Nobody wants Twitter to leave San Francisco, even if there is disagreement about whether it’s a good idea to give the company an estimated $47 million tax break to stay. But the most unsettling aspects of this deal are the unexplained, dramatic expansion of the tax giveaway zone and the unsupported claims that it will “revitalize” the mid-Market and Tenderloin areas without gentrifying them.
Nonetheless, the legislation creating a six-year payroll tax holiday for new jobs is on the fast track for approval after the Board of Supervisors Budget & Finance Subcommittee sent it on to the full board for consideration on April 5, denying the request by Sup. Ross Mirkarimi and other critics of the deal that the public be allowed to comment on a community benefits agreement with Twitter that is still being negotiated.
The deal was crafted mostly by the Mayor’s Office of Economic and Workforce Development, starting last year under Mayor Gavin Newsom (who has close ties to Twitter and its would-be landlord, Shorenstein Properties LLC) and seamlessly continuing under Mayor Ed Lee. For top OEWD staffers Jennifer Matz and Amy Cohen, keeping big businesses happy is a core mission, so their advocacy for this tax-cut package isn’t really surprising. It’s an article of faith with them.
David Chiu, the board president and mayoral candidate who is cosponsoring the measure, also professes a basic faith in the power of cutting business taxes and has a particular disdain for the payroll tax, which he calls a “job killer.” Chiu, who supported extending the payroll tax holiday for biotech companies last year, says this deal is consistent with his fiscally conservative approach to economic development and has even suggested doing similar tax exclusions in other San Francisco neighborhoods.
But the motivations are less clear for two other key proponents of the measure: Sup. Jane Kim and Randy Shaw, the Tenderloin Housing Clinic director and self-styled power broker for a part of town that he’s been seeking rebrand as Uptown.
Kim told us that she’s a progressive who philosophically opposes these sorts of supply-side economic schemes, but that she decided to champion the measure to keep Twitter from leaving and address blight in the neighborhood. Yet that doesn’t explain why she has drastically expanded the giveaway zone or made several public statements that aren’t supported by the facts, and Kim has stopped answering questions from the Guardian.
City Economist Ted Egan testified that there are no discernible economic development benefits to including the entire Tenderloin, and that the Twitter-induced economic boost would increase commercial rents. In other words, the primary economic benefits would be to commercial landlords.
At the same March 16 hearing, Kim claimed the measure will revitalize the Tenderloin without gentrifying it, something she calls one of her top concerns.
Shaw strongly supported Kim’s supervisorial campaign and is pushing this deal with almost messianic desire to call the shots in the neighborhood where he’s been building an empire with public funds for 30 years.
A Guardian investigation (see “Behind the tweets,” March 15) revealed that Shaw was a key architect of the deal: working closely with OEWD staff, adding properties into the tax exclusion zone, developing the talking points, rallying support for the legislation, and being given credit for the deal when city officials talked to landowners.
Being the champion for corporate tax breaks and large landlords is a new role for Shaw, who began his career as a progressive advocate for low-income renters, using lawsuits against landlords and social services contracts with the city to grow THC into a $25 million nonprofit corporation that controls much of the city’s single-room-occupancy housing stock. THC was a prime beneficiary of Newsom’s Care Not Cash program, which converted cash assistance for the poor into housing subsidies and support services, increasing THC’s government grants from $9 million in 2004 to $15.7 million in 2009. Recently THC was awarded a five-year city contract worth $82 million.
But if Shaw is still trying to promote the needs of the poor, he’s now doing it by casting his lot with landowners.
Shaw has lately been in fundraising mode as he tries to open a Tenderloin history museum next year in the Cadillac Hotel (where THC has acquired an ownership interest), and he has ambitious fantasies of turning a neighborhood that has long been one of the city’s poorest into an international tourist destination (see “The Test of the Tenderloin,” 9/28/2010). Who is he soliciting money from? We asked him, in writing, and he won’t tell us.
Shaw once stood with housing-activist-turned-supervisor Chris Daly in protesting plans by UC Hastings College of the Law to tear down low-income housing and build a parking garage — but now Shaw sat through the March 23 hearing on the tax break deal with Hastings CFO David Seward, who spoke in support of the proposal after Shaw added the property into the tax-free zone, saying it might help the ground floor retail businesses on the garage property.
Shaw still plays up his progressive roots and long advocacy for the Tenderloin, as he did during an emotionally overwrought presentation to the Budget & Finance Subcommittee on March 16, detailing his advocacy work over 30 years. “We are a neighborhood starved for investment,” said Shaw, who actually lives in the Berkeley Hills. “We cannot compete on a level playing field.”
But the “we” Shaw refers to isn’t really the poor people in his hotels, or the progressive leaders or movement that he has repeatedly criticized over the last year as “a political machine” that he’s fighting against in BeyondChron, a political blog he runs out of THC. Given the scant information in public records on why so many properties have been added into the district or the private discussions that led to those decisions, it’s hard to say who Shaw’s “we” is these days. But we’ve dug up a few more clues.
In August 2009, THC entered into a partnership with Giampaolo “Paul” Boschetti, to buy a 50 percent interest in THC’s office building, a 3,692-square-foot space at 126 Hyde St. What was unusual about the deal was its documentary transfer tax of just $750, which translates into a purchase price of $150,000.
Records with the Assessor/Recorder’s Office show that even with Prop. 13 limiting annual property tax increases after the property’s base year of 1991, the THC building was actually assessed at $964,161 — and that the reappraisal triggered by the sale would value the building in the millions of dollars, based on comparable buildings in the area.
The city and THC/Boschetti have been in negotiations to determine what the building is really worth for property tax purposes. Those negotiations are confidential, although one city official told us that the financial claims by this property owner are very unusual. The Guardian has repeatedly asked Shaw whether he has any financial interests in properties in the district, questions he ignored until we unearthed the Boschetti deal.
“We own our headquarters at 126 Hyde with Paul Boschetti. We have no other business dealings or investments with him, and our entire space is used by THC,” Shaw wrote. Responding to a follow-up question about whether he has any other financial interests in the district, he wrote, “only 126 Hyde.” When we asked about the strange undervaluing of that property and his financial arrangements with Boschetti, Shaw asked for detailed questions in writing, which we provided but he still refuses to answer. Boschetti also has not returned repeated Guardian calls.
But Shaw’s tax-break advocacy could also help another Boschetti-owned property: the Aida Hotel on Market Street. Helping “two growing hotel chains” buy a hotel on mid-Market Street was cited as a top reason for giving the tax breaks in OEWD e-mails we reviewed, although references to hotels was blacked out in dozens of other documents provided to the Guardian, with city officials claiming they were exempt as “propriety information or trade secrets.”
Matz denies knowing about Shaw’s business arrangements and says the redactions were to protect the identities of the national hotel chains that have been negotiating deals to come here. Boschetti appears to be an active real estate speculator, cutting deals in the Tenderloin and mid-Market areas.
An SF Weekly cover story (“Randy Shaw’s Power Plays,” 3/27/1996) details how Boschetti bought the Hotel Burbank in 1986, renaming it the Hotel Verona and converting it from a residency hotel for the poor into a tourism hotel, despite a city law against such conversions that Shaw worked on and has sued landlords under. “And though Shaw has battled tourism hotel conversion since the beginning of his career, he won’t comment on Boschetti, although he takes time out to praise the hotel owner as a good landlord,” reads the article.
City records show Boschetti also owns a 4,499-square-foot, 44-unit apartment building at 656 O’Farrell St.— just inside the tax exclusion zone that Shaw helped extend all the way to Geary and Polk streets — appraised at $2.6 million, as well as a commercial property at 2260-2264 Union St. worth $1.5 million.
An article in Poor Magazine (“Goodbye Mr. Stag,” 9/11/01) details Boschetti’s brief yet profitable ownership of properties at 1041 and 1035 Market St., once home to Mr. Stag Fashion Center. The article says Boschetti, “owner of the nearby Aida and Verona Hotels,” bought the property for $650,000, then sold it for $5.5 million in the spring of 2000 to a limited liability company, which then resold it four days later to another LLC for $7.75 million.
It is precisely this kind of lucrative real estate speculation — and its potential to affect the poor through rising rents and police crackdowns, such as the 18-hour-a-day police foot patrols that the city is promising Twitter — that most worries critics of the deal that Shaw is pushing.
“The people who are going to profit the most on this deal are big landlords,” said Gabriel Haaland with SEIU Local 1021, which is opposing the legislation.
Even those who support cutting a deal to keep Twitter here say they don’t understand why so many other properties were included. As Egan told us, “If you take Twitter out of the equation, this thing doesn’t make a lot of sense.”
Asaf Shalev helped with research for this story.