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Twitter Tax Deal Done -- But Not For San Francisco's Mayoral Candidates

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TWITTER TAX

If Twitter thought its time in the political spotlight was over the day it won a tax break from the San Francisco Board of Supervisors, it was wrong. The payroll tax exemption created on April 5 to keep Twitter around while developing the city's down-on-its-luck Mid-Market neighborhood still has its critics.

The deal allowed large companies to take advantage of a special exemption from the city's payroll tax as long as they move into one of a swath of large buildings along Market Street. Supervisor Jane Kim, who supported the tax break, said it "is about job growth, and it is about revitalizing a corridor that has been vacant for 50 to 60 years." Large companies, including but not limited to Twitter, are supposed to spend on nearby businesses like restaurants and caterers while perhaps offering local residents jobs directly.

But some local leaders remain skeptical. Supervisor John Avalos, a member of the city's progressive bloc running for mayor, said his campaign will continue bringing up the tax break as an example of a city sliding away from the working class and towards well-connected corporate interests. When the tax exemption zone in the Mid-Market area was created to attract Twitter and other tech companies, Avalos voted against it, calling it a "really bad precedent."

Nearly four months after the Board of Supervisors' decision, and even in the wake of another measure Avalos supported that created a more general citywide exemption for startup companies going public, he said he thinks the Twitter deal continues to be relevant.

"I'm going to be talking about it," Avalos told HuffPost. "We see services getting cut, our parks being privatized, classroom sizes increasing in our schools -- my wife's a teacher, her classroom size is up from 22 to 35 students next year -- and we're giving billion dollar corporations a tax break. To me, something's wrong."

Avalos is running against Supervisor David Chiu, who championed the tax break, and potentially current Mayor Edwin Lee, who directed the full force of his administration into the Twitter negotiations.

Chiu and Lee are just two names bandied about in a crowded field of candidates running for mayor. Only Avalos, so far, has been seen as a credible contender for progressives' first choice in the mayoral ballot. He is angling to connect the seemingly minor local issue of the tax break to a discussion of corporate welfare in general -- a position that could make him stand out from the rest of the mayoral field.

"I think there's a real national debate going on about how major corporations like GE, which made 17.2 billion dollars worth of profit, didn't pay any taxes," Avalos said. "But we're doing tax breaks here at the local level and we're saying that those kind of situations are okay at the national level."

Corey Cook, an assistant professor at the University of San Francisco, said Avalos might have luck with lines like that. "There's enough question about the value of the policy that he can make those claims without being laughed out of the room," Cook said, pointing to a somewhat skeptical take on the tax break from the city economist.

But Cook cautioned that the Twitter tax break, given that it involves a household name brand and the issue of job creation, has become an opportunity for almost all of the mayoral candidates to craft a campaign narrative.

Chiu, he said, could argue that "yeah I'm a liberal, I'm a liberal, but I'm not a job-killer. Even in liberal San Francisco that's a fairly compelling argument." While Cook was not aware of any public opinion polling in San Francisco on the Twitter tax break, he thought it was "pretty clear that this is popular just based on how muted the criticism was."

Chiu's campaign plans to keep on hitting the tax break as an issue of its own. "David believes that this new law is a win-win for San Francisco, it will keep one of the hottest and fastest-growing technology companies headquartered in our City and help to bring new jobs and new life to a struggling neighborhood," his campaign manager, Nicole Derse, emailed HuffPost in a statement. "He couldn't be prouder of his role in getting this done, and there's no doubt that we will be talking about this and other accomplishments on the campaign trail."

But Twitter has done little in the public eye so far to win over Mid-Market community organizations to its quirky, friendly self-image. If Twitter is perceived as indifferent to community concerns in the run-up to the November elections, that could create headaches for politicians who supported the tax break that was crafted in large part at its behest.

Twitter did not provide specifics about neighborhood outreach it has done so far. "We're not moving into the Mid-Market location anytime sooner than next June," Twitter's vice president for communications, Sean Garrett, told HuffPost via email. "However, we'll be doing plenty of engagement with the community and the city well in advance of that date."

Some area leaders, like Don Falk of the Tenderloin Neighborhood Development Corporation, said they did not expect Twitter to do much outreach yet. But Jim Meko, a former District 6 supervisor candidate who heads the SoMa Leadership Council, was not satisfied with Twitter's efforts to in the South of Market neighborhood, one of areas bordering on its future headquarters. Members of his organization, he said, "haven't heard a word from them."

While distrust from Meko, who questioned the tax deal in the first place, is not much of a surprise, he was joined in his criticism by Supervisor Kim, who represents District 6 and threw her support behind the Twitter deal before the April vote. Since then, Kim said, "As far as I know Twitter hasn't done any outreach to the community, and I certainly hope they start doing more."

Kim said she saw potential for "a great partnership" between Twitter and the area she thinks it could help develop. But she also noted, "They should be out there. They're moving into the neighborhood, and there was definitely division and controversy about them coming in, and I think that it's important for them to do the legwork and groundwork."

So far Twitter has met with at least one neighborhood organization, South of Market Community Action Network (SOMCAN), in the nearly four months since it got its tax break. But that meeting with Twitter's human resources department produced no firm commitments yet to hire locals for jobs or internships, according to SOMCAN's organizing director, Angelica Cabande.

When Twitter actually moves into the Market Square building that will serve as its headquarters in 2012, it will be forced, by the terms of the Board of Supervisors' legislation, to enter into negotiations with the city administrator about a community benefits agreement if it wants to take advantage of the tax exemption.

The Board of Supervisors' Rules Committee will meet Thursday to consider candidates for a community advisory committee that will have a limited role in advising the city administrator over community benefit agreements in the Mid-Market area.

But even if the community advisory committee deflects some neighborhood criticism, Twitter will inevitably face charges of gentrification -- and that issue too could become a hot topic in the mayor's race, in addition to the tax exemption.

Meko said he is worried about the "spillover" of Twitter employees seeking to live near their offices. Cabande said SOMCAN continued to question "how is this actually going to bring in jobs into our neighborhood," and said she was worried about housing displacement. Both have the sense that real estate speculators are already accelerating their plans for South of Market -- ahead of a new development plan for the area that could curb the loss of affordable housing, and ahead as well of Twitter's move-in date.

"The way gentrification and displacement works," Cabande said, "it happens now, it doesn't wait until Twitter moves in."

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