Twitter’s San Francisco tax breaks are back in the spotlight again as the tech-darling’s IPO is ready for its first public offering. In Sunday’s San Francisco Chronicle, tech columnist James Temple asked the questions we wish the Chronicle would’ve asked more effectively two years ago: “On the whole, who's getting the better end of the deal? Twitter and its employees, or San Francisco and its residents?”
He notes that San Franciscans are getting priced out as the tech boom raises the rents in the city ever higher, bringing new anti-eviction movements to the fore (Elderly activists and SF natives march to preserve Mission culture at Our Mission: No Eviction, Oct.), an issue we’ve covered many a time. But when looking at Mayor Ed Lee’s tax subsidies to Twitter, you have to understand two sets of context: The dubious successes of tax breaks nationwide, and job growth in California as a whole.
The New York Times investigated the success and failure of tax breaks on a nationwide scale. From its December 2012 article: “A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.”
But although localities often tout job growth as their reason for doling out generous tax exemptions, like Mayor Lee has, many of the benefits are not tracked. From the New York Times:
“A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.
“Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.”
And of course, that was the fear. Twitter supposedly had one foot in Brisbane, just south of San Francisco, when Lee was negotiating for Twitter to remain in the city. It’s a scenario the Times said has played out all over the nation, but San Francisco comes in first.
The Times created a database of 150,000 tax awards, and in California the top of the list, with the biggest subsidy, is none other than Twitter. But according to the Chronicle, that initial estimate of $22 million in breaks may actually be closer to $56 million when you count the legislation ending tax breaks on stock options — money that San Francisco is missing out on.
A New York Times database explores tax subsidies in the United States. The recorded revenue localities and states have gotten back for their trouble is not exactly a ringing endorsement for tax breaks.
And much like the scenarios seen in the NY Times article, the San Francisco Public Press reported that even with 14 city agencies working on employment initiatives, the city isn’t tracking its own job growth (an issue that Guardian News Editor Rebecca Bowe reports on in this week’s Guardian as well). From the Public Press:
“Without a common citywide strategy, no one has been able to measure accurately how many or what kinds of jobs are being filled, or how much is spent to prepare unemployed San Franciscans for new careers."
And any job numbers that the mayor did cite haven’t been clearly separated from state job growth numbers, making claims that job growth is attributable to tech questionable at least.
Again, from the Public Press:
“In a flood of speeches and press releases, Lee has boasted that the city added 31,000 jobs since he became mayor in 2011. The claim is based on data showing a similar employment recovery across the state. Yet the mayor’s office was unable to point to more specific information about how many of those jobs originated through city-sponsored programs.”