San Francisco Mayor London Breed has proposed tax incentives to encourage companies to open new offices in San Francisco and to help in certain ZIP codes.
When Breed originally proposed the plan, That would cost the city about $37 million in lost tax revenue over the next two fiscal years. A recent revision would bring the city’s two-year cost down to about $25 million.
but supervisor Connie Chan proposed an amendment to restrict credit to businesses open in certain ZIP codes: 94102, 94103, 94104, 94105, 94107, 94108, 94109, 94111, 94133 and 94158.
These zip codes are all located in the easternmost part of the city, from North Beach and the Embarcadero down through the north and south financial districts and the Civic Center with its concentration of office buildings.
The southernmost points included in the incentive are Dogpatch and Mission Bay, which are also corporate office hubs.
Chen represents the city’s Richmond 1st district, which is more residential, although it does include busy commercial avenues along Geary, Clement and Balboa streets, as regulators turn their attention to Concentrated in the troubled inner city, these streets will no longer be included in the tax break.
Total available space, which is a combination of directly leased space and sublet space by the landlord, city center 31%, compared to just under 30% last quarter An increase of about 26% year-on-year. Asking rental prices in the city are down 13% compared to the first quarter and 20% from their pre-pandemic peak. However, Colliers Bay Area regional research director Derek Daniels said rents varied widely across different buildings. Direct lease rates for Class A offices are nearly $80 per square foot, compared with $63 for Class B and $55 for Class C.
Breed’s proposal has two components. The first goal is to prevent more businesses from closing their doors and leaving inner city areas.this The proposal would defer tax rate increases for certain sectors until the 2025 and 2026 tax years. These industries include retail trade, manufacturing, food services, accommodation, arts/entertainment/leisure, and certain services such as hairdressers and laundry.Benefits will accrue as Top $25 million in gross receipts.
Revenue rates above $25 million will remain unchanged. So Glorian Chan of the Office of Economic and Workforce Development said the law would hit small and medium-sized businesses the most.
The second part is designed to attract new office users to San Francisco. The proposal defines “new” as having not been to San Francisco in three years. It provides a 0.45% rate discount for information, administrative and support services, insurance, financial services, professional/scientific/technical services and administrative office tax businesses. Businesses can claim the credit for up to three years or until 2028, whichever comes first. Businesses can receive credit up to $1 million in one year.
“We know we’ve lost many businesses and middle-income jobs in this city over the past decade,” Chen said. “This allows us to use this credit as a tool to entice them back to San Francisco.”
Chen said the proposal would require businesses to have a physical location, which would encourage job creation and occupying physical space, rather than providing tax credits to teams working entirely remotely.