Arcelio Reybol

May 5, 2016

Political Thought and Leadership

Topic: Research Paper

Technically Different

San Francisco’s housing market is amongst the hottest market in the world. Literally, any

feet available in the city is quickly purchased for occupation at an extremely high valued price.

There is an attraction to San Francisco that has led to many changes in job occupation, make-up

of residency and property value. The change in San Francisco is viewed as a phenomena known

as Gentrification. This spillover effect is caused from the new influx of high wage earners in

traditionally low income areas around the city. Due to local government policy implications, an

increased attraction to San Francisco has been brought forth by the high earning technology

companies that have led to drastic changes in San Francisco. With property value sky rocketing

in San Francisco, traditional residents are no longer able to afford living in San Francisco and the

newly high wage earning technology sector is bringing forth a new class of residence into San

Francisco. Because of the lack of property development, San Francisco is now experiencing

drastic changes in job occupation, residency, and property value.

With a brief short history explanation of San Francisco and the Bay Area, the Spaniards

came and discovered the Bay eventually conquering the Ohlone Indians through disease and

superior technology. The first settlers established the Presidio and more inland Mission Dolores.

Moving forward in the years to come, with the discovery of the Bay by the Spaniards and with

progression of time, the control of the land eventually landed in the Mexican Government as in

1821 Mexico declared its Independence and then eventually with the attainment of California

through the Mexican War, San Francisco fell into American hands. Eventually the “San

Francisco’s City Planner” Jasper O’Farrell lead to the development of what is now Market Street

and the surrounding areas. Fast forwarding into the future, the Gold Rush established San

Francisco as “the focal point, the new frontier, not just physically, but psychologically as well.”

According to CJJC.ORG: Development without Displacement RESISTING GENTRIFICATION IN THE

BAY AREA, “San Francisco emerged as a financial hub, where international investment

companies located their offices to profit from gold mining and trading. Quicksilver was

California’s next largest export after gold and the San Francisco Mining Exchange was

established in 1862 to support trading and speculation of both these valuable metals. The

location of numerous banks, insurance, and brokerage firms in San Francisco all served to

consolidate her role as a financial “command center” where international banking and trade

was coordinated and huge profits generated”. San Francisco’s history has always been involved

with riches and a basis of finances.

The economic base of a city has a great impact on how the urban environment

develops. In San Francisco the concentration of factories and warehouses were primarily along

the waterfront. “Economic activity was critical in determining the spatial organization of the

city, as well as determining the type of workers these cities would house.” – CJJC.ORG. South of

O’Farrell’s Market Street is where one can find areas traditionally where these factories and

warehouses are located along the waterfront. During these times of expansion and economic

prosperity huge influxes of immigration was occurring from Southern and Eastern Europeans to

Chinese attempting to come to San Francisco.

Moving into the 20th, century and the “Black Exodus” (1910-1950) 1.5 million Blacks

headed to northern and western cities; coming to San Francisco after WWII to the Fillmore and

to Hunters Point. CJJC States that “Mexican migrants, who began to reenter California in the

early 20th century, were fleeing rural poverty, the land takeovers of the Pofiriato Era, and the

Revolutionary upheavals of 1910–17.” Heading to Northern California, they settled in the

Mission District in San Francisco. The importance of this demographic making established the

zoning as CJJC states “In San Francisco, Market Street became the dividing line between

working-class, heavily immigrant districts on the south side, and middle- and upper-class

neighborhoods of U.S.-born Whites on the north side.”

This analysis of San Francisco’s history sets the precedent of how San Francisco has been

always an abundant area of resources leading to a pre-dominantly financial hub, and how the

making neighborhoods of the city have always been until recent times. San Francisco was

developed on economic development, and areas vacant for such residency for workers of these

types of industries that made up San Francisco. But now moving into present day San Francisco,

we see that the lack of housing has led to drastic changes in San Francisco. There is no longer

room for workers of the now new 21st century industries located in San Francisco. The

overtaking of traditional areas from the now new wealthier industries has caused a new

economic make up of San Francisco and new residents.

The housing market in San Francisco paints the picture of why these changes are

occurring. Under the Categorization of Real Estate and Housing Market, the San Francisco

Chamber of Economic Development states the following information about San Francisco: In

2013, “Emerging trends in Real Estate” ranked San Francisco first for investment. Primarily in

Civic Center, Bernal Heights, and the Mission; average residential rental rates increased by 50%.

More than 4,220 units of housing began construction in 2012 and over the next three years,

approximately 8,100 apartments are expected to be completed. These areas are drastically

changing and with an increase of over 50%, it is obvious that the property value has shot up in

traditional areas in where local residents could not afford the new spike. With the new

construction of units in these areas, the surrounding property value will be as an equal level

and will lead to an exodus of former lower level incomers traditionally based in these

neighborhoods, most evidently the Mission District.

Data on San Francisco evictions over the last 30 years shows that eviction notices of all

types peaked in 1997–98, correlating with the peak of the “dot com boom,” which resulted in

skyrocketing housing values and the transformation of San Francisco neighborhoods,

particularly the Mission district. The following list shows the total number of Declarations and

Buyout Agreements filed with the Rent Board from March 7, 2015 to December 31, 2015 during

the reporting period. The following should be read first: the identified zip code, second: the

area of the zip code, third: the declarations of buyouts, and forth: the agreements to the total

of the declarations of buyouts. These statistics are organized by zip code/neighborhood:

Neighborhood Declarations Filed = Buyout Agreements Filed:

94102/Civic Center:13 = 2. 94103/ South of Market: 35 = 3. 94104/Downtown: 0 = 0

94105/ Embarcadero: 0 = 0. 94107/ Potrero: 17 = 1. 94108/Chinatown: 9 = 2.

94109/Tenderloin: 20 = 13. 94110/Mission: 86 = 32. 94111/ Financial District: 0 = 0.

94112/Ingleside: 32 = 12. 94114/Eureka Valley: 36 = 20. 94115/ Western Addition: 19 = 20.

94116/Parkside: 21 = 9. 94117/Haight-Ashbury: 41 = 15. 94118/Inner Richmond: 27 = 4. 94121/

Outer Richmond: 24 = 12. 94122/Sunset: 36 = 12. 94123/ Marina: 28 = 10. 94124/Bayview: 6 =

2. 94127/West Portal: 2 = 1. 94131/Diamond Heights: 15 = 12. 94132/Lake Merced: 5 = 2.

94133/North Beach: 17 = 6. 94134/Portola: 17 = 5. TOTAL Declarations filed: 506 | TOTAL

Buyout Agreements 195. The Mission District has the most buyouts filed but with statistical

analysis, areas such as Diamond heights have a higher rate of buyouts filed compared to

declarations.

Since this time, the Mission district has consistently experienced eviction notices from

Owner Move-In (OMI), a no-fault cause for eviction that is often used to displace tenants and

raise rents, at an annual rate far above any other neighborhood. San Francisco saw a

correlation between the progression of Gentrification and overcrowding with rates of

overcrowding increasingly from early stages of gentrification. Areas affected heaviest in San

Francisco due to the high prices and low vacancy rates, the epicenter of San Francisco’s

Gentrification phenomena, is the Mission District. It has been so much affected that 11% of

Hispanics in the once used to be majority Latino neighborhood have decreased.

“Gentrification is an academic term first coined by Ruth Glass”- Marie-Helene Bacque

and Yankel Fijalkow. According to Tom Slater: Gentrification of the City Ms. Glass termed

Gentrification for the following reasons: “The links between housing and class struggle in

London (particularly in Islington, where she lived) became her long-term research interest, and

concerns about the accelerating rehabilitation of Victorian lodging houses, tenurial

transformation from renting to owning, property price increases, and the displacement of

working-class occupiers by middle-class incomers led her to coin the term “gentrification” in

1964”. In Mixed Communities: Gentrification by stealth? Edited by Gary Bridge, Time Buttler

and Loretta Lees, they introduce gentrification as so: “We define gentrification as the

movement of middle-income people into low-income neighbourhoods causing the

displacement of all, or many, of the pre-existing low-income residents.”

In researching studies of gentrification, there was a tendency of different sources stating

that there were a consistency of gentrification coming into waves, specifically three waves.

In Mixed Communities: Writers Hackworth and Smiths stated Gentrification in all,

including on a global scale, is describe in three waves. The First wave: “Disinvested,

deindustrializing, and socially diverse inner city in late 1960s in a context of ameliorating urban

decline”. The Second wave was in the 1980s, a property boom, market crash, rapid increases in

property values, with changes in the form of displacement. The third wave of gentrification

extends into areas that involve greater economic risk requiring substantial state assistance. This

touches upon legislative amendments, planning/building regulations and policies to encourage

development. Mixed Economies writer Sara Glynn describes third wave gentrification in the

following manner: “gentrification is expanding into new areas, is carried out by large

developers, and crucially is actively promoted by entrepreneurial urban governance. Mixed

Economies writer Neil Smith states, “Gentrification is a general strategy engaged by public and

private sectors to revitalize their cities to be competitive places for other forms of economic

investment.”

According to Dr. Richard Walker of University of California Berkeley, the first facet of

gentrification is the shock of the new and the loss of the old relating to industries. Second is a

wave of urban growth driving up land values and the prices of housing, with the highest in city

centers. Third, is the huge amounts of new money chasing housing. Dr. Walker makes a

connection to the bay area in his statement within the correlation of third wave gentrification,

“especially the limited housing stock of the favored parts of San Francisco, Oakland, and all

around the bay.”

According to CJJC the following waves of Gentrification are connected to the San

Francisco Bay area in the following waves: the first wave of Gentrification as well as to their

extent Displacement is “fueled by venture capital and the technology sector fully exploited the

rent gap that existed in neighborhoods like the Bayview, West Oakland and the Mission.

This first wave and its correlation to the rent gap is referred to from the cause of

disinvestment that had created cheap pockets of real estate in cities that were becoming

sought after destinations for a new, wealthy class of people. These neighborhoods were

attractive for the following reasons: urban nature, cultural diversity, affordable land, and

housing prices. The cause of investment in real estate is argued by CJJC is that “Between the

highest and lowest point of the tech bubble, there was an estimated loss of almost 72 percent

in the value of the Internet Index where tech stocks were traded.” Many shifted investments

into real estate. The California Reinvestment Coalition details the ways in which Black / African

American and Latino communities were flooded with predatory loans that set millions up to

have their homes foreclosed. In June 2013, the Federal Reserve Bank of San Francisco stated,

“House price appreciation in recent years has been nearly double the growth rate of per capita

disposable income. In some geographic areas, the ratio of house prices to rents is at an all-time

high, thus raising concerns about the existence of a housing bubble. For the U.S. economy as a

whole, the ratio of house prices to rents is currently about 16 percent above its 30-year

average. Because of these combinations, evictions were high totaling 40% of evictions due to

foreclosures.

The Second wave of Gentrification was caused by the housing crisis leading to rising

prices as a result of speculation driving many longtime residents and owners out. The Third

wave associated by CJJC to Gentrification is the combo of tech arrivals and continued

speculation in real estate. This speculation has led to the argument that not only a declining

rental stock puts renters at risk of facing a rent gap, but the rise of investor-owned rental

properties that dispossess communities from housing and places them under pressure of price

speculation.

With a sense of Gentrification, the development caused by such a phenomena can

empirically be viewed with analysis of the housing/development market. Thanks to Robert

Sammons the Regional Director of the Northwest U.S. Research, I was able to obtain extremely

valuable empirical evidence from Cushman & Wakefield to shed light upon the effects of what

is occurring in San Francisco as well as the nation.

According to Cushman & Wakefield, a brief has been provided for San Francisco

conducted on March 14, 2016- showing quite relevant data to the present day picture of San

Francisco’s Development. The U.S. Office Rent growth change from Q4 15/Q4 14 equals an

11.9% change in San Francisco. The percent of technology jobs in the technology industry and

change in rents since 2010 have San Francisco with a 10.8% of tech jobs in technology industry

and a 109.5% change in rents compared to the US with a 4.7% tech jobs in technology industry

and a 13.1% change in rents. We see the change that the technology industry is bringing within

rental changes as these new occupants reside in San Francisco.

Cushman & Wakefield exposes Bay Area apartment construction pipeline to be the

largest in history, yet still isn’t enough. From 2012 – 2015 there was a population growth of

396,000 with a construction of +/- 29,500 Multi-Family units per 13.4 people. San Francisco has

planned/constructed the following amount of apartments in the following years: San Francisco:

2012 – 880 units | 2013 - 3,107 units | 2014 - 1,111 units | 2015 - 1,928 units | U/C - 7,042 | Proposed

14,500 (Cushman & Wakefield).

San Francisco has a total inventory of 75.4 MSF with an overall vacancy rate of 5.9%. Overall

Average Gross asking rent is $68.14 psf. A record high overall asking rent in Q4 at $68.14 per square foot

(psf) beating the record set just last quarter (Q3 2015); previously the high point was $66.00 psf in Q4

2000.The citywide overall vacancy rate eased by just 10 basis points (bps) to 5.9% in the fourth quarter

but is down 150 bps from 7.4% one year ago. Net absorption was sharply lower year over year with the

total for 2015 at 0.9 million square feet (msf), down from 3.3 msf for 2014. But 2014 was a banner year

and 2015 was still above the 30-year average of 0.6 msf.

Demands from technology remains well out front with 142 Active Tenant requirements

totaling 4.4 MSF. Here are the industries and their demand for MSF: Non-Profit 0.2%, Other

0.6%, Health Care 1.1%, Consumer Products/Services 1.9%, Communications/Media 2.0%, Legal

5.8%, Financial 9.0%, Government/ Education 9.1%, Professional Services 10.6%, and

Technology 59.8%. Development in San Francisco is extremely active, prices are rising and there

is an extremely high demand for property in San Francisco. With prices skyrocketing, the

market is showing that there needs to be more production of space for such a high demand.

This high demand is specifically coming from the technology industry. Policy makers are to look

to for this reasoning. The actions of the policy makers and explanations are reported by Chris

Garrett, Cindy Starrett, Paul Singarella, and Andrea Hogan of Latham & Watkins with a summary

of the following policies pertaining to what is known as the “Twitter tax break”.

In January 2011, Twitter was considering leaving San Francisco to relocate. In response,

the report states that the Board of Supervisors created a tax benefit to provide businesses with

an exemption from additional payroll expense tax provided they, “maintain a fixed place of

business within the Central Market Street and Tenderloin Area for payroll expense attributable

to that fixed location….” This tax savings, known as the Central Market/Tenderloin Payroll Tax

Exclusion (CMTPTE), was based on a condition that Twitter (and companies that follow) move

to a specific “blighted” section of the City along Market Street”. (Latham & Watkins). This

ordinance known as Ordinance 68-11, CMTPTE, by a vote of 8 to 3, passed on April 19, 2011.

It is shared in the report that three days later, Twitter announced its lease of 215,000

square feet of office space at 1355 Market Street. “Beginning in 2012 and ending in 2019 this is

an exemption from tax additional to the business’ tax “Base Year.”” (Latham & Watkins). What

this exempts as stated in Latham & Watkins report, are new hires after the “Base Year” from

San Francisco’s 1.5% payroll tax. Fully explaining: “in no event shall the tax exclusion reduce a

person’s tax liability to less than the person’s Base Year payroll tax expense liability.”

San Francisco has overhauled its tax code and technology startups are deriving

particular benefits. This overhaul culminated in the passage of referendum Proposition E, The

Gross Receipts Tax. The tax is based on how many the technology companies employ. A

company with a payroll expense (“total compensation paid including salaries, wages, bonuses,

commissions, property issued or transferred in exchange for the performance of services”) over

$150,000 has to pay 1.5% expenses in taxes to the city. The city is using temporary tax

exemptions to move towards taxation of gross receipts as opposed to payroll expenses.

Ordinance 87-11 is a City-Wide stock option Tax exemption. It is stated that with the tax

levied on companies doing business in San Francisco as well as the payroll tax assessed on a

company’s stock options, technology companies have raised concerns. Hence on May 24, 2011

the Board of Supervisors in San Francisco passed the Ordinance 87-11, which in turn excludes

stock-based compensation from payroll expenses from the tax years of 2011 through 2017 by a

vote of 8 to 3. Paying up to $750,000 in payroll expense taxes on their stock options when a San

Francisco Company goes public, now are exempt after that mark. This applies city wide to any

company that is paying the City wide payroll tax and, “undertakes an initial public offering on a

public stock exchange, or experiences a change in control prior to such initial public offering.”

November 6, 2012, San Francisco Voters by 71% passed a referendum Proposition E, the

Gross Receipts Tax. Prop E will phase in a gross receipts tax over a five year period beginning in

2014. According to Latham & Watkins, gross receipts are defined as “the total amounts

received or accrued by a person from whatever source derived, including, but not limited to,

amounts derived from sales, services, dealings in property, interest, rent, royalties, dividends,

licensing fees, other fees, commissions, and distributed amounts from business entities.”

The following order of how San Francisco will transition from a tax of Payroll Expense to

Gross Receipts is explained by, “Following a predetermined formula, the City’s payroll expense

tax will be reduced in tandem with the raise in gross receipts tax and, if the gross receipts tax

generates more revenue than the payroll expense tax would have, San Francisco will transition

away from payroll expense tax completely.” –Latham & Watkins. This gross receipts tax will be

dependent on type/form of industry hence leading to different rates for different industries.

Latham & Watkins state the following in regards of who Prop E is benefiting, “Prop E “benefits

low-revenue, and high headcount companies like startups” and that companies in industries

such as finance, insurance and real estate could see their local taxes increase up to 30 percent,

while taxes would not increase for most scientific and technical companies.” It is also noted

that Prop E is reserving the tax savings granted by the 2011 Ordinance which is stated by

Latham & Watkins created the CMTPTE, “guaranteeing that beneficiaries of the CMTPTE will

not pay more under the new tax scheme than they would have paid had Prop E not been

enacted, for the duration of the CMTPTE, which expires in 2019” – Latham & Watkins. Also,

Companies are not, however, required to disclose the amount of their tax savings to the

general public

Prop E also includes a Payroll Expense Tax Exclusion Credit for those companies

benefiting from other tax savings. These include the Enterprise Zone Tax Credit, the

Biotechnology Exclusion and/or the Clean Technology Business Exclusion. Also in regards to the

stock option tax savings under the Ordinance 87-11, Prop E does not effect this until 2017.

The two entities responsible for ensuring that the CMTPTE is being correctly

implemented / observed are directed by the Office of Economic and Workforce Development

(OWED) who are responsible for ensuring that business meet the CMTPTE Criteria and the

Office of the Treasurer and Tax Collector. Applications to enroll in the CMTPTE must direct their

applications towards the OEWD filing a payroll expense tax return and filing an annual Affidavit

Renewal which details the total number of individuals hired during the year, who were referred

by the San Francisco Workforce Development System during the Year, and the duration of

employment for each individual hired during the year. It is stated that the companies must also

enroll into a program to connect economically disadvantage San Francisco residents with entry-

level jobs, the First Source Hiring Program. Another factor for companies is that Community

Benefit Agreements are required of any company with annual payroll expenses over $1 million

that wishes to apply for the CMTPTE. The discussion point is made by Latham & Watkins that

“the actual amount of the donations varies based on the aspirational nature of many of the

“key features” of the Community Benefit Agreements (which do not require strict adherence

but instead generally provide that “[c]ompletion of at least 80% of items in the CBA

[Community Benefit Agreement] will be deemed as successful, provided that a good faith effort

was made to achieve all items).” In regards to this Community Benefit Agreement, the following

companies listed by Latham & Watkins have signed in San Francisco: Zendesk, Yammer, Zoosk,

One Kings Lane, and 21 Tech.

Latham & Watkins also state applicants must participate in the First Source Hiring

Program requiring, “the identification of entry level positions in order to properly allocate

training resources, and the availability of the first opportunity for graduates of those training

programs to be considered for employment.”

Since 2011, San Francisco has seen the following companies come: Amazon.com,

LinkedIn, Yelp, Salesforce.com, Riverbed, Airbnb, Yammer, Tagged, Macys.com, Pac-12

Enterprises, Kabam, Funzio, 6waves, StumbleUpon, FiveStars, Zynga, Pulse, Appirio,

FinancialForce, Evault, Moshi, Reclip, CallSocket, Pinterest, and Lithium Technologies. Also 59

several major technology funders have also opened offices in San Francisco and the venture

capital funding of San Francisco based companies increased about 41% from 2011 – 2012.

Analyzing the following technology policies and San Francisco’s Involvement in the

market through Tax Emptions, it is clear that there is a connected relationship between private

entities and local government in forming a directed economic growth path for San Francisco.

Through the Government’s actions, not the actions of free market, the economic landscape has

been altered to accommodate such a new industry. Indeed this is changing San Francisco’s

economic make up. The tax exemptions are inducing technology companies to come to San

Francisco and remain in the city. Tax exemptions are ranging to the company itself trickling

down to top executives all the way to normal employees. With this attraction from Policy

Makers, the technology sector and its wealth are having a dramatic effect in San Francisco’s

economy, job market, and within the city in general.

The following information has been conducted by Dr. Michael Mandel of South

Mountain Economics with expertise in emerging occupations and emerging industries.

According to this study, since 2010, San Francisco private sector employers added more than

67,000 jobs for a 15% gain. This alone made San Francisco the second fastest growing large

county in the U.S. as a measured by private sector employment. Technology/Information

companies accounted for 21,000 of the new jobs. The technology/informational sector helped

gain 46,000 private-sector non-tech jobs, or 12 percent, over the same period in the following

areas: construction, manufacturing, health, education, arts, recreation, restaurants, and bars.

Also, this demand has led to a demand of occupations such as accountants, auditors, customer

service representatives, dental assistants, hygienists, truck drivers, industrial engineers,

maintenance, receptionists, and social community service managers.

“San Francisco has far out-performed the rest of the country since the Great Recession

started in 2007” – Dr. Mandel. Between 2007 -2013, there was an 11% rise of the number of

Private Sector Jobs in city, compared to a 1% decline nationally. San Francisco has generated

more private sector jobs than 47 out of 50 states. Ranking first with the change in private sector

jobs ranging from 2007 – 2013 accounting in the thousands was the State of Texas at 717.5

thousand changes, second was the State of New York with 241.6, third was the State of North

Dakota at 81.6, and then comes the City of San Francisco with a change in the private sector

mounting to 51.8 thousand. San Francisco’s Technology/ Informational sector has grown by an

astonishing 45 percent since 2010.

The Technology sector has truly lead to job increases. San Francisco has traditionally

always been a financial powerhouse. Finances dominate San Francisco’s job occupation.

Comparing the newly upcoming Technology Industry with the traditional Financial Industry, one

can see how this norm is also being changed.

In 2012 the Technology/ Informational sector roughly brought in $9.2 billion in wages to

the local economy (22% total), which makes this technology/ informational sector second to

the financial/legal/accounting sector in terms of economic impact in San Francisco. The two

economic drivers in San Francisco’s economy are truly the financial/legal/accounting sector and

the Technology/Informational Sector. “During the dot-com boom that ended in 2000–2001, the

finance/legal/accounting sector was responsible for 20 percent of the private sector jobs in the

city and fully 35 to 40 percent of the private sector wages.” (Dr. Mandel: South Mountain

Economics).

To put into retrospect how strong San Francisco’s Financial/Legal/Accounting sector is,

the sector has been placed in a national context and is only exceeded by New York City. Sector

employment from 2001 through 2013 that of the Technology/Informational sector employment

reached in 2001: 56 thousand jobs as an 11% share of total private employment. In 2013 68.4

thousand jobs were reached as a 13% share of total private employment. An obvious increase.

Comparing this to the Financial/Legal/Accounting Sector in 2001: 103.2 thousand jobs were

reached with a 21% share of total employment. In 2013: 77.4 thousand jobs were reached with

a 15% share of total private employment. Hence showing a drop in the

Financial/Legal/Accounting Sector. In another view that can shed more light onto this matter is

by analyzing sector wage payments.

In 2001 the Technology/Informational sector created 5.9 Billion dollars with a 15% share

of total private wage; as in 2012: 9.3 billion dollars was obtained and 22% was the share of the

total private wages. Compared to the Financial/Legal/Accounting Sector in 2001: 15.6 Billion

Dollars with a 40% share of total private wages and in 2012: 12.6 Billions of dollars with a 31%

share of total private wages. Moreover: In San Francisco, the average annual income in the

technology/ information sector is about $145,000 per year, including bonuses and stock

options. The Average income for the non tech worker is $75,000.

Reasons why Financial/Legal/Accounting sector was negatively affected correlates to the

Dot Com Boom. “In 2000, at the height of the boom, the finance/legal/ accounting sector

accounted for roughly 41 percent of the wages paid in San Francisco.” – (Dr. Mandel: South

Mountain Economics). In addition, the South Mountain Economics study continues to state:

“Yet after the dot-com bust, the finance sector was significantly impacted. Between 2001 and

2005, the finance/ legal/accounting sector lost 25 percent of its employment, amounting to

25,000 well-paying jobs and $1.4 billion in wages and salaries, compared to a decline of 17,000

jobs and $800 million in wages in the tech/info sector. Tech-related jobs started rebounding

strongly after bottoming out in 2005, but finance-related jobs were hit by the national financial

crisis.” In regards to this statement, the South Mountain Economics Study furthermore

continues to states that the employment for the city in the Finance/Accounting/Legal Sector is

“still 25 percent below its 2001 level.” It was noted as well that, “Many of the missing jobs

would have been in clerical and back-office positions accessible to medium-skilled workers.”

Now even though it is still below, the study further continues to state that the growth of non-

tech jobs have been picking up at an accelerating rate. “Employers are advertising for an

increasing number of accountants and auditors, dental assistants and hygienists, customer

service representatives, chefs and head cooks, industrial engineers, truck drivers, maintenance

workers and mechanics, fitness trainers, hairdressers, and social and community service

managers, among others.” (Dr. Mandel: South Mountain Economics). Truly showing a diverse

economy and a diverse economy.

In regards to taxes, the South Mountain Economic Study reported that the technology/

informational sector helped generate total business tax revenues of $480 million in the 2012-

2013 fiscal year. More specifically, the study lists selected taxes for the years of 2009-2010 and

2012-2013. The following selected taxes have created the following in the thousands: Property

Tax 09-10 $1,060.3 | 12-13 $1114 with a percentage change of 15%, Business Tax 09-10 $353.5

| 12-13 $479.6 with a percentage change of 36% , Sales Tax 09-10 $96.6 | 12-13 $122.3 with a

percentage change of 27%, Hotel Room Tax 09-10 $135.5 | 12-13 $182.4 with a percentage

change 35%, All Local Tax Revenues 09-10 $1,934.5 | 12-13 $2350.1 with a percentage change

of 21%.

It was discussed in the study that the growth and the rapidness of this growth can bring

challenges of its own with the affordability of housing, increased cost of living, and a strain on

city services including transportation. Moreover, the study goes in depth stating/ defining what

a balanced economy is: job growth across a wide range of industries/occupations both tech and

non tech, opportunities for local workers with a wide variety of skills, less subject to roller-

coaster cycles.

The end of the technology boom can lead to fears of emptiness within the city, however

the Study reasons why this isn’t/can’t be true for two reasons. The first being that the “2000s

was due to a combined short-term tech bust and a long-term shrinkage of the

financial/legal/accounting sector.” The second reason is that this tech boom, unlike the

previous one, is not being driven by debt.” Further explained with the statement: “Companies

such as WorldCom and Global Crossing borrowed massive amounts of money to lay fiber cable,

buy network routers, hire software developers, construct buildings, and so forth.” The previous

economic wave was based on borrowing as was experienced in the 2007 housing bubble.

Truly the Technology boom is leading to dramatic changes economically in San

Francisco. Wages are changing, tax revenue is increasing, and employment is rising. All signs of

economic development, yet there are both positives and negatives to this such development.

According to the San Francisco Chamber of Economic Development with the

categorization of Positive Forces and Trends, San Francisco has much to show in areas in where

the economic make up can be made extremely clear. Technology, tourism, retail, housing, and

financial services dominate the strong growth in San Francisco’s economic recovery. It is stated

that the Housing and Commercial construction market is booming: 36 construction cranes in

the city and 22 of these are related to residential construction of 8,000 units. The

technology/information sector’s requirements are keeping the office market demand

consistent which in turn continue to push rental and occupancy rates up. In addition, San

Francisco with nearly $7 billion invested in 2012, ranks the top locations for Venture Capitalist

investment.

According to the San Francisco Chamber of Economic Development, under the Negative

Forces and Risk Categorization, the following negativities are stated: Inadequate public

transportation, high cost of living, scarcity of affordable workforce housing, potential changes in

political attitudes, and crime. The Crime rate in San Francisco is the highest in the State of

California and in the Nation. Other negative factors include public employee rising pension and

health care costs, potential loss of San Francisco City College (90,000 students), and traffic

congestion: 350,000 people commute daily in/to San Francisco.

Much of the stated positives and negatives are attributed to a huge portion of the influx

of job creations/ attraction generated by the Technology and Information Sector. This is due in

part because of Political Interaction within the private market and establishing policies

specifically designed to attract and hold technology/informational sector occupations to reside

in San Francisco.

The competition in the housing market of San Francisco induced by lack of property

development has caused extreme price peaks in value of property, causing lower income

residents to no longer be able to afford living in San Francisco; higher wage earners from the

technology industry are now moving in and occupying/buying San Francisco and in turn leading

to the phenomena known as Gentrification. This change is brought forth by the housing market,

however it is equally truly inflicted by the Local Government. Falling into all the categorizes of

the waves of Gentrification, the San Francisco government induced the comings of what is now

the development of San Francisco. Mayor Ed Lee and the Board of Supervisors have indeed

entertained the city of San Francisco to the Tech Industry. This involvement of local

government has indeed brought forth drastic changes into the city itself on all levels of San

Francisco life. It is apparent that the course of action/development of what is occurring

presently in San Francisco will continue. What is interesting however is that all policies for the

tech industry in regards of the tax exemptions are in place until 2019, the end of the second

term of Mayor Ed Lee. Truly statistically, what is occurring is positive, money is being made,

extreme competition is in the market on multiple layers of economic activity, and

wages/revenues are increasing. The true after effect will not be exposed however until the

years to come after 2019. Yes, Gentrification in all forms have made the city of San Francisco

better in nominal terms, however the human element through the loss of its once native

residents that made the city is an extreme lost accounted as the ultimate cost.

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