Do small businesses in S.F. have hope?

After hearing city officials say for years that San Francisco’s small businesses are the cornerstone of its economy — creating jobs, revitalizing neighborhoods and keeping dollars circulating locally — merchants are asking The City to put its money where its mouth is.

Not wanting to bite the hand that might someday feed them, business owners interviewed by The Examiner were hesitant to criticize Mayor Gavin Newsom, who has expressed public support for small businesses and, most recently, declared that he would put a measure on the ballot this November to get nearly $1 million in funding for a one-stop small-business assistance center within City Hall.

Nonetheless, business owners are now reminding Newsom that in October 2005, he put forth an executive directive that encouraged city departments to give small businesses “every opportunity tobid on city contracts.”

However, small businesses say they are squeezed out of the contracting process, and that The City fails to effectively track purchases made from small, local vendors it claims to support.

Those data aren’t currently compiled, according to Jennifer Matz, deputy director of the Mayor’s Office of Economic and Workforce Development. The best data available, she said, is the tracking of the contracts given to Local Business Enterprise vendors — small companies with annual gross receipts that do not surpass a revenue threshold. For example, companies dealing in goods and equipment cannot exceed $7 million in average gross receipts for three years in order to qualify as an LBE. This calendar year, just more than 6 percent of city contracts were awarded to LBEs.

“What we found is just issuing the order didn’t create the momentum necessary to make this happen,” said Jim Ross, spokesman for San Francisco Small Business Advocates, a nonprofit group.

Small Business Advocates want benchmarks for city departments and are pushing for a 25 percent purchasing goal.

How much city money has previously gone to small local businesses is not as important as “that we all agree that there needs to be more,” Newsom told The Examiner on Wednesday, adding that working with small businesses to help them secure city contracts would be one of the tasks of his proposed small-business assistance center.

In September 2006, The City did establish a bid discount of 10 percent LBE vendors.

However, the discount fails to close the higher cost-gap that San Francisco’s small businesses experience, compared with businesses outside of The City, local merchants say.

“The City imposes all of these things on us. I have to pay a higher minimum wage of $9.14 an hour, I have to pay sick leave, I have to pay a cent-and-a-half payroll, and we haven’t even talked about rents,” said Stephen Cornell, owner of Brownie’s Hardware on Polk Street.

It’s ironic, Ross said, that The City expects businesses to spend more to keep up with San Francisco values, but hasn’t done likewise.

“Instead of spending money on our progressive businesses, a good portion of [city] money is spent on businesses not located in San Francisco,” Ross said.

Discussions about increasing the 10 percent discount have just begun, said Virginia Harmon, director of The City’s Human Rights Commission, which oversees the LBE program. She also noted that the commission is looking into ways that purchasing contracts given to large businesses could include subcontract provisions for small businesses, as is done with other city spending, such as construction.

S.F. renews Office Depot contract

Clifford Waldeck, owner of Waldeck’s Office Supplies, said he’s got nothing against Office Depot. He’s just hungering for a piece of the $15 million pie — a city purchasing contract — the Florida-based company was awarded.

“They played by the rules,” said Waldeck, who inherited the downtown office supply store from his father, who opened it in 1954. “It’s the rule book that needs to be changed.”

On Wednesday, the Board of Supervisors Budget and Finance Committee approved an amendment to The City’s agreement with Office Depot, extending the contract one more year, to September 2008. The contract also bumped up the amount of the three-and-a-half year contract to a possible $15 million. Recent monthly expenditures for The City’s office needs have been as high as $461,000, a staff report noted.

Office Depot was awarded the contract because they had the lowest bid, which The City is required to take, City Purchaser Naomi Kelly told The Examiner before the meeting.

Kelly said that next year, when the office supply contract is rebid, The City plans to put a subcontracting provision into the agreement that would require the vendor to parcel out some of the sales to small, local businesses.

“A small business probably doesn’t have the capacity to supply the amount of pencils and the amount of paper that we buy,” Kelly said. “But they’d get a percentage of that contract.”

Small businesses by the numbers

104,747 businesses in San Francisco (including the self-employed)

29,000 small businesses, with fewer than 100 employees

747 businesses, with 100 employees or more

75,000 people who are self-employed

331,395 people who are self-employed, or own or work for a small business

55% percentage of San Francisco’s work force that is self-employed, or own or work for a small business

– Source: 2005 U.S. Census

Is The City doing enough to help small businesses?

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