SF's Twitter tax-break plan spurs political fight S.F. POLITICS Clash pits progressives against moderate supes who favor plan, lead board

Twitter CEO Evan Williams left jokes with co-founder Biz Stone as they invalid the newly revamped Twitter website on Tuesday September 14, 2010 at Twitter headquarters in San Francisco, California. Twitter launched a new version of the popular social media site in hopes it will be more user friendly less Twitter CEO Evan Williams left jokes with co-founder Biz Stone as they invalid the newly revamped Twitter website on Tuesday September 14, 2010 at Twitter headquarters in San Francisco, California. Twitter ... more Photo: Lance Iversen, The Chronicle Photo: Lance Iversen, The Chronicle Image 1 of / 10 Caption Close SF's Twitter tax-break plan spurs political fight 1 / 10 Back to Gallery

A year ago, the idea of extending a local tax break to Twitter, the San Francisco-based microblogging company whose estimated value is $3.7 billion, would have been a tough sell because the left-leaning progressives held a majority on the Board of Supervisors.

The progressive supervisors who dominated the board for the past decade have traditionally seen corporate tax breaks as welfare for the wealthy. But they are now firmly in the minority at City Hall after four new supervisors were elected in November and board President David Chiu moved closer to the center.

"The political ground has shifted," said Corey Cook, a political scientist at the University of San Francisco.

Chiu and new Supervisor Jane Kim came up through the progressive ranks but have shown a willingness to reach across the proverbial aisle to form a new majority. Their support of the tax break for Twitter means the company will probably stay in San Francisco.

"There are now progressives who are willing to be more pragmatic, who are willing to compromise, to negotiate, to bargain. That wasn't the case before," Cook said.

The new dynamic kept Chiu in the board presidency's seat after he lost the backing of the key progressive core and elevated longtime City Administrator Ed Lee into the mayor's office to replace Gavin Newsom, who exited City Hall a year early to become lieutenant governor.

The Twitter tax break, as it has become known, is the latest fissure.

The legislation would give companies in the economically depressed Mid-Market and Tenderloin neighborhoods a pass on paying the payroll tax for new employees. The exemption would be good for six years and would not apply to workers already on the payroll.

It also would exempt companies from paying payroll taxes on employee stock options should they go public during the exemption period, which could lead to major savings for the affected businesses.

The board's Budget and Finance Committee will hear the legislation Wednesday, before it goes to the full board. Passage is expected, but opponents are considering putting the issue before voters in the November election. That could be done with a signature-gathering drive or by getting at least four of the 11 supervisors to sponsor a ballot measure.

If a repeal effort does land on the ballot, it would be decided as voters pick a mayor and could turn into a wedge issue.

Chiu, who is running for mayor, said that when it comes to trying to deal with unemployment and blight - two problems supporters hope the tax plan would address - "I don't think we can defend the status quo."

However, termed-out supervisor Chris Daly, who was replaced by Kim in January after 10 years in office, has not given up pushing the progressive agenda. He has turned his bar, Buck Tavern, into a gathering place for opponents of the tax break.

Joining the cause has been the Service Employees Union Local 1021, the largest city employees' union, whose leadership has tied the payroll tax legislation to the larger budget debate. They argue that a tax break is the last thing the city needs because some city officials are pushing for service cuts and pension reform to balance the books.

Now headquartered in the South of Market, Twitter is eyeing a move to Brisbane. Twitter CFO Ali Rowghani informed city officials last week that if the proposed tax exemption were approved, the company would move into the vacant Furniture Mart on Market Street just east of Ninth Street. It projects growing its current workforce of 350 to 3,000 by 2013.

Legislation backers, led by Kim and Chiu on the board and with strong support from the mayor, say the tax incentive would spark an economic revitalization and keep growing companies, such as Twitter, in San Francisco.

Daly, who testified against the legislation at City Hall last week, argues that this isn't good policy for the city.

"We're here talking about giving away, or foregoing, up to $22 million (in tax revenue) to a corporation valued in the billions." Daly said. "Someone needs to stand up again to the corporate threats and do the people's work."

Daniel Hurtado, executive director of the Central Market Community Benefit District, sees it differently.

"After decades of neglect, the time is now to attract new businesses to our empty office buildings and vacant storefronts," he said.

Kim, who represents the district eyed for the temporary payroll-tax exemption, said she has not supported corporate tax breaks in the past but sponsored this legislation because she thinks it's worth trying.

"This is an issue that has fired up a lot of passions and a lot of opinions in terms of what is the right thing to do," Kim said. "Most of us agree on the outcomes that we want to see but may disagree on the tools that will take us there."