When San Francisco’s tech-fueled economic boom finally goes bust, City Hall wants to leap into action to counteract the downturn.
Mayor Mark Farrell will issue an executive directive Tuesday to “prepare now, while times are relatively good, so that we can be resilient when times are tougher.”
The mayor’s directive orders a group of city officials to regularly convene and monitor the economy for signs of weakness and come up with policies to help San Francisco weather the hard times. When a recession approaches, the group must “alert the mayor and Board of Supervisors describing the conditions of a potential economic slowdown, and any policies or programs recommended to counteract the downturn.”
Advanced planning could soften the blow.
“Critically, we found that we have six to nine months to implement effective countermeasures once a recession begins,” Farrell’s directive says. “We must act now to implement the practices and policies needed to protect San Francisco’s fiscal well-being during the next economic downtown.”
Farrell is expected to discuss the directive during “question time” with the Board of Supervisors.
City Controller Ben Rosenfield said Monday there are “no signs of a recession, but we know we’re now nine years since our last recession ended – which makes this the second longest expansion in the US since WWII.”
He praised Farrell’s directive. “I do think institutionalizing some of the monitoring of current economic conditions makes a lot of sense, as the Mayor has proposed.”
Rosenfield is a member of the group of city officials charged in Farrell’s directive with monitoring for a recession, along with City Economist Ted Egan, City Administrator Naomi Kelly, director of the Office of Economic and Workforce Development Todd Rufo and the Mayor’s Budget Director Kelly Kirkpatrick.
When there is an economic downturn, OEWD will “forward to the Mayor’s Budget Director recommendations for programs and policies to implement to mitigate the downturn.”
“Some recommendations will be implementable without legislation, and some will require ordinances to be introduced to the Mayor and Board of Supervisors,” the mayor’s directive says.
A severe national recession coupled with a downturn in the tech industry could cause unemployment to shoot up by 6.1 percent, according to Beacon Economics’ July 2017 Economic Resilience and Recovery Plan, which was commissioned by the late Mayor Ed Lee.
Farrell requires the group to identify by Sept. 1 trigger points for recession indicators, which include The City’s monthly gross receipts filings, commercial vacancy rates, and per square footage lease rates as well as national indicators like stock prices and real manufacturing and trade sales.
Also by Sept. 1, OEWD must propose programs and legislative recommendations to the group for review.
Some policy ideas have been suggested in OEWD’s March 21 Economic Resiliency and Recovery Plan. They include incentives for businesses to hire more local employees, a funding boost to those nonprofits focused on hiring the unemployed and fee reductions for small businesses.
Other ideas include developing an inventory of construction projects “ready to begin construction within 6-9 months of the identification of a downturn” and to identify a funding stream for them, possibly a “pre-approved” bond by voters “because we would not have time to wait for an election.”
The Great Recession resulted in the loss of 40,000 local jobs and cuts to city services. Since then, San Francisco has added 189,000 jobs and lowered unemployment to 2.4 percent, down from the recession’s high of 9.4 percent.
“There will always be a next recession. This is an unfortunate and sobering reality,” said the 2017 Beacon Economics report. “And while no recession can necessarily be prevented, mitigation strategies can always be pursued to lessen the impact on the local economy.”
City economist Ted Egan agreed. “I don’t think it’s possible for any city to stop a recession, but there are a number of policy steps The City can take to make it less harmful for residents,” Egan said.
As for those high rents the tech boom sent soaring in San Francisco, a recession may not bring much relief. “It’s not immediately clear whether a downturn in the Tech industry would keep home prices at current levels, or at least limit declines to a moderate level,” the report said. A tech downturn would mean lesser demand for homes than seen in past years, but “some of this lower demand would be mitigated by the low supply of homes on the market, which puts upward pressure on prices.”