Harriet Alexander, Daily Mail, December 17, 2022
San Francisco’s mayor is asking municipal departments to find significant savings as the embattled city braces for a $728 million budget deficit, predicted for the next two fiscal years.
With some of the lowest office occupancy rates in the country, thanks to the tech companies that make the city’s lifeblood retreating to remote work, San Francisco has seen residents move to the suburbs – pushed also by rising crime.
The city’s income from property taxes and office rates has plummeted, causing sleepless nights in City Hall.
London Breed, the mayor, on Thursday asked municipal departments to identify ways to reduce costs by 5 percent in the next fiscal year and by 8 percent in the year after that.
‘We know the challenges facing San Francisco are significant, and we have a lot of work ahead of us to maintain the city’s recovery efforts,’ Breed said in a statement.
‘As we work to close this deficit, it will require tough choices and real tradeoffs.’
Breed must submit a balanced plan on June 1 to the board of supervisors for the years beginning in July 2023 and July 2024.
Breed’s team now believe the situation is worsening, and expect business taxes over the next two years to decline by $179.3 million from previous estimates.
Property taxes, usually a stable revenue source in downturns, are now projected over the same period to drop by $261 million from the earlier forecast.
And it could get even worse: Breed’s presentation, obtained by Bloomberg, warned that ‘departments should prepare for outlook to worsen.’
Office buildings are at about 40 per cent of their pre-pandemic occupancy, while the vacancy rate which was 5 percent in 2019 is now at 24 per cent.
Occupancy of the city’s offices is roughly 7 percentage points below that of those in the average major American city, according to Kastle, the building security firm, cited in a New York Times report into San Francisco’s struggles.
The scale of the problem was laid bare by a San Francisco tech entrepreneur, who in October shared startling scenes of the deserted downtown of her city, with the previously bustling streets void of people and eerily quiet.
Michelle Tandler, founder of professional development firm Growth Path, posted the images to her Twitter account, and says she now fears for the future of the City by the Bay.
‘This is downtown San Francisco, Monday morning at 9:20am,’ she captioned one.
Her photos showed the streets to be largely empty, with only a scattering of people, and very few cars.
She also posted a video of the quiet city center.
‘Historically these streets were bustling with office workers,’ she wrote.
‘Now, they are virtually empty.’
Tandler, founder of a professional development firm, said she hoped the local government realized how serious the problem was
Tandler and others worry that many big firms won’t renew their office leases, killing small businesses which depend on trade from workers.
That would also lead to a collapse in local tax revenues, and further desolation of an area already infamous for homelessness, public drug-taking and serious crime.
She photographed the streets around the offices of financial services firm Chime, and the Salesforce Tower – the tallest in San Francisco. Salesforce’s office still remains nearly empty, thanks to their workforce still remaining largely remote.
Tandler captioned the photos: ‘9:40am in San Francisco. Where is everybody…?’
She took another set at midday, with the streets still deserted.
‘I don’t think San Francisco government has fully grasped how problematic this is,’ Tandler said.
‘Either that, or they just don’t care.
‘When these leases come up, companies are going to downsize or leave.
‘These buildings rely on rent. The landlords pay $$ in taxes…’
Prior to COVID-19, San Francisco’s office occupancy percentage was constantly at or near 100 percent, with many companies, especially tech firms, fighting for office space, the authors wrote.
San Francisco’s office occupancy rate compares poorly to Austin, Texas, where 61 percent of workers are back; New York City, with 46 percent occupancy, and Los Angeles, with 45 percent.
‘San Francisco put a lot of their resources aimed at tech companies, and while that may have been a blessing last decade, them refusing to bring back workers to offices, or just plain leaving the city, have hurt San Francisco,’ said Michelle Duggan, a building occupancy researcher.
She told The Californian Globe: ‘The pandemic and the Great Resignation have changed how many see work. Many really like working remotely. No long commutes, no idiotic office politics, no high gas and vehicle repair costs. You get to work at home and even run errands during the day or stay with pets and kids.
‘Even more, tech firms are wired to do this, adding to the reluctance on their part.
‘Cities like San Francisco need to realize that it will never be the same, that they bet on the wrong industry to keep a presence there in the end. But that’s not happening right now. And probably will continue to do so as many companies may nix offices in favor of more remote work as a recession mounts.’
In July, Breed wrote an op-ed on Medium entitled: ‘Revitalizing Downtown and our Economic Core’.
In it, she insisted her administration was working to bring the jobs back to the city center.
‘There are no easy solutions here,’ she warned.
‘Along with AdvanceSF, we convened small business owners, large employers, property owners, and arts organizations to begin identifying initiatives and policies to support the future of our Economic Core.
‘Through our Economic Core Forum, we are exploring ideas like how we might attract new businesses and industries to San Francisco, how to improve transportation to serve the needs of an ever-expanding region, and how to make our downtown more resilient to economic shocks like what we experienced in the pandemic.’
She proposed new festivals to bring life back to the city, and beautification of plazas and public spaces.
‘To address storefront vacancies, we can pair property owners with artists and small businesses who can use the space for short-term activations that enliven the surrounding area and ensure the services and amenities visitors expect are available in our core,’ she wrote.
She also said they intended to proactively approach new businesses, suggesting they move into the downtown area.
‘San Francisco is a city of innovation and resilience,’ she concluded.
‘These are the values that will help us bring our city back from this pandemic.’
Breed’s optimistic vision is yet to show results.
Luxury condo prices in downtown San Francisco have been plummeting as the city’s crime rate continues to spiral out of control and many tech workers avoid the office in favor of working from home.
A recent report by realty group Compass found that the median sale price of a two-bedroom condo in the Golden Gate city’s downtown area has plunged 16 percent since 2021, while sale prices in surrounding areas have plummeted only 7 percent.
Patrick Carlisle, the group’s chief market analyst, attributed the rapid decline in housing prices to the area’s high crime rate and growing homeless population, as high-earning tech workers move out of the area to work from cheaper locations.
The report comes just months after it was revealed that the city’s ultra-luxurious Four Seasons Residences sold just 13 of its 146 units in the two years since the high-rise opened. Prospective buyers including Steph and Ayesha Curry have snubbed the high-rise, where condos go for up to $49 million.
The Four Seasons residences sat just four blocks from San Francisco’s infamous open air drugs market, the Tenderloin Linkage Center.
Opened in January, the government-funded center was billed as a space where drug abusers could use safely, and seek out help for their addictions.
But it quickly descended into anarchy, and closed earlier this month having cost $22 million – and San Francisco’s once golden reputation as a destination for tourists and businesses.
A mass exodus has been occurring in the city since the pandemic struck in 2020, and many office spaces were abandoned.
That means the city’s streets have become increasingly dangerous, with many locals avoiding downtown’s sidewalks for fear of a violent encounter with one of the many vagrants and drug abusers who’ve taken over.
‘San Francisco went from being one of the hottest office markets in the country to one of the weakest,’ Carlisle told the San Francisco Gate, adding: ‘High tech workers were the ones who were most likely to say, “Well if I can work from any place, I’ll move some place where housing costs 90 percent less.”‘
The statistic illustrates San Francisco in particular’s failure to recover following the spread of the virus, with homeless encampments and open-air drug markets since sprouting up and becoming commonplace.
The data also serves as fresh evidence of the city’s loss of its hallowed high-income earners – with over 72,000 moving out of Silicon Valley Between January 2020 and September 2021, according to University of California Consumer Credit Panel data.
That figure, which has likely swelled in the year since, is almost eight times higher than from the same span between 2018 to 2019.
Breed’s office, meanwhile, recently estimated that as much as one-third of San Francisco’s workforce now lives outside of the city as a result of the advent of remote work – as an increasing amount of citizens elect to work from home instead of braving the seedy San Franciscan streets.
Residents have instead flocked to less costly, conservative-run locales, such as Austin – noticeably absent from the list – or even suburbs outside their city limits, all to escape the crime and homeless camps that now prevail post-pandemic streets.
Crime is up 8.5 percent in San Francisco compared to this time last year, following two years of record crime rates during the height of the pandemic.
Assaults and rapes are both up by a marked 11 and 10.7 percent percent, respectively, and robberies up a similar 5 percent.
All are well over totals seen in the previous decade, prior to the pandemic and the implementation of several soft-on-crime policies by city officials that have allowed criminals to offend repeatedly and stay on the streets.
Larceny theft, meanwhile, has rocketed a concerning 16.6 percent, with 25,712 reported incidents so far this year.
While the statistics are somewhat less severe than other Democrat-run cities like New York – currently up 35 percent – and Chicago, which is up 37 percent, homicide is the only crime to see a decrease from last year in the northern California city, which serves as home to tech giants such as Twitter and Google as well as countless lucrative startups.
Both cities made the list of the cities to see their median incomes diminish in the years since the outset of the pandemic.
The San Fransciscan crime epidemic has gotten so out of hand, that it has seen the city’s former progressive District Attorney Chesa Boudin forced from office for his policies.
His replacement Brooke Jenkins has vowed to take a tougher stance on so-called quality-of-life crimes including theft and public drug taking.
The City’s Castro Merchants Association, meanwhile, which represents roughly 125 businesses, sent a letter to the city government in August, threatening to withhold tax payments if the city doesn’t get the homelessness issue under control.
Other metros to top the list included other Democratic-run locales such as Portland and Washington, DC, which have both been grappling with a similar surge in homelessness and violence.