Wednesday, April 6, 2011

The Tenderloin - The Next Sunnyvale?

Just about any visitor to San Francisco who walks down Market Street past the Westfield Mall notices how the neighborhood progressively worsens.   Tourists are sometimes shocked to find so many seedy neighborhoods not far from the expensive hotel/corporate office tower areas they stay in closer to downtown and Union Square. The city is hoping to fix up the neighborhoods just west of downtown by offering a tax exemption to companies that locate there.

San Francisco has an increasingly well-known 1.5% tax on corporate payrolls.   This tax has done little to stop startups from increasingly favoring the city over distant Valley suburbs many employees don't want to commute to.   Zynga, Yelp, and many A round Internet service firms have all chosen to stay in the city rather than trot out to Mountain View or Sunnyvale like most web startups did in the 90s.  But with Twitter threatening to move just south of the city line, the city felt unusual pressure to retain a corporate tenant. 

The tax isn't going away, but it is being temporarily lifted for companies that locate in the Tenderloin/Mid Market areas.   I've visited San Francisco probably more than any U.S. city I've never actually lived in, and walked through these areas during daylight and had no problems.  They're not atrocious ghettos, but they stand out because of their proximity to downtown.   Not unlike how South of Market used to be before it began gentrifying in 2000 after the completion of Pac Bell/AT&T Park.

While I doubt the Tenderloin will be transformed like South of Market was, there is an opportunity here to take San Francisco's increasing ability to draw startups away from Silicon Valley, and use it to improve some dreary parts of the city.