The bubble is back

City policies are encouraging a new tech boom — but have we learned any lessons from the last one?


San Francisco's future is in the process of being written, once again using lines of computer code and blips on the screens of electronic gadgets, the same as during the last dot-com boom. Its proponents insist it will be different this time — that Boom 2.0 won't displace the working class, that the bubble won't burst — but critics have their doubts.

After all, the city completely screwed up the last boom by favoring flashy tech development and growth over the needs of existing, often vulnerable residents. There are already signs that displacement is creeping back, rents are soaring, housing prices are driving people out of town — and even the city's own economist admits that nobody knows whether the tax-cut driven development will pay for itself.

In many ways, Zendesk, which recently moved to the area, is a poster child for the main obsession of Mayor Ed Lee and other city leaders, who are pushing policies that will make San Francisco the center of a new high-tech expansion. They hope to use that economic growth to create good jobs and address challenges such as revitalizing the mid-Market area.

Lee and Sups. David Chiu and Jane Kim a year ago led the creation of a business-tax exclusion zone intended to keep Twitter from leaving town. The company's planned growth and relocation to mid-Market, they argued, would be a magnet for more tech companies. The city would give up payroll taxes on the new jobs and provide other taxpayer-financed incentives — but big companies in the zone would be required to enter into community benefits agreements that would help low-income residents and small businesses benefit from the influx of well-paid tech workers.

In fact, a Guardian review of documents ("Behind the tweets," 3/15/11) found that Twitter resisted the city's efforts to get a substantial community benefits package, and that deal was pushed back to a later time. The agreement isn't actually due until the company occupies the new site, and Twitter officials are upbeat about their interactions. Twitter spokesperson Robert Weeks told us by email that the company is working with others to improve mid-Market: "Based on early meetings we're having with various entities, it's clear there's great collective energy that can bring positive change to the neighborhood."

But Zendesk — a Danish company that makes help-desk support software from an airy third floor office near Market and Sixth streets — seems to be offering a lot to the gritty neighborhood where it opened up shop last year. In January, Zendesk became the first company to take advantage of the tax break and sign a community benefits agreement with the city.

"This is about forming a longstanding relationship with the neighborhood," said Tiffany Maleshefski, the company's community benefits manager who negotiated with the city.

The agreement has both general goals and a number of specific requirements. The company will contribute $5,000 to mid-Market community gardens, use local businesses for at least 40 percent of its events, hire two paid interns from the neighborhood, donate equipment to local groups, coordinate several specific outreach events a year, help staff the Tenderloin Tech Lab, and participate in local nonprofit organizations and ventures.

Avoiding payroll taxes on the 66 new employees it's hired will save the company about $30,000 in its first year, Maleshefski said, and the company plans to grow from about 110 employees in San Francisco now up to about 200 employees by the end of the year.