7 ms·

San Francisco Doing Everything It Can To Drive Zynga And Twitter Away

87 points by staunch 16y ago

Stormbringer 16y ago
There are a bunch of Techchruch stories on right now, this one made the front page with no comments and only 6 votes?
- coderdude 16y ago
  That's not really unusual actually. It was submitted 31 minutes ago and has 6 up-votes. That's enough for just about any story submitted by anyone to get on the front page (unless there is a filter in place that requires more votes, like anything Julian Assange related). 3-4 up-votes in the first 10-15 minutes of submission is going to get your story in the middle of the front page. It only sucks that TechCrunch is popular here, IMO.
guywithabike 16y ago
What makes Twitter and Zynga more deserving of tax breaks than any other company in the city? Honest question.
- maxharris 16y ago
  I'd rather work somewhere else than pay even higher taxes, and lots of people are thinking exactly this same thing. SF isn't being competitive with the surrounding towns.
- mcritz 16y ago
  The author makes the case that these companies are driving job growth, and that the tax on stock being treated as payroll is unusual and counterproductive.
- ihodes 16y ago
  I don't think that was the point of the article. Rather, Arrington was commentating on the state of taxes in San Francisco, and he used Twitter and Zynga as an example of high-profile companies which were facing these taxes.
- aresant 16y ago
  Two notes: a) Not more deserving, but most companies in the city don't have to deal with the secondary tax mentioned. The 1.5 payroll taxes on gains from stock options is aimed at high-growth / go-public companies. b) The article is asking why do this to ANY company in the city. Even in small biz an additional 1.5% in regular payroll taxes hurts.
  - blazer 16y ago
    And most importantly they are big whales not startups. TC is talking about two big billion vauated companies and their problems.
- deleted 16y ago
  [deleted]
- pg 16y ago
  As it says in the article, the problem is that the law covers not just salary but employees' stock gains as well. Twitter and Zynga uncomplainingly pay payroll tax on salaries like other companies, but the growth in their valuation combined with the fact that lots of employees get stock means that if the law were enforced, Twitter and Zynga would be hit with huge extra bills that other companies aren't.
  - crux_ 16y ago
    This is probably because other companies either aren't in SF, or aren't winning the Startup Lottery. You yourself have long advocated that the former greatly increases your chances of the latter. Now, it's late, so correct me if I'm wrong in my thinking here: If twitter magically gained $3 billion in additional valuation, and all employees cashed in all their options, all at once, it would result in a "huge" tax bill of .... $13 million or so. Compare to the ~$270 million in capital gains taxes the employees would have racked up when they exercised their options. Yeah, I think that Twitter could live just fine with that. Making a large and loud public fuss is cheaper, of course. In light of all that, I think "huge" is a misleading word to use. (Assumptions: a full 30% of the company as employee options; directly translating a higher valuation into the strike-vs-share price spread that's actually taxed.)
    - pg 16y ago
      Actually I've never said that startups do better in SF specifically, but rather the Bay Area. This problem is limited to the city. The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.
      - idiopathic 16y ago
        Ah, OK, now I understand a problem I can agree with - so it's not so much the damage from paying 1.5% on a profitable transaction (employees exercise options as part of winning start-up lottery) but rather the company has to pay cash for a gain it only realised in paper. So now I understand why they were saying a company going for IPO would have to pay most of the money raised as taxes, rather than just 1.5% of it. Why is no one suggesting applying the 1.5% when cash exchanges hands? Everyone is either suggesting keeping the 1.5% as is, or scrapping it completely for stock options. But surely a middle ground allows cash for taxes as a small percentage of cash from profits?
- latch 16y ago
  I think it has more to do with the timing...in that, these are two companies that are going to be seriously affected by SF policies in the short term. Why Twitter and Zynga might be more deserving than a non tech company is because of the relatively high salaries of their staff. This extra disposable income flows up and down to the rest of the city. Look at it this way. You run a dry cleaning business. These are your choices: Your city can give Twitter a tax break to open shop near you (the same city). This will hopefully bring you new customers and help your business. This can work very indirectly. Twitter Employee >> Diner Waitress >> You. Or Your city can give you a tax break, but not one to Twitter. Twitter goes to a different city (because you can always find someplace that has lower taxes). Now neither you nor the diner have new customers. In theory, the tax break that you get ends up being less money than the extra money you would have made had Twitter opened shop.
  - impendia 16y ago
    So, in other words, because Twitter and Zynga's staff get paid more, we should give them tax breaks.
- hexis 16y ago
  It has nothing to do with those companies deserving anything. The problem that is being solved is that if Twitter or Zynga leaves San Francisco and continues to grow and hire people in their new location, that will be used against the current politicians in upcoming elections. Challengers could point to the new jobs being created in another Bay Area city and say, "San Francisco could have had those jobs, but Politician X let them leave. I will make sure we keep the new jobs in San Francisco." On the other hand, if the current politicians give Twitter or Zynga too big of a tax break, they'll get challengers claiming that they gave away the store to these rich companies, along the lins of what some politicians are already saying about any proposed deal. Hence, the negotiations.
  - mc32 16y ago
    >The problem that is being solved is that if Twitter or Zynga leaves San Francisco and continues to grow and hire people in their new location, that will be used against the current politicians in upcoming elections Maybe, but what you're saying is politicians are more interested in the politics in and of itself than really serving the citizens. They should do what they think will benefit the majority of the citizenry with disregard what it will do to their political 'career'. One other pet peeve I have with the city is its requirement that construction jobs must include a large percentage of city residents. This is a city which prides itself in being open and welcoming of the whole gamut of locals and all immigrant types. How does that reconcile? What if San Mateo county got the itch and said, you know what, anyone not from San Mateo working in San Mateo will be levied a non-resident payroll tax.
timr 16y ago
Oh, give me a break. I live in the supposed "tax free hooker area", and there are probably more hookers in the lounge of the Ritz Carlton than there are near the SF Furniture Mart (where the city wants Twitter to move). It's not like they're proposing to move them into an abandoned Happy Donut at the corner of 6th and Market. City hall and the Asian Art Museum are one block north. The opera, symphony and ballet are two blocks northwest. There are two high-rise, luxury condominium buildings directly across the street. Walk 10 minutes west, and you're smack in the middle of one of the city's up-and-coming neighborhoods (Hayes Valley), replete with boutique shopping, gourmet coffee stands and antique stores. If offering Twitter a sweetheart lease on a gigantic building in a gentrifying urban neighborhood and giving them a tax break is enough to drive them away, then I sincerely wish Twitter luck in trying to retain their employees once they move to Brisbane. What've they got out there? A Taco Bell?
- deleted 16y ago
  [deleted]
- mc32 16y ago
  The city, is just too enamored with itself, especially when the city is represented by the BOS. If SF wants to behave like this, (making a tax grab) they'll likely end up alienating what they're attempting to co-opt. You hear SF trying to ride the coattails of stratups everywhere. SF the 'heart of silicon valley', 'the epicenter of entrepreneurship', etc, etc. but on the other hand, it s as if they want to do as much as they can to drive job-growing business away and let SF just become the kitchen/dining room to silicon valley.
- aristus 16y ago
  This is the same game of chicken as played between sports teams and municipalities. It's interesting because it's highflyin startups instead of the New York^W^W San Francisco Giants, but the outline is the same. Muni wants to keep tax base and halo effect, but maybe also wants an extra cut of the upside. Startup wants to expand, but also establish a base of operations. Everyone wants something and has a backup threat just in case. The dance ensues. SF has some interesting tax policies. I had a startup in SF lo so many years ago. Our total capitalization was $30K. We spent about $15K (on equipment and rent, no salaries) total before shutting down. A few months later SF City/County tried to collect a /$69K/ payroll tax bill based on... well, I never figured out what. I sent them a letter + documentation and never heard about it again.
sbov 16y ago
> Tech startups aren’t just driving some job growth in the city, they’re driving absolutely all of it. I assume theres a source for this somewhere?
- bgentry 16y ago
  Not sure if he has a study to prove this.. But can you think of any other industries in SF that have generated huge job growth during the past 10 years? I can't. That doesn't mean Arrington is right, but I can't think of a reason to doubt that statement. And I know I've heard that many of the financial companies have moved out of the city or downsized operations here during that span in order to avoid the high cost of living and tax rates.
  - _delirium 16y ago
    Has the tech industry in SF generated huge job growth recently? From the scarce statistics I can find, it seems SF tech employment has actually declined over the past few years.
joelandren 16y ago
There's no way Twitter moves to Brisbane. This is all bargaining and Arrington's a useful pawn.
beedogs 16y ago
This entire article seems like rich people whining. Give me a break.
jRoden 16y ago
I'm probably a "fecking eejit," but what exactly is so stupid and ridiculous about the quote "Who are the [Twitter] investors? Probably some of the wealthiest people in this country. And we are giving them more wealth."? I mean, would the tax really hurt Twitter or Zynga? This stuff is just kind of disheartening. Oh no, your multi-billion dollar massive success of a company might lose a couple mil to taxes, better throw a fit or pack up and move to a new city.
- mc32 16y ago
  Maybe i am too, but I can't figure out how SF is "giving" [the companies] wealth? Said companies are earning their own wealth. SF is not "giving" it to them, I'm sure. Let's say you were going to lease storage (physical) and outfit A had a flat fee of 50/mo. Outfit B had a flat fee of 70/mo plus appreciation on the goods you stored. Let's say 20/mo difference had negligible impact on your disposable income. Who would you choose? If you have a choice, why choose the costliest one?
  - vacri 16y ago
    I might choose the one that is closer to me, or closer to where I would want to use the stored items. I might choose the one that also offers a parcel reception service. I might choose the one that has better security - some storage outfits are just a single room separated into lots by loose cardboard. I might choose the one with greater hours of access. One day people will get that there is far more to 'value' than 'money'. SF is a nice place. People want to be there. Why shouldn't they capitalise on it? Boo-hoo, stupidly wealthy company can't take the heat, so go move to Idaho and see if that tax is really the kind of thing that cripples your tech company. Rah, rah, private companies should be allowed to accrete wealth for their superior products because that's The American Way. But should a city offer a superior product, suddenly we're all supposed to be communist equalists when it comes to the public life?
    - TillE 16y ago
      > SF is a nice place. People want to be there. Exactly. I could count on two hands the number of places I'd be willing to live (unless you were paying me truly obscene amounts of money and doing incredibly interesting work). Proper cities with good public transport and fun things going on. In a country where I speak at least a bit of the language. Quality of life is not something to be ignored; requiring employees to live elsewhere or make long commutes is a big deal. When you're a startup looking for younger employees and fostering that kind of culture, location is vitally important.
tt 16y ago
This is likely to be a political battle between the progressive members of the Board of Sup and what former Mayor Newsom had apparently set up with Twitter. Newsom had always focused on developing and growing high tech companies in SF to increase jobs and revenue for the city. On the other hand, certain members of the Board strongly believe in taxing our way out of the deficit. As a startup founder in SF, it's sad that I may one day have to deal with this.
binspace 16y ago
San Francisco needs to run the city more efficiently. I'm tired of paying lazy lifers to do nothing but collect extravagant salaries and lifetime benefits. Work hard for a living dammit. We do.
esmevane 16y ago
I'm sorry, but I didn't read the article. I'm just posting right now because I clicked on it accidentally for the exact same reason that I decided to quit reading Tech Crunch: there is little to no substance there, but there are tremendous amounts of gamey, overblown, linkbaiting article titles. I'm really frustrated right now, for several reasons. One, I know that a portion of the articles I'm scouting around for are being shoved aside to make way for these techno-celebrity gossip columns. Only so many articles can get in the top 40-50, and I only have so much time in a day. Two, I clicked on it. Which means Tech Crunch is correct in their assessment of my interests and certain keywords that instinctively drive my click impulses.
- meterplech 16y ago
  Commenting doesn't help. If you don't think it's appropriate, flag the story.
  - esmevane 16y ago
    If you're aware of a better place to discuss my dissatisfaction with a recurring news source, here, I think that, itself, would be more newsworthy than this article.
cloudwalking 16y ago
I appreciate it when people pay taxes because I like public transportation, fire safety, paved roads, bridges, public schools, police officers, health inspectors, safety inspectors, public parks, libraries, clean air, (relatively) fair corporations, airports, hospitals, court systems, electricity, vehicle regulation, elections, veteran associations, child support, public television... San Francisco is a pretty nice place to live. Sometimes you need to pay a little more for nicer things.
- binspace 16y ago
  I don't appreciate the extravagant waste and the entitlement of the state to impose it's will on the people. With our taxes, we also support bailouts, wars, and other profiteering of those in control. Also, these institutions are basically monopolies, where the people in charge are not really accountable to run them efficiently or effectively. Does giving the government more money make the government more effective?
  - kscaldef 16y ago
    I wasn't aware of the wars or bailouts the city of San Francisco has run. Could you elaborate?
    - binspace 16y ago
      Nice straw man. The originating subject was on taxes (since it takes more than a city to provide all of those services), not only SF taxes :-) San Francisco residents live in the United States of America. The United States of America imposes federal taxes. Federal taxes have been used to fund wars and bailouts of various failed businesses. Of course, no real city has the authority to have a military. The city does have a police force, which often acts in ways that do not better the lives of SF residents (parking tickets for example).
      - pyre 16y ago
        You seem to be arguing against city-level taxes with examples of the ways that federal-level taxes are used...
egypturnash 16y ago
Why yes, because hoping to take this insane amount of money flowing into the city (and state!) and use it to make everyone else's lives that much more livable is a terrible, horrible, no good very bad thing. I'm sure nobody involved in the tech sector has ever benefited from any public monies; it's only right that they shouldn't have to pay any taxes! </sarcasm>
- binspace 16y ago
  And yes, giving extravagant monies to the government makes everybody lives better, cures cancer, and causes world peace too! </sarcasm>
  - _delirium 16y ago
    Having lived in cities on various parts of the city-services spectrum, I do think it overall improves the quality of life to have higher city taxes and more services (especially public transit). But fortunately people who think otherwise can choose where they want to live accordingly, since many cities are available on different parts of that spectrum. For example, if you prefer the tax/services tradeoff Houston makes to the one San Francisco makes, you can live in Houston (and many people do).
impendia 16y ago
The SF Chronicle has long been playing it the other way: the city government has been tripping over itself to brown-nose Twitter and other companies. Being able to work in the city is a huge draw. Just ask the many people who live in SF and commute down to Stanford, Google, or elsewhere in the South Bay.
koski 16y ago
Ah, politics: Taking from someone and giving to someone else.
anigbrowl 16y ago
Twitter is almost certainly not going to pay this tax. The finance committee supervisors (who will consider it tomorrow) are fiscally conservative and Avalos and Mar are the only major opposition to the tax break when it comes before the full board next week. Mar will roll over in the (unlikely) event that the board is split. This is not really about the tax, though. The city is not so much fixated on taxing anyone's options, as it is using the exemption to make it worth Twitter's while to stay in the city. Taxes are lower in Brisbane, but rents are higher because the building on offer there is newer. Over 6 years, Twitter stands to save ~$15 million by staying in the SF Mart building, notwithstanding the higher initial refurbishment costs.
fab13n 16y ago
If I understand correctly, all this fuss is about a 1.5% tax on wages. If so, it seems nonsensical: settling in the Silicon Valley costs much more than that, yet companies still prefer to settle there than in the rust belt or in Europe. There is a significant advantage in being in the SF area, and companies already evaluate this advantage to much, much more than 1.5% of payroll. Now I understand that big companies try to pretend otherwise, so that they can scare the city and save these 1.5% for themselves, but don't take this for anything other than BS.
- jackowayed 16y ago
  It's a 1.5% tax on wages and stock gains. They pay the 1.5% on wages already and are fine with it. They just don't want a massive tax bill when they go public for all of the stock they gave to employees.
  - bgentry 16y ago
    According to one of the previous articles on this subject, this provision actually requires companies to pay taxes on their employees' options based on the company's valuation, even if those employees aren't even able to sell those shares. The example I remember was that if a company raised a bunch of money at a ~$1B valuation but was later acquired for a significantly smaller sum, they would have already paid taxes on their employees' stock option gains at the ~$1B valuation based on the increase in perceived value of their shares at the time they raised money. Edit: what I said above is in line with what pg said in his comments here: The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.
deleted 16y ago
[deleted]
binspace 16y ago
The key is to learn how to get the government to give money to you!
rmorrison 16y ago
Wow. My company has been trying to decide between setting up our HQ in San Francisco or further down the bay. I think we have our answer.
- dreyfiz 16y ago
  Price of everything, value of nothing.
- nupark 16y ago
  There is a reason why people set up in San Francisco even though it costs more. We have an office there, and in terms of both recruiting and business contacts, moving it out of San Francisco would be a waste of money. We also have an office in NYC -- also not cheap, but totally worth it. Between NYC and SF we have no trouble recruiting employees who want to live in a desirable location (and we, the officers, want to live here too!), and nearly all of our partners and business contacts are either in SF or NYC, too.
dools 16y ago
The only problem here is that the U.S has completely different tax laws for each state. If everyone wasn't so fanatical about state's rights it would be far more difficult for companies to jump ship in order to evade tax, and far less administrative burden caused by tax compliance issues.
- jpadkins 16y ago
  yes, lets take away choice of government so the empire can rule effectively. /s Competing jurisdictions is a check on corruption.
  - cpeterso 16y ago
    I like to think of the states as "regulatory laboratories". In an ideal world, states would learn from their neighbors' regulatory successes and failures.
berkes 16y ago
«The company will be forced to move to a new location in order to get a six year payroll tax break». No. The company is forced to pay tax, just like everybody else. Tax must be payed to keep community-owned stuff rolling, functioning and improving. If a company jumps trough hoops to avoid that, they are putting efford in being selfish, scrooges. And should probably be banned from your community in the first place, since they only leech and don't contribute back. It might be, that growing up in western Europe has made me a bit too soft, but I think this article illustrates perfectly why so many people despise "big companies", rather then embrace and love them for doing their good work for their great country.
binspace 16y ago
Twitter should move to Oakland :-)
- cpeterso 16y ago
  Oakland could has so much going for it, yet the city continues to nosedive. Oakland is: * centrally located to SF, SJ, and the rest of the Easy Bay. * cheaper than SF or SJ (unless you live in the Hills) * an international airport. * an international shipping port. * convenient BART access from SF and the East Bay * not far from UC Berkeley. * (somewhat) cleaner than SF. Full disclosure: I live in Oakland, but plan to move. I was bullish on Oakland, but not its city government.
phatbyte 16y ago
You know what ? Sometimes it can't be about the money, sometimes it's about what you can do for the community and the city you choose to have a business in, and the quality of living there. Why do most startups are located there and in cities nearby ? I'm pretty sure Twitter wouldn't be twitter if they weren't in SF. And this is what's scares me about this whole "bubble 2.0" thing. People (investors) are getting too greedy, they rather move an entire company, including reallocation of it's employees than to pay a fraction of their $xxB evaluation. I don't give a damn about the investors, they knew where this companies was located. If they aren't informed before their investment, this just shows how much they know about their own country and cities. Besides, you have no idea how much tax europeans startups have to pay, If there was a place like SF in Europe, I would be moving there tomorrow morning. And finally, we are talking about Twitter. Have they finally got a way of making any real money ? Or this company based only on paper money ?
pjhyett 16y ago
No one in their right mind thinks Twitter's moving to Brisbane except for the jokers in city hall. Their employees would sooner quit than have to commute to an office park wasteland everyday.
kbatten 16y ago
Is hiring 800 people really that big of a deal for a place like SF? The article made it sound like 2400 new jobs accounted for not only most of the tech jobs in SF, but most of the growth all together.

87 points by staunch 16y ago

Stormbringer 16y ago

There are a bunch of Techchruch stories on right now, this one made the front page with no comments and only 6 votes?

coderdude 16y ago
That's not really unusual actually. It was submitted 31 minutes ago and has 6 up-votes. That's enough for just about any story submitted by anyone to get on the front page (unless there is a filter in place that requires more votes, like anything Julian Assange related). 3-4 up-votes in the first 10-15 minutes of submission is going to get your story in the middle of the front page. It only sucks that TechCrunch is popular here, IMO.

guywithabike 16y ago

What makes Twitter and Zynga more deserving of tax breaks than any other company in the city? Honest question.

maxharris 16y ago
I'd rather work somewhere else than pay even higher taxes, and lots of people are thinking exactly this same thing. SF isn't being competitive with the surrounding towns.
mcritz 16y ago
The author makes the case that these companies are driving job growth, and that the tax on stock being treated as payroll is unusual and counterproductive.
ihodes 16y ago
I don't think that was the point of the article. Rather, Arrington was commentating on the state of taxes in San Francisco, and he used Twitter and Zynga as an example of high-profile companies which were facing these taxes.
aresant 16y ago
Two notes: a) Not more deserving, but most companies in the city don't have to deal with the secondary tax mentioned. The 1.5 payroll taxes on gains from stock options is aimed at high-growth / go-public companies. b) The article is asking why do this to ANY company in the city. Even in small biz an additional 1.5% in regular payroll taxes hurts.
- blazer 16y ago
  And most importantly they are big whales not startups. TC is talking about two big billion vauated companies and their problems.
deleted 16y ago
[deleted]
pg 16y ago
As it says in the article, the problem is that the law covers not just salary but employees' stock gains as well. Twitter and Zynga uncomplainingly pay payroll tax on salaries like other companies, but the growth in their valuation combined with the fact that lots of employees get stock means that if the law were enforced, Twitter and Zynga would be hit with huge extra bills that other companies aren't.
- crux_ 16y ago
  This is probably because other companies either aren't in SF, or aren't winning the Startup Lottery. You yourself have long advocated that the former greatly increases your chances of the latter. Now, it's late, so correct me if I'm wrong in my thinking here: If twitter magically gained $3 billion in additional valuation, and all employees cashed in all their options, all at once, it would result in a "huge" tax bill of .... $13 million or so. Compare to the ~$270 million in capital gains taxes the employees would have racked up when they exercised their options. Yeah, I think that Twitter could live just fine with that. Making a large and loud public fuss is cheaper, of course. In light of all that, I think "huge" is a misleading word to use. (Assumptions: a full 30% of the company as employee options; directly translating a higher valuation into the strike-vs-share price spread that's actually taxed.)
  - pg 16y ago
    Actually I've never said that startups do better in SF specifically, but rather the Bay Area. This problem is limited to the city. The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.
    - idiopathic 16y ago
      Ah, OK, now I understand a problem I can agree with - so it's not so much the damage from paying 1.5% on a profitable transaction (employees exercise options as part of winning start-up lottery) but rather the company has to pay cash for a gain it only realised in paper. So now I understand why they were saying a company going for IPO would have to pay most of the money raised as taxes, rather than just 1.5% of it. Why is no one suggesting applying the 1.5% when cash exchanges hands? Everyone is either suggesting keeping the 1.5% as is, or scrapping it completely for stock options. But surely a middle ground allows cash for taxes as a small percentage of cash from profits?
latch 16y ago
I think it has more to do with the timing...in that, these are two companies that are going to be seriously affected by SF policies in the short term. Why Twitter and Zynga might be more deserving than a non tech company is because of the relatively high salaries of their staff. This extra disposable income flows up and down to the rest of the city. Look at it this way. You run a dry cleaning business. These are your choices: Your city can give Twitter a tax break to open shop near you (the same city). This will hopefully bring you new customers and help your business. This can work very indirectly. Twitter Employee >> Diner Waitress >> You. Or Your city can give you a tax break, but not one to Twitter. Twitter goes to a different city (because you can always find someplace that has lower taxes). Now neither you nor the diner have new customers. In theory, the tax break that you get ends up being less money than the extra money you would have made had Twitter opened shop.
- impendia 16y ago
  So, in other words, because Twitter and Zynga's staff get paid more, we should give them tax breaks.
hexis 16y ago
It has nothing to do with those companies deserving anything. The problem that is being solved is that if Twitter or Zynga leaves San Francisco and continues to grow and hire people in their new location, that will be used against the current politicians in upcoming elections. Challengers could point to the new jobs being created in another Bay Area city and say, "San Francisco could have had those jobs, but Politician X let them leave. I will make sure we keep the new jobs in San Francisco." On the other hand, if the current politicians give Twitter or Zynga too big of a tax break, they'll get challengers claiming that they gave away the store to these rich companies, along the lins of what some politicians are already saying about any proposed deal. Hence, the negotiations.
- mc32 16y ago
  >The problem that is being solved is that if Twitter or Zynga leaves San Francisco and continues to grow and hire people in their new location, that will be used against the current politicians in upcoming elections Maybe, but what you're saying is politicians are more interested in the politics in and of itself than really serving the citizens. They should do what they think will benefit the majority of the citizenry with disregard what it will do to their political 'career'. One other pet peeve I have with the city is its requirement that construction jobs must include a large percentage of city residents. This is a city which prides itself in being open and welcoming of the whole gamut of locals and all immigrant types. How does that reconcile? What if San Mateo county got the itch and said, you know what, anyone not from San Mateo working in San Mateo will be levied a non-resident payroll tax.

timr 16y ago

Oh, give me a break. I live in the supposed "tax free hooker area", and there are probably more hookers in the lounge of the Ritz Carlton than there are near the SF Furniture Mart (where the city wants Twitter to move). It's not like they're proposing to move them into an abandoned Happy Donut at the corner of 6th and Market. City hall and the Asian Art Museum are one block north. The opera, symphony and ballet are two blocks northwest. There are two high-rise, luxury condominium buildings directly across the street. Walk 10 minutes west, and you're smack in the middle of one of the city's up-and-coming neighborhoods (Hayes Valley), replete with boutique shopping, gourmet coffee stands and antique stores. If offering Twitter a sweetheart lease on a gigantic building in a gentrifying urban neighborhood and giving them a tax break is enough to drive them away, then I sincerely wish Twitter luck in trying to retain their employees once they move to Brisbane. What've they got out there? A Taco Bell?

deleted 16y ago
[deleted]
mc32 16y ago
The city, is just too enamored with itself, especially when the city is represented by the BOS. If SF wants to behave like this, (making a tax grab) they'll likely end up alienating what they're attempting to co-opt. You hear SF trying to ride the coattails of stratups everywhere. SF the 'heart of silicon valley', 'the epicenter of entrepreneurship', etc, etc. but on the other hand, it s as if they want to do as much as they can to drive job-growing business away and let SF just become the kitchen/dining room to silicon valley.
aristus 16y ago
This is the same game of chicken as played between sports teams and municipalities. It's interesting because it's highflyin startups instead of the New York^W^W San Francisco Giants, but the outline is the same. Muni wants to keep tax base and halo effect, but maybe also wants an extra cut of the upside. Startup wants to expand, but also establish a base of operations. Everyone wants something and has a backup threat just in case. The dance ensues. SF has some interesting tax policies. I had a startup in SF lo so many years ago. Our total capitalization was $30K. We spent about $15K (on equipment and rent, no salaries) total before shutting down. A few months later SF City/County tried to collect a /$69K/ payroll tax bill based on... well, I never figured out what. I sent them a letter + documentation and never heard about it again.

sbov 16y ago

> Tech startups aren’t just driving some job growth in the city, they’re driving absolutely all of it. I assume theres a source for this somewhere?

bgentry 16y ago
Not sure if he has a study to prove this.. But can you think of any other industries in SF that have generated huge job growth during the past 10 years? I can't. That doesn't mean Arrington is right, but I can't think of a reason to doubt that statement. And I know I've heard that many of the financial companies have moved out of the city or downsized operations here during that span in order to avoid the high cost of living and tax rates.
- _delirium 16y ago
  Has the tech industry in SF generated huge job growth recently? From the scarce statistics I can find, it seems SF tech employment has actually declined over the past few years.

joelandren 16y ago

There's no way Twitter moves to Brisbane. This is all bargaining and Arrington's a useful pawn.

beedogs 16y ago

This entire article seems like rich people whining. Give me a break.

jRoden 16y ago

I'm probably a "fecking eejit," but what exactly is so stupid and ridiculous about the quote "Who are the [Twitter] investors? Probably some of the wealthiest people in this country. And we are giving them more wealth."? I mean, would the tax really hurt Twitter or Zynga? This stuff is just kind of disheartening. Oh no, your multi-billion dollar massive success of a company might lose a couple mil to taxes, better throw a fit or pack up and move to a new city.

mc32 16y ago
Maybe i am too, but I can't figure out how SF is "giving" [the companies] wealth? Said companies are earning their own wealth. SF is not "giving" it to them, I'm sure. Let's say you were going to lease storage (physical) and outfit A had a flat fee of 50/mo. Outfit B had a flat fee of 70/mo plus appreciation on the goods you stored. Let's say 20/mo difference had negligible impact on your disposable income. Who would you choose? If you have a choice, why choose the costliest one?
- vacri 16y ago
  I might choose the one that is closer to me, or closer to where I would want to use the stored items. I might choose the one that also offers a parcel reception service. I might choose the one that has better security - some storage outfits are just a single room separated into lots by loose cardboard. I might choose the one with greater hours of access. One day people will get that there is far more to 'value' than 'money'. SF is a nice place. People want to be there. Why shouldn't they capitalise on it? Boo-hoo, stupidly wealthy company can't take the heat, so go move to Idaho and see if that tax is really the kind of thing that cripples your tech company. Rah, rah, private companies should be allowed to accrete wealth for their superior products because that's The American Way. But should a city offer a superior product, suddenly we're all supposed to be communist equalists when it comes to the public life?
  - TillE 16y ago
    > SF is a nice place. People want to be there. Exactly. I could count on two hands the number of places I'd be willing to live (unless you were paying me truly obscene amounts of money and doing incredibly interesting work). Proper cities with good public transport and fun things going on. In a country where I speak at least a bit of the language. Quality of life is not something to be ignored; requiring employees to live elsewhere or make long commutes is a big deal. When you're a startup looking for younger employees and fostering that kind of culture, location is vitally important.

tt 16y ago

This is likely to be a political battle between the progressive members of the Board of Sup and what former Mayor Newsom had apparently set up with Twitter. Newsom had always focused on developing and growing high tech companies in SF to increase jobs and revenue for the city. On the other hand, certain members of the Board strongly believe in taxing our way out of the deficit. As a startup founder in SF, it's sad that I may one day have to deal with this.

binspace 16y ago

San Francisco needs to run the city more efficiently. I'm tired of paying lazy lifers to do nothing but collect extravagant salaries and lifetime benefits. Work hard for a living dammit. We do.

esmevane 16y ago

I'm sorry, but I didn't read the article. I'm just posting right now because I clicked on it accidentally for the exact same reason that I decided to quit reading Tech Crunch: there is little to no substance there, but there are tremendous amounts of gamey, overblown, linkbaiting article titles. I'm really frustrated right now, for several reasons. One, I know that a portion of the articles I'm scouting around for are being shoved aside to make way for these techno-celebrity gossip columns. Only so many articles can get in the top 40-50, and I only have so much time in a day. Two, I clicked on it. Which means Tech Crunch is correct in their assessment of my interests and certain keywords that instinctively drive my click impulses.

meterplech 16y ago
Commenting doesn't help. If you don't think it's appropriate, flag the story.
- esmevane 16y ago
  If you're aware of a better place to discuss my dissatisfaction with a recurring news source, here, I think that, itself, would be more newsworthy than this article.

cloudwalking 16y ago

I appreciate it when people pay taxes because I like public transportation, fire safety, paved roads, bridges, public schools, police officers, health inspectors, safety inspectors, public parks, libraries, clean air, (relatively) fair corporations, airports, hospitals, court systems, electricity, vehicle regulation, elections, veteran associations, child support, public television... San Francisco is a pretty nice place to live. Sometimes you need to pay a little more for nicer things.

binspace 16y ago
I don't appreciate the extravagant waste and the entitlement of the state to impose it's will on the people. With our taxes, we also support bailouts, wars, and other profiteering of those in control. Also, these institutions are basically monopolies, where the people in charge are not really accountable to run them efficiently or effectively. Does giving the government more money make the government more effective?
- kscaldef 16y ago
  I wasn't aware of the wars or bailouts the city of San Francisco has run. Could you elaborate?
  - binspace 16y ago
    Nice straw man. The originating subject was on taxes (since it takes more than a city to provide all of those services), not only SF taxes :-) San Francisco residents live in the United States of America. The United States of America imposes federal taxes. Federal taxes have been used to fund wars and bailouts of various failed businesses. Of course, no real city has the authority to have a military. The city does have a police force, which often acts in ways that do not better the lives of SF residents (parking tickets for example).
    - pyre 16y ago
      You seem to be arguing against city-level taxes with examples of the ways that federal-level taxes are used...

egypturnash 16y ago

Why yes, because hoping to take this insane amount of money flowing into the city (and state!) and use it to make everyone else's lives that much more livable is a terrible, horrible, no good very bad thing. I'm sure nobody involved in the tech sector has ever benefited from any public monies; it's only right that they shouldn't have to pay any taxes! </sarcasm>

binspace 16y ago
And yes, giving extravagant monies to the government makes everybody lives better, cures cancer, and causes world peace too! </sarcasm>
- _delirium 16y ago
  Having lived in cities on various parts of the city-services spectrum, I do think it overall improves the quality of life to have higher city taxes and more services (especially public transit). But fortunately people who think otherwise can choose where they want to live accordingly, since many cities are available on different parts of that spectrum. For example, if you prefer the tax/services tradeoff Houston makes to the one San Francisco makes, you can live in Houston (and many people do).

impendia 16y ago

The SF Chronicle has long been playing it the other way: the city government has been tripping over itself to brown-nose Twitter and other companies. Being able to work in the city is a huge draw. Just ask the many people who live in SF and commute down to Stanford, Google, or elsewhere in the South Bay.

koski 16y ago

Ah, politics: Taking from someone and giving to someone else.

anigbrowl 16y ago

Twitter is almost certainly not going to pay this tax. The finance committee supervisors (who will consider it tomorrow) are fiscally conservative and Avalos and Mar are the only major opposition to the tax break when it comes before the full board next week. Mar will roll over in the (unlikely) event that the board is split. This is not really about the tax, though. The city is not so much fixated on taxing anyone's options, as it is using the exemption to make it worth Twitter's while to stay in the city. Taxes are lower in Brisbane, but rents are higher because the building on offer there is newer. Over 6 years, Twitter stands to save ~$15 million by staying in the SF Mart building, notwithstanding the higher initial refurbishment costs.

fab13n 16y ago

If I understand correctly, all this fuss is about a 1.5% tax on wages. If so, it seems nonsensical: settling in the Silicon Valley costs much more than that, yet companies still prefer to settle there than in the rust belt or in Europe. There is a significant advantage in being in the SF area, and companies already evaluate this advantage to much, much more than 1.5% of payroll. Now I understand that big companies try to pretend otherwise, so that they can scare the city and save these 1.5% for themselves, but don't take this for anything other than BS.

jackowayed 16y ago
It's a 1.5% tax on wages and stock gains. They pay the 1.5% on wages already and are fine with it. They just don't want a massive tax bill when they go public for all of the stock they gave to employees.
- bgentry 16y ago
  According to one of the previous articles on this subject, this provision actually requires companies to pay taxes on their employees' options based on the company's valuation, even if those employees aren't even able to sell those shares. The example I remember was that if a company raised a bunch of money at a ~$1B valuation but was later acquired for a significantly smaller sum, they would have already paid taxes on their employees' stock option gains at the ~$1B valuation based on the increase in perceived value of their shares at the time they raised money. Edit: what I said above is in line with what pg said in his comments here: The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.

deleted 16y ago

[deleted]

binspace 16y ago

The key is to learn how to get the government to give money to you!

rmorrison 16y ago

Wow. My company has been trying to decide between setting up our HQ in San Francisco or further down the bay. I think we have our answer.

dreyfiz 16y ago
Price of everything, value of nothing.
nupark 16y ago
There is a reason why people set up in San Francisco even though it costs more. We have an office there, and in terms of both recruiting and business contacts, moving it out of San Francisco would be a waste of money. We also have an office in NYC -- also not cheap, but totally worth it. Between NYC and SF we have no trouble recruiting employees who want to live in a desirable location (and we, the officers, want to live here too!), and nearly all of our partners and business contacts are either in SF or NYC, too.

dools 16y ago

The only problem here is that the U.S has completely different tax laws for each state. If everyone wasn't so fanatical about state's rights it would be far more difficult for companies to jump ship in order to evade tax, and far less administrative burden caused by tax compliance issues.

jpadkins 16y ago
yes, lets take away choice of government so the empire can rule effectively. /s Competing jurisdictions is a check on corruption.
- cpeterso 16y ago
  I like to think of the states as "regulatory laboratories". In an ideal world, states would learn from their neighbors' regulatory successes and failures.

berkes 16y ago

«The company will be forced to move to a new location in order to get a six year payroll tax break». No. The company is forced to pay tax, just like everybody else. Tax must be payed to keep community-owned stuff rolling, functioning and improving. If a company jumps trough hoops to avoid that, they are putting efford in being selfish, scrooges. And should probably be banned from your community in the first place, since they only leech and don't contribute back. It might be, that growing up in western Europe has made me a bit too soft, but I think this article illustrates perfectly why so many people despise "big companies", rather then embrace and love them for doing their good work for their great country.

binspace 16y ago

Twitter should move to Oakland :-)

cpeterso 16y ago
Oakland could has so much going for it, yet the city continues to nosedive. Oakland is: * centrally located to SF, SJ, and the rest of the Easy Bay. * cheaper than SF or SJ (unless you live in the Hills) * an international airport. * an international shipping port. * convenient BART access from SF and the East Bay * not far from UC Berkeley. * (somewhat) cleaner than SF. Full disclosure: I live in Oakland, but plan to move. I was bullish on Oakland, but not its city government.

phatbyte 16y ago

You know what ? Sometimes it can't be about the money, sometimes it's about what you can do for the community and the city you choose to have a business in, and the quality of living there. Why do most startups are located there and in cities nearby ? I'm pretty sure Twitter wouldn't be twitter if they weren't in SF. And this is what's scares me about this whole "bubble 2.0" thing. People (investors) are getting too greedy, they rather move an entire company, including reallocation of it's employees than to pay a fraction of their $xxB evaluation. I don't give a damn about the investors, they knew where this companies was located. If they aren't informed before their investment, this just shows how much they know about their own country and cities. Besides, you have no idea how much tax europeans startups have to pay, If there was a place like SF in Europe, I would be moving there tomorrow morning. And finally, we are talking about Twitter. Have they finally got a way of making any real money ? Or this company based only on paper money ?

pjhyett 16y ago

No one in their right mind thinks Twitter's moving to Brisbane except for the jokers in city hall. Their employees would sooner quit than have to commute to an office park wasteland everyday.

kbatten 16y ago

Is hiring 800 people really that big of a deal for a place like SF? The article made it sound like 2400 new jobs accounted for not only most of the tech jobs in SF, but most of the growth all together.