
The Big Vote Is Today: Will San Francisco Hang on to Twitter? - vrikhter
http://techcrunch.com/2011/04/05/the-big-vote-is-today-will-san-francisco-hang-on-to-twitter/
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anigbrowl
It's more complex than that - TC's reporting isn't much better than that from
the unions.

That part of SF Twitter is likely moving to (Market street between 6th & Van
Ness) is really blighted, most business left the area some time ago except for
2-bit retailers, and it has become a skeevy dump over a 20 year period. The
tax break is for companies over a certain size who lease space for a minimum
of 5 years; Twitter would be one beneficiary, but behind them is SF property
management company Shorenstein, who has much more to gain/lose depending on
the outcome. Due to long-standing existing plans, several firms/organizations
are set to move out of that area this year and next - Bank of America, the CA
public utilities commission, SF county health commission. BofA is moving some
operations out of town and others into vacant space in its financial district
offices, the CPUC has been waiting for construction on its new HQ to be
completed, SFCH is also moving into new premises.

The upshot of all this is that an already blighted area is anticipated to see
the departure of ~8,000 employees to other parts of downtown and _3 million
square feet of newly vacant office space_ \- which means imminent death for
other local businesses like coffee shops, convenience stores and drugstores
which serve the needs of office workers. Besides office workers, the only
other traffic in that area comes from the Warfield (a popular live music
venue), two tired-looking strip clubs, and a few discount stores selling
clothes, cellphones or DJ equipment. Not only is it desperately in need of new
business, it's in need of a younger population with different standards and
demands.

Anyone who's been thinking of opening an office in SF ought to look into it;
besides the possible 1.5% stock option exemption for the next 5 years, right
now prospective tenants have about as much negotiating power as they will ever
have. Monthly rent in that area is under $3/sqft. and although it is tatty at
street level, it has the same transit connections as the rest of downtown.

~~~
anigbrowl
You can read the city economist's analysis of the proposals here, from the
city's incredibly modern website:
<http://co.sfgov.org/webreports/details.aspx?id=1255>

I'm watching the SF supervisor's meeting so you don't have to - I'll post the
outcome of the vote. They just begun discussing it right now (2:15pm). I
anticipate it will pass 8-3 or so.

EDIT: passed, 8-3 as predicted. A lot of talk during the meeting about
suspending or scrapping the share option tax, and maybe even the payroll tax.

------
simulate
Since most venture-backed start-ups lose money, they pay little state and
federal income tax. San Francisco taxes payroll expense, which is independent
of operating profit and can easily become a burden especially since most web
businesses have little capital costs and the largest business expense is
employee salaries.

My 20 person company is financed through cash flow. We pay around $1.5 million
in payroll each year and our after-tax profits are around 8% of revenue. San
Francisco's payroll tax reduces our after-tax profits to around 6%, which is
equivalent to the city charging a 20% income tax on top of the existing
Federal and State taxes. This brings our total tax burden to well over 50%.

------
impendia
This is surprisingly well written. Indeed, it persuaded me that this SF stock
option tax is probably a bad thing.

But the article is wrong in one point: a move to Brisbane _would_ be a painful
quality-of-life sacrifice. True, in most major US cities, eight miles doesn't
count as a commute, but as a transplant from the suburbs to San Francisco, I
can assure you that I appreciate a city where I can walk or take transit most
places. Most of my friends and I would take San Francisco over "most major US
cities" in a heartbeat. Exorbitant rents and all.

Indeed, although I own a car, many of my friends don't, and I wouldn't be
surprised if more than a few Twitter employees are now happily doing without.
You can't reasonably get to Brisbane without a car.

~~~
hugh3
Ah, but we're not talking about Brisbane vs Marina or SoMA. We're talking
about Brisbane vs Tenderloin, and the Tenderloin is really not the most
enticing part of the city. The advantage of working in the city is somewhat
nullified when the only available lunch options are "grease burger" and "strip
club".

> You can't reasonably get to Brisbane without a car.

Perhaps, but you can't reasonably get to the Tenderloin _with_ a car, so
working at Twitter is now inconvenient for those who don't live close to one
of the Bay Area's few good public transport options.

Besides, most of the big tech companies in Si Valley nowadays run shuttle
buses to San Francisco -- there's nothing to stop twitter from doing the same.

~~~
rdouble
The part of the tenderloin where Twitter is considering moving is 6th and
Market. I personally would call this 'Civic Center', not the loin, but that's
a different story. In addition to grease burger and strip club, there is also
tu luan, Taqueria Cancun, Showdogs, Passion Cafe, John's Burger, and a number
of upstart foodie places. If you're a yuppie who drinks 11 dollar coffee,
there is Mint Plaza with the 2 million dollar Blue Bottle, and if you're
suburban at heart it's about 2 blocks from the Westfield center. Both muni and
Bart stop at civic center, as well as 11 buses and the antique F line trolley.
The 101 and Oak street feed right into market street via Octavia, but alas,
there is nowhere to park.

~~~
hugh3
Alright, sixth and Market is about as inoffensive as the Tenderloin gets (with
the possible exception of having a reservation at the Bourbon and Branch).
Proximity to Westfield and Bluebottle would be a major plus (and, y'know, it's
actually only the same price as Starbucks... though I should refrain from
recommending Bluebottle to anyone since it's quite crowded enough already).

~~~
rdouble
Don't get me wrong, it is a zombie movie after dark. I just wouldn't worry too
much about getting there or lunch.

------
oconnore
There really is no argument here. Either SF wants to keep Twitter, or they
don't. They aren't going to guilt trip Twitter into staying, so there is
absolutely no chain of events that ends in Twitter paying the SF payroll tax.
Case closed?

~~~
rhizome
Twitter benefits from having "San Francisco" on their letterhead. "Burlingame"
and "Menlo Park" don't really have the same ring to them. Twitter wants to
keep San Francisco just as much (if not more) than SF wants Twitter, but I
doubt the BoS will call their bluff.

~~~
ceejayoz
Twitter can put "San Francisco" on their letterhead no matter where they're
headquartered. As long as the zip code is correct, it'll get there.

~~~
rhizome
Yeah, that'll look good.

~~~
ceejayoz
How many people would ever notice?

That said, my point is more that it'd be a bafflingly tiny reason for a
company as large as Twitter not to move. There are far more significant issues
in the decision than how it looks on their letterhead.

~~~
rhizome
It's possible you underestimate the role of vanity in corporate America.
Twitter is bluffing.

~~~
hugh3
If Apple and Google can be located in the dull stretches of suburban
mediocrity known as Cupertino and Mountain View, there's no reason Twitter
should be too concerned about Brisbane.

~~~
rhizome
Apple became identified with Cupertino before, well, pretty much anything.
They could have been anywhere, but it was cheaper than Menlo Park and they
needed proximity to HP.

Mountain View and Google is a little more complicated, but back during the
first dotcom bubble Mountain View was hotter than San Francisco is today. I
remember seeing vacation pictures of people who came here and got their
pictures taken in front of the Netscape business park sign.

Google took over Silicon Graphics' wacky old buildings, which is yet another
part of Silicon Valley's storied history that has nothing to do with Twitter.
In fact, Twitter has none of this kind of history period, so really, if you
think about it, Twitter _should_ think "San Francisco" is important. It's
pretty much the only real history they have aside from the fail whale and
Ashton Kutcher. Think more "Wired Magazine" than Apple or Google.

And really, you're right, they could move to Brisbane and all of my critiques
would fall flat. I'm not saying they won't, but I'm also not going to agree
that Twitter doesn't see value in "San Francisco." Heck, how many man-hours
are they spending in order to secure this kickback? That certainly implies an
internal level of value somewhat north of "trivial."

------
nickbp
I think the degree of special treatment Twitter is seeking from SF is
disproportionate to the number of jobs they actually provide.

~~~
tptacek
That may be, but the quality of the jobs they provide is also extremely high
compared to one of those sweatshops filled with old Asian ladies, with which
the SF I came to know and (cough) love was well stocked.

High quality jobs improve the tax base, lessen the demands on social services,
indirectly increase property values, and create fewer negative externalities
(waste, pollution, noise, crime). They also have lower turnover, are less
seasonal, and are more likely to result in SF homeowners as opposed to
itinerant renters.

There's a balance to be struck, to be sure; "hedge fund manager" is a very,
very high-quality job, but having 1 hedge fund manager isn't better than
having 100 software developers, no matter what the numbers might say.

~~~
rhizome
_High quality jobs improve the tax base, lessen the demands on social
services_

Except in this case, not only is Twitter asking to be relieved of $500K/yr in
payroll tax burden, but also to get $250K in additional police presence in the
area.

~~~
anigbrowl
$250k in annual police presence is 2 more cops 24/7 and covers the entire
proposed exemption district, which includes the Tenderloin - not just the
street between Twitter's future front door and the subway entrance.

To put this in perspective, if 2000 Twitter employees purchase lunch near the
office 5 days a week at an average price of $10, the sales tax revenue will
offset the cost of the payroll tax holiday - not to mention the benefits of an
extra $5m/year flowing through the neighborhood economy.

~~~
rhizome
Well, I don't know that adding two more officers to the Tenderloin is the same
as adding two more to Twitterland. I guess if Twitter is smart they'll have a
Starbucks nearby or inside; I'm sure it'll work out in their favor one way or
another. I certainly don't think Twitter is asking for the police presence out
of concern for those living three blocks north, it would be fiducially
irresponsible.

2000 lunchers to the tune of $100,000 spent in the neighborhood _per week_ ,
are you saying that Twitter is _not_ going to have their own on-site
cafeteria?

~~~
tptacek
He gave one example of how the numbers for 2000 Twitter jobs can scale to
revenue. He hasn't done an analysis of Twitter employee eating habits; he's
just injecting more numeracy into the discussion. On the other hand, a
protracted argument about _exactly_ how much lunch business Twitter employees
will do is likely to harm the overall discussion more than it helps.

~~~
rhizome
I see, more numeracy. Let me add: 40. Fantasy numbers don't help, and "maybe
the city will even out in side-effects" isn't exactly moving the discussion
along, either.

~~~
tptacek
Just for what it's worth:

* Fantasy numbers do help when they illustrate the scale of the dollar figures we're talking about. It is helpful to measure things in "Twitter employee lunches to break even". It's actually more helpful than "$250,000" is, even though the latter number is more "factual".

* If you don't believe it matters whether the city will even out in side-effects†, you're basically arguing there's no point to discussing incentive programs. All of them are cost-benefit investments (or gambles). Make the argument that they're bad gambles, sure. But it's probably not worth making the argument that the city shouldn't try incentives; you'd be howling into the wind, since every city in the country has, in the city council and at the ballot box, decided this already.

† _And, tip, which I learned here the hard way: watch out for the double
quotes; they can mean, "reader, this is what the person who I'm responding to
just said; would you get a load of it?". You'd be surprised how irritating
this can be to people. I re-learn this at least once every couple months._

------
elptacek
I always wondered why Pixar was in Emeryville. :-)

------
rhizome
Here Twitter is a bunch of whiners trying to use social capital as political
capital, "people think we're cool, so you should give us something special."
which means the SF Board of Supervisors will likely bend over on this. Total
high-school politics. The supes like fancy holiday parties too, after all.

~~~
zachallaun
I question whether or not you read the article...

    
    
      Still, there’s a lot of groups in the city lobbying against
      any change in taxes, confusing the issue with “corporate 
      welfare.” I’ve read through some of the materials they are 
      sending out, and while a lot of this is politics, there seems 
      to be a lot of genuine confusion between the nature of the
      way big companies, small businesses and startups work.
    

This isn't a handout; it's an attempt to fix one of San Francisco's
competitive disadvantages. I can't blame Twitter for lobbying against an
abusive tax code literally found _no where else_.

~~~
nickbp
They're not seeking to modify the code for everyone, only to get a special
exemption for themselves.

~~~
zachallaun
The larger goal, however, is to set a precedent for other high-growth pre-
IPO's within the city.

~~~
rhizome
And if they can't get the goal, they'll take the handout.

