By NOAH BUHAYAR

(correction appended)

Joseph Schmidt’s chocolate business was growing fast in the mid-1990s when he decided to buy and remodel a 100,000 square foot facility—half a city block—on 16th and Folsom Streets for $5.5 million.

A year later, eager developers scoured the northeast Mission, anxious to convert old industrial buildings into high-end live-work spaces for the city’s burgeoning population of dot-com entrepreneurs. One of them eyed Schmidt’s property.  Would he take $16 million to move his business—and his 100 neighborhood jobs–elsewhere?

“It was very tempting to sell,” he said recently.

But he declined, and unlike many businessmen who believe in free, unregulated markets, he now wants such temptations taken off the table.  And he may get his wish: If the Planning Department has its way, developers will be prohibited from converting old industrial buildings into apartments in the northeast Mission, and rezoning will limit the amount of retail and office space in any future development.

The department presented a suite of changes to the Board of Supervisor’s Land Use Committee last week that would rezone most blocks in the northeast Mission. The changes are part of the Eastern Neighborhoods Area Plans, a comprehensive agenda for promoting industry, improving public transit, greening neighborhoods, and increasing the stock of affordable housing in the Mission, East SOMA, Showplace Square/Potrero Hill, and the Central Waterfront.

By designating blocks for “production, distribution and repair” businesses, city officials hope to keep high-paying blue-collar jobs in the neighborhood and promote employers who bring new jobs to the area, explained Claudia Flores, a lead planner for the department.

The northeast Mission is home to a wide range of businesses—from custom furniture manufacturers and auto mechanics to machine shops and garment factories. Timbuk2, the messenger bag company, designs and sews its custom orders at a facility on 16th and Alabama Streets. Pacific Frame makes furniture on 17th Street and Treat Avenue.

But the neighborhood has also changed in the last decade. Skyrocketing rents during the dot-com boom pushed out several long-time companies, and invited in new upscale businesses, like doggy day cares and chic street cafes.

Lee Manning, owner of Pacific Frame, said that most of the cabinet makers who used to fill neighborhood workshops were forced out in the last decade.

“This used to be more of a working-class neighborhood,” he said.

Those shifts have heightened the need to hold onto the remaining blue-collar jobs, city planners said.  Census and Bureau of Labor Statistics data show that the Mission District has historically had a higher unemployment rate than the rest of San Francisco. In 2000, the rate was 5.7 percent in the Mission, compared to the city’s 3.4 percent.

Twenty-five percent of working-age people in the eastern neighborhoods, primarily the Mission, have no high school diploma, compared to 19 percent city-wide.

In 2000, however, production, distribution and repair businesses in the Mission created some 12,000 jobs, more than half of all employment in the neighborhood, according to the Department of Planning’s socio-economic analysis. On average, these jobs paid higher wages than those in the service sector.

Schmidt gets this intuitively. It’s why he kept his chocolate factory in the Mission.

“Jobs are more important than housing,” he said.

Six of his original eight employees are still working for him nearly 30 years later. Eighty percent of his staff lives in the Mission. Few came to him with any special training, something Schmidt, an autodidact who attended only eight years of formal education in his native Israel, said he respects.

His employees’ starting salary: $12.95 an hour. With regular wage increases, some people are making as much as $29 an hour. Everyone has health care, he said.

As he took a visitor around the factory floor last week, several workers, all smiles, paused from pouring chocolate into molds or packing gift boxes to greet him.

In a small room, a woman who has worked for Schmidt for more than 20 years stacked plain, white boxes full of chocolates for employees to take home to their family and friends at the end of the day. She and Schmidt joked about the size of his sweet tooth.

“We chose the Mission because there are a lot of good, hard-working people,” said Schmidt. “This neighborhood has the best pool of employees.”

(Correction, March 23, 2009)

Hershey Co. purchased Joseph Schmidt in August 2005. Joseph Schmidt continued to work at the Mission District factory.