(Kevin N. Hume/S.F. Examiner)

(Kevin N. Hume/S.F. Examiner)

Data shows steep drop in SF sales tax revenue, possible decline in population

City economist calls data ‘a warning sign for small businesses’

San Francisco suffered the worst drop in sales taxes in California this year even after businesses began reopening and may have also suffered a drop in its population, The City’s chief economist said Thursday.

The City experienced a 43 percent drop in sales taxes from April to June compared to the same period in 2019, Chief Economist Ted Egan told the Planning Commission Thursday. Brick and mortar stores, restaurants, hotels, and gas stations suffered the deepest losses, as anticipated.

But surprisingly, online sales to San Francisco residents increased by just 1 percent during that time, according to data that arrived earlier this week.

Egan said that could mean that people in San Francisco simply aren’t spending at the same rates as other areas, or that people’s incomes have taken a bigger hit here despite a similarly awful unemployment rate as other municipalities. However, he said the most likely explanation was a drop in population.

“That leads to the other answer, which is there aren’t as many people in San Francisco,” said Egan, who was briefing the commission in advance of recommendations from an economic recovery task force. “The sales tax data is just a warning sign for small businesses that don’t have the resources to take a long-term shutdown or recession.”

About 62,000 jobs have been recovered of the 175,000 lost since COVID-19 shelter-in-place orders took effect. While high-paying jobs in business have seen a roughly 5 percent decline since February, low-income jobs in accommodations, food service, arts, entertainment, and recreation saw a 35-45 percent decline.

San Francisco has also seen the sharpest drop in asking rents in the country. Average one-bedroom rents went from just under $2,500 in March to roughly $2,300 in August, according to Apartment List, a site Egan called reputable.

Compared to other Bay Area cities, those with more tech companies like Mountain View, Sunnyvale, Santa Clara, and Redwood City saw some of the largest rent drops. The sharp decrease is likely, in part, due to tech giants like Twitter and Facebook implementing a permanent remote work option.

“It makes a very big difference to the future of The City’s economy if they’re working at home from…somewhere in the Bay Area or if they’re working from home in Hawaii,” Egan said. He added, “There’s a building potential crisis of either people unable to pay rent or dipping too deep into other assets or savings to pay rent.”

Other economic indicators included transportation and tourism. Flights at San Francisco International Airport have come to a near standstill since February but domestic flights have bounced back slightly to an 80 percent drop in frequency since 2019.

People have started to drive more as businesses have reopened, bringing slower freeway speeds. But BART ridership has hovered below 500,000 weekly riders, down from two million in March. The agency has an estimated $51 million operating budget deficit for the current fiscal year.

“It’s not just a matter of how we get through COVID-19,” said Assessor-Recorder Carmen Chu, who sits on The City’s economic recovery task force. “We do realize that business is not coming back to the same level as before. Ultimately, we need to make sure that people feel comfortable coming back to work. We also need to make sure that consumers and tourists feel comfortable.”

Egan told commissioners he is a little more optimistic about tourism returning in the mid-term but more concerned with the future of downtown San Francisco, where little office space is currently being used.

The task force will release its final recommendations by next week, Chu said. That will help form the Planning Department’s response to land use issues.

Commissioner Deland Chan advocated for the commission to take a few steps back and ask who the recovery would be for.

“That normal wasn’t really working for a lot of people,” Chan said. “[We] can only really build back better by working with those disadvantaged communities.”

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