A customer places an order at Doppio Zero Pizzeria in Hayes Valley on Friday as officials consider plans to offer restaurants financial relief. (Kevin N. Hume/S.F. Examiner)

San Francisco plots economic course to rise from out of the recession

The City has never seen an economic downturn of this type

Implementing effective recovery ideas in these times of economic turmoil could mean the difference between survival or extinction for thousands of small businesses impacted by the coronavirus and the monthslong shelter-in-place order.

And they could determine the pace by which the local economy comes charging back as well as the degree by which it benefits different segments of the population.

Economic recovery is no stranger to San Francisco.

It was only a decade ago when The City climbed out of the Great Recession by ushering in a tech boom that brought unemployment to record lows but also greater displacement and income inequality.

To plot a course out of the coronavirus-caused recession, an 80-member Economic Recovery Task Force, which held its inaugural meeting on April 24, was established by Mayor London Breed and Board of Supervisors President Norman Yee. Its charge is no small task. As Breed put it, the task force will help San Francisco “emerge a stronger city despite the challenges.”

The City has never seen an economic downturn of this type.

The shelter-in-place order that went into effect on March 17, now extended to May 31, has impacted 14,072 businesses and 166,936 employees, which is “more than 20 percent of all the jobs in San Francisco,” the City Controller’s chief economist Ted Egan told the task force on April 24.

“We’ve never had a recession caused by a government shutdown and that is going to make this very unusual and very hard to predict,” Egan said. More than 70,000 people have filed for unemployment insurance in San Francisco and the unemployment rate has shot up to about 10 percent.

The task force, which meets next on May 14, is asking for ideas.

There was no shortage of ideas at the Small Business Commission meeting on Thursday.

“Let’s aim high and let’s see what The City comes back with,” said Small Business Commissioner Manny Yekutiel, owner of Manny’s in the Mission, a coffee, restaurant and community gathering business. “Let’s actually ask for what we need and what the small business owners need and if they say that’s impossible at least we asked for what we need.”

The commission has not made a formal recommendation to the task force, but plans to at its next meeting.

Laurie Thomas, executive director of the Golden Gate Restaurant Association, an advocacy group for restaurants, told the commission that “most of us, including me, had less than a month of cash runway.”

“We just weren’t ready for the music to stop,” said Thomas, owner of two restaurants in San Francisco.

“What we need and I’ve been saying it over and over again is cash, cash, cash, cash, cash,” she said.

Thomas said that The City needs to help businesses pay for personal protective equipment, allow restaurants to open up on outside spaces for more capacity and forgive some taxes owed.

One of the biggest challenges facing small businesses are rents and their relationships with landlords.

Adam Gordon, founder of Oxygen Massage Therapy, which employs 30 people at three locations, said, “I want to really emphasize that we need relief when it comes to rent.”

Some argued for a law being pursued in New York that would remove personal liability from commercial leases so landlords couldn’t hold the tenant responsible if they default on their rent due to impacts of the coronavirus. They argue this would encourage landlords to negotiate lower rents.

To that end, there was a suggestion for free legal services in all languages to help small businesses renegotiate their leases.

Other ideas floated include waiving fees small businesses owed The City before the pandemic and through to 2021.

The City has allowed small businesses to defer their registration fees until Sept. 30, which total $49 million for 89,000 businesses, but Yekutiel said that doesn’t go far enough.

“My small business has a $4,000 bill on it basically,” Yekutiel said. “That is money that is going to have come out of my bank account at some point, so consider waiving those.”

Other ideas include waiving any application fees to make changes to businesses’ physical space, to make improvements, such as for permits to put tables and chairs outside, and making it easier for small businesses to add accessory uses, like adding retail to a bar or restaurant.

To fill up vacancies, which can help revive a commercial corridor benefiting all businesses there, the commission talked about recommending a reduction or removal of fees for new business applications for the next 12 months.

In a likely controversial proposal, Yekutiel suggested expanding the definition of chain stores, which are banned or require a special permit to open in neighborhood commercial corridors.

Chain stores, also known as formula retail, are currently defined as businesses with 11 or more locations operating in the world, a restriction meant to preserve neighborhood character and foster the growth of more mom-and-pop establishments.

“We should also expand formula retail from 11 shops to 51,” Yekutiel said. “A lot of the big bad businesses have a lot more than 51 locations.” He said it would “allow us to bring in a lot of new businesses into vacant spaces.”

There were more ideas, too, such as creating a special “recovery fund.”

“A lot of small businesses are going to need to purchase completely new inventories, to beautify the small businesses, new signage, make improvements to space in order to bring people in and The City should help them do that because The City and the state and federal government forced us to shut down,” Yekutiel said.

Another suggestion likely to cause controversy is to suspend the requirements of The City’s Health Care Security Ordinance, in which businesses with 20 or more employees and nonprofits with 50 employees or more must make a certain amount of health care expenditures per employee, which could include depositing money into Medical Reimbursement Accounts.

The commission has not yet scheduled a date for the next meeting when it is expected to make formal recommendations to the task force, but is considering May 11.

Sharky Laguana, president of the Small Business Commission, acknowledged Thursday that many small business owners were “watching their life savings going up in smoke” as they comply with the shelter-in-place order.

“We know that there is not going to be a quick fix for turning the economy around. That is the unfortunate reality,” Laguana said Thursday. “But we do know that the economy will come back and that any effort to support our small businesses should be developed with their voices and diverse experiences in mind.”

Rodney Fong, president and CEO of the San Francisco Chamber of Commerce and a co-chair of the task force, told the commission that it remains unclear when small businesses can start to reopen and he cautioned about going too soon. He warned of a second wave of the virus or opening without the consumer confidence in place.

“We maybe have one good shot to do this and so we want to make sure we do it right and at the right time so we don’t have a false start,” Fong said.

He suggested in the future retailers may only see customers on a reservation basis like what’s done in “fancy” art galleries. And that there was a need to get creative in spaces, such as by allowing restaurants to also sell retail and manufacture homemade products as well as allow boutiques to sell food like brownies — all of which would require changes to existing land use controls.

“A lot of it comes down to land use. Land use will control a lot of our future,” Fong said.

Egan noted that nationally by the first week of April, 25 million people had applied for unemployment, about the same number of jobs created since the Great Recession. “So we spent 10 years building up 25 million jobs. We spent one month losing 25 million jobs,” he said.

He said some economic experts predict “a much sharper recession than the great recession but also a much more rapid come back than the great recession.”

Egan added that it may not be until 2025 that the “labor market is back in full swing.”

jsabatini@sfexaminer.com

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