JOEL ON LOCAL ECONOMY
and SMALL BUSINESS

Overview
Small businesses were closing in San Francisco long before the pandemic. The reason was City Hall’s excessive fees and regulations.

Starting a business in San Francisco can range from maddening to impossible because City Hall bureaucracy is designed to stifle good ideas. It’s time to cut the red tape and roll out the red carpet for entrepreneurs and artisans who want to open businesses. We can’t afford to hinder the new ideas that will revolutionize our merchant corridors in a post-pandemic world.

That’s why Joel helped organize the effort to make outdoor dining permanent — a lifeline to small businesses that kept our favorite restaurants alive. He also started the first-ever Sunset Night Market to give local merchants a boost.

While the tech industry is an important driver of San Francisco's economy, small business is the backbone of our neighborhoods. City Hall needs to streamline the approval process for new businesses, waive fees, and reward entrepreneurs. We need public servants who will foster creativity and innovation. City Hall must get out of the way and let every idea have a chance to be the one that saves our local economy.

Why are local businesses going extinct?
The owner of the St. Francis Fountain — the iconic ice cream parlor that’s been around for 100 years — told the San Francisco Chronicle that small businesses are facing an extinction level crisis. But the owner was not talking about the pandemic that decimated businesses citywide.

The extinction was happening long before the pandemic.

Consider this: the year before the pandemic hit, more than 500 restaurants closed in San Francisco. Why did 500 restaurants close when the economy was booming?

Because City Hall was killing small businesses with excessive fees, regulations and permits from hell. There are more than 200 potential permits a small business might have to apply for to open a storefront.

Food trucks could have been the savior of restaurants that can’t use an indoor dining room during the pandemic. But it can take six months and 11 permits just to start a food truck. The Chronicle reported that San Francisco was one of the most difficult cities in the country to open a food truck. We need to rank as the easiest.

Nothing is easy. Even selling candy is hard. There are different permits for a candy store, a chocolate store or a corner store. Can the candy store sell chocolate? Can the corner store sell candy? Does the chocolate store only sell chocolate?

City Hall spends too much time and resources trying to figure out what a piece of candy is and what kind of store it can be sold in. This is absurd.

Consider the Ice Cream Bar in Cole Valley. It was an innovative idea that became a hit. But back in 2012, the concept of bourbon milkshakes short-circuited City Hall regulators. Was it an ice cream parlor? Was it a bar? It checked none of the boxes on existing forms. So instead of welcoming something new, City Hall responded with roadblocks. It took the owner two years of permitting hell and $200,000 to open. The saga was so incredible, it was featured in the New York Times. A decade later, City Hall’s hostility to small business had not improved.

The Chronicle reported that a young entrepreneur tried to open his new idea for an ice cream shop and “after spending $200,000 on rent, an architect, a lawyer, equipment and fees, he still has nothing to show for it and has given up on the idea.”

Most entrepreneurs don’t have the resources or resilience to survive running City Hall’s gauntlet, so we’re left to wonder how many creative ideas never happened that we would have loved.

Why City Hall needs to change its ways
It’s a wonder why anyone would voluntarily choose to do business in such a difficult place as San Francisco when there are plenty of other cities and states more attractive to small businesses.

The short answer is San Francisco’s unique charms and natural beauty give it an advantage over other places. Business owners are willing to take a chance on a city with such high costs because so many people (and potential customers) want to be here, including millions of tourists each year.

Realizing this, City Hall assumed enough businesses would put up with the onerous fees, rules, and requirements that feed the bureaucracy’s bloated budget. When occasional bumps in the economy exposed how much small businesses struggle, City Hall would create departments and task forces to cover up the problems it made — all while adding more layers of bureaucrats on the city payroll.

Business taxes account for more than $1 billion of City Hall’s annual general fund, and businesses were leaving San Francisco in droves before the pandemic shut down. The pandemic only revealed just how much City Hall had hamstrung one of its largest sources of revenue. 

San Francisco is now forced to compete against places that are more attractive to business.

A 2023 report from the San Francisco Controller’s Office analyzed the impact of declining commercial property values on the city’s tax base. It said San Francisco “started the decade with the highest business tax burden of any city in California [and] further raised that burden with several rate increases and new taxes.”

This means that “a hypothetical tech company with $30 billion in sales and 10,000 local employees in San Francisco would pay 20 times more in local business taxes than if it were located in Mountain View, 200 times more than in San Jose and 1,300 times more than in Sunnyvale,” according to a San Francisco Standard report.

For the first time, San Francisco faces the following question: When other cities go out of their way to support small businesses and attract new businesses, who would ever want to start a business here?

To avoid spiraling into irrelevance, San Francisco must insist that City Hall radically change its relationship to business.

How do we keep small businesses alive?
San Franciscans shouldn’t be expected to do the work of keeping small businesses alive by becoming philanthropists who buy gift cards or crime watch volunteers who patrol neighborhood merchant corridors. City Hall must step up to create an atmosphere conducive to business.

That means, at a minimum, keeping streets safe and clean. For example, enforcing laws against open air drug dealing that leads to increased crime and sidewalks littered with needles. This is what scares customers away.

Then, we must undo the most harmful and short-sighted rules that hinder business growth. That means slashing permits, fees, licensing restrictions, and overreaching regulations. We must remove everything that is excessive.

Of course, some regulation is necessary to keep residents and workers safe. But beyond that, we need to eliminate the roadblocks to good ideas.

ECONOMIC GROWTH ESSAYS