>> the data is done at year after year and allows you to study the size and location of individual companies from one year to the next sequentially. what allows you to do, and i would credit your oversight effort the data i got, but it allows you to see on companies that were there in your 1 who were not there in year to by location. this is analysis i did for each of the bay area counties. it shows san francisco with a much higher percentage, double santa clara county's move out. there is one of immediate obvious answer an economist would give added is only partly right. it is that san francisco is more expensive. when companies become a certain size, they look for more mature businesses, more self-contained businesses and they don't need to be in a dense, urban center

anymore and they get to alameda or solano county. if you are already there, you are less likely to move again. that does not explain why we have such a high-risk move out rate. frankly, a lot of places are more expensive than san francisco. we do not seem to have those non-cost factors that hold businesses here that they do in santa clara county whereby you have businesses in that county with multiple thousands of employees in one place in that county even though it is a very expensive place. there is something about san francisco -- maybe it's just a stage of evolution of our technology industry and we are in a state of transition, but we do not have those attractiveness factors. we are great at attracting talented people and grated having talented people start

companies, but once they get to the size of major enterprises, we are not as good as keeping them here. that goes back to some of the major infrastructure backers as well as other companies. president chiu: i would like to explore what other things we can do to retain the company's their birth tear and grow here, but seem to when they get larger, flee to other counties. one topic that is a big difference between our county and others is we are the one city and county in california that does levy a payroll tax. you have studied this last year, looking at the payroll tax and is not an efficient tax to in cent job growth. can you talk about that for a moment? not all of my colleagues were here when he presented that study last year. could you talk about some of the issues with the payroll tax more generally? >> certainly.

in that research last year, we looked at columbia economic and fiscal impact from changing the 1.5 -- looked at the up fiscal and economic impacts changing it from one plan 5% and switching it to a more progressive payroll tax with a gross receipts tax on commercial rents or a wholesale replacement of the payroll tax with the gross receipts tax including commercial property owners. the crux of the economic benefit and one of the interesting things, at your request, a supervisor, was we were trying to increase jobs and be an economic benefit to the city and raise revenue to this city. this was only possible because the payroll tax was a particularly discouraging tax because of falls directly on the price of labor. if we were to say, for example,

and i am not recommending this, a flat for business tax, that would not encourage businesses to do one thing or another as opposed to hiring. but when we say we are going to tax your labor bill, that tells companies i'd better keep my labor bill down. when the list that tax, you get i am no longer this incentivized to hire people and there'll be a job boost from that. if you find the revenue from something else that's less discouraging of hiring like commercial rent or inputs or gross receipts, you can receive more -- you can achieve more net hiring or you can achieve more revenue and net hiring. our report did investigate ways which you could find fiscally better economic alternatives to the payroll tax. i just want to say that the focus goes on the payroll tax and i don't think that's mistaken, but i would not want anyone to think i believe the

payroll taxes a major reason businesses leave san francisco. labor costs are significantly higher in san francisco than the rest of the bay area counties. that goes directly to housing costs. if housing is expensive, you have to pay laborers' more who work here. it's not clear that transportation is the advantage it could be. at adds to cost as well. there are a number of things, including the payroll tax. president chiu: one last question -- i know folks have been concerned this particular tax policy will lead to a hit to the general fund. what i have been saying until i saw this report was i expect it to be neutral. if a company like twitter or other companies leave and are not creating employment in vacant buildings, zero times 0 equals 0. one of the statistics i was surprised to see is you believe

if twitter does stay here, and there is a cluster of technology companies around the central market area, you expect to see $2.7 million per year on average additional payroll tax growth over the next 20 years. that does not include amount related to additional sales tax, hotel tax, utility user, or transfer tax revenue. could you estimate what those numbers might be? >> i cannot estimate those numbers that want to place too much credence in the exact numbers. it is very clear that based on our analysis, this would create jobs on a net basis. because it creates jobs, it create tax revenue associated with job growth, hotel tax, utility tax and so forth. the real question is since you are using the payroll tax and an exclusion from the payroll tax to generate growth, does it hurt

payroll tax specifically or not? our assumptions are not based on any crystal ball but on a wide range of potential futures. we make more payroll tax revenue in the long run than we give up in the short run because attracting twitter to the area leads to economic development and higher payroll tax revenue in years seven and beyond that we could expect to otherwise receive. we could further increase that benefit by following the recommended amendment we have in relation to the large commercial properties. >> thank you. supervisor chu: why don't we go to the budget analyst report? >> we have a rather detailed report. i will try to be brief and summarize a few of the highlights. on the top of page seven, we

state that assuming twitter was able to relocate into the central market tenderloin area and there is no change in the average annual twitter salary, this would result in over a million dollars of payroll expense taxes to the city in 2012 and approximately $4,054,500 in 2013. this assumes twitter would remain in the city without payroll tax exclusion. if the number of employees at twitter remains relatively stable at approximately 3000 employees, when the payroll tax expires, twitter would pay approximately a total of $4,590,000 annually to the city. we also point out on page 7 that under the proposed ordinance, of twitter relocated to the central

market and tenderloin area and went public with an six years of their participation, the proposed payroll tax exclusion would be a value of such stock options as has been indicated would also be excluded, such that twitter would only pay their base per -- based payroll tax of $535,500. on the bottom of page seven, we point out some administrative costs that would be incurred if this legislation isn't -- if this legislation is approved. there would be some one time costs from the tax collector of $162,000. in addition come on an annual basis, approximately $186,000. we have one recommendation i will mention in a minute to address that. on page eight, we state that if the proposed payroll tax exclusion is not approved, twitter may not stay and grow their business in san francisco

such that san francisco would lose the estimated $535,500 in annual payroll taxes and -- that twitter currently plague -- that twitter currently pays to the city. if twittery to the central market and tenderloin area and grows there business, the proposed payroll tax exclusion, and if that is approved, the city would forgo up to $4,054,500 in excluded payroll tax annually overall for the sixth year time frame that twitter could obtain the payroll tax exclusion, this could result in a little over $22 million of foregone payroll taxes to the city. then we state it twitter relocates to the area and grows there business as has been previously discussed, after twitter receives the payroll tax

exclusion, the city would begin to receive significantly greater peril taxes from twitter. with respect to your question, supervisor mirkarimi, about services on the top of page nine, we stayed in negotiations with the office of economic workforce development, that office has agreed to address twitters concerns regarding public safety, neighborhood conditions, and a central market in the tenderloin area which could result in additional costs to the city. 8 -- the police department has agreed to expand its foot patrol to 10th street and in addition, the mta has been requested to provide a non-stop express service during prime commuting hours between the caltrans station at fourth and

king streets and the civic center bart station at ninth and market streets. these two proposed improvements coupled with actions of essentials -- of the central market partnership have been made to address twitter's concerns regarding neighborhood conditions. as the city is experiencing significant budgetary shortfalls, if twitter does not expand at the rate projected, the budget and legislative analyst questions whether the city would be able to deliver increase levels of services to meet the demands of a large company while potentially reducing payroll tax revenues. on the bottom of page nine, regarding proposed amendments, we point out that section 9063 of the section of eligible of police is at least 96% of work time within central market

underlying area, and at least 90% of the work, activities directly related to the concept of activity is located within the central market and tenderloin area. in discussions with the treasurer and tax collector's office, specifically michele, estimates that the language were to be deleted, the office estimates that while the initial 162,000 would remain the same, that is the one-time costs, the annual ongoing costs could be reduced from $186,000 to $81,000. that would be a reduction of $105,000 annually of general fund expenses. we recommended you recommended ordinances on pages 9 and 10 and to clarify the provision of the

ordinance, and we consider approval of the ordinance as amended to be a policy decision for the board of supervisors. supervisor chu: thank you. if it is ok, i think there is a number of people have been waiting to speak, so vital good public comment before we ask additional questions -- why don't we go to public comment. [reading names] >> thank you, supervisors. it has been eight years since i have been in this room to testify. it is still a beautiful room. you forget how beautiful the place that we work is. i would also like to say congratulations to barbie. this is 40 years of work in the city. i have been watching market

street for 40 years since bill alioto tried to clean it up, and each time, it has failed. very briefly, staff gave you all the detail in the world, but the big picture is there is a chance now to rebuild that area. the work done on sixth street over the last half-dozen years has picked that area up a lot. from fifth street east is fine. this is sort of the last blockage. you can build and arts community that is a destination for people both from the city and from outside the city that has a balance of housing and job opportunities. twitter is only one part, but it is an important part. what you really want is it is not the 20 jobs. it is the restaurant jobs, the retail jobs, and jobs local residents can get that will come as a result of twitter and other

buildings growing and the synergies they create. you will make more money because of that. if we can successfully build an arts district, that would be a wonderful thing. it has worked in some other cities, and certainly, if it is arts involved, it should be able to work in san francisco. last two points -- supervisor mirkarimi, i share your concern about who gets services and who does not, but if we fill up some of those towers, there will be a great deal of foot traffic, and that foot traffic will lower costs, not raise them. the reality of large numbers of people working on the streets is more crime. lastly, i will said the this is a beautiful building, fabulous architectural building. i hope we can save it. supervisor chu: if i could ask speakers, as you come up, please state your name and your decision -- whether you are opposed, for, or neutral. >> i am definitely for an

representing the residents of soma grande. i submitted a petition today. within a day and a half, we got over 100 signatures. business attractions and job creation are two very important components to revitalizing our community. i grew up in this city. i am a native. i used to come downtown in my teenage years, and it was vibrant. there was activity. if this legislation is not passed, i believe that we are going to continue to see blight and devastation in our downtown cities. many people now do not come here to shop. people use to travel from far and near in areas outside of san francisco to shop in our downtown area, and they do not do that anymore. residents would like to see revitalization and see the vibrancy that this city used to have.

i have seen businesses leave this city in the past year because of the unwillingness of the city to work with companies and businesses that locate here and do business in san francisco. i implore you to definitely pass this legislation. thank you. supervisor chu: thank you. next speaker please. >> good morning. we are in support of this legislation. with 140 manufacturers all located here in city limits, and by far, the largest of our sectors is of help and showing products like bags. the core of the manufacturing capacity is actually centered in some of these very buildings we are talking about. we believe that having a tax exclusion will have a stimulative effect as these companies begin to start hiring again coming out of the recession. contrary, i think, to popular

belief, the garment manufacturing sector is not dead in this city. we have seen, although brian, designs may have failed on some levels, we see is that in the manufacturing sector, when we are very pointed about connecting those companies to these kinds of incentive programs and helping them use them in advance of hiring, that both can help them bring in their date of when they start to add headcount, and it also will help them hire more than they might have an ability to do by releasing extra cash flow. we believe for this sector, it is immaterial whether twitter does or does not come, and we also believe that having twitter in an adjacent building is not a threat or in any way in conflict with this objective. so we are in support. thank you. supervisor chu: 90 very much.

i will call a few more names. -- thank you very much. >> good morning, supervisors. i am chief marketing officer and senior vice president for the san francisco chamber of commerce, and the chamber of commerce is fully in support of the payroll expense tax exclusion. you really are -- [bell rings] i was going to say more. advocating for small businesses and midsize businesses, the kind of companies that had egan had shown up for. i'm representing 1500 member companies, which of chocolate to about 1/3 of the business community, in terms of number of employees. we have strong support for the job incentive because we really feel like it is the newcomers. pedestrian activity, safety, in

our once bustling district. as we mentioned before, in an area where the city vacancy rate is at an all-time high. we have recently conducted a citywide hole where sen for assistance were asked about the support for this particular measure, and 70% of voters in san francisco as recently as last month said they supported a payroll tax exemption for new hires and only 19% oppose. the 41,000 unemployed san franciscans -- let's put them back to work. we need creative measures to bring companies in to get a good start with in san francisco, and we appreciate the leadership of the mayor and supervisors for sponsoring the measure. exactly the type of policy we need to jump-start the neighborhood in our economy. thank you. supervisor chu: thank you. next speaker please.

>> good afternoon. i'm from seiu 1021. i'm calling to speak against the payroll tax exemption for twitter and other buildings that may go in that area. we feel that this is the time when we really do need taxes into the general fund of the city. we are seeing vital services cut. i am the union representative for general hospital. we see lots of services cut. throughout the hospital and throughout the city with nonprofits, these are services that go to the city opposing most impoverished citizens in that we need this important money for the general fund. i think it is unfair that we have other businesses that have to pay the payroll tax, but twitter is the most profitable corporation of and it does not. in the context of us saving jobs, we should really consider not having the payroll tax for twitter and other buildings in

that area. thank you. >> good afternoon. i'm the director of sustainable economics. i were to speak in favor of the payroll tax exemption for the area. specifically, it is about directed investment with in this corridor. when you think about real estate decisions, these are one of the line items that we are looking at, and they have to make a choice in their costs when they make that very costly investment of where they are going to locate. while a share of their total cost is relatively low, as a share of their real-estate costs, it is quite high. in decisions of where they are going to locate, it is clearly important to think about how we reduce those costs. this first investment is a good one. the other point i would make is that the international council of shopping consumers estimates that the average office worker

spends around $3,000 in the local retail environment, so by bringing twitter and other office workers to this location, you are reinvigorating the retail market along that corridor. in addition, there is also trends and occupancy tax or hotel tax that can be realized as you bring more offices to this location. thank you. >> good afternoon, supervises. i'm with residents solutions, and i'm here in tremendous support for this item. we have been doing business attraction in this area for several years now. without the incentive available to the redevelopment agency, the success we have had of in those

areas would not have happened, and vacancy rates would probably still be pushing 60%. that said, amid market and the tenderloin need much more robust incentives. they are very large and in a grave state of disrepair. i wanted to quickly reiterate something i heard yesterday from the president and ceo of intel. he has recently been appointed to a white house committee on job creation. he said the most important thing government can do right now to spur development and create jobs is to get out of the way. i think that this legislation in some small way help san francisco to do that, and our implementation of this incentive really gives us the competitive advantage that we need.

>> in a resident of district 6, and i'm in favor of the proposal. i think twitter is a good company. aside from that, i think that -- i'm very excited about what is happening on market. excited about city place being approved. excited about the international hostel on seventh and market being approved, excited about crescent heights development at 10th and market. there are all kinds of things indicating a resurgence of market street that has not been happening since i have been here in the city since 1978. so i am in favor of this proposition, and i cannot really understand any objection to it because, as i understand it, it does not take away from the city. this building would probably go

vacant if twitter does not move in, so it is not really a loss to the city, as i see it. also, i am a member of seiu. thanks. supervisor chu: thank you. i'm going to read a few more names. [leading names -- reading names] . >> good afternoon. i am on the board of directors of san francisco beautiful. while we profess our love for the livability and unification of the city, we also understand that there has to be some kind of proliferation and activation of open spaces. those spaces, of course, do not happen without some level of foot traffic and certainly employment. i myself was an employee in district 6, very much closer central market for 15 years. i have lived the goods and the

bats of the community, but i'm very glad i did. san francisco beautiful has been around for 64 years. in fact, we were the ones that say the cable cars in central market. 64 years ago. additionally, we are still committed -- so committed to this area that we had a student from berkeley create a niche market strategic plan that we have on the website that you look at on your ladder -- letter of support as well. more recently as well, we were able to be successful at banning billboards on central market at the last election in 2008. we have certainly worked on funding several projects in the tenderloin and central market area, and we are very glad we did. on that note, we certainly

support the payroll tax exemption. thank you very much. supervisor chu: 90. >> thank you, supervisors. i am the chair of the redevelopment agency's mid market project development area. peter bay area is a nonprofit that serves 400 theater and dance companies around the bay area and nearly 3000 individual artists. we have been interested for a number of years in helping to create -- really reestablish central market as a dynamic arts and entertainment district, and we believe that this proposal will help to achieve that goal of creating a great place for arts organizations to be, by consenting companies of all sizes, but particularly larger ones like twitter, to move in. i should point out that my numbers largely will not benefit fromec