Slog Music

Music, Nightlife,
and Drinks

Monday, March 31, 2014

What a City Gets (and Doesn't Get) When It Gives Tech Companies Tax Breaks for Building in Low-Income Areas

Posted by on Mon, Mar 31, 2014 at 6:00 AM

One could easily imagine this idea being proposed in Seattle, so it's worth checking out the fine print:

A series of tax breaks given to tech companies to ensure that they stay in San Francisco seems to be benefiting both start-ups and the city, if even just a little.

The tax break, called a “community benefit agreement,” makes it possible for companies housed in specific low-income areas of San Francisco to receive breaks on some of the city’s payroll taxes, but to do so, they must perform a number of tasks that help improve their neighborhoods.

Okay. But, then we meet a company called Zendesk, valued at $1.5 billion, whose wealthy employees are served meals by homeless people who inhabit the low-income area the company has picked for its offices. The total value of the tax breaks that Zendesk and 14 other companies got in one year as a result of locating in low-income San Francisco neighborhoods: $1,903,321.

The amount that Zendesk spent in 2013 to pay the homeless people feeding its employees: $3,500.

Even if you take Zendesk's total spending in 2013 on "donations and hiring local businesses"—according to this New York Times story, $100,000—and then assume the 14 other companies, on average, spent a similar amount, you end up with local government losing about $400,000 in tax revenue.

This is a complicated project, with hard-to-calculate benefits like volunteer hours and redevelopment involved. But, if Seattle were to go down a road like this, it would be wise to make sure the city benefits as much as the tech companies.


Comments (16) RSS

Oldest First Unregistered On Registered On Add a comment
And negotiate for benefits to the neighborhood that are more structural and less condescending than hiring the local homeless to wait on their economic superiors.
Posted by jnonymous on March 31, 2014 at 6:12 AM · Report this
The govt never benefits as much as the company. Otherwise the company wouldn't take the tax break. File under: 'how capitalism works'
Posted by Foonken2 on March 31, 2014 at 6:14 AM · Report this
seandr 3
you end up with local government losing about $400,000 in tax revenue.

That's assuming the companies would be willing to pay $1,903,321 per year for the privilege of being located in San Francisco as opposed somewhere in sunny Silicon Valley. The city can't "lose" $400,000 that it never had.
Posted by seandr on March 31, 2014 at 8:01 AM · Report this
Joe Szilagyi 4
@3 there's actually a resurgence of tech companies wanting to be positioned in San Francisco these days.
Posted by Joe Szilagyi on March 31, 2014 at 8:22 AM · Report this
sperifera 5
But those tech companies are JOB CREATORS!!! Won't somebody think about all the jobs they create?
Posted by sperifera on March 31, 2014 at 8:27 AM · Report this
seandr 6
@5: They'll create jobs where ever they are located. The question is, do you see benefit in having them located in low-income SF neighborhoods? If so, offer them incentives. If not, don't.
Posted by seandr on March 31, 2014 at 8:38 AM · Report this
VelhoSorriso 7
@ 2 Foonken2 said it.

I've yet to read where municipalities win on tax breaks for companies. Maybe the entities can approach it like dating -- if a company wants to locate in an area ~ fine, show off the best assets of the area. But don't give them a tax break for doing it.
Posted by VelhoSorriso on March 31, 2014 at 8:42 AM · Report this
Uhm, in general I don't think the tech boom has been good for San Fran, in any sense. I've lived here for two years, and more and more I think I can ascribe the problems I encounter on a daily basis are related right back to the tech industry.

Tech workers, as a rule are pretty socially awkward. The amount of socially awkward I encounter here is sometimes above and beyond what I can parse. Imagine an entire office full of that one awkward girl at the party. Sometimes it's cool but it often sucks when you are actually trying to accomplish anything.

This means social venues like clubs, restaurants, bars, concerts, etc are pretty watered down because tech is their main client. I get so much bad service here it's not funny. But tech guys don't notice, so they still get big tips, leaving places with horrible service doing the briskest business in the city!

There is a lot of elitism here. But not a lot of 'taste'.

Yes, the tech business has brought a lot of money to the bay area, but it caused a lot of the current problems because it brought a lot of people here without any infrastructure to support them. Traffic is horrible, housing is out of control (3k a month for a dumpy 'college' style apartment), there is an acute water shortage. And because things got so expensive, plenty of the more interesting cultural things to do either got so expensive that you can't afford to go (200+ dollars to go see the ballet, and that's the just-in-front-of-nosebleed-seats) or they just folded up and left.

Pay can't keep up with the rising costs.

The tech industry is trying to solve the problem by building their own housing, but that's fraught with other problems, and you've all read about the google buses.

Uncorralled tech is not a good idea for any city.
Posted by MameSnidely on March 31, 2014 at 9:53 AM · Report this
You_Gotta_Be_Kidding_Me 10
"and then assume the 14 other companies, on average, spent a similar amount"

Journalism at its finest!
Posted by You_Gotta_Be_Kidding_Me on March 31, 2014 at 10:38 AM · Report this

I guess I just don't have the super brain power that lets me understand.

The logic was the "Cities" are so overwhelmingly great and fantastic that all high tech is moving there.

Well, except for Google, Apple and Facebook, who have to provide their own buses to let people leave the city crime zones for healthful, brand new campuses.

But leave that aside, these Cities are so great and perfect they have to lure people in with tax breaks that exceed the benefits accrued. The benefits that justified the tax breaks! The tax breaks which shouldn't be necessary because cities are so superior to suburbs. Which don't need to give tax breaks...
Posted by Supreme Ruler Of The Universe http://_ on March 31, 2014 at 10:55 AM · Report this
If having a tech company nearby increases property values on the surrounding properties by only a few percent above the neighborhood mean, the program has just paid for itself. A large(ish) loss on one program is made up by the aggregate gains in property tax revenue throughout the community.

Criticize the program for increasing the breadth of gentrification pushing low-income people out of the city, but don't say it doesn't make financial sense.
Posted by Ryan the MUP on March 31, 2014 at 11:52 AM · Report this
Will in Seattle 13
Tax breaks are bad

Another way of giving the rich more, paid for by the poor

Detroit is because the State of Michigan won't give Detroit the legal share of state sales tax collected
Posted by Will in Seattle on March 31, 2014 at 1:08 PM · Report this
Doctor Memory 14
@9 complains that abundance of tech workers is bad because they tip service staff too well, so those staff no longer bow and scrape for @9's tips.

Well, that's novel at least.
Posted by Doctor Memory on March 31, 2014 at 4:26 PM · Report this
Doctor Memory 15
@13: as a former Michigan resident, let me just say that your analysis of Detroit's problems is as accurate as your analysis of comparative wine prices.

In other words, put a sock in it.
Posted by Doctor Memory on March 31, 2014 at 4:41 PM · Report this
@14 -- I leave very good tips for good service, often more than 20% of the bill. But the service is laughably bad more often than not -- wrong order, dinner more the 1 hour after ordering, poorly made drinks (this long island tea tastes like coffee?) Dirty tables. I could go on.

I've seen tech workers drop 30% on shitty, shitty service.
Posted by MameSnidely on March 31, 2014 at 7:20 PM · Report this
Doctor Memory 17
Wow, you're really committed to this whole "tech workers are bad because they give too much of their disposable income to service workers" line? Okay then.
Posted by Doctor Memory on March 31, 2014 at 11:03 PM · Report this

Add a comment

Commenting on this item is available only to registered commenters.

All contents © Index Newspapers, LLC
1535 11th Ave (Third Floor), Seattle, WA 98122
Contact | Privacy Policy | Terms of Use | Takedown Policy