we attracted interest from a couple grocery stores, but to no avail. the two stores that we had interest from backed out because they believed the area was not good for business. we also started working to improve the taylor street corridor, in part to try to encourage the owners of original joe's to reopen after they closed three years ago due to a fire, but it has been challenging, and the owners are not yet convinced that it is worth their investment. we also worked with a broad coalition of community stakeholders to prevent the transfer of a liquor license, and we succeeded, but even so, residents of the neighborhood came out to the planning commission a month ago and said they still are really concerned for the safety in the area. in january 2010, we came together with a number of stakeholders to form the central market partnership.

in recognition that these disparate efforts to revitalize the neighborhood have not been enough. the central market partnership, the idea behind it is that it takes a number of stakeholders, multiple city agencies, brought private sector participation and investment in order to turn a neighborhood around, and we have learned as in other neighborhoods where we have done the commercial corridor worked. most importantly, for a neighborhood to turn around, it needs to fill its vacant storefronts and buildings with positive activity that will lead to increase retail services and much needed employment in the neighborhood. a payroll tax break for the area is not a silver bullet, but it is a game changing tool that is part of a comprehensive strategy that we think will help.

there are a lot of challenges that have prevented the city from making real changes in this neighborhood. you can see from the slides, there are some things that i will not read. one of the main features of the neighborhood is the challenge of the indian underutilized buildings. -- the empty and underutilized billings. there is real poverty in the neighborhood. there is a lack of retail services and jobs. there are open spaces that are tempting for criminal activity. the tenderloin is often home to a lot of families who only leave to take their kids to school and come back. we have a sample list of vacant buildings. we have been working with a number of community-based groups and the northern california loan fund to try to attract arts groups to the area. we have not worked on every vacant building, but this is

just an idea of what we are up against. we work city-wide on struggling commercial corridors, and the storefront vacancy rate on central market alone is much higher than all the other neighborhoods in which we work. central market's commercial storefront vacancy rate is over 30%. that compares with our next toughest neighborhood, which is the view, at 24%. in terms of office vacancies, it is even worse. while we have a 15% citywide rate for office vacancies on central market, it is 51%. i'm sorry if this slide is actually wrong. it is 51%. i'm really sorry that change did not make it in. there is a concentration of crime in the area. it is not just a perception among businesses that there is crime. both violent crime and vice

crime, including narcotics, alcohol, and prostitution. you can see where the payroll tax break boundary is. the community has come together to address crime and is trying, but it has been challenging. as i said, our strategy in part has been to build on the assets in the neighborhood, so we are working with folks like the golden gate theater, like blick art materials, which recently came in. many stroke, and they want to see new businesses that foot traffic to help them keep their doors open. one of the things in particular that we are doing is trying to make sure that as new parts nonprofits come into the area, that they have sound financial situations, strong, long-term leases to help them stay, or even helping with folks who might potentially become owners

of buildings, which is a great strategy for long-term stabilization. if you look at the next slide, we have a number of development projects in the pipeline. some of which are actually in title. but, you know, city place and 1095 market, which is the proposed upscale youth hostel -- a number of these are entitled but did not necessarily have the tenants in place, nor their financing. one of the development projects on this pipeline is a proposed project with american conservatory theater. this is an opportunity for them to: land -- to own land, to have a campus that would include a second stage for them, and the office space they need. it will also include retail space and housing. it is a $100 million project. we have begun to make a moderate investment in this, but it is going to take a lot to get it

through the finish line. the system does not work in this neighborhood. there is a breakdown of the market, and i just want to explain very briefly that in order to fill vacancies, you need to have a neighborhood that businesses and arts groups and any potential tenants want to be in. it is true that the property owners have led buildings go into disrepair. it has been over decades that that has happened, but now, we see a willingness on the part of property owners to lease and improve their space. what we are lacking is tenants who can come in, pay rent, and justify the investment that property owners, tenants, and potentially the city will make in order to do the major improvements that building in the area need. the strategy we are proposing is to improve those conditions in the neighborhood as well as create financial incentives that will allow businesses to

actually consider coming into this area, leasing space, making an investment here. we have a number of neighborhood improvement strategies, some of which you heard about. we are trying to get more our programming on the streets. we are trying to develop our venues -- art venues. we're working to promote cleanliness and unification. we recently formed a new civic center cvd. we're working hard to bring more safety resources to the area. we're working to try to ensure that police will patrol on market. we're trying to attract small businesses, big employers, housing, and we will be redesigning the street. in 2015, there will be an overhaul of market street. we have a number of tools that we are bringing to bear in order to make this revitalization happen, but it is going to take everything we can possibly

muster. we have a loan fund we established for small businesses and commercial development, and it is useful, but there are some limitations. it is not no-interest, and it has some bureaucratic limitations that will prevent it from being useful to everyone who wants to come in. we have some other tax incentives, but those might be going away. we have had a limited amount of grant funding. we have a grant from the national endowment of the arts to help with bringing in our non-profits and programming. we hope to get another grant from them, but it is not much money. we are working on zoning that will incentivize certain arts units and this incentivize some of the - uses that have been preventing these uses from coming into the area, but zoning alone does not do anything. it just creates the conditions to allow someone to come in. we were hoping to establish a

redevelopment area. we thought this was a good use of tax increment financing, but it is unlikely at this point that tax increment financing through redevelopment will be an option. this is why we have proposed a payroll tax exclusion, to add an additional tool to the arsenal. i need to say a couple of words about twitter and whitewater matters -- y. twitter matters. twitter is on its own economic revitalization tool for the area. if it comes in, it will send a signal of neighborhood transformation to other businesses, to the real-estate community, to the property owners, and to the folks who are there and maybe encourage them to dig in their heels a little bit and stick it out. it will lead to increase retail and services and then entertainment uses. it will support the arts groups in the neighborhood. other social media companies

will want to co-locate, which will help us selling this vast amount of office space that we have here a big thing that i really like about twitter is that it will help us designate the area as a unique niche. it creates a sort of cutting edge nexus between technology and the arts. you might have heard the burning man is interested in coming to the neighborhood. bernie mahon is committed to putting a headquarters somewhere near six and market, but burning man and twitter are very nice complements. we also have another group doing similar economies/arts work. business is important because it prevents us from just having this area be an extension of downtown shopping. it will not be just a formula of retail expansion area. it will be a unique place. finally, and i think you will hear more about this later -- we

believe twitter and companies like it will engage meaningfully with the neighborhood and the city, and they are excited to do that. going to turn it back to jennifer to present the proposal. >> i wanted to take a few minutes to talk about the actual payroll tax exclusion provision and the amendments that we are working with supervisor kim's office and introducing today. carla, small businesses would pay less than $250,000 do not pay a payroll tax in san for cisco. this proposal would allow businesses that do pay a payroll tax, that create new jobs in the area to be exempt for six of the next eight years. that eight-year window would allow us to use the program as an incentive to draw business in without having the clock immediately taking down. once a business is located in

the area, it would be able to take the table tax exemption on all of their growth for six years and then pay full payroll tax on all of that growth, starting in year seven. the legislation includes first source hiring requirements, which mirrors that in the biotech payroll tax exclusion. we also are adding a requirement that businesses with a payroll of over $1 million must opt in to a finding community engagement plan. part of the policy goal of this legislation is to revitalize this neighborhood. the idea is that we want the visitor taking advantage of the tax breaks to do so. because this is a net new proposal, very similar to the policy thinking around bio-tech tax exclusions, those were enacted at the time in which the city had virtually no tax paying businesses of that sort. the city made a policy decision

that we were willing to forgo for a fixed number of years the payroll tax off of those jobs in order to end sent the industry to locate here. by creating a net new component of this legislation, we are doing the same thing, saying that we are willing to accept the growth but committed to maintaining the based payroll that the city is receiving and former general fund revenue over the life of the program. based upon our projected job growth numbers, our estimates for twitter, we believe that they will bring 1300 jobs to central market and then grow to more than 2600 jobs over six years, and these are direct jobs. we estimate that twitter will generate 11 $6 million in cash revenue to the city on an average annual basis over the life of the exemption. this includes an estimated base pay will tax of $535,000, and

then, the multipliers of the utility user taxes, sales and use tax, hotel tax, and property tax that would be generated by these jobs remaining in sanford cisco and locating in -- on market street. we are aware twitter itself does not pay hotel tax, but we are using and methodology provided to us by the office of economic analysis, which projects if the types of revenues that businesses generate through their business enterprises. the third column shows that in year seven, twitter comes off the exclusion, the city would start to receive an estimated $4.9 million in payroll tax revenue alone, and those other numbers are the annual numbers that we would receive on an annual basis simply from twitter relocating in the district. another type of job that twitter would create is something we call spin out job creation.

these are not the jobs that would be created by similarly situated businesses, other digital media companies. these are jobs directly attributable to twitter's presence. they are the jobs would it would be using to be successful. restaurants, cafes, janitorial, security. they are ancillary to twitter's business enterprise. we anticipate there would be the creation of an additional 800 jobs in san francisco in the first year, and that would grow to 3700 jobs in six years. using the same methodology from the office of economic analysis, we show that the average annual revenue during the tax exemption is $2.84 million in revenue to the city, totaling $17.3 million over six years. in summary, this is a summary slide showing the total jobs and tax revenue we project over the

life of the exemption, just directly attributable to twitter's presence. central market also has one of the highest office vacancy rates in the city with more than 1.5 million square feet of vacant or soon to be vacant office space in four large office buildings located within the central market tenderloin boundaries. this is in addition to the space that twitter would occupy. this level of vacancy along with the potential number of new projects creates an opportunity to add jobs. we estimate that philip just 25% of the 1.5 million square feet of vacant office space would bring more than 1600 jobs. the assumption we are making is one of general office employment utilization rate of one employee per 250,000 square feet. this type of targeted tax break, whether by industry cluster or

location, the proven economic development policy -- our research shows it has been successful in carry, new york city, lower manhattan, and certainly, with the viral attack -- the table tax exclusion. businesses will have to opt into this. it is not automatic simply by virtue of having your district located within the district. you have to show that your employees are conducting business in the district. with our biotech payroll tax exclusion, we believe there are 74 or 75 businesses in san francisco right now. there are between 10 and 15 biotech companies taking advantage of the exclusion. while it is a very important and sent -- incentor, not every business thinks it is.

we estimate that over 250 clean tech businesses in san francisco with approximately 20 taking advantage of the targeted tax breaks. we believe the tax proposal is also sound land use policy. promotes the concentration of of women in an urban core that has outstanding transit and promotes development and revitalization of a struggling neighborhood. we also believe we have heard concerns around displacement. we move that there are extraordinary other policies within the city that prevent displacement with in these neighborhoods. over 45% of the city's permanent affordable housing is located either in or adjacent to this -- to the boundaries of the central market and tenderloin payroll tax exemption. there is the sro payroll ordinance. the land use ordinance in effect provides multiple opportunities for the city to review

conditional use permits, a plethora of development projects, including demolition, rehab, replacement of formula retail, creation of residential dwelling, and all searches. current zoning controls established a western soma planning area and the citizens task force is charged with updating plans to solidify zoning controls for the proposed special use district. formula retail is conditional affirmative and triggers the review process. there are prohibited uses within this area, etc. the next slide shows the concentration of affordable housing within the proposed boundaries. at this point, i'm going to turn it back over to a need to talk about the outreach and supporters we have -- back over to amy. >> thank you. you should have a packet with a list of supporters and some letters we received in support.

a number of folks have expressed support, many of whom are here. american conservatory theater, burning man, theater bay area, and brad ericsson. such a city hospitality is here. central market arts festival. bockscar theater. the original joe's restaurant, and john dugan senior year to date. showed odds restaurant. archetype boutique. -- show dogs a restaurant. pearl's restaurant will be opening in a couple of months. daniel hertado is here from central market community district. urban solutions is supportive.

spur is supported. there may be people here who i have not seen. we have alexander quinn, an economic consulting firm. we have support from san francisco beautiful. we have some residents of the soma grande who have submitted a petition. we have the holiday inn civic center. we have group our development, which owns a building on mcallister. we have davis realty. we have troika construction. byron ye, who owns the renoir hotel. kim bender, a resident. john and michael are both here.

marlon word. we have kate of sfmade, who is supporting the proposal. there are other folks who i think will speak for themselves today, and i'm just going to turn this over to regina to make a couple of comments in closing on behalf of the small business commission. >> on monday, the small business commission heard this recommendation and gave full a condition to the board of supervisors to approve and pass it. while many of our points have been clearly outlined about the job growth, the residual money that the city will receive from

these jobs and the increase in job growth in that particular area in revitalization, but another point that the commission thought was very important for them in terms of approving this piece of legislation is that not only will the small businesses in that particular district benefit, but the small businesses where the employees live within the city of san francisco will also benefit from those individuals shopping, dining, doing their groceries in their neighborhoods. also want to point out that on page four in the comptrollers' economic analysis report, it made a comment that small businesses would not benefit from this payroll tax exclusion, and that is because what is

defined by the control of -- comptroller -- controller's office is those who do not a payroll tax, but our definition is under 100 employees. so you might take a look at a business that might have five employees, and they would be able to benefit from this by being able to add $1 two employees. restaurants would be able to benefit from this, and we think of them as small businesses as their business picks up from having twitter come in and other businesses come in. they will be able to benefit from this as well. as identified, the business to business component that will be able to be developed, many of the business to businesses that will come in, being attracted by an entity like twitter, black arts foundation, are sold -- are small businesses, so it will be

an attractive tool for them. the small business commission, just to reiterate, you have received a written recommendation, which encourages you to approve and support this legislation. supervisor chu: thank you very much. does that include the office of economic development's presentation? ok, why don't we move over to the controller's office, with regards to the economic analysis. >> good morning, supervisors. our office yesterday issued an economic impact report on this item, which you have before you. i would like to briefly summarize some of the main points, and i would be happy to take questions about our work. first, i would like to show you on the overhead if i may another map of the district, which i have -- [inaudible]

if i could color-coded. i color coded it because there are four types of properties with respect to how this legislation impacts the economy, and i'll go through them in order. property here in red on market street between ninth and 10th is the complex, and that is the site where it has been reported that twitter is interested in locating. the properties interested in blue. these properties are the large commercial properties that are in the district. these properties are also notable because they are either vacant or will become vacant, as well as the sfmart within the next year to 18 months. i would also mention that the large commercial property not in the district, the aaa tower at van ness and hayes, is also

nearly completely vacant. you have a situation in which the bulk of commercial real estate in the district will be vacant in the forthcoming period, which has profound implications. i wanted to just start off on that point. i will come back to that when i go through some of the details. you have already heard the details of the policy, the fact that it is a six-year exclusion for net new payrolls, that expires, and that it only applies to net new payroll within this defined area. this type of policy is something that is familiar in economic development. it has a fairly long history now, and it is similar in a policy to enterprise zones in which basically a zone is derived defined around an economically depressed area, and

taxes are used to incentivize growth and business locations within that area. there are differences with this policy, of course. it is a local only policy. we have a state enterprise program here in many enterprise policies are focused on jobs for residents within the district. this is an across the board payroll tax break. but it has a similar spirit, which is to say it is using tax incentives to try to incentivize business location and job creation within an area. the literature i think is fair to say is next. there was a major, for example, study by the public policy institute of california last year that evaluated california's enterprise policy, which is the largest economic development policy, state and local, in the country, and found that it created no new jobs on average. on average means some places it does and some places it does not. but it is not, let's say, a reliable by double source of job

creation. it does not work automatically. looking at the literature, there's three things to consider in doing a policy like this, to sort of checked to make sure that the details of the place and the policy match these best practices. one of which is to make sure that the only thing you are doing is not tax cuts. i believe in this case, and i believe as a detailed for you, the city has done a lot, and in the process of doing many of the things, and this is a complementary initiative. not simply throwing a tax cut in area in the hope that something will happen. it is, i think, one piece of the process of cattleization that might happen in the area. second, care must be taken to make sure you are not subsidizing business location and job growth that would happen anyway. this is basically a cost of a tax-cut policy that is broadly offered, that people will be eligible for the tax cut and be able tke