“[San Francisco] continues to struggle through an economic recession that has gutted revenue from property taxes and other sources. [Mayor Gavin] Newsom said that property tax revenues, which had been climbing 11 percent every year, are now growing only about 1 percent year over year and economic forecasters said they don’t anticipate that revenue will improve significantly any time soon. San Francisco was late to be hit by the recession, and may be late to recover from it, the report noted.”
Report: S.F. deficit $750 million in 2011 [SFGate]

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Comments from “Plugged-In” Readers

  1. Posted by ex SF-er

    it is interesting to note the shift in arguments I’ve heard of late.
    at one time, some posters were claiming that SF was special and different, and thus was immune to the trends in the US/global economy.
    now, I’m hearing people use the argument that SF is special and different due to tech, which will lead SF out of the recession prior to other areas.
    seems like the same argument in different dressings.
    (the other argument, NOT made here, that I often hear is “if California gets a cold, the US gets pneumonia” which is completely backwards, as shown by the 1990s downturn in CA that only mildly affected the rest of the country)
    i’m not sure if SF will emerge first or last from the worldwide downturn. It has advantages: desireable locale, educated workforce, concentration of tech and biotech and other fields, just to name a few
    it has huge disadvantages: mainly cost of living, poorly run local and state government, hostility to business, just to name a few.
    which over-rides the rest? it is unclear.
    If I had to guess about a metro area that would emerge first I’d guess Washington DC (they make all the rules after all, and most of the economy is suckling at its teat).
    After DC it’s a tossup. I can easily see SF emerging stronger due to its advantages but also easily see it dying the slow death due to its overly high COL.
    part of it really depends on if we have inflation or deflation (medium to long term). If we have continued deflation, that is bad for SF, because SF is high cost, and there is less reason to do R&D in a deflationary environment as it’s hard to recoup costs in such an environment. inflationary environment is advantageous to tech and thus SF.

  2. Posted by sf jack

    Let’s just have a return to sanity in government.
    If they really want to make a dent in that deficit, perhaps City Hall should fully consider why it pays 9,000 of its 28,000 in staff at least $100,000 a year (and let’s not mention the pension and health benefits).
    Apparently, high end welfare for civil servants works when bubbles are predominant… less so, otherwise.

  3. Posted by anon cityworker

    sf jack,
    Each city worker pays 7.5% of their salary towards the pension plan. So someone making 100K is really getting 92.5K.
    1 of 9000

  4. Posted by sf jack

    Pre-tax, or after tax?
    And you guys fully fund it yourselves?
    In any case, what do you 9,000 do – I mean, for the money paid?
    Why isn’t the City better run – with Muni such a mess, permitting such a joke and spending plus $40,000 a year on each homeless person?

  5. Posted by sf jack

    Two more figures and a last question…
    A city staffer for every 30 residents.
    A city staffer making at least $100K for every 90 residents.
    I know it’s April Fools Day, but do these define insanity in local government?

  6. Posted by anon cityworker

    sf jack,
    The pension is taken pre-tax. Other cities pay for their employee’s pension plan SF doesnt.
    Here is a list of “open” positions, their salary and what they are responsible for doing.
    The buck stops with the Mayor and BOS. They appoint the Dept. heads, who appoint their Exec. Staff who manage middle management who manage the average city worker.
    Since I do not live in SF so I did not vote for the Mayor or BOS. If they wanted to fix SF services they would have to start at the top.

  7. Posted by REpornaddicty

    shouldn’t this be LILO, not FIFO?

  8. Posted by The Bunk

    The payroll of the city is a huge problem. They have a listing for a gardener at $24-$28 an hour. Unreal.

  9. Posted by FSBO

    anon cityworker – thanks for weighing in. Don’t know if it’s April Fools or not – but sf jack and ex SF-er (and most rational observers) are right on the money. The city government is obscenely bloated and spending is out of control. Same applies to the state govt. Yes the problem starts at the top – and the solution, if there is one, ultimately lies with the voters. All the best to you – but we need a reduction of about 4,500 of you 100K-ers. That would be a start.

  10. Posted by Jimmy (No Longer Bitter)

    The payroll is no problem until they start running out of money 🙂
    The solution, obviously, is to raise taxes. Perhaps a city income tax like in New York? Sales tax should go up 2%, or maybe 3%, not just 1% like everywhere else …
    Instead of a 30:1 ratio of city workers to residents, why not grow city government until the ratio is 10:1? And a raise! Raises for everyone!
    Then the city will become a perfect socialist paradise, governed by our benevolent Uncle Newsom.
    Honestly, I don’t see a downside. What are people going to do? Move?

  11. Posted by Jake

    Jimmy, I thought there was a city income tax(?) Agreed that SF government is waaaay bloated: a good chunk of that bloat however comes from all the health and human services we offer, not just the 100k’ers. SF needs to stop trying to solve larger social problems that it cannot possibly address – let the feds/state deal with it, heck, strongly advocate for policy xyz at the state/fed level, but start fixing potholes and stop trying to bring about world freakin peace.

  12. Posted by tipster

    Sales taxes rose today by 1% to 9.25%.
    I don’t believe that it’s last in last out. Look at the source of the last in. You can pay for real estate with the money you earn from your job. However, with Option Arm loans, we let people stay in their homes without even making the interest payments. Those homeowners are going to hang on to that sweet deal until it ends, then they’ll walk away, cuz they’ve got nothin in the game and the LTV is greater than 100%.
    And prices have to drop because the same number of people can not afford to pay for homes with mortgages that you actually have to pay interest on. They’ll keep dropping for years.
    As jobs are lost, they’ll drop more. We’re running a jobs deficit of about a million jobs per month over what we’d need to stay even. (ADP says we’re down 750,000 and we need to be UP 200,000 to stay even!) With all the job losses, wage losses are right behind. We’re about to start making offers at 25% UNDER what we were offering 3 years ago.
    But that has nothing to do with how soon the second derivative of house prices stops accelerating. That is a function of when the ticking time bombs of option arm loans finally blow up, and drop prices to a level consistent with employers ability to pay enough workers to fill them. A million jobs per month tells me we’re a long way off from that.

  13. Posted by jessep

    Why not just zero out the property tax like Florida and Texas do? Then just tax other things but not with this dumb rule prop 13.

  14. Posted by anonm

    sfjack and others – I know you will find this impossible to believe, but I seriously doubt that the city is vastly overpaying these $100k+ workers.
    Look, either you believe in competitive markets or you don’t (and from your posts, I’m betting that you don’t). The SF govt may be a public sector entity, but it still has to hire from the same labor market that everyone else hires from. If it’s true that these jobs really are so cushy and high-paying, then thousands of qualified people should be beating a path to City Hall right as we speak. How in the world can there still be vacancies…it’s downright shocking that any of the jobs is still open! Heck, there are plenty of qualified, college educated people on this board. Why aren’t many of us applying for these “dream jobs”?
    The fact of the matter is, if you pay well above the market price for a good, then someone will show up very quickly to sell you that good (i.e., in this context, someone will show up very quickly to fill the job). The fact that that isn’t happening implies one of two things: (a) SF Gov is not paying above-market wages or (b) there is an enormous arbitrage opportunity here that for some reason everyone has been missing for years and years.

  15. Posted by Jimmy (No Longer Bitter)

    Prop. 13 is great b/c it forces new entrants to the city to subsidize longterm residents. Honesty, newcomers to this city have been ruining it for real San Franciscans for at over 30 years now. The bridge tolls to enter the city should be raised to $300 per crossing (except for longstanding residents, of course), and anyone who was born in the city of SF and still lives there should receive an income tax refund and a medal from the mayor, just for being OH-SO-SPECIAL.
    This will be paid for by a ‘head tax’ on new immigrants to the Socialist Paradise of San Francisco (SPSF).

  16. Posted by LMRiM

    Just raise income taxes on the “rich”. A progressive city income tax of 1% rising to around 4% for incomes over $250K should do it. BOHICA all you W-2 chumps!

  17. Posted by unearthly

    I’m pretty sure passive income is taxed at ordinary income tax rates in California. So you don’t even need a W-2 to pay income tax to the state 😉

  18. Posted by anonm

    Bunk – Re: the $24/hr gardeners. It’s pretty well known among the urban economics crowd that wages for low-skilled workers must be disproportionately high in high cost of living areas.
    It doesn’t take a rocket scientist to figure this out. Let’s say you pay your gardeners “Central Valley wages”…let’s say $12/hr for convenience. Then gross pay is $24k/yr, and net pay is maybe $20k/yr, or $1600/mo. Even splitting a decent 2 BR in an okay part of town is still going to be $1000/mo, so you’re already spending over 60% of your pay just on housing alone!! Of course you could live out in Concord for cheaper, but then you’re incurring hundreds of dollars of commuting costs every month, so that doesn’t help either.
    The question is, why the heck would any rational gardener ever choose to work in SF at less than $20+/hr? The answer is that s/he wouldn’t. The reason that (some) professionals are willing to live in SF even though the Central Valley offers much lower cost of living with only somewhat lower wages is that SF offers amenities that these professionals value: cultural events, fine dining, panoramic views, etc. But these same things have little or no value to a low wage gardener: s/he can’t afford to go to these cultural events or eat at good restaurants or rent an apartment with a nice view.
    As long as RE prices are high in SF, then you’re going to have to offer relatively high wages to lower skilled workers. Otherwise, none of them will come here. The only way to “fix” this problem is to knock down SF RE prices by almost an order of magnitude. And that’s just not going to happen (there is, after all, a limited amount of land).

  19. Posted by LMRiM

    I’m pretty sure passive income is taxed at ordinary income tax rates in California. So you don’t even need a W-2 to pay income tax to the state 😉
    Tell me about it, unearthly. The only saving grace for the passive investor is the ability to time shift recognition of capital gains/losses using derivatives, but this opens up all sorts of market risks. As much as I love living in the Bay Area, I think a zero income tax state is in our near future.
    That being said, non W-2 earners (passive income typically is not considered “earned income”) do retain some flexibility to offset taxable income with business expenses not available to the W-2 employee. In CA, it’s best to avoid entirely the whole stigma of working 😉 In addition to tax efficiency, you feel good about yourself contributing as little as possible to a government that has clearly gone off the rails. It leaves more $$ too for voluntary contributions to projects/priorities, which is really IMO the basis of a civil society (not being forced at gunpoint by the state to “contribute” your “fair share” to priorities that are picked by polticians).

  20. Posted by dopmaniergic

    anonm –
    You’ve got to be joking playing the free market card with government jobs. Two components to a labor market, supply and demand. Somehow I don’t think the City of San Francisco’s demand curve is tailored towards maximizing productivity.

  21. Posted by Gavin

    anonm: The limited land argument does not explain why prices in the last two decades rose faster in San Francisco than the central valley. Nor does it explain why San Francisco is likely to fall less than the central valley in the future.
    Europeans discovered that San Francisco had limited land hundreds of years ago and this fact is priced into the market. It is improbable that buyers in the 1990s and 2000s suddenly realized that space is limited in San Francisco driving up prices more than in the central valley.
    Prices in San Francisco are higher than in the central valley but the premium is likely to be relatively constant. If Stockton has fallen 60% from the peak, San Francisco is also likely to fall a similar percentage to a first approximation to maintain the same premium over the central valley.
    That said, I would expect San Francisco prices to fall less than prices in the central valley because they rose less than in the central valley. A single family house in Stockton was selling at 4 times its 1990 value at the peak while homes in San Francisco only rose to about 3 times their 1990 values.

  22. Posted by Dude

    anonm, I think you’re really stretching. First off, I’ve known folks who have worked for the city government in various capacities. From the anecdotes I’ve heard, most city employees don’t even live in the city of SF, they live in cheaper areas in the south or east bay. So they do indeed commute in from Concord. anon cityworker above doesn’t live in the city, either.
    Secondly, I may be sterotyping here, but I highly doubt garderners and similar trades are large patronizing Aqua or the opera (if I’m wrong, apologies to any epicurean & erudite garbage collectors who may be reading).
    I have no problem with paying bureaucrats competitive wages – otherwise you end up with a City Hall full of listless clods who are unable to find jobs elsewhere. The problem is we have too many bureaucrats in general. And unlike the private sector, there are few benchmarks by which their performance is judged, few mechanisms to oust poor performers, thus resulting in an environment where the goal is to do the minimum possible to remain employed and not draw attention to yourself.

  23. Posted by anonm

    dopmaniergic – Please re-read the post carefully. You are missing the main point. It is a response to sfjack’s question as to “why [the city] pays 9,000 of its 28,000 in staff at least $100,000 a year.” The answer is that that is what you have to pay in order to attract qualified candidates.
    Now, you can have a serious discussion about whether we need to attract qualified candidates (maybe incompetent people will do) or what the optimal number of positions should be. But such a discussion would require actual data and analysis, none of which is happening here. A starting point would be to look at other urban city and county governments and see what their staffing:population ratios are (it’s essential to combine the two, because unlike most places, SF is both city and county, and generally the county govt is much bigger than the city govt). That data isn’t trivial to find.

  24. Posted by dopaminergic

    I didn’t misread your post anonm. You said that the city is not overpaying for the $100,000 workers because it must compete in the labor market with private entities. That misguidedly assumes that the city is looking to hire the same individuals as the private market and faces the same incentives as private entities to maximize productivity.
    However, the city has very different incentives as a public government. Thus, perhaps the market price for a worker who (1) is good at campaigning for city leaders; (2) is Gavin’s frat buddy; and (3) has very little skill to actually run a city is legitamitely $100,000 (how many friends can Gavin have?), but the reason for the $100,000 salary has nothing to do with the private labor market.
    You’re also incredibly out of touch with the going wages for manual labor. $24 is way, way over what manual laborers get paid in the private market, even in San Francisco.

  25. Posted by zzzzzzz

    One indisputable fact: SF cannot afford its massive, highly benefitted civil service. The lifetime health insurance alone guarantees that labor costs will continue to rise and consume an ever-greater share of the budget. Yet there’s no conceivable way taxes can be raised sufficiently to afford such a bloated workforce (the tax increases would inevitably affect far more than just the “rich”). But the alternatives – layoffs, contracting out and reduction of services – won’t be easy in a pro-labor town with immensely influential public sector unions. Perhaps a bankrupty, Vallejo style, is what it will take to put SF’s house in order.

  26. Posted by Brutus

    I’ve never thought we pay too much to city employees, by and large (sure, there are some examples, just as there are some examples in any large company – how much do the janitors at Google make again?)
    The problems are:
    1. We expect too little for that pay.
    2. We give out too much money, both directly to people in terms of services and handouts, as well as to non-government entities (non-profits and such) that we have very little control over.

  27. Listening to this crowd cry about city payrolls and tax burdens reminds me of one rather cruel fact, the ones who wine the most are often among those who really can’t afford to live here, many of whom should make more rational decisions and move somewhere else with a much lower tax burden, one that you can handle. I rarely hear this whining among the economic winners as they love all of amenities and services, despite potentially bloated and inefficient bureaucracies. And in the last analysis, the real story is that those who have secured our place here don’t really care if you get to stay or not. In fact, we wish you would leave because your constant bitching and moaning bums us out and makes you very unattractive. We would prefer to spend our time and energy taking our tax-supported transit to our tax-supported concerts in tax-supported parks (with reasonably paid gardeners) watched over by tax-supported security and tax-supported clean up after wards.

  28. Posted by anonsf

    The answer is that that is what you have to pay in order to attract qualified candidates.
    It doesn’t work that way, unfortunately. City workers are paid wages that high because they’ve been able to jury-rig the system to their advantage. To take another example, do you REALLY think that union autoworkers (are/were) paid their high wages because it was necessary in order to attract a productive workforce? No. It was because they were able to wring excessively high wages out the auto companies. Same with SF city workers. It’s not a free market.

  29. Posted by dopaminergic

    I’m not sure who the economic winners you’re referring to are. Perhaps trust fund kids or people who have never lived outside of San Francisco. I find that those who “whine” the most about being ripped off are those that actually know what it means to work for a living and subsidize the rip-off artists and lazy bums that constitute local government and the interest groups supporting local government. The reality is that the city of San Francisco provides terrible service for an unparalleled cost.
    Most people (especially here) would be perfectly happy paying for big government if it was at least somewhat efficient. For example, Chicago has better parks and public transportation, is a cleaner city, and has better amenities all while having a very corrupt, albeit efficiently corrupt, government.

  30. Posted by anon

    Most people (especially here) would be perfectly happy paying for big government if it was at least somewhat efficient. For example, Chicago has better parks and public transportation, is a cleaner city, and has better amenities all while having a very corrupt, albeit efficiently corrupt, government.
    Ever been to the south side? Chicago simply does a better job of keeping the crappy areas segregated from the nice areas.

  31. Posted by Mark

    The theme of Chicago vs. SF is a peculiar recurring theme on SS. As a former Chicago south side resident I will rise to the bait once more and state that I not only owned a home there, but I found the city services on the south side and more generally to be substantially more impressive than SF’s. Whether we’re talking about street potholes or public park maintenance, SF doesn’t compare well unless you put the very best of SF up against the worst of Chicago.

  32. Posted by anon2

    The President of the United States still owns a home in the South Side and seems to like it just fine.

  33. Posted by Usually Named

    Of course the President likes his South Side house — he got it at a, um, “good price.” Who doesn’t like a deal, even if it might have strings attached?

  34. Posted by tipster

    “The President of the United States still owns a home in the South Side and seems to like it just fine.”
    I know a lot of people who would like to help him get back to that Chicago home, the sooner the better.

  35. Posted by Jimmy C

    I’m not sure how this thread ended up talking about a house on the south side of chicago when it seemed to start about the city’s tax base.
    As far as the tax base goes, we spend way too much here. The unions need to go as we have too many firemen, too many city workers but not enough qualified teachers all resulting in firemen spending thier days washing trucks and making chili, bad schools and too many potholes.
    Do we really need 11 supervisors in such a small city all furthering their personal agendas (plus their staff) rather than governing and running the city. Compare this to LA County with 7-8 times as many residents, yet only 5 supervisors.
    I hope SF goes bankrupt like Vallejo so we can rid ourselves of the unions. Getting rid of district elections and maybe down to 7 supervisors may take a little longer.
    We may have bad schools, bad streets and a vanishing middle class, but at least the board of supervisors is addressing the tax base by banning foie gras.

  36. Posted by anon

    Jimmy C – LA County has more than 12 times as many people as SF County. However, it also has 88 different incorporated cities and towns, as opposed to one in SF. Each of those cities has some form of city council (we only have a board of supervisors since we’re a combined city/county), so the total number of city council members and county supervisors in LA County is MUCH, MUCH, MUCH higher than the one per 70,000 or so that we have. (I’ve seen something before showing that overall LA County has somewhere around one per 30,000 people, though some of those are probably part time)

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