A Bold New Tax Plan for San Francisco?

by on January 29, 2024

Photo shows SF's Bustling Mid-Market--2015
SF's Bustling Mid-Market--2015

Mid-Market, Tenderloin Need Boost

In 2011 San Francisco Mayor Ed Lee announced a revitalization strategy for the long neglected Mid-Market and Tenderloin neighborhoods. Lee’s temporary payroll tax exemption for new hires (often described as the “Twitter Tax”) was an incredible success; it brought more new investment into both neighborhoods than in the prior half-century.

But COVID reversed this resurgence. Now its time for City Hall to again use tax policy to boost these historic neighborhoods.

Specifically, San Francisco should pass legislation temporarily allowing all sales tax revenue generated in these neighborhoods to stay there. The revenue would be used solely for infrastructure and public safety. Unlike an Infrastructure Finance District (IFD),  which assigns increased property taxes to the neighborhood where created, this would solely involve sales taxes. It would last five years and ensure that public safety concerns in both neighborhoods were sufficiently addressed.

As with Mayor Lee’s tax the city would not be able to use the Mid-Market/Tenderloin tax revenue to supplant existing revenue (meaning it would go on top of what is currently spent). The Mayor and Board of Supervisors would designate an entity to oversee the sales tax program.

We know that Mid-Market and the Tenderloin benefit from tax incentives. This sales tax plan, ending the rideshare/car ban in Mid-Market, and bringing Vacant to Vibrant to Little Saigon would give these neighborhoods the necessary boost they need.

SF Must Do More

The term “doom loop” may not fairly describe San Francisco’s Mid-Market neighborhood but nearly all the progress made from 2011-2019 has stopped (IKEA being the big exception). New investment has dried up. The exodus from the San Francisco Centre mall (formerly Westfield) is ongoing. There is little likelihood of retail returning.

It pains me to write these words because when 2020 began Mid-Market’s prospects were incredible. COVID had not emerged and the ambitious Better Market Streets plan had not been scaled back (that would happen in October 2020) But after nearly four years of vacant offices, closed retail and the feeling of a ghost town when walking down Market, it’s time to conclude: Mid-Market needs a lot more city help.

That’s why the Board of Supervisors should pass legislation allowing the sales tax revenue generated in Mid-Market and the Tenderloin to stay there for public safety/quality of life purposes.

Would the Whole Foods at 8th and Market closed if neighborhood sales tax revenue had been used to improve security? The city and Trinity Properties funded some security but the store might have been saved with the additional resources provided by local sales tax revenue.

Would the exodus from the Westfield now San Francisco Centre have still occurred?

Similarly, the ACT-Strand would not be having problems if the area’s sale tax revenue were protecting the surrounding area. Instead, Market between 7th and 8th Streets has been terrible at night. That’s when the Strand’s major performances occur.

What’s the Downside?

Is it reckless for a city facing a massive budget deficit to make the shortage worse by diverting sales tax revenue? No.

We’re talking about spaces that haven’t reopened for years. Vacant retail spaces don’t generate sales taxes. Pop ups are great short-term but Mid-Market needs permanent businesses. Businesses encouraged to open by the sales tax-generated increased security will still be there when the tax plan ends—adding to the city’s coffers.

Some vacancies can be blamed on landlords and bankers continuing to ask rents that nobody will pay. But they are a minority. And those keeping retail spaces vacant won’t benefit from the tax plan. Will the sales tax plan reward some unreasonable owners by enabling them to obtain higher rents than currently possible? Possibly. But that seems a fair tradeoff to get businesses to open.

The big question is whether these areas generate enough sales tax revenue to make a difference. The Controller should do a study to get an estimate. IKEA alone will bring in a lot of sales tax revenue so keeping those dollars in Mid-Market would seem to be impactful.

Retail-Housing Connection

Over two thousand new housing units have opened in Mid-Market in recent years. Yet the urbanist strategy many espouse—use housing to boost ground floor retail—hasn’t happened. Instead, potential tenants see the lack of nearby retail and decide to live elsewhere.

That’s why a temporary sales tax plan to encourage Mid-Market retail will also make nearby housing more attractive. More tenants living in the area means greater street life and a more dynamic neighborhood.

The new Trinity Plaza project at 8th and Market was supposed to include a commercial plaza linking Market to Mission. Outdoor cafes, entertainment and an active sidewalk life were planned. But because of COVID and then the area’s decline, the plaza has never opened. Couldn’t a sales tax linked to increase public safety help get those spaces occupied?

I know this: staying the course in Mid-Market and the Tenderloin is not sufficient. City Hall spent $22 million on a Linkage Center that dramatically worsened public safety concerns in both areas. The city has spent millions transforming the tourist COVA hotel into a homeless shelter, which has brought drug dealers and users to the Tenderloin and Little Saigon.

The city’s current investment in public safety in these neighborhoods has not done the job; in fact, the business exodus in Mid-Market is continuing.

San Francisco must think big in working to revive both neighborhoods. The city can’t build its future with its core central city neighborhoods suffering.

Randy Shaw

Randy Shaw is the Editor of Beyond Chron and the Director of San Francisco’s Tenderloin Housing Clinic, which publishes Beyond Chron. Shaw's latest book is Generation Priced Out: Who Gets to Live in the New Urban America. He is the author of four prior books on activism, including The Activist's Handbook: Winning Social Change in the 21st Century, and Beyond the Fields: Cesar Chavez, the UFW and the Struggle for Justice in the 21st Century. He is also the author of The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco

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Filed under: Mid-Market / Tenderloin