San Francisco Mayor London Breed is seeking a combination of tax incentives, revamped zoning and enhanced public-safety efforts to revive the city’s struggling downtown as it faces record office vacancies and a slow return of workers.
(Bloomberg) — San Francisco Mayor London Breed is seeking a combination of tax incentives, revamped zoning and enhanced public-safety efforts to revive the city’s struggling downtown as it faces record office vacancies and a slow return of workers.
As part of her State of the City address, the mayor unveiled an economic-recovery plan Thursday that includes almost 50 initiatives to address the damage wrought by the Covid-19 pandemic and shifting working habits. She is seeking to transform the downtown and attract a more diverse set of employers to the tech-industry hub.
San Francisco, long an economic boomtown, has seen its recovery from the pandemic lag amid low return-to-office rates, falling property values and an ongoing homelessness and drug crisis. Those issues are now being compounded by a downturn for the tech sector and mass layoffs at employers including Twitter Inc. and Salesforce Inc.
“The last few years have been tough and our challenges ahead are tougher still,” Breed said in prepared remarks, noting “public safety concerns, a spiraling fentanyl crisis, empty offices, shuttered businesses, and profound learning loss among our kids.”
She spoke at a warehouse occupied by Astranis Space Technologies Corp., a satellite manufacturer in the Dog Patch neighborhood south of downtown, seemingly underscoring the city’s opportunity to attract new types of employers. Rather than relying so heavily on the tech sector, the mayor and her economic team are focused on recruiting companies in industries including life sciences, health care, artificial intelligence and climate tech.
“As people think about the changing nature of the workplace, we have a once-in-a-generation opportunity to recruit new business sectors and companies to create a more diverse and resilient economy,” she said, telling San Franciscans to accept the “tough fact” that “downtown as we knew it is not coming back. And that’s OK.”
See also: Tech’s Bust Delivers Bruising Blow to Hollowed-Out San Francisco
A central part of the recovery plan is reforming San Francisco’s tax structure to make it more competitive. Breed is proposing legislation to retain existing businesses by pausing planned tax increases on retailers, hotels, the manufacturing sector, and arts and entertainment businesses until the 2025-26 fiscal year. Such a plan requires approval from the Board of Supervisors.
San Francisco’s economic advisers project the tax pause will cost the city around $5.6 million in uncollected tax revenue, but say it would provide significant relief to small businesses, inducing them to stay.
Breed also is seeking a three-year break on a tax on gross receipts for office-based companies moving into San Francisco’s downtown, an incentive city officials project will cost the city $32.5 million between 2024 and 2028. She also plans to work with other city leaders on tax reform legislation for the 2024 ballot.
The tax breaks would come as the city faces a budget gap estimated at $728 million over the next two fiscal years because of the slow recovery and tech cutbacks. Breed warned in December that municipal departments need to cut costs and prepare for a worsening outlook.
“Nobody has their head in the sand on the challenges that are ahead in terms of the city’s economic vitality,” said Rufus Jeffris, spokesperson for the Bay Area Council, a group of business leaders aimed at enhancing the region’s economic competitiveness. “The mayor is focused on how do we adjust, how do we kind of turn the ship of the city to adapt to these kinds of changes, both economic changes but workforce, workplace changes.”
Reviving downtown also is key for mass transit systems that have been hit hard by a lack of commuters. The Bay Area Rapid Transit District, which has four stops in downtown San Francisco, has weekday ridership at about 40% of pre-pandemic levels.
“A thriving downtown San Francisco is imperative to BART’s survival,” Alicia Trost, BART’s chief communications officer, said in an emailed statement. The downtown corridor of Market Street “must be transformed into a destination and activated with art, culture, shops, and a diverse set of business industries.”
Breed stressed the integral role of improving public safety in her efforts to improve the economic climate. Like many US cities, San Francisco is struggling to retain and recruit police offers, and is at least 500 officers short of its fully authorized force. The mayor said Thursday that she plans to request $25 million to fund police overtime and foot patrols to make drug arrests and address retail theft.
While acknowledging the city’s problems, Breed sought to counter the narrative of San Francisco’s demise, citing the Great Earthquake of 1906, fire, shipwrecks, and boom and bust cycles dating back to the Gold Rush.
“Let’s keep some perspective. In 1907, downtown was mostly rubble and ash,” Breed said. “That’s considerably worse than today’s shift in how people work.”
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