Twitter Tax Deal Boosts San Francisco Revenue $7 Million

By Alison Vekshin

Photographer: Christopher Stark/The New York Times via Redux

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A payroll-tax break created three years ago in the blighted Mid-Market area of San Francisco to keep Twitter Inc. (TWTR) from leaving the city has generated $7.6 million in additional payroll-tax revenue as more companies moved to the area, a city report said.
While the exclusion that applied to the social-media giant and 14 other companies cost the city $4.2 million in lost revenue last year, 61 more businesses filed a payroll-tax return than in 2010, the year before the exclusion was enacted, according to a report yesterday by the San Francisco controller’s office.
“The turnaround in Central Market in just three years is truly remarkable,” San Francisco Mayor Ed Lee said in an e-mailed statement. “What began as a c
onversation with Board President David Chiu and Supervisor Jane Kim about how we could leverage private investment to help turn around a neighborhood has turned into a policy that has been truly transformative for Central Market and for our city.”
The tax incentives helped reduce San Francisco’s unemployment rate to 4.4 percent, according to Lee’s statement.
Twitter, poised to move out of the city in 2011, sought the tax break from Lee and city officials, who approved the exemption that year. Twitter instead moved its headquarters to Mid-Market in 2012, joined by technology companies including Zendesk Inc. (ZEN) and Yammer Inc. Other companies, including Uber Technologies Inc., a taxi service that lets people summon drivers by smartphone, and payments system Square Inc., moved to an office building a block from Twitter’s headquarters without qualifying for the tax break.

Payroll Expense

Twitter and the 14 other businesses that used the exclusion in 2013 still paid payroll taxes based on their base year workforce, according to the report. Businesses in San Francisco with more than $250,000 in payroll paid a 1.5 percent tax on their payroll expense in 2011.
Twitter spokeswoman Natalie Miyake didn’t immediately respond to an e-mailed request for comment.
The Mid-Market area experienced faster growth in the number of businesses and their payroll than the rest of the city, according to the report.
The findings suggest that “the exclusion may have had a role in making the area more attractive as a business location - - even to businesses who did not take advantage of the exclusion,” the report said.