Prop. D would tax vacant storefronts to help small businesses

Voters will decide Tuesday whether San Francisco should tax landlords for vacant storefronts as a way to boost the vibrancy...

Voters will decide Tuesday whether San Francisco should tax landlords for vacant storefronts as a way to boost the vibrancy of neighborhood commercial corridors and support small businesses.

Vacant storefronts have become a problem in some neighborhoods including North Beach and the Sunset.

Proposition D would begin imposing a tax in 2021 of $250 per linear feet of street frontage if a storefront is vacant for more than 182 days in a given tax year.

The tax, which applies to specific neighborhood commercial corridors, increases to $1,000 in three years. It is expected to generate up to $5 million a year, which would go into a fund to assist small businesses.

Supervisor Aaron Peskin introduced the tax, which was placed on the ballot with a vote by the Board of Supervisors. Mayor London Breed also supports it.

Peskin has argued that the tax would compel landlords not to sit on vacant storefronts and that it would also “give small business lessees leverage in lease negotiations.”

The measure has picked up support from a number of merchant groups, including Fillmore Merchants Association, Haight Ashbury Merchants Association and the North Beach Business Association.

While high rents are a factor in the increase in vacant storefronts, proponents of the tax measure have also vowed to also address other reasons cited for the vacant storefronts, including The City’s byzantine permit approval process.

Peskin introduced legislation last week to help streamline the process for small businesses to open.

The legislation would reduce fees for applying for conditional use permits and establish a “90-day shot clock” for The City to act on the application.

“We all know the stories about businesses that are facing a conditional use application that are paying rent for six months, eight months, a year, and many of these can and should get through the system in a much more expedited form,” Peskin said.

Referencing the vacancy tax, Peskin said, “Where there are sticks, there should also be carrots.”

No one has organized a political committee to fund a campaign against the measure, but it does have opponents.

The San Francisco Republican Party and a real estate broker submitted paid arguments against the measure in the voter information pamphlet.

The San Francisco Chamber of Commerce has also come out against the measure.

“Small businesses are absolutely facing serious challenges in San Francisco,” chamber spokesperson Jay Cheng said in a statement last week. “In so many cases, storefront vacancies are a result of permitting delays and complexity at City Hall. We think the best way to approach the issue of vacancies is to remove those permitting roadblocks and letting small businesses fill these storefronts.”

However, the pro-development think-tank SPUR recommends approval.

The group said that combined with permitting process improvements, “Prop. D could be an effective tool to push property owners to put their buildings into active use.”

“It’s clear that there are a number of reasons behind vacancies and that speculative landlords are just one part of the problem,” SPUR said. “The tax is certainly imperfect, but it has been thoughtfully tailored to protect small businesses and landlords who are acting in good faith.”

The group noted that “the Board of Supervisors could revisit the tax and amend it as circumstances change.”

Jim Stearns, a political consultant running the Prop. D campaign, said Friday that he was “cautiously optimistic” the measure would obtain the two-thirds vote needed to pass.

“We are getting very positive reception, great endorsements, we have done a lot of grassroots work, have solid small business support and lots of signs in small businesses,” Stearns said.

He added that “there is little or no opposition and the general trend on the ballot measures is that everything is a ‘yes.’”

The campaign for the measure had raised about $50,000 as of Friday with the largest contributions from Housing Forward SF, One Vassar LLC, New Deal Advisors and Chris Foley, founder of commercial real estate brokerage firm Ground Matrix.

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