The bubble is back - Page 3

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


In the latest Harper's Magazine cover story, "Killing the Competition: How the new monopolies are destroying open markets," writer Barry Lynn argues that the consolidation of wealth and dismantling of fair trade and pro-labor laws has allowed the Bay Area tech industry to unfairly dominate small competitors and control the labor market.

That trend has been masked by political euphemisms that fool the public. "Corporate monopoly? Let's just call that the 'free market.' The political ravages of corporate power? Those could be recast as the essentially benign workings of 'market forces,'" Lynn wrote.

Donohue has been calling out such rhetoric for decades. He told us the city's economic development policies are mostly a boon to politically connected landlords and investors, and there's been remarkably little discussion at City Hall about gentrification, increased demand for city services, or other problems created by economic bubbles.

"People say it's different this time, but they say that every time. It's not different," Donohue told us. He said economic bubbles usually hurt the poor and working class by driving up the cost of living. And he also said, "Even the most conservative economists don't like the idea of subsidizing businesses because they think it's a distortion of the market."

Yet the "jobs" rhetoric and assumption that government should actively promote and subsidize the private sector has broad support in City Hall these days, even though Donohue said few people are stopping to ask whether a new tech bubble is actually good for the city.

"When you bring a lot of people into an area, you're going to create a demand for public services," Donohue said. "I don't think anyone has done a very good assessment of what this will cost the city."

Donohue worked on a political campaign in the mid-'80s to require a study of the costs to the city of serving commercial growth that was occurring in the Financial District at the time, but he said it was bitterly opposed by then-Mayor Dianne Feinstein and her downtown allies. "Nobody seems to want to know what that figure is," Donohue said. "Nobody at City Hall is even asking the question."

City Economist Ted Egan confirmed that his analysis of the mid-Market tax break and other economic development schemes doesn't include the cost of increased demands on city services. "I've never dealt directly with that argument," Egan told us.

Based on his assumption that Twitter's move to the SF Mart building (owned by the politically connected Shorenstein family) on Market between Ninth and 10th Streets will fill up commercial vacancies throughout the area and generate increased sales, property, and payroll taxes, Egan concluded the city will more than make up for the lost business tax revenue over the long run.

He minimized the importance of costs to the city, such as increased police or sanitation services, and impacts to city infrastructure from water and sewer to roads and public transit. "It can't be that running more transit is bad in a transit-first city," Egan said, noting the relatively fixed cost of operating a Muni station.

Yet Donohue and others say the fact that the city and San Francisco Municipal Transportation Agency have huge budget deficits to close every year, even after years of cutting services and raising fees, indicates the city has a structural budget deficit that will only get worse as growth places more demands on government.

"I don't think these things are well-thought-through, ever," Donohue said.

Lee, Kim, and representatives from the Mayor's Office of Economic and Workforce Development didn't return our calls, but Chiu did and he said he believes in actively courting the tech industry with public incentives: "My support for these policies is a belief that it will broadly benefit San Franciscans."


Is it more feasible to build in an already dense environment? Or is it more feasible to expect all of the less dense cities ringing the bay to build more densely.
These are cities which have no interest in being as densely populated as San Francisco, and are places which are often populated by people who enjoy the relative density of their chosen home.
To expect other cities to densify to the degree SF has - even in places like the outer richmond, is an extreme pipe dream.

To the other poster who thinks that if we build some housing then we should build for 5 million people because thats what will happen:
It's nice to think that everyone in the US wants to live in SF, but thats just not reality. Not everyone wants to live here. We can do a better job with housing both the people who already are here, as well as a portion of the people who want to move here than what we are doing now. There is no valid reason to leave development lots undeveloped in prime SF other than peoples irrational need to control their environments.

Posted by Greg on Feb. 16, 2012 @ 11:45 am

Is this some kind of bizarre over-long troll? You don't want Stanford, Cal and UCSF because they lead to an educated successful population?

You are the one who should move, hopefully to someplace like Cleveland, so you can see what kind of economy your madness creates.

Posted by Guest on Feb. 20, 2012 @ 9:42 am

But of course the NIMBY's and activists don't really want affordable housing, because then they'd be out of a "job".

Posted by Guest on Feb. 15, 2012 @ 4:08 pm

who don't rent out their properties. Progressives are always opposed to the tyranny of the judicial system - except when they want to use it for their own means.

Posted by Guest on Feb. 15, 2012 @ 7:00 pm

Guest wrote: "And the city's economist is surprised rents would rise so quickly? Wow, apparently anyone can be an economist, no matter how dim-witted."

So funny and so true.

I heard someone from the city's economic department (I think it was Mr. Egan) testify in front of the BOS last year that a rent tax would cause rents to increase. What?? Where did he make that up?

Apparently Mr.Egan studied economics in Soviet Russia where they tried - and failed miserably - to match prices to costs. If he knew about the real world in the US and other capitalist countries, he would have learned that rents are already as high as the market will pay because - guess what - landlords are profit maximizers and costs have NOTHING to do with the rents landlords charge.

Anyone - including even a "trained economist" - who can't compare two reasonably similar apartment or commercial buildings - one with a low Prop 13 value and no mortgage, and one with a high Prop 13 value and huge mortgage - and not see that the rents charged are EXACTLY THE SAME, obviously is not very well-versed in the way economics works in the real world.

He sounds like a perfect hire for SF, a city famous for its mayors and BOS who give great soundbites about an "inclusive, progressive city," while in reality the city rapidly morphs into a place where only millionaires and multi-millionaires (and a few token poor people) can afford to live. Hell yeah Mr. Mayor and (most) BOS members: we need more high-paying technology jobs, more millionaires, and ever more multi-millionaire transplants from India and China. There's $3 Billion of "free" real estate money" for landlords and property speculators just by getting rid of the lower and middle income "off-brand" San Franciscans and replacing them with shiny new million dollar "brand name" replacements. The politicians and city bureaucrats are doing a great job, so please keep up the good work.

Posted by Guest on Feb. 15, 2012 @ 9:46 pm