Optimistic “boom loop” declarations aside, San Francisco is suffering with profound financial problems, currently and most likely deep into the future. According to the City and County Ethics Commission, the city is facing a budget shortfall of $799 million over the next two years.
The economic engine that supplies essential revenue to the city’s coffers has broken down.
Although there are some bright spots, such as San Francisco emerging as a key center for the artificial intelligence technology industry, there are plenty of serious illnesses that need to be cured.
Major retail closures drive cash out of the city
Just a few of the major retailers that have abandoned San Francisco include Nordstrom, Old Navy, and The North Face. Each of their large physical footprints remain empty. Westfield Mall is no more, as the lease holder gave up after rampant thefts decimated profits and hurt customers and workers. Now Emporium Centre, the mall is just about half full and losing leases rapidly.
In February 2024 Macy’s announced it will close its flagship store on 170 O’Farrell Street, an enormous space that spans nearly an entire city block.
The majority of the shops along the once thriving Powell Street corridor to the cable car turnaround on Market Street are bordered up.
If shoppers want to spend money at the now-shuttered businesses, they’ll have to go elsewhere.
Empty and emptying financial district
Millions of square footage of financial district office space are vacant. Of the companies that remain in operation, many still haven’t brought workers back into the office on a full-time basis.
Per Cushman & Wakefield’s Q1 SF commercial real estate data, employee office attendance is just under 46 percent of its prepandemic level. Office vacancy is the highest on record, at 33.9 percent. Worse, approximately 16 million square feet of leases are set to expire over the next 24 months, and the majority of the tenants are actively seeking smaller footprints.
The impact fewer in-person employees has had on small businesses is far-reaching, as shops, bars, cafes, and restaurants no longer enjoy the foot traffic of people on their way to and from work.
Mid-Market drug-fueled woes
And then there’s the Mid-Market stretch, where projections for prosperity have been shattered. Ten years ago ASB Real Estate Investments purchased 989 Market Street, a six-story, 110,717-square-foot office and retail building for $61.3 million. Today it’s listed for sale at $12 million; an 80 percent devaluation.
Another example is the Whole Foods Market that opened in March 2022 at the base Trinity Place, a complex of 1,900 apartments. Even with built-in customers the supermarket was unable to compete against the rampant theft and violence from the open drug scene that surrounded it. The problem magnified when the City set up the Linkage Center across the street, ostensibly to help homeless drug addicts in need get connected with essential services, but turned into a dangerous de-facto drug use site. Whole Foods closed just about a year later, and the location remains empty today.
Inhospitable hospitality
Despite public relation efforts, tourism has not rebounded after extreme policies dictated by the city’s public health department shut San Francisco down during the Covid pandemic. Starting in 2020, there was a mass exodus, causing the city to shrink in population. According to the U.S. Census the City and County of San Francisco lost 65,000 people. When they left, so too did much of the city’s vibrancy.
Along the way, San Francisco lost its appeal, and its reputation sank. It became more known for squalor and crime than a safe and fun place to visit.
Companies, such as Twilio, Workday, Samsung, Red Hat, and Meta have all decided against holding their conventions in San Francisco, devastating the hospitality industry that caters to this lucrative crowd.
Proposed cures from mayoral hopefuls
The illnesses are real and severe, so what are the cures? That largely depends on who San Franciscans vote into office as mayor in November 2024.
The Voice of San Francisco reached out to the four primary candidates for their proposals on how they will help the city regain its health. We received responses from contenders Mark Farrell and Daniel Lurie, but Mayor London Breed and Supervisor Aaron Peskin did not respond, so we are publishing information from their press releases and public statements.
Here is a taste of their medicine, with more surely to come as election day nears.
Mayor London Breed
Per Mayor Breed’s Downtown Recovery Plan, she is leaning into proposed legislative bills, such as SB 1227. If passed, it would create a “Downtown Revitalization Zone,” altering the city’s landscape by bringing in college campuses and student housing, sports and entertainment venues, and science space.
The mayor also supports two other bills — AB 3068 and AB 2488 — both of which are designed to make office-to-housing conversions more feasible.
To support commerce, Breed wants to pause scheduled tax increases for retail, restaurants, entertainment, hospitality and other businesses, give a downtown office tax credit, and reform business tax to encourage in-person work.
For public safety, she says she will expand law enforcement and community ambassadors.
Mark Farrell
Mark Farrell, a former city supervisor who took the helm after Mayor Ed Lee died in 2018, envisions a San Francisco that is growing economically. His goal is to have City Hall work collaboratively with both large and small companies. He will create new tax incentives and programs across the city, not just in the Financial District and Union Square but in troubled areas like the Tenderloin and South of Market.
To help local businesses thrive, he will eliminate taxes for those making less than $5 million in gross receipts.
Public safety is Farrell’s primary priority, and he says he will hire a new police chief, aggressively increase police staffing by fully funding police academy classes, and reinstate a program to rehire hundreds of retired officers. To address the drug crisis Farrell says he will work with state and federal leaders to declare a fentanyl state of emergency to rapidly unlock resources to expand recovery treatment. He will also leverage city-owned property outside of San Francisco to provide more treatment options, while empowering state and local law enforcement to close open-air drug markets.
Moreover, Farrell aims to create a centralized intake center, open 24-7 for homeless people, with plans to clear all large tent encampments and connect people to shelter and services within his first year in office.
Daniel Lurie
Daniel Lurie, a philanthropist and the founder and former CEO of Tipping Point Community, believes both people and businesses will return downtown when the streets are safe and clean. And that can’t happen until the city stamps out corruption and reigns in wasteful city departments.
“My plan to make City Hall accountable will transform a bureaucracy that is rewarding corruption and holding up progress on the biggest issues plaguing downtown and the city at-large, like public safety and homelessness,” said Lurie in a provided statement. “We can’t fix San Francisco until we ensure accountability for people and systems alike, and right now the system at city hall is failing us all.”
From his proposal, Lurie plans to centralize contract management and oversight into a specialized unit of experts. They will oversee the annual $5 billion of taxpayer money that the city has been spending. He will reform the broken permitting process and the Department of Building Inspections, assuring transparency and ending the requirement to hire permit “expediters.”
Attacking financial waste is a cornerstone of Lurie’s campaign, adding that he will streamline construction management and avoid issues like the embarrassing $1.7 million toilet debacle.
Aaron Peskin
Aaron Peskin, District 3 supervisor and president of the San Francisco Board of Supervisors, has long struggled with alcohol dependency and maintaining sobriety. This experience, he contends, gives him insight into what it will take to help the city recover. In his rally speech, he said he’s grateful to have received the support he needed to become sober, which inspired him to dedicate the next chapter of his life to San Francisco’s recovery.
Specifics are vague, however. Peskin has yet to submit details, especially regarding the city’s economic concerns. “I will be a hands-on mayor, using the 25 years of governmental know-how, to once again make San Francisco the city that knows how,” he said in speech.
On the illegal drug trade, Peskin said he supports arresting drug dealers and holding them accountable, “but arresting drug users and doing nothing more is a cynical and dangerous policy that often results in more overdoses, and not more treatment for addiction.”
To rebuild a troubled San Francisco, in his campaign video Peskin says he will “start in neighborhoods” and be a “neighborhood mayor,” promising to add 5,000 homes for working families, 2,000 shelter and treatment beds, and hire more emergency service workers.
When the cure is worse than the disease
Just how and when San Francisco will bounce back from its myriad ailments largely depends on decisions made by policy makers. For this reason, thorough and accurate information is critical. As election day nears, more details about the candidates’ plans should emerge. It will be important to not just look past the marketing copy, but to ask questions and demand comprehensive answers. After all, prescriptions designed to boost business, invigorate neighborhoods, and “reimagine” downtown can have plenty of unwanted, and sometimes toxic, side effects.