The people at City Hall whose job it is to add up numbers are at a loss these days. Because there aren’t so many numbers to add up.
Only to subtract.
Your humble narrator managed to get a hold of some of the dire economic forecasts stemming from the health and humanitarian crises of the COVID-19 pandemic. These reports will likely be made public in the next day or so.
As you’d expect, they’re abysmal.
In San Francisco, we’re told, some 14,000 businesses, by law, should be totally or partially shut down. Those businesses employ 170,000 people. They generate $3 billion per month. They pay their workers $900 million per month.
That’s the economic engine that COVID-19 tossed into reverse so fast the transmission dropped onto the pavement. That’s the kind of money this city and its people and businesses are out. But wait, there’s more.
Or, rather, less.
Hotel taxes in San Francisco account for some $400 million a year in revenue. That’s gone to zero. Property transfer taxes also account for around $400 million. Mark it zero, Dude.
The city, then, will lose hundreds of millions in revenue in just the last few months of fiscal 2020 alone — a sudden and precipitous drop so much sharper and faster than 9/11 or the dot-com bust.
The fiscal year ends on June 30, 2020.
And then things get bad.
The United States is cursed with the worst president at the worst time.
Locally, however, this may be the best time for an economic calamity. The city’s reserves were at all-time highs. “We are,” says one city official, “sitting on a ton of cash.”
Millions of people, small businesses, and even multinational businesses were living paycheck to paycheck in America — but San Francisco was not.
Those reserves, however, will be depleted sooner rather than later. The controller’s office, we’re told, is diligently monitoring the burn rate for the city, and it has easily passed into conflagration territory.
The city’s spending has accelerated even while its revenue has cratered. And, even before COVID-19 was the sort of thing a computer could auto-complete, San Francisco was facing a (now quaint) $150 million shortfall.
So, by fiscal 2021 in July, those reserves may be a fond memory, like ballpark crowds and mediocre office coffee and packed Muni buses.
Sans the hotel tax, the payroll tax, parking fees and fines, property transfer taxes, etc. the city may be forced to lay off thousands of workers. For the legions of men and women who are now working long hours and putting their health on the line in San Francisco’s hour of need, this is a bleak horizon.
Also, like a rock always just below the waterline, the city’s pension obligations are due to explode. It’s a cruel system: When a down market doesn’t produce investment returns, the difference must be made up by city general funds.
So: Right when cities start having money problems, they suddenly owe much, much more.
Due to pension “smoothing” provisions, the good returns of boom times and losses of bad times (like these) are stretched out over several years. As such, expect this city’s pension contribution to shoot to infinity and beyond in the fiscal year after the next one.
You can mark it on your calendar: The city gets a pension kick in the shorts in July 2021.
As noted up top, in the not-too-distant future the city’s mathematically inclined will be disseminating projections on our impending economic plight. There are ranges involved: Bad and worse.
As dire as these predictions are, nothing is more pressing or concerning or horrifying than the humanitarian crisis facing this and every city. Lives are at stake. Lots of them. And, if you’re looking for a little bit of good news, San Francisco is not pinching pennies with that in mind.
Some of this city’s biggest fiscal hawks all gave me variations of “who cares?” when asked how much it would cost to obtain thousands of hotel rooms and begin quarantining people. Not only is cost immaterial, the cost of inaction could well be greater.
It always is. In both humanitarian outcomes and dollars and cents.
The next few weeks and months are going to be very ugly. In many ways. And when, God willing, it all subsides, then the bills come due.
So it’s nice to see this city, in essence, saying: Damn the torpedoes — spend at full speed ahead.
UPDATE: Tuesday, March 31, 2020
The full report released Tuesday.
Highlights:
- The report estimates that the prior deficit of $420 million for the upcoming two-year budget from earlier this year, will increase to between $1.1 to $1.7 billion driven by revenue shortfalls related to the public health crisis.
- In the current fiscal year, the report projects a budget shortfall of between $167 million to $288 million, primarily driven by losses in hotel and transfer tax.
In a separate letter to Department Heads, Mayor London Breed said that in addition to working on a new budget and timeline, ” I am instructing departments to help identify
cost reductions and curb spending immediately….We also need to focus staff time and resources on our essential workforce, programs, and efforts that help our City respond to the health crisis
and support vulnerable residents. To meet these two goals my Budget Office is implementing the following measures over the next month:”
- Only allow hiring of essential workers. There are many important staffing needs of
Departments who are responding to the health crisis, and we must focus our hiring efforts
to ensure that they have the support they need. Over the next month, all requests to fill
positions will be approved by my Budget Office to ensure we are prioritizing the hiring
of our essential workforce. - Evaluating and pausing non-essential capital projects funded in the current year.
- Reviewing and pausing new programs funded in prior budgets that have not started.
Read us regularly? Please chip in so that we will be here to read regularly. Thank you and stay safe.
Thanks for confirming your objective and role here isn’t a journalist, but blogging to advocate your particular point of view. That’s very helpful.
You sure got me figured out, dude.
JE
In SF it’s first rate objective journalism vs the feels and ad hominem attacks.
Another new reality is treating things seriously rather than trivially in the civic discussion space.
Now that everyone has skin in the game I know it will. Try this…
Joe – Thank you for this excellently written piece and objective analysis.
Joe,
Just one week ago I commented “As of this minute, the City financial situation is very uncertain…Even before covid, Mayor Breed’s budget called for cuts to expected City budget increases. It’s now fairly likely there will be cuts that actually reduce the City budget.”
You off handedly rejected that as nonsense. Dismissively declaring we are spectacular wealthy. “Our city’s budget approaches $13 billion and it has built up a (much needed) and huge reserve. There are rich and poor among our population but, as a municipality, we are spectacularly wealthy. Period. Full stop.”
You know Joe, you were wrong and you should have known it. Your weakness is shortsightedness and inability to acknowledge inconvenient facts that contradict assumptions and prejudices about how society functions. In truth you have a lot in common with “the worst president at the worst time”. If you consider yourself a journalist, you owe your readers a mea culpa. Otherwise, you’re simply a advocate for a particular point of view.
Not a native —
Let the record show that the line that set you off — in a long column about lots of other things — was “Our spectacularly wealthy city struggles to tie its own shoes during the best of days.”
With all due respect, go back and read the words on the page. I did not dismiss “out of hand” your claim we’d have budget troubles because that’d be crazy thing to do.
Rather, I focused on your objection to my use of the term “spectacularly wealthy” to describe San Francisco as a city. I didn’t touch on anything else you said and even agreed with you that the coming months would be dire. It doesn’t exactly make one Nostra-fucking-damus to predict budget problems in the wake of a global recession/depression/pandemic.
You are re-writing the past, which is silly because … IT IS WRITTEN DOWN ON THIS SITE FOR ALL TO SEE.
Only some misbegotten pedant or delusional person would go down the rabbit hole you have chosen to enter and object to a city with our budget and reserves being described as “wealthy.”
You want a mea culpa? I’m sorry that you have either willfully misread what I wrote or simply failed to comprehend it.
But when I need dimestore analysis of my strengths and weaknesses from a rando inveterate Internet commenter, I’ll let you know.
JE
We need to help the homeless an make more subsidized housing.
if it’s really as dire as all that then the city can file for bankruptcy just like Detroit, Vallejo or Stockton.
Thay’s a good point on the current debt, but it’s the revenue to cover future debt which has been-is being lost over the next 2-3 years.
The debt and cost of living are so tight and high here they would still hurt alot of People particular pensions public workers etc. I think the scale is too large for it to be an overriding solution. Maybe a part.
“The United States is cursed with the worst president at the worst time.”
This SF small business owner (and many other small business owners in the neighborhood) are thankful for our President and task force – and the resources available to us, because of their hard work.
It’s “journalists” (I use that word loosely), like Joe Eskenazi that continue to try and divide our great City and country.
There’s no room for this in San Francisco.
You should say thanks to the Democrats. V1 of the bill had bailouts for corporations, and not a lot for small businesses. Remember, the democrats had to lobby to make sure Trump didn’t get a hotel payout for himself amid the crisis. While the current president is a master of spin and smoke and mirrors – history will show us he was mostly full of crap and happy to lie and deny for as long as possible until he could opportunistically take credit for the work of others.
I’m certain you’ll not name your business publicly. If you did you know customers would avoid you like the plague(or Covid-19). So much for the courage of your political convictions. But you’re happy to take from the very people being harmed by public policies you support. IMO, you’re not helping to M(SF)GA.
Journalists report “onjectibe facts”. They don’t care what you feel and I doubt insults will inspire attention. It’s too bad to for other commenters who would like to know your opinion and logic about possible solutions or outcomes. When you start attacking everone around you deny them of that. It’s also the polite thing to do.
Author maybe just a little over the top with exaggerated melodrama, humanitarian crisis. Oh yeah streets are overflowing with people dying due to Covid-19. Hardly worst president we have had, Cater and Obama are the worst. The humanitarian crises ain’t Covid-19 it is the streets of San Francisco covered with urine and excrement and drugged out addicts ( and that is not an exaggeration). Yet instead of blaming or holding accountable the mayor and board of Stupidpvisors it is easier for your narrative to blame him. Local and state officials are responsible for oversight and planning for need of hospitals in their jurisdictions. The city having a lot of money giving them compliments like they did great extorting form working people. They tax business and legal U.S. citizens to death that is why there is money, not because they manage it well. They mismanaged the pension for decades that yo did not mention. Gee I wonder why. Why not cover something like Nuru and the Breeder (What? You mean it is wrong as mayor to take a loan from an ex-boyfriend who happens to work for me? I am shocked) pay to play. Of course that is not the kind of thing you want to cover as it shines a light on the worst elected officials in the country and deflects from you r hate and attacking Trump even though this is far more relevant to the daily lives of people living in SF than anything Trump does.
1. Actually Jimmy Carter was a decent president who has been mythologized as a bad one. Carter appointed Paul Volker to the Fed and Harold Brown, head of California Institute of Technology, as head of the Military, bringing both of these departments well up to date, Volker taming inflation and Brown developing stealth aircraft capabilities. As a result, Carter basically handed Ronald Reagan the keys to a ready-to-go economy and military. Plus the Carter adminstration’s stand on carbon dioxide emissions was way ahead of the curve.
2. The Feds are responsible for developing strategies and equipment to deal with national emergencies and pandemics, not the states. Only the Federal governments has the resources and authority to build and stockpile essential supplies in great economies of scale – as in World War II when whole airplanes were being turned out of Northrup and Boeing on the hour. President Trump has been exceptionally slow to get up to speed on covid-19, having to be turned into the right direction by the Foxies, most notably in an hour-long private audience with Tucker Carlson.
Horror of horrors. Poor San Francisco. The 12 billion dollars a year they spend like a trust fund bro on coke is gonna dry up! Who could have seen this tragedy coming? Now they will have to cut back and spend like a regular plebeian city, say like San Jose, that manage to get by on the paltry sum of 4.3 billion dollars a year.
I visited your ‘fair city’ before the Pandemic, and it was a disaster area then. Had no idea it had deteriorated so massively since I had been there in the mid 2000’s. With any luck, the whole fetid place will burn to the ground and can be rebuilt from scratch.
Enjoy the bread line when your paper goes dark! At least you got in a shot against Trump though, right? Hope that comforts you in your times of privation and suffering to come.
Hey Terry, You had your say. let other people say their opinion.
You don’t have to reply to every comment.
Wow, first time reader… amazing what garbage can be peddled as news. Hopefully this dismal rag shop closes down.
Good, but terribly depressing, reporting Joe. What comes out the other side of this is anybody’s guess. Let’s just hope that the same spirit of community that allowed the City to rebuild physically after the 1906 earthquake is still present to rebuild economically in 2021 or 2021. Based on the deep divisions in our society today, however, I’m not optimistic.
Imagine thinking society in 1906 was more equal than the one we have today.
Two major differences you could say barriers ee have now are taxes and credit.
In 1906 I do not believe there were taxes yet (8-0
The cost of running things and doing business.
Credit, was also just starting to be widely available. Thats how the Hero Bank of America CEO Amadeo Pietro Giannini did it! And People’s Trustworthiness then.
That’s all gone now. And the credit card and debt are maxed out. Facts.
I believe it’s, “Man the torpedoes. Full speed ahead!”
Sir —
It is not.
“Torpedoes,” in Admiral Farragut’s day are what we would now call mines, but the “damn” part seems to be about the only consistent element of this somewhat disputed exclamation from our first admiral.
https://www.usni.org/magazines/naval-history-magazine/2014/july/damn-torpedoes
Crime is rising too, with a number of muggings and robberies at gunpoint in the area.
John —
Calls for service have dropped 25 percent. People may not be making calls on car break-ins, but people report “muggings and robberies at gunpoint.” You need to cite your sources or stop writing things that have no basis in fact.
JE
JE – man let’s pray that too many law enforcement officers don’t get sick. All my points about the subversive culture here will become obvious.
People have forgotten that Liberalism is built on the backs of the self-sacrifice and cohesion of previous generations. Concepts everyone is getting newly acquainted with.
If we had that we wouldn’t need the shelter in place, military, or marshall law in the first place.
source is nextdoor.com, the biggest timesuck waste of eye time since twitter
it’s algorithm is dependent on a bleads-it-leads attention hook headline, leaving one to believe the only thing that happens is awfulness.
not so.
Also forgot to thank Joe for his story. Great writing..
Indeed thanks Joe for some unbiased news-perspective for once.
I’m still baffled (not really) at the lesser covered local story of the year with Mr Nuru the FBI arrested corrupt Dept of Public Works head, Mayor Breed’s admitted loan and lay with him, and his girlfriend the lead on cleaning our streets of poop team.
Wow. Now this major pandemic happens and we have evidence these people were complicit and derelict in keeping our wonderful city cleaner…their job.
It’s like ignored for now, but my sense is after all the blood and graft on their hands we haven’t heard the end of it. Local like any government has three jobs…shelter, security, and sanitation. Looks like SF leadership and LA have failed on all three.
3rd generation born and raised in beautiful San Francisco! Sure it has its pros and cons. But doesn’t every big city? Even with the rich & poor classes spilt far apart making our streets full of homeless folks. San Francisco will still be the best! Maybe not to reside in but to visit! People need to stop complaining about things unless they are trying to do something to improve things themselves. (Doubtful)
Don’t sweat the small stuff. There are people dying daily right now! We can only guess the outcome, nobody really knows. Let’s just pray we stay virus free and it’s contained somehow quickly. So we can start repairing our financial situations.
Appreciate your opinion but here’s the thing. How you feel and objective reality are different. Wishful thinking is cool for your own Life assuming you don’t succumb to reality.
The fact is that you say “Even with the rich & poor classes spilt far apart making our streets full of homeless folks. San Francisco will still be the best!” is subjective and false on it’s face. It’s the exact opposite.
And People have a choice where they do and don’t visit other People’s opinions don’t decide. They might influence assuming it’s a positive opinion but so far as visiting tourists SF is running out of those positives because of it’s pathalogical inability to manage itself.
“Doesn’t every big city” on par with SF no they don’t. This is an arbitrary comparison because as everyone knows there’s no city in the USA – LA is a close second – which has the filth, inflated cost of living, crime (you can shoplift $900 in value and get a ticket), political bias, and uneven populace in terms of culture, behavior, and cohesion (its thoroughly Balkanized). This is not the case with the exception of a handful of mean incompetent large US cities. You know who they are!
As a Black man I’ve experienced more racism here – and I’ve lived in the South – than ever in my life. I’m still tryin to understand diversity and so few Black folks who are the catalyst of civil rights…but fhat’s for another post.
In so far as “Let’s just pray we stay virus free and it’s contained somehow quickly.” I agree pray, but take action and follow the rules. Shelter (ha) in place, wear gloves, and a mask you know the things we can control and know scientifically limit the spread. The Lord helpa thoae who help themselves”.
“So we can start repairing our financial situations.” Appreciate your objective and positive outlook…keep that so am I. At the same time we have to balance that with future reality…it will not be the same after this. And Joe has done as you acknowledge a great job of describing that new reality.
In economic terms it’s just getting started! Tragic that so many in SF who’ve worked hard and made money they could have saved up for times likes this had to pour most of it i to the pockets of opportunist la dlords. And sooo many are happy to rely on other people’s money (taxes) to survive.
It’s all subjective feely until it hits the fan then suddenly the value of things like competence, safety, and predictability become self evident.
But never mind me there I go spoutin off again! Forgot I’m supposed to ignore the impact of all this so it’s back to business as usual.
I know quite a lot of “old school” landlords who aren’t gouging people. This city has always been expensive. My rent when I moved here was $1,200 in 1980 which I split with two roommates–three of us in a two-bedroom. That’s the equivalent of $3,700 today and I know A LOT of people who are not paying $3,700 in rent.
It’s the highest rent in the nation. So it’s factually too high. After COLA cost of living asjustment California is the 48th poorest state in the USA 8-( It’s an unassailable reality that high rents are the primary reason why.
I doubt that many of the people with”spirit of community” in 1906 are still around. What was done in 1906 in the “spirit of community” was trampling over people’s freedoms and rights. Especially those of minority communities who were widely considered undesirables.
And make no mistake. Your “spirit of community” is a mythic urban legend. After quake rebuilding was no different from today’s redevelopment. “The goal of recreating working class neighborhoods in post-1906 San Francisco ultimately fell victim to class and race-based prejudices fueled by commercial opportunism.”
“The earthquake and fire hit the poorest San Franciscans the hardest. On the eve of the quake, the poorest workers lived in old, run-down boarding houses and apartments. Employment was scarce and poorly paid. Working families, especially those living in the south of Market Street neighborhood, often stretched their incomes by taking boarders into their already crowded homes. The flimsy construction of these neighborhoods guaranteed their destruction by the quake and fire. With most housing burnt to the ground, rents immediately soared 350%, and in 1910 were still 71% higher than pre-fire rates. Women faced especially severe problems, as their manufacturing and service employments disappeared along with the income they had received for cooking, cleaning, and laundering for lodgers. Asian San Franciscans faced additional barriers to survival. In the weeks following the disaster, Chinese refugees remained segregated and were relocated four times by city and military officials in response to whites who refused to share space with the much-despised Asians. Although ultimately unsuccessful in their efforts, city developers seized upon the destruction of Chinatown, located on some of the most valuable property in the city, as the perfect solution to ridding the city of Asians once and for all. Asian San Franciscans were totally excluded from official relief efforts.”
https://www.cairn.info/revue-annales-de-demographie-historique-2010-2-page-217.htm
That picture of the street bum sitting under a comforter, and smoking, and flaunting that thick dark head of hair, in front of the graffiti that says “FAITH”. Are you intimating that many of us here face a future of being street bums as the coronavirus pandemic destroys the world economy? First I lost my $70,000 a year hourly job. Then I got evicted later this year. Then I discovered the wonder of meth and after a few weeks of busily bumming cash from strangers discovered the still bigger wonder of heroin. And eventually all I had left was my comforter and a cigarette I cadged off a stranger?
Karl —
Go around the corner and see if it’s raining.
JE
You’re making a lot of assumptions there, Karl. The “street bum” has a name and unless you ask someone how he or she ended up on the street and how you can be of service, posting such comments are not only unhelpful but in bad spirit. But to answer your question, I did not take that photo to insinuate anything about your future.
Things will never be the same
He is the worst president in history, but that check isn’t from him personally (could you imagine that from a guy that steals from his own charities?) but from the government of the United States, to be used to support the citizens of this country.
Since he is the worst president ever I won’t mind taking that $1200 check if you don’t want it Thanks!
The average income in the Bay Area makes people ineligible for the checks. The checks are just another con man smoke screen.
Based on the con cost of living and rent, it would’nt make a difference except 2 eeeks of rent..lol
It would be one thing if it was coming from his ostensible personal fortune, but that check is coming from the American taxpayer. If you like him so much, you might want to contribute your check to defray some of his golf expenses that are being borne by the American taxpayers.
Compared to the billions this City throws…ahemm…used to throw out of the window I’m good with golf expenses!
gleneagles?
So you’ll trade your values for a $1,200 check? Now that’s commited character! Shame it doesn’t go so far in a city with unfair housing prices and squalid space. Cha ching!
The damage has indeed been done and it’s incredible how fast this is happening and there’s more sustained layers of this tectonic econimic shift.
The tech and “creative class” dispersion will be right behind all this as the tax dollars all those “terrible techies” contribute to SF and bay area evaporate!
It’s not just whether or not they live here there’s also the matter of their employers for risk management purposes moving to various US states and cities. San Francisco and the BA will long for the Silicone Valley. Not to mention their consumption dollars enable a lionshare of area small businesses to operate. Most of which goes into rent….speaking of our friends the “rentier class”!
Astonishing how the commercial and residential “rentier” class of Landlords and RE companies are going facing a reversal in thier fortunes. Ohh and all the “professinal” class (lawyers, accts, title cos, insurance) that will follow.
There’s several more layers I’ll ignore because at my last projection living in a city with tremendously less congestion, one city employee to every 50 residents instead of one to 18, and affordable housing might not be all that bad!
But given the crime, filth, poorly mannered populace and newly impoverished vagrant rentiers, sophists, & bloggers it still won’t be worth living here.
Don’t let the door hit ya….
There is no door.
Tech companies being the first to adopt work from home policies are one of the major contributors to the low virus spread in SF. People who disagree are clueless. SF will do whatever it takes to keep those companies here. Thankfully with the poor economic projections we can stop endlessly funneling money with zero accountability to end stage homeless addicts
Ad hominem aside it’s in fact the company’s who choose where they locate employees. Employee’s go there. So as companies wisely start spreading out their operations to other cities the employees will follow.
A term I think we’re going to hear alot more of…”Dispursion”
Company’s don’t like cancelling conventions for street hazards, exposing employees mgmnt and ultimately a fiduciary duty to protect operations from risk. Based on entrinched enabling policies (think prop 47) SF is not going to remedy public safety, shelter, and sanitation anytime soon. Further enlight of this surreal PANDEMIC the risk is to great to ignore for companies stake-shareholders.
The smart money is on the will distribute operations taking office space, employees and ohh jobs to far away lands such as Boise, Salt Lake, etc. The most incredible impact will be on real estate – soon a buyers market…fingers crossed – to the chagrin of the rentier and equity class who are also alot of tech People. And credit-banks which it all rides on. Its one thing when your $10m stock account is generating a free $200,k per month through modest gains – another when that evaporates! No more lil Julie on IG with LV. No more $20,k pr mo leased loft! Its a cascade.
I think it’s the end of the Twitter era in SF and huge shift in the peninsula era to come. SF budget in general is going to have rough times ahead for a decade.
“May You Live in interesting times!”
Then obviously you need to move before the ” poorly mannered populace and newly impoverished vagrant rentiers, sophists, & bloggers” make your life a living Hell. Sadly it sounds like you already live there.
I do. It is sad. So little objective reality and quality of Life. Hold on to the shards!
Oh no! Not bloggers! Anything but bloggers!
Silicone valley is in LA. Silicon valley is in the Bay area.
Those tech companies, and employees have no more reason to leave the Bay Area now then they did before. They are sitting on tons of cash reserves and all well positioned to weather this storm, and if they stay, the jobs stay here as well.
“Risk mitigation” same thing happened to Wall Street operations after 9/11. And that was a targeted event. It’s basic management reality. No matter how much cash one has lives are priceless. It’s not just SF…it’s California LA included. Even SD had a Hep A outbreak not long ago.
To tech companies in particular lives with brains that are rational and have valuable programming skills. Their greatest asset that they will not sacrifice to politics or uninformed opinions.
There’s just no getting around filth and bad hygiene with wishful thinking. Especially now that everyone has “skin in the game”.
That’s why I have a photo framed , of Friedrich Nietzsche on my wall . The new man , beyond man Uber mensch is here ! Now a reality..
D’oh!
There will be manufacturing jobs when production leaves China and returns to America. We can’t depend on their supply chain anymore. It is just San Francisco is too expensive to build a plant.
True. What sucks is it could be done with the resources here, but politics..smh