange for not leaving town. Take your own advice, Twitter:

"Be a part of something bigger than yourself and make a difference in someone else's life. Get involved in making your community and the world #betternow." Don't take the tax break.

SusanSuval's picture

Choices

Last night the Planning Commission voted to give developers a 30 year agreement that will destroy a thriving multi-ethnic, multi-generational, economically diverse community at Parkmerced in the name of building a tax base.  

buchsons's picture

Depends on the value of the tax break.

If the tax break creates more revenue than it costs, then my vote is yes, otherwise no.  Twitter's valuation is completely irrelevant; i.e., whether someone would buy it for $1 or $100B has nothing to do with whether we should give it a tax break. 

What does matter are the numbers.  If having the additional jobs in SF generates more cash then the tax break then Twitter should receive it.  If not, then let Twitter move.  Stop debating "right" and "wrong" and let the numbers decide.

Kate Maeder's picture

Sign the petition

Wow, there are some great conversations going on here.

Have you seen the new dueling petitions on ResetSanFrancisco.org? Pick a side, sign the petition and share it with your friends:

Sign this petition if you think Twitter tax breaks are good for 
San Francisco.

Sign this petition if you think the city should not give Twitter – a company valued at $10 billion – a tax break.

 

Alyssa Sittig's picture

San Fran IS Better Than This

When I posted to this thread a few weeks ago, I asked if San Francisco was "too good to care" about ensuring that we keep such a well-known and powerful company like Twitter in our city. 

Now, I'm starting to rethink this matter.

Maybe we ARE too good to give into corporate greed that demands Twitter cut costs at all costs. Corporations are feeling the pressure from every angle these days to maximize profits at all expenses, even when it means setting morals aside.

But we are San Francisco. The city that is not afraid to say and do and stand for what we believe is right. We are a progressive, trend-setting, model city for the rest of this nation.

Bottom line: Twitter does not get to threaten this great city. I refuse to believe we have no choice in the matter.

Let's take the money we would lose by appeasing to Twitter's threats and create new, better, more sustainable and long-term jobs.

We do NOT need Twitter to save San Francisco.  

Stan861's picture

Why Twitter Should Get the Tax Break

I definitely agree that we should never let corporations hold us hostage and it would be a dangerous precedent to set.  However, I think Twitter's case is a little bit different.  Twitter isn't trying to run away from a standard payroll tax on the salaries it pays its employees, it's trying to avoid an unusually extreme tax that is unique to San Francisco.  The law in question allows the city to tax employee stock options as pay.  No other city or state (and not even the federal government!) taxes stock options in this way. 

To put it simply, when Twitter IPOs, they are expected to raise around $100million in cash.  Under the current rules, they will have to pay somewhere around $50-75million of that as tax to the city.  This is a tax that can be avoided simply by moving their office to anywhere in the country besides SF, even if it's a foot outside of city limits.  I think we can all agree that no reasonable business owner that is raising money to invest in the business would subject themselves to such an extreme tax.  You can read more details on Techcrunch here:  http://techcrunch.com/2011/02/18/san-francisco-wants-to-tax-your-stock-o...

As an FYI, I'm not a Twitter employee or even a user.  Just a concerned citizen who wants my city to make the best decisions possible! 

Alyssa Sittig's picture

Thanks for Shedding some Light!

So San Francisco passed a law in 2004 requiring corporations to pay this payroll tax  - and we're just talking about enforcing it now? Seven years later? What's changed?

I think this dilemma San Francisco is facing is becoming an all too familiar a story. As a supercapitalist society, are afraid to spook corporations. Maybe we should be?

We won't ever know what lays down path not taken - would Twitter really leave if we began to enforce our laws? Or, are we losing much needed revenue by allowing the law to slide? 

@Eric - Thanks for reminding me that issues aren't always black and white. You should consider swinging by Food for Thought this Saturday morning at the SF County Fair Building. It's a cool chance to talk with the Reset SF team and Assessor Phil Ting. 

Eric Jaye's picture

Office Rents Expected to Soar

From today's Ex - good reporting on how office rents in San Francisco are going up fast. Rising prices are driven by increasing demand - particularly for the kind of "creative" space Twitter and other tech startups are looking for. 

One more data point showing that demand is already increasing and does not need to be driven by a tax break.

Here's the link:

http://www.sfexaminer.com/local/2011/02/office-rents-san-francisco-expec...

Kate Maeder's picture

Twitter and MUNI

Article today in the Bay Guardian:
http://www.sfbg.com/2011/03/15/behind-tweets

Twitter gets a new MUNI line too? Why can't we fix our current lines, like the N-Judah or 38-Geary, instead? Transportation resources and funds should go towards making our current system more reliable... in my opinion. Is the Twitter tax break shaping up to really be good thing for San Francisco?

Juan Carlos Sanchez's picture

Zynga's Farmville Joins the San Francisco Twitter Tax Break Game

Sympathy for the Farmville: Ed Lee and David Chiu Want to Keep Zynga in Town Too

Now that Twitter's on its way to some sweet tax breaks, it looks like Farmville wants to join the fun too. Its now clear that the Twitter tax break is a dangerous precendent - and is poised to become an expensive one too.

 

dmw's picture

Twitter has yet to agree to Community Benefits Package

 

http://www.sfbg.com/politics/2011/03/23/tax-break-sponsor-denies-review-...

Twitter's big tax break is heading toward approval.... but the company has yet to agree to the community benefits package intended to revive the mid-market neighborhood.

Paid for by Phil Ting for Assembly 2012. FPPC ID# 1343137