Why is Twitter thinking about leaving San Francisco proper for the (shudder) suburbs? Twitter is the epicenter of cool. They belong in SOMA, right?
Right. Until you start doing the math.
Twitter is thinking about moving to the suburbs for one reason. Stupid payroll taxes that San Francisco put in place because they thought they could. Other cities, like my own Birmingham, have done the same thing. Then they complain about the flight to the suburbs.
"Twitter will be hit with $35 million in city payroll taxes over the next six years if it stays in San Francisco -- and that's only if the city enacts a tax break. The bill will be tens of millions of dollars higher without the break.
Worse yet, Twitter will have to move to a blighted area of town and spend about $30 million on renovations just to get the tax break at all. The estimates come from a new report by the San Francisco Controller's office, which supports establishing a new economic development zone southwest of downtown. The main benefit of the zone would be the temporary exemption of stock options from the city's 1.5% payroll tax.
This tax is San Francisco's second-biggest source of revenue, and contributed $345 million to city coffers last year. But as TechCrunch has reported extensively, no other city in the world has this kind of tax, and it could cost pre-IPO companies located in the city -- like Twitter and Zynga -- tens of millions of dollars when employees exercise their options."
When I was a part of the DAXKO team, our CEO (David Gray) was shopping a new headquarters in Birmingham. He wanted to show support for the city by locating in a hip area off downtown. The move, without any proactive adjustments, would have been the equivalent of a pay DECREASE for all our team members due to the unbelievable payroll/occupational taxes that exist within the traditional city limits.
The city of Birmingham is lucky to have folks like David Gray as corporate citizens, who believe in the city and want to show support through the location of their businesses. That deal ultimately fell through due to property availability and development issues, but you have to ask yourself - why would the city have the taxes in place and then bemoan the flight of the most successful startups to the suburbs?
Answer - because they can and don't have any other revenue ideas. They'd rather tax the hell out of the utility workers who won't be going anywhere than think about development and retention of the smaller fish.
Good luck Twitter - See you in San Mateo or on Sand Hill Road (see below) in 2013...