document: Proposed tax break to keep Twitter in city leads to classic San Francisco fracas SAN FRANCISCO - In the shadow of San Francisco 's stately City Hall , sidewalks abound with transients , drugs and crime . Into this neighborhood , one of the world 's hottest social media companies has promised to stride , offering urban rebirth in exchange for a tax break . Tax incentives to bring businesses to blighted streets are not unusual . But this is San Francisco . And Twitter . The mayor supports the plan , but progressive politicians -- and now the city 's largest public employee union -- call the proposal a poorly crafted giveaway to the rich . The conflict comes at a time when the city 's high tech economy teems with energy not seen since before the first Internet bubble burst more than a decade ago . At issue is the city 's payroll tax . San Francisco is the only city in California to levy its business tax based on how much companies pay workers , rather than how much money they take in . Since Twitter emerged as a side project of a San Francisco podcasting company in 2006 , the business has grown from a handful of employees to a few hundred . With investors pouring money into Twitter , the company expects to grow to more than 3,000 . To do that , Twitter needs a lot more space . One option would be to flee to a sprawling suburban campus in Silicon Valley , where adding more employees would not mean adding to the tax bill . But earlier this month , recently appointed Mayor Ed Lee announced what seemed like a winning solution for everyone . Twitter had signed a letter of intent to sign a six-year lease on several hundred thousand square feet of office space in a historic building in the struggling Mid-Market neighborhood . The only condition : The city must agree to exempt Twitter from paying any new payroll taxes on any additional hires . For a company that expects to add thousands of new of employees in the next few years , the savings would add up quickly . '' `` This is the moment we have been waiting for , '' '' Lee said of the proposed deal . '' `` The transformative nature of an anchor tenant like Twitter will revitalize this community . '' '' Yet in San Francisco , where an overall economy largely untouched by the recession has kept real estate prices among the highest in the country , some low-income residents worry that revitalization will just lead to higher rents . And city employees facing layoffs and contract concessions thanks to a massive budget shortfall resent what they see as a giveaway to venture capitalists and a bailout for landlords . '' `` Who are the -LRB- Twitter -RRB- investors ? '' '' Supervisor John Avalos told The San Francisco Examiner . '' `` Probably some of the wealthiest people in this country . And we are giving them more wealth . '' '' Last Tuesday , members of a neighborhood group protested outside Twitter 's current headquarters , about a mile from the proposed new offices . They accused Twitter of not living up to its pledge to be a good neighbor . They complained neither the city nor the company have considered the low-income residents who would be adversely impacted by rising rents spurred by the prosperity Twitter could bring . '' `` The residents are feeling that if they 're not going to benefit from this revitalization that the city is pushing for , it really does n't make sense for these companies to stay in San Francisco , '' '' said Angelica Cabande , director of South of Market Community Action Network . Twitter declined to comment on the tax-break fracas . As a result of the controversy , a lawmaker on the Board of Supervisors ' progressive wing , Ross Mirkarimi , has proposed an alternative measure he says will fix an underlying legal flaw that has led to anxiety among hot tech companies looking to grow . San Francisco 's payroll tax is unusual enough , but one provision makes it even more unique . The city in 2004 added language to the tax code to make clear that tax collectors considered stock options a part of employees ' compensation and hence taxable as part of the payroll . For tech startups , stock options are one of the most common ways to hold onto employees , especially when a lack of funds does n't allow them to offer competitive salaries . When lucky companies reach a point where they can make their initial public offering of stock , those options can turn into a major windfall for workers . But for companies in San Francisco , that windfall sticks employers with a huge tax increase right at the time they 've issued the stock in an effort to expand . Mirkarimi 's proposal would place a two-year moratorium on taxing any company 's stock options to ease the fears not just of Twitter , but other San Francisco-based startups like social gaming leader Zynga and consumer review website Yelp . '' `` You do n't want to write law in a way that only helps one company or one neighborhood in one part of the city , '' '' Mirkarimi said . The Board of Supervisors is scheduled to vote Tuesday on the Twitter package , and Mirkarimi predicts it will pass even without his vote . If that happens , Service Employees International Union Local 1021 , the public employees union , may seek a ballot measure that could delay the deal until voters weigh in . City economic officials paint any failure of the deal not as a loss to Twitter but as a loss for the neighborhood , where more than half of the available commercial real estate sits vacant . While Twitter is the big fish the city is seeking to catch , any businesses within the geographic zone defined by the legislation would get a similar tax break . '' `` The benefit we want , which is jobs in this area , is not happening without some incentive , '' '' said Jennifer Matz , director of the city 's Office of Economic and Workforce Development . Without such incentives , she said , the neighborhood has not seen improvement for a generation . '' `` It resisted the last dot-com boom . '' ''
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