Small San Francisco tenants create economic multiplier

Who cares if a small, 10-employee business decides to rent an office in San Francisco? It means nothing to you, right? Actually, it could mean quite a bit of money — not only to a San Franciscan but also to people throughout the Bay Area. Here’s how it works.

Let’s say the payroll for five professionals is $125,000 each with another $65,000 for each of five junior staffers. That’s $950,000 a year that will be spent mostly on housing and other expenditures in the area. Then add the office leasing expense, tenant improvement expenditures, electrical installation, various utilities, taxes, tech services, office supplies, marketing, legal, accounting, health care benefits, transportation, dining and entertainment, local and state taxes and so on. Since the company will probably make a profit, there will be additional funds to spend and invest locally. The total annual impact of that 10-person firm could easily be $2 million. And since probably half of the workers have significant others who moved here with them, you can add even more money to The City’s gross domestic product.

So why should we care whether a small business decides to open its doors here vs. in Seattle? In case you didn’t know, most firms that rent office space in San Francisco’s commercial buildings — even in the biggest buildings, are small — or they are the regional offices of large firms. San Francisco is not home to many Fortune 500 companies with vast assets that government can tax and regulate. Our business community is comprised primarily of small entities that are vulnerable to unwise government actions. And, because they’re small, these firms have the flexibility to leave San Francisco if they are made to feel unwelcome or if they grow to a size where taxes and regulations make it cost-ineffective to remain here;

All San Francisco citizens should care about small tenants because collectively, they are a very big deal; 41,614 small companies equal many Fortune 500 firms. There are 34,793 companies and organizations in San Francisco with fewer than 10 employees, according to business list compiler InfoUSA. And there are 6,821 tenants with between 10 and 50 employees in The City. That’s a significant economic impact. So we need to make them feel as special as they really are to our economy — and not discourage them with onerous taxes and inefficient government.

Call me optimistic, but lately I believe I’ve seen at City Hall an awakening to the basic economic reality that the private sector provides the overwhelming amount of local tax revenues. Dare I say there have even been some entrepreneurial gestures under the golden dome, such as the recent decision to encourage Twitter to remain here by giving it a tax break to keep it from heading south? Twitter started small and is now a growing company, and its location here will create jobs for numerous small businesses and organizations that serve it. Twitter’s workers will buy consumer goods here, dine in restaurants, spend on entertainment and use many local services. The company will attract visitors who will stay in hotels, spend more locally and go on Facebook and Twitter and tell the world how fabulous it is here. Oh, and all the spending is taxed, which means we can keep that gold on the City Hall dome shiny.

Our local economy is coming back, but there are still more unemployed San Franciscans than you can fit into AT&T Park. As city elections loom, we should be asking candidates how they plan to create jobs — or at least how they plan to remove government’s impediments to job creation. We could use a few more 10-person offices downtown. And maybe even more companies like Twitter.

Marc Intermaggio is executive vice president of BOMA, San Francisco’s Building Owners and Managers Association.