San Francisco Sees Budget Gaps as Highly-Paid Workers Flee City - Bloomberg

San Francisco Sees Budget Gaps as Highly-Paid Workers Flee City - Bloomberg

San Francisco Sees Budget Gaps as Highly-Paid Workers Flee City

By Romy Varghese

January 15, 2021, 6:10 PM EST

 

 Costs out-pace revenue growth for $503 million total shortfall

 ‘Uncertain future’ for San Francisco if remote work lasts

 

San Francisco officials expect to see budget shortfalls reaching $503 million in five years and said it’s unclear if high-wage workers will return to the technology hub after the coronavirus pandemic subsides.

 

In a report released Friday by the city’s fiscal analysts, San Francisco projected a $411 million gap in the next fiscal year. Through June 2026 from June 2021, expenditures, driven by increases in salary and compensation costs, will rise by 24% with revenue growing only by 15.5% over the same period. Meanwhile, city officials have largely exhausted one-time sources to close the previous two-year budget gap of $1.5 billion, the report said.

 

In addition, while the analysts expected most of San Francisco’s revenue streams to rebound to pre-pandemic levels in five years, they raised flags about the prognosis for tourism, offices and small businesses. They noted that sales tax receipts dropped more than 70% in the second quarter last year compared with the same period in 2019 in retail, hotel and business districts downtown. And the city saw virtually no growth in online sales tax, unlike other communities, showing that San Franciscans did indeed move away, at least temporarily, while working remotely.

 

“While we’re hopeful the economic consequences of COVID-19 will become less severe as the vaccine rollout continues and we reopen once again, we still need to make tough choices now to ensure we’re able to provide the services that our residents depend on,” said Mayor London Breed in a statement.

 

If people return to their offices after the outbreak abates, San Francisco will rebound and return to normal, the report said. “On the other hand, if office tenants and their employees decide that the cost benefits of extended working from home – or outright relocation – outweigh any loss of productivity, then expensive office and real estate markets like San Francisco face an uncertain future.”