Tweaking an existing tax break for biotech that few companies use, the San Francisco Board of Supervisors approved a change this week that gives new biotech companies the full 7.5 years worth of city payroll tax exemption.
Some supervisors were wary of the amendment—the original ordinance would have given new applicant companies four instead of the original seven plus years awarded companies who came into the program at its onset. The ordinance retains the 2014 sunset clause.
“I think it’s important that we do not use this as a way to stimulate job creation,” said John Avalos, Supervisor for District 11. Avalos and Chris Daly were the only supervisors to vote against the ordinance.
Avalos said the tax breaks weren’t necessary since San Francisco had other benefits like transportation infrastructure, the education system, as well as being “a beautiful city.”
David Campos, Supervisor for District 9, voted to approve the extension, but not wholeheartedly. “I don’t generally like these kind of tax breaks,” Campos said. “I have to say though that what’s been difficult about this is, I do believe there is something unique about biotech.”
None of the commissioners talked about the numbers, which show just 8 percent of eligible biotech jobs using the exemption in 2008.
“In fact, the primary worth of the incentive may lie in its marketing value, and how it signals to the industry that San Francisco is a credible location for biotechnology,” wrote the office of the Controller’s Office of Economic Analysis in a 2009 report.
Only 231 jobs were exempted from tax in 2008 – accounting for employees at eight companies – out of an estimated 2,750 eligible biotech jobs, according to the San Francisco Controller’s Office. That represented $365,000 in uncollected revenue.
There was also about $111,000 in a business property tax exclusion for biotech firms.
San Francisco collected about $5.5 million in biotech taxes for 2008 from payroll, hotel taxes, and sales.
Meanwhile, if lease rates are any indication, biotech likes San Francisco. Leasing rates have increased significantly since 2006. Last year’s estimates showed the city’s lease rates to be more than twice San Mateo County’s and the East Bay’s.
The ordinance approved Monday also requires participants to file affidavits with the Office of Economic and Workforce Development, so that the city can track how many exempted employees live within San Francisco and make sure business complies with the city’s First Source program.
“San Francisco has been a real melting pot when it comes to scientific innovation and discovery,” said Michela Alioto-Pier, Supervisor for District 2 and sponsor of the Payroll Expense Tax Biotechnology Exclusion Amendment.