SAN FRANCISCO (KCBS) – A controversial piece of legislation was scheduled to be introduced at Tuesday’s Board of Supervisors meeting at San Francisco City Hall.

KCBS’ Barbara Taylor Reports:

Supervisor Ross Mirkarimi drafted the legislation with the goal of enticing high-tech companies to keep their operations in San Francisco. Specifically, he has proposed giving companies a two-year break on taxes on stock options. In order to qualify, the company must be privately-held, employ a minimum of 100 people, and agree to stay and operate within San Francisco limits.

Mirkarimi’s legislation comes a week before his colleagues are scheduled to consider a 6-year payroll tax break for micro-blogging giant Twitter, if the company moves to San Francisco’s Mid-Market neighborhood.

Employee stock options take much of the blame for Twitter’s high taxes.

The two pieces of legislation aren’t “either-or,” meaning supervisors could theoretically approve both measures. Mirkarimi stressed that he wasn’t intent on competing with the Twitter tax break measure, rather trying to level the playing field for all high-tech companies.

“There’s a number of companies like Zynga, for example, that’s considerably larger than Twitter. So it’s hard for us to have this uneven practice of why one company versus another,” he said.

Mayor Ed Lee made clear, though, that his immediate focus was on helping Twitter relocate to Mid-Market.

“When they’re going to make a lot of money and they’re going to hire a lot of people, is it going to be San Franciscans that get a chance at these jobs or is it going to be South San Franciscans?” Lee wondered. “I want to make sure that we create an excitement that tech companies like Twitter can come in and take advantage of the exemption that we have but that can also breathe new life.”

The two pieces of legislation make clear that the stakes are high for San Francisco, if it wants to keep high-tech companies in town.

KCBS and Chronicle Insider Phil Matier Comments:

“You know, San Francisco’s the only city or county in the state that has a thing called the payroll tax and as part of that payroll tax, if a company makes over $250,000 they kick in 1.5% of that payroll to city tax. And it funds a whole lot of programs at San Francisco and City Hall that San Franciscans love,” explained KCBS and Chronicle Insider Phil Matier. “But, it also turns out it applies to those stock options that these tech companies and these gaming companies, when they go public, explode in value, employee compensation and could leave the Zyngas and the Twitters of the world on the hook for $50, $60 million in taxes and they don’t want to pay it. And they’re saying if we have to, we’ll leave town.

San Francisco officials appear to be learning that luring companies is by no means a sure thing.

“In the past, you know, what San Francisco did was argue the beautiful views, the postcard scenery, the hip and happening place,” Matier pointed out. “When other corporations said hey, we don’t like paying this and they said, oh what are they going to do? Move to San Ramon? Well, they did. They up and did.”

(© 2011 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)


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