After making some last minute amendments proposed by sponsoring Sup. Jane Kim, including cutting the northernmost 10 blocks of the Tenderloin out of the tax exclusion zone, the Board of Supervisors today voted 8-3 to approve a six-year payroll tax holiday on new jobs for Twitter and the mid-Market area.
Even the three dissenting supervisors – John Avalos, Ross Mirkarimi, and David Campos – said they support economic development efforts for mid-Market and the Tenderloin and a targeted tax break to keep Twitter from following through on its threat to leave town for Brisbane.
“I think the city blinked too soon,” Mirkarimi said, objecting the fact that Twitter has not yet agreed to a community benefits agreements (CBA) and calling for a broader discussion of business tax reform, noting that this piecemeal approach has caused Zynga and other companies to also demand a tax cut. “I would rather take a step back.”
Avalos called the deal a “bad precedent” that encourages these same kinds of ultimatums and other bad corporate behavior while adding to economic inequities. “I have real concerns about disparities in wealth in this country,” he said.
Campos said he applauded Kim for taking on the issue, but said it didn’t make sense to vote on this before a CBA was approved. He also asked the Budget Analyst’s Office to study a proposal by City Economist Ted Egan to institute a parcel tax on vacant commercial properties to incentivize owners to lower rents enough to attract tenants. He acknowledged that Kim has pledged to sponsor such legislation and said he wants to work with her on that.
The rest of the supervisors said they voted for the legislation in order to support the business community and many of them called for replacing the payroll tax with another form of business tax, such as a gross receipts tax, as well as reforming how the city taxes stock options.
“I think it’s unfortunate that this has devolved into a discussion of one company,” Sup. Mark Farrell said of legislation that began as an effort to keep Twitter in town. It was a point echoed by Sup. Malia Cohen: “I’m extremely skeptical of how the discussion has turned to focus on one company.”
Cohen and Campos also raised concerns that the mid-Market tax break could serve to draw businesses from other struggling parts of town, with Cohen noting that she was voting for the legislation but “with serious reservations about the mixed messages we’re sending to our small business community.”
Kim answered the criticism by noting that the legislation was crafted to apply only to “net new jobs” in an effort to discourage companies from moving to the region in order to erase their business tax obligations. She also said mid-Market is unique because it “was always intended for large commercial use” and is well-served by transit.
In addition to the CBA, Kim also proposed trailing legislation that would create a Community Benefits Task Force to evaluate the CBAs that the legislation requires big companies to negotiate with the city and unspecified legislation on protecting tenants from displacement.
The only real surprise in today’s hearing was the “yes” vote of Sup. Eric Mar, who had previously told the Guardian “I’m voting with the progressives on this one.” But he said that he was won over by what he called Kim’s community outreach efforts and with the trailing legislation that she proposed because, he said, “This tax break will have a gentrifying impact.”