Were Twitter's SF tax breaks worth it?

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Twitter got a $22 million tax break for its move to mid-Market and $34 million it would have paid on its stock options.

Twitter’s San Francisco tax breaks are back in the spotlight again as the tech-darling’s IPO is ready for its first public offering. In Sunday’s San Francisco Chronicle, tech columnist James Temple asked the questions we wish the Chronicle would’ve asked more effectively two years ago: “On the whole, who's getting the better end of the deal? Twitter and its employees, or San Francisco and its residents?”

He notes that San Franciscans are getting priced out as the tech boom raises the rents in the city ever higher, bringing new anti-eviction movements to the fore (Elderly activists and SF natives march to preserve Mission culture at Our Mission: No Eviction, Oct.), an issue we’ve covered many a time. But when looking at Mayor Ed Lee’s tax subsidies to Twitter, you have to understand two sets of context: The dubious successes of tax breaks nationwide, and job growth in California as a whole.

The New York Times investigated the success and failure of tax breaks on a nationwide scale. From its December 2012 article: “A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.”

But although localities often tout job growth as their reason for doling out generous tax exemptions, like Mayor Lee has, many of the benefits are not tracked. From the New York Times:

“A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.

“Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.”

And of course, that was the fear. Twitter supposedly had one foot in Brisbane, just south of San Francisco, when Lee was negotiating for Twitter to remain in the city. It’s a scenario the Times said has played out all over the nation, but San Francisco comes in first.

The Times created a database of 150,000 tax awards, and in California the top of the list, with the biggest subsidy, is none other than Twitter. But according to the Chronicle, that initial estimate of $22 million in breaks may actually be closer to $56 million when you count the legislation ending tax breaks on stock options — money that San Francisco is missing out on.

nyt data map   

A New York Times database explores tax subsidies in the United States. The recorded revenue localities and states have gotten back for their trouble is not exactly a ringing endorsement for tax breaks.

And much like the scenarios seen in the NY Times article, the San Francisco Public Press reported that even with 14 city agencies working on employment initiatives, the city isn’t tracking its own job growth (an issue that Guardian News Editor Rebecca Bowe reports on in this week’s Guardian as well). From the Public Press: 

“Without a common citywide strategy, no one has been able to measure accurately how many or what kinds of jobs are being filled, or how much is spent to prepare unemployed San Franciscans for new careers."

And any job numbers that the mayor did cite haven’t been clearly separated from state job growth numbers, making claims that job growth is attributable to tech questionable at least.

Again, from the Public Press:

“In a flood of speeches and press releases, Lee has boasted that the city added 31,000 jobs since he became mayor in 2011. The claim is based on data showing a similar employment recovery across the state. Yet the mayor’s office was unable to point to more specific information about how many of those jobs originated through city-sponsored programs.”

Give Temple’s piece on the Twitter tax break a read, but check out the Public Press and New York Times articles first for the full context on the only question that matters: “Was it worth it?”

 

Comments

The article also mentions that had Twitter left, it would have been a total loss for the city. Better to get some tax than none at all.

The fact that Twitter have jump-started the redevelopment of Mid-Market is the real win here, however. Chris Daly had a decade to do that, and failed dismally.

Posted by Guest on Oct. 29, 2013 @ 2:01 pm

they were part of regular payroll, which it blatantly is not, because it is risk capital.

It's not surprising that Twitter were willing to quit. It's a wonder that any of our high-tech wunderkids stay here at all.

Posted by Guest on Oct. 29, 2013 @ 2:03 pm

And yet they do stay here, the country's biggest tech companies, those that have gotten tax breaks and those that haven't. Hmm, maybe low business taxes don't really drive corporate decisions as much as the anti-government yahoos say they do. BTW, the mayor who signed the tax on stock options was the business-friendly Gavin Newsom, who was at least reasonable enough to see that corporations were using that form of compensation to avoid local taxes, unlike many of today's right-wing zealots. 

Posted by steven on Oct. 29, 2013 @ 2:38 pm

companies might have been here but for SF's bad reputation for punitive taxes and regulations. It's not a coincidence that none of the real biggies are in SF, e.g. Apple, Google, HP, IBM, MicroSoft, Cisco and Intel.

SalesForce, Twitter and FaceBook isn't bad, but we could have done so much better. At best, it is ambivalent.

The real problem, at noted here many times, is SF regarding itself as a separate city, rather than just a neighborhood in the Bay Area. This beggar-thy-neighbor game with companies is terribly wasteful.

Posted by Guest on Oct. 29, 2013 @ 3:02 pm

Doesn't that beg the question as to why their employees are living here in large enough numbers to impact the rental market?

If Twitter had moved to Brisbane, do you have any doubts about where their employees would choose to live?

Posted by Guest on Oct. 29, 2013 @ 3:42 pm

live isn't important. Unless they work in SF, then SF cannot collect payroll tax.

The city is not allowed to tax income directly via a city income tax because the State does not allow it. Otherwise, you can bet SF would have tried that before now, and then you really would see an exodus of well-paid SF residents.

Posted by Guest on Oct. 29, 2013 @ 3:56 pm

If they had moved to Brisbane, people would be complaining about the Twitter buses.

Posted by Guest on Oct. 29, 2013 @ 7:39 pm

"Beg the question." You keep using that phrase. I do not think it means what you think it means.

Posted by RemyMarathe on Oct. 30, 2013 @ 8:55 am

look it up

Posted by glojdoip on Oct. 31, 2013 @ 12:48 pm

I'm not certain about the others, but Google does have an office in SF. Right on the Embarcadero across from the Bay Bridge.

In many of the other cases they're simply too large. Not only is there not nearly enough space, but people would complain if they were to try and move into the city. Or if the ludicrously low height restrictions on buildings were increased to the point that we could have actual high-rises and make more effective use of our limited land area.

Posted by Belgand on Nov. 05, 2013 @ 6:07 pm

It is often interesting to take some of Steven's statements and compare them to reality. For example in this case his claim that the nation's biggest tech companies locate in San Francisco. Obviously nonsensical, but for the record:

None, zero of the top 25 Fortune 500 tech companies are located in San Francisco.

6 of the 25 are located in the Bay Area - eBay, Oracle, Cisco, Google, Intel, Apple. So they can get to San Francisco for lunch and the employees can live there if they like but the corporation doesn't have to pay San Francisco any taxes. Luckily, Twitter will be different.

I don't know where Steven gets half the things he says but it is still possible to learn from them.

Posted by Guest on Oct. 30, 2013 @ 11:48 am

and he can get a table at his favorite bijou French restaurant again.

Assuming it doesn't close, of course.

Posted by Guest on Oct. 30, 2013 @ 12:01 pm

What do you think they would say, Joe?

Posted by anon on Oct. 29, 2013 @ 2:09 pm

SF has received in taxes from Twitter.

Posted by guest on Oct. 29, 2013 @ 2:37 pm

Everyone pays taxes -- bigger companies more than small because they use more city services and have a bigger impact on the city infrastructure -- what's your point?

Posted by steven on Oct. 29, 2013 @ 2:40 pm

Why the SFBG is not doing hard-hitting pieces like this which raise legitimate questions about public policy? Instead you're holding an umpteenth "public meeting" on housing issues and embedding reporters with protestors in Dolores Park who wave signs comparing Scott Wiener to Dan White?

Under your leadership this paper continues its fast descent into total irrelevancy.

Posted by Lucretia Snapples on Oct. 29, 2013 @ 3:02 pm

This is one step up for Joe, who usually just cites a few Twitter quotes and then adds in a few glutinous bromides.

While Steven is all emotion and no facts. Tim would talk to people, fact check and at least tried to stay factual. This emotive maudlin sanctimonious nonsense just makes the entire enterprise look rank and amateur.

Maybe the budget is hot and they get what they pay for, but it's still sad.

Posted by Guest on Oct. 29, 2013 @ 3:16 pm

... is that you're looking on our politics blog, and not the news features section. We have plenty of journalistic enterprises in both, but if its a "just the facts ma'am" that you're looking for, it's in a different section of the website. 

And I rarely, if ever, quote a Tweet in my article. I just like embedding them because it gives the reader a chance to see what people are saying on an issue I write about.  

Posted by Joe Fitzgerald on Oct. 30, 2013 @ 12:15 pm

and devoid of any political agenda?

Really?

Posted by Guest on Oct. 30, 2013 @ 12:32 pm

... I'm just saying that in terms of depth of pieces, length of article, breadth of analysis, those things go into the news features section. The politics blog is just that, a "blog," which sometimes means a few observations about a current issue or article. They're different entities. 

Posted by Joe Fitzgerald on Oct. 30, 2013 @ 1:30 pm

everywhere in SFBG, but that in the enws section you actually try and conjure up some facts to support your bias?

Good to know.

Posted by Guest on Oct. 30, 2013 @ 1:42 pm

It is just extorting less, and only because Twitter stood up to the city, whereupon the city realized that it needs Twitter more than Twitter needs SF.

Posted by Guest on Oct. 29, 2013 @ 3:03 pm
Posted by Guest on Oct. 29, 2013 @ 4:39 pm

And SF will always do better if it welcomes and encourages those enterprises, rather than drive them out of town thru misguided ideologies.

Posted by Guest on Oct. 29, 2013 @ 4:51 pm

San Francisco will outlive Twitter, which will be gone in less than ten years.

Posted by Guest on Oct. 29, 2013 @ 5:01 pm

It's about what the city has to do to preserve the tax base that it needs to pay all the insane benefits to the city family.

Posted by Guest on Oct. 29, 2013 @ 5:11 pm

this.

progressive goofballs just don't have basic common sense.

Posted by RemyMarathe on Oct. 30, 2013 @ 8:37 am

In short,

you want ever more services that you want others to pay for it, but complain that others are using up services, while, you want ever more services that you want others to pay for it, but complain that others are using up services, while, you want ever more services that you want others to pay for it, but complain that others are using up services, while, you want ever more services that you want others to pay for it, but complain that others are using up services, while, you want ever more services that you want others to pay for it, but complain that others are using up services, while,

Twitter is by Bart by the way, using few services.

Posted by Matlock on Oct. 29, 2013 @ 8:28 pm

There's the special Twitter Express that runs from CalTrain to 10th and Market ferrying Twits who commute from the South Bay to their job site.

Posted by marcos on Oct. 29, 2013 @ 8:52 pm

paying whatever the rent and taxes are.

It's employees either live outside the city, or much to the chagrin of the Guardian types bought houses at inflated high tax prices.

Either way the Jones metric is a fail.

This is a classic true believer knot.

the enemy don't live in the city so don't pay taxes
the enemy live in the city but suck culture wise so don't belong here
the enemy business is going to fail
the enemy business owes us money because it makes so much
the neighborhood, the neighborhood is entitled to something because the area is a mess
the neighborhood, its is a mess because of government
the neighborhood, it's not that bad
the neighborhood, it's a mess because of capitalism
the neighborhood, it's a mess because of lack of investment
the neighborhood, it's a mess because of investment
The newcomers are terrible because of their lack of investment
The newcomers are terrible because we hate them and don't want anything to do with them
The newcomers are terrible because of the time of day
The newcomers are terrible because of their hair cuts

I loath the new dot com types as much as the next guy, but I don't make my shit up new to fit the agenda of the moment.

Posted by nixon on Oct. 29, 2013 @ 9:22 pm

Matlock/nixon.

Exhibit A: Your post under the Mission Dolores protest thread entitled "All these laws are terrible."

You love to accuse others of hypocrisy, but your own glaring hypocrisy never fails to amaze.

Posted by Greg on Oct. 29, 2013 @ 9:40 pm

is that the question of the article is whether the tax breaks are worth it.
How can that be measured if some type of measurement of what SF has received by getting Twitter to stay isn't included in the equation?

I apologize for asking such an inpertinent question

save your assholishness for someone who is being an asshole

Posted by guest on Oct. 30, 2013 @ 7:20 am

Fellow Guest-
Steven, can ably speak for himself, but let me defend him anyway.

It isn't his job to provide any information (such as Twitter tax revenue) that can help you to create an informed opinion. His job is to provide information, correct or not, that advances his agenda.

If you want information covering both sides of a story then go read pieces written by journalists, but don't foolishly criticize Steven who is doing his job properly.

Posted by Guest on Oct. 30, 2013 @ 8:08 am

should not have to be held to the same standard? No need to fact check, for instance? And license to overstate and omit as he sees fit?

He's more a blogger than a investigator or reporter?

Posted by Guest on Oct. 30, 2013 @ 8:40 am

Only the Guardian could question something that - for the first time after 50 years of trying - actually is transforming the mid-Market district. We would have lost one of the city's major employers, and we would have missed out on thousands of jobs - not just tech jobs, but also all of the other ones that feed off of the tech economy - restaurants, etc.

The reason that the Guardian hates tech is that it fears how tech voters will vote. Not surprisingly, after getting bashed by the Guardian week after week, I'm guessing that they won't be big fans of the far left.

Posted by Guest on Oct. 29, 2013 @ 3:49 pm

mantra no matter how much ridicule gets piled upon them for it.

They want SF to be a fiscal basketcase like Detroit so that poor people can live here again and turn SF into some mecca of bad art, sex, drugs and rock and roll.

IOW, they never grew up.

Posted by Guest on Oct. 29, 2013 @ 4:10 pm

>"$22 million in breaks may actually be closer to $56 million when you count the legislation ending tax breaks on stock options — money that San Francisco is missing out on"

No, it doesn't work like that on this planet.

Look, if you are Twitter you have the choice of moving to Brisbane and letting your employees keep the $56 million dollars.

Or you could stay in San Francisco and try to explain to your employees why their $56 million is going to the city. Because you didn't want to move 6 miles south.

Any rational company would move to Brisbane and let their employees pocket the $56 million

But the SFBG likes to write to about San Francisco 'missing out' on money that they never had a chance for in the first place.

SFBG, please hire someone knowledgeable in economics and listen to him/her. You are a complete embarrassment already

Posted by Guest on Oct. 29, 2013 @ 5:15 pm

From another article I read earlier (Twitter Just Revealed Its IPO: Surprise, It's Not Profitable):

"Twitter is not profitable. It lost almost $70 million in the first six months of 2013, and has never been profitable—though revenues were $28 million in 2010, and $316 million last year. That's a big jump, but doesn't negate the fact that this business doesn't turn a profit. Twitter currently has 215 million monthly active users—less than expected."

My opinion: Twitter is the most useless thing I can think of other than data-mining FB and waste-of-time silly apps. All of this tech shit and the sheeple's addiction to iphones is serving as a major distraction from the important stuff that is going on in the world. Verbal talking with one another has been replaced by typing. WTF?

Also read this:

Mark Zuckerberg Partners with Right Wing Christian Homophobes

Posted by Guest on Oct. 29, 2013 @ 7:22 pm

If Twitter takes a shit you are out even less than what you feel entitled too but are not really owed.

Years ago I spent a minute attempting to log into twitter, a "progressive" co-worker had already logged in on that computer. I figured if he had already was into twitter it must be shit so I never even bothered again.

If Twitter going public is a fiasco, then your sense of entitlement to other peoples money is safe, as Twitter won't have any for you.

Posted by Matlock on Oct. 29, 2013 @ 8:01 pm

Get help, matlock.

Posted by Guest on Oct. 29, 2013 @ 8:51 pm

somewhere and I as a progressive am owed.

Posted by nixon on Oct. 29, 2013 @ 9:03 pm

I read this article earlier:

Twitter's Unprofitable Board Gives Itself a Huge Raise

The all-male directorship at Twitter is rewarding itself handsomely for running a business that makes no money, Footnoted reports. The salary for attending board meetings, while your company bleeds money? Now up to $16 million per year.

These are people who, by traditional business metrics of "earning money" and "doing things that don't lose tens of millions of dollars," aren't terribly deserving of a raise. But an update to Twitter's pre-IPO documentation shows deserve ain't got nothin' to do with it:

The disclosure sets the value of initial stock grants for Twitter's five outside board members at a minimum of up to $16 million each, double what the company had initially planned, though that number too was new to yesterday's amended filing.

[...]

Just to put this into perspective, we went back and skimmed the pre-IPO filings for both Google and Facebook to see what those directors got: two of Facebook's directors received around $600K worth of stock each, which isn't even close.

Posted by Guest on Oct. 30, 2013 @ 2:52 am

The compensation is a matter for the owners and, after the IPO, the shareholders.

Posted by Guest on Oct. 30, 2013 @ 6:27 am

It's amazing how the author of the article makes no mention of exactly which taxes Twitter got a break from. It matters because they are anti-growth taxes that are unique to SF. They're ridiculous and shouldn't exist in the first place.

And most of the commenters have no idea either. Amazing how little facts enter into the conversation.

Actually, on sfbg, I guess it's not that amazing.

Posted by RemyMarathe on Oct. 30, 2013 @ 8:33 am

While tech companies get tax breaks, I almost break my leg in a hole in the sidewalk in U.N. Plaza. The City has money to put on extravaganzas for the rich, but not to fix the streets, see that public transit is operated efficiently (four 6-Parnassus busses in a row? Express service on weekends and after 10 a.m.?), provide the public and tourists with restrooms and drinking fountains and benches and waste receptacles, take care of the woman who has been living at the bus stop at 8th and Mission the past two years, put an accessible supermarket in Mid Market, create real bike roads and walking routes, replace nondescript exotic plants with natives, rehabilitate some of the dozens of vacant buildings "downtown" for low/no income housing, feed the hungry, heal the sick, and comfort the afflicted. That would be everyone who is not a "greed is good" carpetbagger; especially those of us who remember a kinder and gentler City not dominated by dogs and ugly architecture.

Posted by TrollKiller on Nov. 04, 2013 @ 2:38 pm

employ each city worker, because of all the benefits.

Posted by Guest on Nov. 04, 2013 @ 3:01 pm

A worker who does their job should be paid well. This is especially true for workers who are essentially our servants. Those who do all the dirty work so we don't have to cook, clean, do laundry, dispose of our own waste, and who make it possible to use the public infrastructure without injury or death. This especially applies to those who handle our food, care for our children, and provide medical and therapeutic services.
Today, those who build castles of sand in the air are rewarded with millions, while those who do real work are castigated, denigrated, and resented. This is the world tech hath wrought. The good news is that after the next Big Bust, most of you ingrates will go back to whatever God-forsaken Hell-hole you came from. Or maybe you can try picking tomatoes.....

Posted by TrollKiller on Nov. 04, 2013 @ 3:19 pm

Unskilled workers get minimum wage because that is all it costs to replace them

Posted by Guest on Nov. 04, 2013 @ 3:41 pm

bump

Posted by upmnj on Nov. 04, 2013 @ 4:22 pm

Not the "benefits," not the workers.
It's the "business" part, the bureaucracy that drives up costs.
Bunch of overpaid, over-educated Know-Nothings that micro-manage
everything to the detriment of the whole process. Hmmm,
sounds like most of the Tech industry.....

Posted by TrollKiller on Nov. 04, 2013 @ 3:27 pm

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