other districts, like district 10, who is also struggling to get some attention out there, should benefit from that as well. >> i would welcome a conversation on stock options and the way the city treats stock options as a form of compensation and whether a more wholesale reform is needed. my understanding from talking to city attorneys and the treasurer and tax collector is that when businesses pay a payroll, there are many different elements we consider to be part of payroll, traditional compensation, stock options, and all of that is aggregated. it is not a disaggregated number. to say let's eliminate stock options from what we consider to be compensation has an unknown impact to the general fund. this is me talking, but based on my understanding of having other

conversations, until more understanding and analysis is done, we do not know because it's an aggregate number, what the impacts are of reducing the definition of compensation. but i think you're absolutely right that a more holistic conversation is necessary, given the changing world we live in, in which many companies are compensating employees with stock options as they have limited resources to compensate them traditionally. i think it is a conversation we should have. and i welcome it if the office of economic analysis wants to add any thoughts to the conversation. >> good morning. in response to your question, our report did include as a recommendation that the city look two ways to modify the payroll expense tax to remove

the specific expense tax that the largest and most valuable companies have to leave san francisco simply because of the value of their stock and stock options. we did not, however, suggest such a policy would in any way replicate what the current policy is doing. there are two things to keep in mind about what is different with this current policy verses a wholesale policy of payroll tax to deal with stock options. the first is that this policy, particularly as it has been amended, is a highly targeted tax cut which is in effect aimed at one company or will primarily affect one company which based on our best analysis is very much on the bubble as to whether it makes sense to say in san francisco or not and says it will stay if the policy is enacted. as i indicated in my comments last week, that's an ideal tax

incentive situation because it is focused on a company, it seems to clearly be affecting their behavior and not subsidizing behavior that would happen anyway, particularly with the amendments introduced last week. if we were to, on the other hand, a wholesale reform of the payroll tax code to address all stock options, there are some technology companies that have grown in san francisco and have not been motivated to leave san francisco despite the fact we tax stock options. if we gave them a tax break, we would be giving them that effective subsidy in that we did not have to do. even if we did save some companies from leaving outside of san francisco. question of how to properly target a reform of the stock options issue so you are excluding companies likely to stay in san francisco even with our tax treatment is a future conversation.

the second thing this legislation does, that a reform of the stock option does not do is address the specific neighborhood. twitter, by moving to the central market area, is in effect helping the city to solve a problem of economic development localized to that area. if we gave a tax break on stock options or some other modification to a company in a different part of the city where the neighborhood they were at already had very low commercial vacancy and they stayed in san francisco, that's great, but they were not helping to anchor the formation of a new cluster, they are clearly not doing as much for the city's economy as twitter is by moving into a long-vacant building and anchoring a cluster that would fill up other long-vacant buildings. that clarifies the difference between the two policies from our perspective.

supervisor mirkarimi: so you would be in favor if we did something for another company who would want to locate itself in the quarter of district 10 or western addition of district 5? >> the way we would answer the question in that case is how likely is it with the company move without this break? what is the likely impact they stay on surrounding properties and overall employment in the area? supervisor mirkarimi: but you see the slippery slope that opens the revolving door of this discussion, correct? >> yes, i do see that. >> want to respond to some of the things that supervisor mirkarimi just brought up. there are two sets of issues that are this in sending companies to grow in the area. first is we have a payroll tax

of 1.5% of payroll that does not exist in any other city in california. for a company like twitter or other similar the-situated, creates an enormous incentive for them to grow their peril in the immediate future here in san francisco. what we are trying to do with the legislation we have in front of us is to in send these companies to locate in a neighborhood that has potentially some of the most significant blight of any neighborhood we have had in this city. in my mind, that's different from the situation confronting a lot of tech companies and other companies that rely on stock options as part of their conversation -- part of their compensation, which is something i've been looking into and as has been rightfully pointed out, there are nuances and a bit of information the city is still trying to understand as we figure out whether or not this makes sense.

in my mind, those are two different obstacles to companies trying to make business decisions and what this legislation is doing is addressing the first piece, which is a necessary piece. it's not an issue of either/or, there are two issues we have to figure out how to grapple with. the first is the payroll peace. i was heartened by the openness of supervisor mirkarimi on the stock options peace. we have to do our homework to see if anything can be done there, but i don't think we can replace one with the other. if we do not move forward with this legislation, as we understand clearly from twitter, and frankly, as i have understood over the years, which is the problem with the payroll tax if we don't move forward with this targeted, geographically-located change to the payroll tax, we stand to be set back economically in this area. is that a fair characterization?

>> i believe that is essentially what i was trying to say. there are two major differences between this legislation and a broader tax reform. it is much more targeted and has, given its size, much clearer fiscal and economic benefits. supervisor chiu: what i am hearing from supervisor mirkarimi is that we could substitute them -- i view them as separate challenges for businesses we need to think about. >> i would say that for businesses that for one reason or another cannot or will not locate in the area in the legislation, the issue of stock options remains. that remains to be a disincentive. that is why we mentioned it as a different item in the report that related but does not directly pertain to this legislation. supervisor mirkarimi: i don't

disagree with the exchange in terms of how to interpret approaches here. all i am trying to do is forecast ahead, while obviously the business at hand is to take care of this particular target incentive, the question then becomes how do we recruit companies with -- within other parts of the city that i feel i can make just as strong argument that blighted and distressed by public safety challenges that i want to bring in district 10 if me or my successors in the western addition who have been ravaged by bad urban renewal policies, how do we do this so it is not making an uneven characterization of centralizing these resources and the upgrades toward our own star attraction, market street, and all of these other areas. how do we do that without

getting into this revolving door of a discussion? >> as i tried to make clear last week, we are not sanguine about stone-based tax strategies or enterprise zones in general. there are specific characteristics about this area and opportunity with twitter we think will lead to fiscal benefits for this city in the long run. if you are looking at other areas in the city, the question i would ask myself is do you have a large potential anchor that's likely to leave if they don't get a break and likely to stay if they do? is that anchor going to grow? in particular, in this case, is the existence of the vacant commercial office space or soon to be vacant commercial office space, that with twitter is likely to be filled with companies that would pay the payroll tax that would not be there if not for twitter? if you can point to another area in the city in which a large,

growing company has expressed an interest in locating at, and surrounding that location, there are millions of square feet of vacant office space, then i think you have a strong case to say you could build a cluster in that area where the payroll tax to bring in from that induced growth far exceeds any fiscal rescue have. i would not say there are lots of areas in this city that are like that, but there may be some. supervisor mirkarimi: again, the motivation is to fold. is to use though wave effect to help the tenderloin which has been part of the promise of what we are discussing -- what we are discussing here, and to satisfying oversized buildings that have remained chronically vacant so we can get some life blood back into market street. you could take a scaled-down version of that or even similar size to anyone of our other districts. the right answer is i would be

looking to leadership to suggest there would be wholesale structural reform to answer this question instead of getting into the diatribe of singularly trying to fix it in one area hoping we are going to be able to spot the zone of the correction as opposed to other areas of the city that are crying out for need and attention. that is all. supervisor chu: i know we have done the presentations from other departments. supervisor can, did you want to bring anyone else up from other departments -- supervisor kim, did you want to bring anyone else up from other departments? supervisor kim: i want to address some of the comments from supervisor mirkarimi and the public. i think this corridor is unique because there are over 3 million square feet of space, the

highest vacancy in the city and it impacts the entire city. i know it is in district 6 but it impact the city district- wide. it is also one rich in transit and infrastructure, not one we have to build additional infrastructure for in order to attract businesses. one of the reasons our office considers this legislation, again, as i said before, we have seen that date and we know enterprise taxes have mixed results and out comes here and in the state but we have a unique factor which is that we have an anchor tenant, a unique company that is both growing and interested in moving to this area and has shown in the past they are able to attract other companies into its parameters. that is one of the things, one of the two factors that makes this legislation unique. a lot of folks are concerned about the slippery slope.

i think there are a lot of arguments as to why this cannot be expanded to other parts of the city. we don't have other neighborhoods with 3 million square feet of commercial real estate. we don't have a neighborhood where a growing company that has a track record of attracting other companies is interested in moving in. there are not even five twitters per se, that even exist in the bay area. we're talking about unique legislation and a unique set of factors that causes our office to consider this legislation. part of it is keeping twitter here, but part of the motivation for that is it is about job growth and creating jobs in the city, not just 350 employees of twitter that get to stay in san francisco, but potentially 3000 jobs if they stay in san francisco. that is one of the reasons why

we consider this. i also want to follow up, because i know there have been concerns from the community and members of the public year-to- date would want addressed. i want to thank the folks from south of market and the tenderloin for continually giving input to the supervisors on this legislation. our office agrees about strengthening the community benefits with the twitter and that's something we are continuing to negotiate. we have taken many of the feedback given to us and we're working to strengthen at and working with the full board if that strengthening does not happen. what we are looking at in terms of what twitter could address in the neighborhood, it would be something twitter cannot make an impact in -- one is around workforce development and our community, not just for folks with 4 year college degrees but

less. working with our hiring program doing local hiring and schools and city colleges around workforce development so we are preparing our own residents for jobs at twitter. second is addressing some of the digital divide issues in our neighborhood. we know that access to technology continues to be an issue. wifi in the tenderloin is something that has been talked about for a long time, particularly given the density of that neighborhood. even though many of the residents may not have computers, many have cell phones with wifi capacity. that is something we are looking at that we're pushing that we would like to see come out of this community benefits agreement. thank you. supervisor chu: before go to further questions, why don't we open this item up for public comment? i know there are a number of cards and i will read them.

[leading names] -- leading name[reading names] please line up in the center aisle and we will do two minutes each. >> good morning. and with the carpenters' local 22 and i would like to say carpenters' local 22 does urge a yes vote for this. we believe this tax exemption is a good idea. we believe it is going to provide jobs for residents, jobs for carpenters, and we urge your yes vote. thank you for bringing it up. supervisor chu: thank you. >> i am from the mission district and i'm working with the mission community response network. basically, i am asking the

supervisors to respectfully request an amendment requiring the company benefiting from the tax break to contribute to a community-based nonprofit working to prevent street violence in that area and areas of the community. just to give you a small idea, i will read you one piece of work this community has done to prevent violence. i will read it off here. in mid march, 2000, a group of a samoan girls were attacked. one girl was stabbed in the face by gang members involved on the 24th street corridor. known also as the high gang activity, with then our community response network -- within an hour, our community response network got word and mediated the conflict and got the samoan communities together, got the latino community together, the gang members and

were able to mediate the conflict and it resulted in them not having any conflicts there. what i am trying to say is we want twitter to be part of the community, but we want them to be part of our effort to prevent violence. i know you have some community benefit programs built in, but programs that benefit the neighborhood organizations struggling to prevent violence with gangs in their community. prevention is the main thing we're talking about. millions of dollars goes into treating young people exposed to all this violence, but the prevention efforts has saved many lives. the people working that community are putting their lives to prevent violence. most of them, 90% of our staff are people -- [tone]

we are saying help supporters. supervisor chu: thank you. >> we in this room know it is about the area. i would like to emphasize that pointing out, according to my statistics, that building has 941,900 feet in it, and that does not include the stephenson st. anax which has 405,000 more. certainly, the short-term needs of twitter are quarter of that building. there's a huge amount of space for other companies that will benefit from the program and some of the people who have been caterwauling in the press about how unfair this is can certainly move there. certainly, the approved plans for this building call for the ground floor to become a retail center. i have always felt this is a very important new development

for civic center because there is no retail community meeting center for the north south of market and civic center area. this would have restaurants, community service facilities and all sorts of things. that is a source of employment for people in the neighborhood who may not get a job atwitter. thirdly, this is in the new center district and the building itself without the stevenson and >> will leave repaying every year 27,500 -- that is a portion of the budget and i expect $150,000 to be spent on that market street corridor to improved cleanliness, sanitation and other things. with regard to your concern about a community benefit package, you need to be talking to the shore and skiing co., not necessarily twitter. -- [tone]

supervisor chu: thank you. >> good morning. i am with you see hastings college of law. i am here to speak in support of this measure and to indicate that it's important for the tenderloin. as we all know, the tenderloin has many challenges and issues it confronts and these issues provide a deterrent for the activation of a street friends, particularly storefronts. at hastings, we have roughly 5000 square feet of empty retail that has been in the almost two years. the adoption of this measure will be a positive in our efforts to lease it out and get activity, particularly evening activity to bring additional vitality into that their bread. the mid market area is

depopulating. every effort should be made to stem that and reverse the trend. i think this legislation will be positive in that regard. thank you very much. supervisor chu: thank you. >> good morning, supervisors. and from the san francisco chamber of commerce. in the press and the last few days, there have been issues about the supporters questions raised by the small business community. the chamber has 1500 members, the vast majority of which are small business members and our small business advisory council met yesterday on this issue and unanimously supported the legislation before you today. but also raised the issue that has been discussed by supervisor david chiu, not necessarily to look at our tax structure. given these tax exempt sure -- giving these tax exemptions is not unusual. los angeles went to gross receipts tax exemptions 10 years

ago. we retain the payroll tax. their gross receipts covers all the businesses coming into los angeles city. they have a higher threshold before you have to pay the tax than we do on the payroll side and this two-year exemption. i think we do need to look and the supervisor has requested for legislature to be drafted and we look forward over the next year of working with the board of supervisors and the mayor's office to look at a tax structure that is not anti-job development. we have a system now that really hurts job development in the city because we have a lot of businesses trying to stay at that $249,000 per year payroll level. if you bridge that, you go to 100% tax on your wages. we support this and we support working with you on tax reform generally. the small business community does as well. thank you. supervisor chu: thank you.

>> good morning. i'm from the tenderloin neighborhood development corporation. i am here to speak on behalf of our executive director who is unable to be here today due to a conflict. we support the proposed payroll tax exemption. we have been involved first and in many efforts to revitalize mid market over the past decade and none have succeeded. the status quo should not be acceptable and we should be willing to try something different even if it involves some risk. some have raised the specter of gentrification as a reason not to proceed. in the tenderloin, gentrification is less relevant today that was 30 years ago, given that we and other nonprofits, the mayor's office of housing and redevelopment agency have created thousands of units of permanently affordable housing. it is a more legitimate objections south of market where less has been done. for this reason, we support a

realistic community benefits agreement that not only enables low-income people to share in the benefits that twitter and the payroll tax exemption will bring, but also is structured in such a way that twitter's growing success yields growing community benefits. while not putting twitter at risk should its business plan not come to fruition. finally, it is crucial part of the tenderloin be included in the exemptions boundary. the marginal costs would be mineral. [tone] where landlord to 20 commercial tenants in the tenderloin and we know how difficult it is to operate business there successfully. tenderloin merchants feel the city does not do enough to support them and the difficult circumstances they operate in. it would be a powerful symbolic statement that we care about the business -- we care about their

success. thank you very much. [tone] >> i represent the harvey milk glbt democratic club. our membership voted unanimously to oppose this as it stands. there are three reasons. one, we feel it's a dangerous precedent to include the tenderloin in this because other neighborhoods that then decide they want special tax breaks and we feel that's a very dangerous precedent for the city to start. second, many nonprofits looking to relocate their businesses and offices have run into problems with speculation in the area andt.i's, which are beyond their ability to work with. 3, third going to be benefits, one of the things this area needs more than anything is a

grocery store. we suggest a co-op restore be part of it. we would also like to say -- i'm sorry, cold medicine is making me a little speech today -- we would also like to say that we would like to have that tenderloin removed from this agreement so that it would concentrate only on the mid market corridor and not into the tenderloin. thank you very much. supervisor chu: thank you very much. i'm going to call a few more names here. [reading and names] abroad -- ope>> i'm a longtime f that tenderloin. i commented last week on the gentrification and the possibility that the jobs would not benefit the neighborhood. i know those seem contradictory

statements, but i am concerned there be jobs, but also housing and affordability to the neighborhood. icahn barely afford to live in san francisco as it is. i do see a need to keep twitter in this city, but i'm a little concerned and going to be priced out of the neighborhood and the city as a result of what goes on here. i am not necessarily against the twitter legislation, but i would just emphasize that gentrification is a real possibility and if there is something that can be done to mitigate that impact, then i urge you to do so. thank you. supervisor chu: thank you. >> i'm with the housing rights committee and i'm a long time clear activists here in san francisco. -- longtime