Showdown time for Twitter/Tenderloin tax break

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The tax exclusion zone has grown huge with little explanation why.

After months of backroom deals to enlarge the tax giveaway zone – which I detail in this week's Guardian, based on my review of thousands of pages of public documents – the Board of Supervisors Budget and Finance Sub-Committee tomorrow (Wed/16) will finally consider the mid-Market and Tenderloin payroll tax exclusion zone.

There's been a flurry of last-minute activity on the proposed legislation, including the increasingly desperate and personal advocacy by Tenderloin power broker Randy Shaw, who has worked closely with Sup. Jane Kim and the Mayor's Office economic development status to craft a deal that has grown from focusing on keeping Twitter in town to encompassing all of the Tenderloin, a tax giveaway that the Budget and Legislative Analysts' Office says totals $22 million.

City Economist Ted Egan told the Guardian that he doesn't understand why the tax exclusion zone was expanded so far and he doesn't think inclusion of the Tenderloin properties or the big Market Street commercial properties (except for SF Mart, where Twitter is seeking to relocate) provides much economic stimulus. “If you take Twitter out of the equation, this thing doesn't make a lot of sense,” he told us.

Egan submitted his report on the project for the Office of Economic Analysis to Controller Ben Rosenfield at the end of the day on Friday, but it's still being tinkered with and has still yet to be released even though the hearing is tomorrow at 10 a.m. Egan said he recommended the area be reduced and that the city consider legislation aimed to lessening how much Twitter would pay on stock options as an alternative to the broader giveway.

As I write in this week's paper, the reasons why the area was expanded – it now reaches north to Geary, west to Van Ness, and east to Mason, rather than just being on Market between Sixth and 10th as originally proposed – is a bit of a mystery, although we know it was pushed by Shaw and Kim, as well as some members of the Office of Economic and Workforce Development staff.

Kim has decided to stop answering questions from the Guardian and Shaw also didn't answer our inquires, including whether he has any economic interest in any properties in the tax exclusion zone, a question that OEWD staff said they never looked into as well. So what exactly is going on here?

Perhaps we'll find out tomorrow, although Kim and co-sponsor David Chiu have decided to have the legislation heard by just the Budget Sub-Committee, which is chaired by fiscal conservative Sup. Carmen Chu, rounded out by Kim and Sup. Ross Mirkarimi. So this thing seems likely to be passed on to the full board as soon as Tuesday.

If Chiu and Kim continue their unquestioning support for legislation created by former Mayor Gavin Newsom they've chosen to champion and expand, this thing could be a done deal, although progressives (including Sup. Eric Mar, who endorsed Chiu for mayor but last week told the Guardian, “I'm voting with the progressives on this one”) are strongly opposing the deal and threatening a referendum on it.

So this will be the first big political fight of the new year, and the first big test of Chiu's stated belief that there's common ground to be found on all controversial issues.