SAN FRANCISCO (CBS/BCN/AP) — The San Francisco Board of Supervisors approved a tax break Tuesday to keep Twitter from fleeing the city.

The measure passed 8-3 exempts the micro-blogging service from paying payroll tax on new hires if it moves to the city’s neglected Mid-Market area.

”This is a tax policy designed to revitalize neighborhoods in San Francisco that have been blighted for decades,” said Board of Supervisors President David Chiu, who was also one of the measure’s sponsors.

The exemption applies beyond Twitter, to any business in the Mid-Market or Tenderloin neighborhoods, on or near Market Street between Fifth Street and Van Ness Avenue. But city officials called Twitter the big fish that could spur economic growth.

Twitter is already outgrowing its current San Francisco headquarters in the city’s South of Market neighborhood, and the company is poised to expand from a few hundred to a few-thousand workers.

While seeking a building with more office space, the company had said it had considered moving down the Peninsula to a city that has no payroll tax.

But last month, Twitter signed a letter of intent to sign a six-year lease and move into the San Francisco Mart building on the southwest corner of Market and Ninth streets, contingent upon supervisors approving the tax break.

Soon after, Zynga, maker of social games like Farmville, indicated it would leave its San Francisco headquarters unless the tax break was expanded to include it. Other online companies like review site Yelp and real estate site Trulia indicated the payroll tax was among the reasons they were adding jobs outside of the city.

San Francisco is the only city in the state that charges companies a payroll tax; 1.5 percent of total employee compensation each year if the firm has more than $250,000 in payroll. The tax also applies to money made on stock options, a prime consideration for Twitter and Zynga which are both rumored to be exploring initial public offerings.

The payroll tax debate came at a time when the city’s high tech startup scene teems with energy not seen since before the first Internet bubble burst in 2000.

John Avalos, Ross Mirkarimi and David Campos were the three supervisors who voted against the legislation. The critics called the plan an ill-conceived corporate giveaway that would lead other companies to issue ultimatums demanding similar treatment.

“I worry that we set the wrong precedent,” said Avalos, who predicted that the measure would result in many more companies asking for tax exemptions and could take businesses away from other areas of the city.

The city’s largest union, Service Employees International Union (SEIU), also opposed the legislation, arguing that wealthy companies didn’t need tax breaks.

The measure was supported by the Chamber of Commerce, which maintaned the tax cuts help job development in an area of the city where half of the office space is vacant.
The Chamber’s view was ultimately echoed by the board’s majority.

“We finally have a chance to put into place a policy that will bring economic development and jobs. This ordinance offers hope to revitalize a long neglected part of our city,” said Supervisor Jane Kim, another of the measure’s backers.

Mirkarimi, a member of the board’s progressive wing, had proposed a two-year moratorium on payroll taxes on stock options for all city companies as an alternative to the Twitter deal.
The legislation passed Tuesday will require Twitter and other larger companies in the area to enter into agreements with the city outlining actions the businesses will take to benefit the surrounding community.

The agreements are intended to assuage concerns of low-income residents worried that an influx of businesses could raise rents and price them out of the neighborhood, as happened in other parts of the city during the first dot-com boom.

“We want some assurance that the people will not be displaced,” said neighborhood resident Jesus Perez, 31, who attended the board meeting to show his opposition. “All the property is going to start climbing up.”

Under city rules, the full board will vote again on the measure as early as next week before it goes to the desk of Mayor Ed Lee, who is a backer of the tax break and is expected to sign it into law.

(Copyright 2011 by The Associated Press.  All Rights Reserved.)

Comments (41)
  1. WeThePeople says:

    Why Not ALL Companies?

    Simple plan will increase revenue, business, incomes, fix housing, and ailing banks, to mention only a few of the benefits of reduced tax to companies

    1. Jack R. says:

      Aside from most rural areas, just about every community in America takes part in tax breaks for certain companies and not others. It’s to attract desirable business in or keep one from leaving.

      In my town they helped to attract WalMart by offering a deal where they wouldn’t have to pay taxes for 5 years. After the 5 years is up, we have a store generating major tax revenues that otherwise wouldn’t be here.

      For SanFran, Twitter – one of the most well recognized sites in history – works as a showpiece in their portfolio of businesses. Besides, the deal isn’t that big of a deal. It applies to the payroll taxes of new hires only, and Twitter must move their offices to an area that needs an image boost.

      The concepts behind this sort of thing are unlikely to be faced by the kind of commenters that Drudge report sends here. Most live in rural areas (or they are just stupid). Hence, the shallow opinions being posted.

  2. Nate says:

    “Critics have called the plan an ill-conceived corporate giveaway.”

    I’m always amazed that there are so many short-sighted people out there who would rather have a company leave their area rather than letting them keep more of the wealth they earned.

    I have a feeling that if these people actually had a goose that laid golden eggs, it wouldn’t last a day before they had it for dinner.

    1. Randy says:

      The problem is that it is a corporate give away to a politically favored company. If it was FOX news that requested the same tax breaks, there would be a “snow ball’s chance in hell” that the supervisors would give that company the same treatment. This is more than an issue of economic revitalization. It is an issue of political favoritism which arises anytime anyone of political power has the ability to dispense favors.

    2. JD says:

      So true. Companies can vote with their feet and just leave. I mean if you’re not a department store, restaurant or something then why not just leave. Twitter can be twitter someplace else. The same with Yelp and other businesses. How much is that 1.5 percent going to matter if a lot of other businesses leave then the result would be less revenue, all because of that tax.

  3. walter says:

    I love how the left always screams “tax the rich”. Well, if even California is going to give tax breaks to rich corporations in order for them to stay in their area, what chance is there that other states will start taxing them more? We are in a global economy. There is absoluately no reason for any company to do business in the U.S. vs. other countries. The sooner people realize this, the better.

  4. brian says:

    I wonder if the same tax applies to city workers?

  5. LOLBERALS says:


    except our friends and shills

    LOLBERALISM the home for hypocrites

  6. tramky says:

    First of all, tell the SEIU to shut its collective, collectivist yap.

    And San Francisco had better repeal this idiotic tax altogether. Why would any company want to establish itself in San Francisco, with its Progressive, idiotic Board of Supervisors?

    These kinds of tax breaks just cannibalize businesses. Any big company in SF that doesn’t get this tax break should get out of town at the next opportunity.

  7. Steve says:

    It will be funny in a few years when everyone gets sick of Twitter and moves on. Then there were be more empty buildings and unemployed. Twitter doesnt create or sell any products. how are they going revitalize the area?

    Twitter is the dumbest website ive ever seen. All is does is massage celebrites egos.

  8. Betty says:

    They threatened to leave and used the Media as their mouthpiece. If San Fran is going to role over so easily they should do it for more businesses.

  9. jones says:

    An in your face example of how low taxes = jobs!

  10. Fast_Eddie says:

    Why is the SEIU involved with this? What do they have to do with this? The SEIU is no longer interested in making sure their members get a fair shake. They are now only interested in increased power and political sway. Why should they care who does and does not get taxed as long as it is not the union members?

    The unions may have rid itself of mafia ties, but not the money generated that the mafia craved. People are unemployed in unimaginable numbers, and instead of spending money helping those unfortunates, they are spending BILLIONS to keep certian politicians in office so that their money making scheme continues.

  11. TotalAxcess says:

    The only CA city that imposes a payroll tax, yet they can’t figure out why half of thier office space is empty.

  12. Hank Warren says:

    Endless corporate tax breaks, yet another violation of our rights. Add it to the list of gov’t violations of our right:
    They violate the 1st Amendment by placing protesters in cages, banning books like “America Deceived II” and censoring the internet.
    They violate the 2nd Amendment by confiscating guns.
    They violate the 4th and 5th Amendment by molesting airline passengers.
    They violate the entire Constitution by starting undeclared wars for foreign countries.
    Impeach Obama and sweep out the Congress.
    (Last link of Banned Book):

  13. NowListenUp says:

    Twitter is weak. I don’t care if you are having your second BM of the day. Don’t care where you are or what you are doing. This tweeting makes no sense to me. Ban Twitter!!

  14. Dude says:

    Nice to see liberals finally admit that tax cuts help business and jobs creation.

    1. jnsesq says:

      No, only friends…

  15. jnsesq says:

    Nothing like government sponsored crony capitalism to sour people improperly on free market economics. This serves the SF government doubly well: Keep Twitter $ while turning angry people who don’t know any better (i.e., their voters) against those evil capitalist corporations.

  16. John Pinches says:

    If I were the decision maker at Twiiter I would leave anyway. How long before one of those wack-job progressive liberal city councilmen comes up with a bill which would have a major impact on their business. Just ask McDonalds how they liked the city banning the sale of Happy Meals in San Francisco.

  17. Bob Ho says:

    so much for the holyer than thou poop from the comunist coast. Jump right in bed with them evil corps San Fran.

    pathetic hypocrites

  18. Bob Ho says:

    so much for the holyer than thou poop from the comunist coast. Jump right in bed with them evil corps San Fran.

    pathetic hypocrites

  19. Craig says:

    Amazing… give a company tax breaks, you get local economic improvement. Seems obvious, doesn’t it?

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