
San Francisco Doing Everything It Can To Drive Zynga And Twitter Away - staunch
http://techcrunch.com/2011/03/15/san-francisco-twitter-zynga/
======
timr
Oh, give me a break. I _live_ in the supposed "tax free hooker area", and
there are probably more hookers in the lounge of the Ritz Carlton than there
are near the SF Furniture Mart (where the city wants Twitter to move). It's
not like they're proposing to move them into an abandoned Happy Donut at the
corner of 6th and Market.

City hall and the Asian Art Museum are one block north. The opera, symphony
and ballet are two blocks northwest. There are two high-rise, luxury
condominium buildings _directly across the street_. Walk 10 minutes west, and
you're smack in the middle of one of the city's up-and-coming neighborhoods
(Hayes Valley), replete with boutique shopping, gourmet coffee stands and
antique stores.

If offering Twitter a sweetheart lease on a gigantic building in a gentrifying
urban neighborhood and giving them a tax break is enough to drive them away,
then I sincerely wish Twitter luck in trying to retain their employees once
they move to _Brisbane_. What've they got out there? A Taco Bell?

~~~
keyle
You got my heart pumping when you said Brisbane. I thought you meant Brisbane,
Australia.

~~~
davidw
If it's any consolation, there are plenty of "gum" (eucalyptus) trees in
Brisbane, California, too.

~~~
Stormbringer
Well, there aren't any donut shops in Queensland anymore either. They all got
washed away by the recent epic storm that made Katrina look like a fourth
grade spitball contest.†

†This is of course, patently false. Oh sure, the storm was bigger and nastier,
but if you do insist on building your city below sea level, then route crucial
funds from the Army Corps of Engineers who are supposed to keep the levees
strong, to some Blackwater dudes playing 'choose your own adventure' in the
Middle East...

~~~
alnayyir
Politics not welcome, caustic attitudes even less so.

~~~
Stormbringer
Anyone marking me down who _doesn't_ have friends and family in a disaster
area, can go die in a fire.

~~~
alnayyir
That's so completely besides the point that I feel I should be sending a quote
with context to somebody compiling a rhetoritician's dictionary.

Let me help you, since you are being so pointedly blind to your own
offensiveness. (Which only hurts your ability to be pithy and forceful, by the
way.)

This is a conversation about tax breaks and municipalities, in this case, the
subjects involve SF and some startups.

This particular thread was an aside about Australia, because of the name
"Brisbane".

You derailed it into a micro-rant about a recent tragedy, and then threw in an
even less relevant slam on the US.

I'm not the most popular person here on HN. I've gotten into it with Justin of
Justin.tv before because I was calling out some of the more offensive startup
hysteria/bullshit.

You are something else entirely. You're not an iconoclast.

You are the 25 year old whose parents died when he was 2 y/o and won't shut up
about it at the bar.

Have yourself a coke, a smile, and shut the fuck up.

------
cloudwalking
I appreciate it when people pay taxes because I like public transportation,
fire safety, paved roads, bridges, public schools, police officers, health
inspectors, safety inspectors, public parks, libraries, clean air,
(relatively) fair corporations, airports, hospitals, court systems,
electricity, vehicle regulation, elections, veteran associations, child
support, public television...

San Francisco is a pretty nice place to live. Sometimes you need to pay a
little more for nicer things.

~~~
fleitz
public transportation? I live in Vancouver and recently flew in to SFO. Being
from Vancouver I thought I know I'll save time and money and just take the
subway in. BART is fucking disgusting and I couldn't sit down on the train for
fear of picking up god knows what. In Vancouver if you start a startup and
hire someone under 30 with a degree the gov't will pay you the first $15/hour
of their salary, the rest you can avoid paying all taxes on if you make a SRED
claim. All that AND we have public transportation you can sit down on, and
even inside the tunnels you still have 3G connections. All that AND 'free'
health care, and there is no f'ing way the city would ever levy a 1.5% payroll
tax, let alone on stock options. In Vancouver we live in the best city on
earth and pay less tax to the city than in SF.

~~~
crux_
If you include the portion of your federal & provincial taxes that are then
granted/budgeted to the city, I bet the tax you're paying "to the city" is a
lot higher than you think it is, and per-capita are _probably_ on par with SF.

Also, unrelated question: How much harder is it for a 31-year-old to find
work?

~~~
fleitz
That question largely depends on your skill set and who you know. If you know
lots of people in SF then it's going to be more difficult in Vancouver if you
don't know anyone.

I'm not sure what age has to do with the question though? Either you have have
marketable skills or you don't.

edit: After reading jackowood now I realize what the issue was, most places
are up front about it and they look like really shitty places to work that are
more concerned about saving $15/hour than figuring out how to make an extra
$15/hour. They take a total labour mentality to programming instead of the
view of code as a capital good with near-zero cost of reproduction. (aka,
their idiots). I've never had a problem finding work in Vancouver and I'm 29
with no degree.

~~~
jackowayed
I think his point was that if that subsidy exists for hiring people <30, once
that subsidy stops applying, you'd expect companies to be less willing to hire
you. The idea being that they could hire someone with basically the same
experience and also get the subsidy.

~~~
binspace
Hopefully you have more experience when you are older.

~~~
ericd
There's a discontinuity in desirability at 30, though.

------
guywithabike
What makes Twitter and Zynga more deserving of tax breaks than any other
company in the city? Honest question.

~~~
pg
As it says in the article, the problem is that the law covers not just salary
but employees' stock gains as well. Twitter and Zynga uncomplainingly pay
payroll tax on salaries like other companies, but the growth in their
valuation combined with the fact that lots of employees get stock means that
if the law were enforced, Twitter and Zynga would be hit with huge extra bills
that other companies aren't.

~~~
jasonkester
That doesn't seem like a satisfactory answer to the question. It essentially
translates to "they deserve to get special treatment because they're rich."

Why should a company with lots of tax gains not have to pay the same taxes on
them as the company next door? Certainly they were familiar with the tax code
and its consequences when they set up shop in that city.

The whole article reads me as simply "big successful company wants to avoid
paying taxes."

~~~
pg
As I explain here,

<http://news.ycombinator.com/item?id=2331182>

the problem that the companies the law applies to aren't necessarily rich;
they're not being taxed on their revenues, but on their valuations, which
reflect investors' hopes about their future revenues. So they're effectively
being asked now for money they don't have yet.

But in any case it would not be "special treatment" to exempt them; this is
one of those laws that is so weird (zero other cities have it that I know of)
that the only reason it has stayed on the books is that it has not actually
been enforced in the past.

~~~
crux_
You're splitting hairs. A company whose valuation rises enough for this to
become an issue is very rich in a very real sense.

Second, most events that would cause such a huge rise in valuation are
accompanied by a huge influx of cash. There may be some tiny edge cases, but a
gangbusters IPO ain't one. The bill is due once a year, and imagining a
company being without the cash for it stretches my imagination to the breaking
point.

Third, "being asked now for money they don't have yet" is the entire reason
the company is selling equity in the first place. They can surely budget for
an extra 0.015 of an already proportionally tiny amount.

Fourth, they aren't taxed on valuations but on, to coin a term, their
employees' _realized compensation_. This may be based on valuation, but
justifiably so, since compensation is compensation.

Hell, a company with bottomless greed and a deep commitment to nickle & diming
could probably find a way write the tax bill into their options contracts.

Fifth, the weird part of the law is that it is structured as a payroll tax
rather than as an income, capital gains, or wealth tax.

Otherwise it appears to be a very honest attempt to fairly tax different forms
of compensation in a non-regressive way.

------
egypturnash
Why yes, because hoping to take this insane amount of money flowing into the
city (and state!) and use it to make everyone else's lives that much more
livable is a terrible, horrible, no good very bad thing. I'm sure nobody
involved in the tech sector has ever benefited from any public monies; it's
only right that they shouldn't have to pay any taxes!

</sarcasm>

~~~
binspace
And yes, giving extravagant monies to the government makes everybody lives
better, cures cancer, and causes world peace too!

</sarcasm>

~~~
_delirium
Having lived in cities on various parts of the city-services spectrum, I do
think it overall improves the quality of life to have higher city taxes and
more services (especially public transit). But fortunately people who think
otherwise can choose where they want to live accordingly, since many cities
are available on different parts of that spectrum. For example, if you prefer
the tax/services tradeoff Houston makes to the one San Francisco makes, you
can live in Houston (and many people do).

------
fab13n
If I understand correctly, all this fuss is about a 1.5% tax on wages. If so,
it seems nonsensical: settling in the Silicon Valley costs much more than
that, yet companies still prefer to settle there than in the rust belt or in
Europe. There is a significant advantage in being in the SF area, and
companies already evaluate this advantage to much, much more than 1.5% of
payroll.

Now I understand that big companies try to pretend otherwise, so that they can
scare the city and save these 1.5% for themselves, but don't take this for
anything other than BS.

~~~
jackowayed
It's a 1.5% tax on wages _and stock gains_. They pay the 1.5% on wages already
and are fine with it. They just don't want a massive tax bill when they go
public for all of the stock they gave to employees.

~~~
bgentry
According to one of the previous articles on this subject, this provision
actually requires companies to pay taxes on their employees' options based on
the company's valuation, even if those employees aren't even able to sell
those shares.

The example I remember was that if a company raised a bunch of money at a ~$1B
valuation but was later acquired for a significantly smaller sum, they would
have already paid taxes on their employees' stock option gains at the ~$1B
valuation based on the increase in perceived value of their shares at the time
they raised money.

Edit: what I said above is in line with what pg said in his comments here:

 _The difference between the two cases is that the employees are being taxed
out of money they have (if they exercise and sell) whereas the company is
being taxed based not on revenues but on the appreciation of its stock. So a
company whose valuation shot up in advance of anticipated revenues could find
itself with a bill it had no money to pay._

------
phatbyte
You know what ? Sometimes it can't be about the money, sometimes it's about
what you can do for the community and the city you choose to have a business
in, and the quality of living there. Why do most startups are located there
and in cities nearby ?

I'm pretty sure Twitter wouldn't be twitter if they weren't in SF.

And this is what's scares me about this whole "bubble 2.0" thing. People
(investors) are getting too greedy, they rather move an entire company,
including reallocation of it's employees than to pay a fraction of their $xxB
evaluation.

I don't give a damn about the investors, they knew where this companies was
located. If they aren't informed before their investment, this just shows how
much they know about their own country and cities.

Besides, you have no idea how much tax europeans startups have to pay, If
there was a place like SF in Europe, I would be moving there tomorrow morning.

And finally, we are talking about Twitter. Have they finally got a way of
making any real money ? Or this company based only on paper money ?

------
impendia
The SF Chronicle has long been playing it the other way: the city government
has been tripping over itself to brown-nose Twitter and other companies.

Being able to work in the city is a huge draw. Just ask the many people who
live in SF and commute down to Stanford, Google, or elsewhere in the South
Bay.

------
rmorrison
Wow. My company has been trying to decide between setting up our HQ in San
Francisco or further down the bay. I think we have our answer.

~~~
nupark
There is a reason why people set up in San Francisco even though it costs
more. We have an office there, and in terms of both recruiting and business
contacts, moving it out of San Francisco would be a waste of money.

We also have an office in NYC -- also not cheap, but totally worth it. Between
NYC and SF we have no trouble recruiting employees who want to live in a
desirable location (and we, the officers, want to live here too!), and nearly
all of our partners and business contacts are either in SF or NYC, too.

------
sbov
> Tech startups aren’t just driving some job growth in the city, they’re
> driving absolutely all of it.

I assume theres a source for this somewhere?

~~~
bgentry
Not sure if he has a study to prove this.. But can you think of any other
industries in SF that have generated huge job growth during the past 10 years?

I can't. That doesn't mean Arrington is right, but I can't think of a reason
to doubt that statement.

And I know I've heard that many of the financial companies have moved out of
the city or downsized operations here during that span in order to avoid the
high cost of living and tax rates.

~~~
_delirium
Has the tech industry in SF generated huge job growth recently? From the
scarce statistics I can find, it seems SF tech employment has actually
declined over the past few years.

------
tt
This is likely to be a political battle between the progressive members of the
Board of Sup and what former Mayor Newsom had apparently set up with Twitter.

Newsom had always focused on developing and growing high tech companies in SF
to increase jobs and revenue for the city. On the other hand, certain members
of the Board strongly believe in taxing our way out of the deficit. As a
startup founder in SF, it's sad that I may one day have to deal with this.

------
pjhyett
No one in their right mind thinks Twitter's moving to Brisbane except for the
jokers in city hall. Their employees would sooner quit than have to commute to
an office park wasteland everyday.

------
berkes
«The company will be forced to move to a new location in order to get a six
year payroll tax break». No. The company is forced to pay tax, __just like
everybody else __. Tax must be payed to keep community-owned stuff rolling,
functioning and improving. If a company _jumps trough hoops_ to avoid that,
they are putting efford in being selfish, scrooges. And should probably be
banned from your community in the first place, since they only leech and don't
contribute back. It might be, that growing up in western Europe has made me a
bit too soft, but I think this article illustrates perfectly why so many
people despise "big companies", rather then embrace and love them for doing
their good work for their great country.

------
joelandren
There's no way Twitter moves to Brisbane. This is all bargaining and
Arrington's a useful pawn.

------
jRoden
I'm probably a "fecking eejit," but what exactly is so stupid and ridiculous
about the quote "Who are the [Twitter] investors? Probably some of the
wealthiest people in this country. And we are giving them more wealth."?

I mean, would the tax really hurt Twitter or Zynga? This stuff is just kind of
disheartening. Oh no, your multi-billion dollar massive success of a company
might lose a couple mil to taxes, better throw a fit or pack up and move to a
new city.

~~~
mc32
Maybe i am too, but I can't figure out how SF is "giving" [the companies]
wealth? Said companies are earning their own wealth. SF is not "giving" it to
them, I'm sure.

Let's say you were going to lease storage (physical) and outfit A had a flat
fee of 50/mo. Outfit B had a flat fee of 70/mo plus appreciation on the goods
you stored. Let's say 20/mo difference had negligible impact on your
disposable income. Who would you choose?

If you have a choice, why choose the costliest one?

~~~
vacri
I might choose the one that is closer to me, or closer to where I would want
to use the stored items. I might choose the one that also offers a parcel
reception service. I might choose the one that has better security - some
storage outfits are just a single room separated into lots by loose cardboard.
I might choose the one with greater hours of access.

One day people will get that there is _far_ more to 'value' than 'money'. SF
is a nice place. People _want_ to be there. Why shouldn't they capitalise on
it? Boo-hoo, stupidly wealthy company can't take the heat, so go move to Idaho
and see if that tax is really the kind of thing that cripples your tech
company.

Rah, rah, private companies should be allowed to accrete wealth for their
superior products because that's The American Way. But should a city offer a
superior product, suddenly we're all supposed to be communist equalists when
it comes to the public life?

~~~
TillE
> SF is a nice place. People want to be there.

Exactly. I could count on two hands the number of places I'd be willing to
live (unless you were paying me truly obscene amounts of money _and_ doing
incredibly interesting work). Proper cities with good public transport and fun
things going on. In a country where I speak at least a bit of the language.

Quality of life is not something to be ignored; requiring employees to live
elsewhere or make long commutes is a big deal. When you're a startup looking
for younger employees and fostering that kind of culture, location is vitally
important.

------
beedogs
This entire article seems like rich people whining. Give me a break.

------
koski
Ah, politics: Taking from someone and giving to someone else.

------
anigbrowl
Twitter is almost certainly not going to pay this tax. The finance committee
supervisors (who will consider it tomorrow) are fiscally conservative and
Avalos and Mar are the only major opposition to the tax break when it comes
before the full board next week. Mar will roll over in the (unlikely) event
that the board is split.

This is not really about the tax, though. The city is not so much fixated on
taxing anyone's options, as it is using the exemption to make it worth
Twitter's while to stay in the city. Taxes are lower in Brisbane, but rents
are higher because the building on offer there is newer. Over 6 years, Twitter
stands to save ~$15 million by staying in the SF Mart building,
notwithstanding the higher initial refurbishment costs.

------
dools
The only problem here is that the U.S has completely different tax laws for
each state. If everyone wasn't so fanatical about state's rights it would be
far more difficult for companies to jump ship in order to evade tax, and far
less administrative burden caused by tax compliance issues.

~~~
jpadkins
yes, lets take away choice of government so the empire can rule effectively.
/s

Competing jurisdictions is a check on corruption.

~~~
cpeterso
I like to think of the states as "regulatory laboratories". In an ideal world,
states would learn from their neighbors' regulatory successes and failures.

------
kbatten
Is hiring 800 people really that big of a deal for a place like SF? The
article made it sound like 2400 new jobs accounted for not only most of the
tech jobs in SF, but most of the growth all together.

------
Stormbringer
There are a bunch of Techchruch stories on right now, this one made the front
page with no comments and only 6 votes?

~~~
coderdude
That's not really unusual actually. It was submitted 31 minutes ago and has 6
up-votes. That's enough for just about any story submitted by anyone to get on
the front page (unless there is a filter in place that requires more votes,
like anything Julian Assange related).

3-4 up-votes in the first 10-15 minutes of submission is going to get your
story in the middle of the front page. It only sucks that TechCrunch is
popular here, IMO.

------
binspace
San Francisco needs to run the city more efficiently. I'm tired of paying lazy
lifers to do nothing but collect extravagant salaries and lifetime benefits.
Work hard for a living dammit. We do.

------
binspace
Twitter should move to Oakland :-)

~~~
cpeterso
Oakland could has so much going for it, yet the city continues to nosedive.
Oakland is:

    
    
      * centrally located to SF, SJ, and the rest of the Easy Bay.
      * cheaper than SF or SJ (unless you live in the Hills)
      * an international airport.
      * an international shipping port.
      * convenient BART access from SF and the East Bay
      * not far from UC Berkeley.
      * (somewhat) cleaner than SF.
    

Full disclosure: I live in Oakland, but plan to move. I was bullish on
Oakland, but not its city government.

------
binspace
The key is to learn how to get the government to give money to you!

------
esmevane
I'm sorry, but I didn't read the article. I'm just posting right now because I
clicked on it accidentally for the exact same reason that I decided to quit
reading Tech Crunch: there is little to no substance there, but there are
tremendous amounts of gamey, overblown, linkbaiting article titles.

I'm really frustrated right now, for several reasons.

One, I know that a portion of the articles I'm scouting around for are being
shoved aside to make way for these techno-celebrity gossip columns. Only so
many articles can get in the top 40-50, and I only have so much time in a day.

Two, I clicked on it. Which means Tech Crunch is correct in their assessment
of my interests and certain keywords that instinctively drive my click
impulses.

~~~
meterplech
Commenting doesn't help. If you don't think it's appropriate, flag the story.

~~~
esmevane
If you're aware of a better place to discuss my dissatisfaction with a
recurring news source, here, I think that, itself, would be more newsworthy
than this article.

