Mid-Market tech companies reach new tax-break agreements

Six technology companies taking the mid-Market Street tax break have received approval for required community benefits agreements, with some for as long as four years.

In 2011, The City adopted the tax break for the mid-Market area with the mayor and other city leaders saying it was needed to keep Twitter from moving out of San Francisco to places with lower taxes. Supporters argued that the break would help revitalize the economically stunted mid-Market Street area.

To gain political support for the tax break, larger companies receiving it were required to enter into community benefits agreements. New agreements with tech companies Microsoft-Yammer, One Kings Lane, Spotify, Twitter, Zendesk and Zoosk took effect Jan. 1.

While ambitious ideas like a site-acquisition fund or more modest ones like mentioning “displacement” did not make the cut, the agreements, city officials say, are a combined $6 million investment in the Tenderloin and mid-Market areas.

The community benefits agreements were created as part of the tax break established in the mid-Market Street area in 2011 to help soften the impacts of gentrification as Twitter and other companies moved in bringing economic activity to the area.

Some members of the Citizens Advisory Committee for the Central Market and Tenderloin Area, an 11-member advisory body established to oversee the agreements, were critical of the process, feeling left out. But unlike the previous year when the committee recommended rejecting all but one of the agreements, this time, a majority of the committee members present supported all but One Kings Lane's because the company's liaison had not attended past meetings and failed to stay for the vote.

City Administrator Naomi Kelly, who oversees the agreement process, has final say on the terms of the agreements since the committee is purely advisory.

She signed all six into effect this month. Three of the agreements, those with Microsoft-Yammer, Zendesk and Twitter, are for four-year terms. Initially, agreements were for one-year.

Some community groups made specific requests. The Market Street for the Masses Coalition, which has 31 members, sent a Dec. 1 letter to the committee requesting the agreements support the creation of a mid-Market acquisition fund to enable nonprofits to buy and preserve below-market-rate housing, office space and small-business space in the area. That wasn't included in the agreements.

The coalition also asked for “meaningful orientation” for employees.

“In addition to physical displacement, there is a psychological displacement that comes when people start feeling they are no longer welcome in their neighborhoods,” the letter said.

While advisory committee member Peter Masiak said, “I do like the idea of the site acquisition fund,” he said the committee was limited in what it could do.

“The CAC was excluded from the actual negotiation of these contracts,” Masiak said. “They were sort of dropped on our laps in the November meeting.” The committee took a vote on them at a subsequent meeting on Dec. 4.

Masiak, who voted for all but one of them, said while he had some issues he wanted to recognize with his votes how the agreements have improved since last year with monthly status reports on fulfilling the obligations, tech company liaisons appearing at every meeting and clearer language.

One challenge overall, he said, is “it's really difficult to gauge the level of impact they are having” in the area.

Another committee member, Stephen Tennis, said he wanted to see displacement recognized in the agreements, even if just a commitment to discuss the topic, and noted that's why the advisory committee was formed. “It's nowhere to be found in any of the agreements,” Tennis said.

Kelly, who signed the agreements in December, was out of town and unavailable for comment.

“The City Administrator's Office solicited and received input from over 300 community members (including members of the Citizens' Advisory Committee) to inform the drafting of the Community Benefit Agreements,” Deputy City Administrator Jennifer Johnston said in an email. “Those processes generated over 400 ideas, many of which many were incorporated into the Community Benefits Agreements and resulted in well over $6 million in the direct investment to the Central Market and Tenderloin neighborhoods.”

Twitter's agreement, which runs from 2015 until 2018, comes with 10 main items. They include a $3 million investment in Twitter's NeighborNest, a neighborhood learning center for use by nonprofits, a minimum of 4,000 volunteer hours annually and assistance with neighborhood improvements like gardening and cleanup.

Under the four-year agreement, Twitter will also increase this year's existing agreement of $300,000 in grants to local nonprofits to $3 million during the next four years, donate $50,000 each year in IT equipment to schools, offer $60,000 of free promoted tweets to nonprofits, provide pro bono legal services for the Eviction Defense Collaborative and buy at least $500,000 goods and services from local small businesses annually.

In 2013, 15 businesses took advantage of the tax break for $4.2 million. It is likely this amount will increase due to the sale of Twitter stock holdings. Only those companies with a payroll in excess of $1 million must also sign a community benefits agreement. The tax break expires after eight years and companies can use it for six of them.

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