Shop local, City Hall!

San Francisco spends just 10 percent of public money with local businesses -- and that's bad for everyone
Portrero Hill Merchants Association

On Dec. 3, 2008, just before noon, Mayor Gavin Newsom arrived at a press conference in Noe Valley to remind city residents why it's important to shop locally. The mayor climbed out of his shiny new hybrid SUV, walked into the Ark Toy Company, showed charts and graphs, and talked about how money spent in town helps the local economy. Joined by Steve Falk, president of the San Francisco Chamber of Commerce, Newsom urged holiday shoppers to look first in San Francisco before buying something on the Internet or in some suburban mall.

The mayor's shop-local press conference was a clear sign that the debate over the role of small business in the San Francisco economy is over. Everyone from the mayor's business advisors to the Chamber of Commerce to small business advocates and progressive economists now agrees that small local businesses provide the vast majority of the jobs, keep their money in town, and generate more tax dollars, more wealth, and more prosperity for this city than the big out-of-town chains.

It was a picture-perfect scene, until KPIX-TV reporter Hank Plante asked the mayor an embarrassing question: Why, he wanted to know, did the Mayor's Office buy Newsom's new car in Colma?

Newsom said he didn't have a clue.

Actually, the reason was pretty simple: the dealership in Colma submitted the lowest bid. But San Francisco lost out on the sales tax, a local Chevy dealer that was going out of business lost a local sale, San Francisco workers lost a commission — and in the end, the city almost certainly lost more on the deal than it saved with the Colma discount.

That's the untold story behind the mayor's promotion. San Francisco, as a buyer of goods and services worth hundreds of millions of dollars a year, does a terrible job at shopping local. Indeed, for years small business advocates have been trying to get city officials to make it easier for local merchants to get city contracts — and they've made very little progress.

"I've worked so hard on this, year after year, and nothing ever happens," Scott Hauge, a small business activist and organizer, told us. "After a while, I just threw in the towel."

Hauge is devoting his energy these days to statewide issues. But on the local level, there's a growing sense that the city needs to do more to help small local businesses get their share of the massive public spending pie.

"The Small Business Commission has made it clear that this will be a priority over the next year," Regina Dick-Endrizzi, the commission's acting director, told us.

Nobody knows exactly what percentage of city contracts for goods and services go to local businesses. Hauge said the Mayor's Office did a limited survey about a year ago, but the data wasn't very good. And while Newsom signed an executive order in 2005 directing departments to look for ways to patronize local businesses, there's not much to show for it.

"I think probably less than 10 percent [of city spending] goes to local businesses," Hauge said.

Board of Supervisors President David Chiu, a former small business commissioner, agrees. "I think it's accurate to say that at least 70 to 90 percent of all city contracts go to out-of-town businesses," he told us.

As Dick-Endrizzi pointed out, city purchasing has strict rules — and for good reason. "In most cases, you have to put out a request for proposals and take the lowest bid," she said. "If you didn't have that, you'd have a big problem with favoritism."

But when the lowest bid is the only criterion, San Francisco businesses are at a distinct disadvantage.

"Say a city agency wants to buy five hammers," said Steven Cornell, owner of Brownie's Hardware.

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