0.Framing Paper

Toward a Dynamic and Bold New Deal for San Francisco

A bumper sticker made popular in the early 1980s recession read, “If you think the system is working, ask someone who isn’t.”  Today’s Great Recession has rivaled that grim time on national, state, and local levels—and San Francisco’s system of boom-bust, market-driven economic development has proven particularly inept at addressing double-digit unemployment and deepening socio-economic inequities. San Francisco’s economic and fiscal crisis is not a passing moment, rather it signals long-term structural flaws in the City’s economic policies and planning; San Francisco has lost roughly 100,000 jobs since 2000, and each ‘recovery’ is marked by steadily higher unemployment rates.

As a result, our city is in a state of intensifying crisis and conflict.  An ongoing fiscal nightmare, marked by annual budget deficits of nearly half a billion dollars, is endangering communities across the city and threatening San Francisco’s identity as a haven of diversity and opportunity.  Families have been displaced by the thousands, economic and public health divides have widened, and homelessness and underemployment have become systemically entrenched.

As revenue has plummeted, due partly to the housing market crash but also to long-term policy choices, underlying chronic weaknesses in the city’s economic approach have been laid bare. For decades, San Francisco leaders have banked on a corporate economic development model that has been both unstable and uneven.  Even before the speculative housing bubble burst in 2008, San Francisco faced a monumental challenge: how can the city revitalize and stabilize its economy for the long haul in an inclusive and democratic manner that feeds diverse communities hit hard by recession—including small business owners, renters, homeless people, public sector workers, working-class and middle-class groups and people of color?

Instead, the economic crisis has been used as an opportunity to foment false divisions, pitting constituencies and interests against one another.  As the city’s fortunes have flailed, city leaders have resorted to the defeatist and divisive politics of economic scapegoating, blaming unions, public sector workers, the homeless, immigrants, and others as the cause of today’s crisis. Indeed, San Francisco’s crisis is not simply economic but also political.  At a time when record deficits imperil communities and services, city government has abandoned its core responsibility for economic recovery, equitable development, and creation of opportunities.

Repairing socio-economic and political fault lines has never been easy, particularly when leaders lack clarity and consensus on causes and solutions.  But in today’s context of rapidly diminishing oil supplies and growing climate chaos, there’s a vital urgency – and opportunity – to reshape and democratize the economy to make it truly ecologically sustainable and socially just.

The Community Congress is committed to forward-looking solutions that are inclusive and collective. Below lies our initial draft of a New Deal for San Francisco—a bold revitalization of the role and meaning of government, and a plan for community-led development.  We propose new truly green industries that train and employ local residents; a redoubled commitment to the public sector as a lead agent in both economic development and social equity; the creation of new redistributive stimulators such as a municipal bank that spurs community-based development; and a broader policy culture dedicated to eradicating poverty and homelessness through aggressive commitments to affordable housing, job training, a real community jobs program, and other dynamic approaches that help people and communities rebuild themselves.

The working proposals below are intended as the beginning rather than the end of a conversation, a spark for further dialogue. We invite you to read, engage, and contribute.

Guiding principles

  1. Economic development policies must contribute to the health and well-being of the city’s neighborhoods, provide decent wages, be attentive to impact on the urban environment, and promote alternative business and ownership models.
  2. Economic development must incorporate the role of local government as a key driver of the local economy, both through infrastructure provision and direct public sector employment.
  3. Economic policy must balance the use of “external” market linkages with the powers of local government to create more democratic and accountable development.
  4. The city’s existing financial resources should be tapped and mobilized to fund local projects that balance economic viability with a commitment to social goods such as economic democracy and equality.
  5. Local government must provide means for shaping development, through new forms of economic governance that encourage representation of sectors and constituents typically excluded from the local policy process.

A New Framework for Development

Our working group has over the last six months of ongoing discussion developed a host of complementary policy recommendations that, among other things, promote major changes in the city’s economic development agencies and governance, and expanded support for small business, cultural institutions, affordable housing development, back street light industrial businesses, urban agriculture, living wage and labor rights, and real opportunities for homeless and welfare recipients.

The first new proposal is our plan for The Municipal Bank of San Francisco (MBSF) with the capacity to eventually invest up to $500 million of low-interest loans in alternative forms of development in San Francisco. The second is the formation of a Municipal Development Corporation (MDC) that will operate municipally controlled public enterprises to help generate surpluses that can be fed back into community development. The third is consolidating the city’s economic development roles (currently residing in multiple agencies: the Mayor’s Office of Economic and Workforce Development, the Mayor’s Office of Community Investment, the San Francisco Redevelopment Agency, and the Planning Department) into a new Department of Economic Planning and Development with the goal of serving key policy priorities of the City Charter and General Plan in support of the city’s backbone of small businesses and “creative” industries.

Create a municipal bank to reinvest locally in San Francisco. The city needs to create a new funding mechanism through a municipal credit union to reinvest in the city. The municipal bank would also be responsible for supporting community-based economic development, including access to credit for local businesses, community corporations, and worker cooperatives. The MBSF would be incorporated as an independent, member-owned, federally chartered and fully insured credit union. A Charter Amendment may ultimately be required to make this happen. The City and County of San Francisco currently has assets totaling slightly over $16.1 billion. Total liabilities of the City at year-end of 2008 were $9.6 billion, yielding a net worth (assets minus liabilities) of $6.5 billion. Approximately $2.8 billion of the City’s assets are held in a general-purpose pooled fund in liquid instruments – government treasury debt, securities backed by mortgages guaranteed by Fannie Mae and Freddie Mac, and time deposits at large commercial banks. Approximately $2.1 billion of this fund is designated specifically to the general-purpose government fund. A portion of these liquid investments could be sold and/or transferred to the MBSF over the period of 3-5 years, up to a certain total amount, perhaps $500 million, to provide the initial equity investment. Additional assets transferred from the City Treasury to the MBSF would provide the latter with an initial asset pool offset by a long-term debt of the MBSF to the City of an equivalent amount. The City would, in effect, become a long-term investor in the MBSF. The municipal bank would vigorously raise additional funds from social investment funds and foundations. This would represent a significant infusion of loan capital into currently underserved segments of the credit market in San Francisco.

Create new municipal enterprises. The goal of the Municipal Development Corporation will be to form locally controlled, municipally owned large-scale enterprises that are able to produce surpluses (profits) that can be redirected into subsidizing low-return but socially vital forms of economic and cultural development. These enterprise funds would not be folded into the City’s General Fund, nor would they replace or displace existing funding for community-based nonprofits currently financed out of General Fund appropriations. To encourage the development of proposals, the City would convene discussions amongst representatives drawn from alternative business networks, organized labor, community-based organizations, and workforce developers about ways San Francisco can foster publicly-owned and controlled enterprises with the explicit purpose of generating revenue from the sale of goods and services to private firms, households, and public entities. Possible ideas include: cultivation of medical marijuana for sale to registered medical dispensaries; investment of substantial funds over the next five years to generate alternative forms of energy to compete with and eventually displace PG&E as the dominant supplier of energy to the local consumer market; and development of a publicly owned local fiber optic and broadband network.

Consolidate and democratize economic planning and development agencies. Key to any successful economic development agenda is restructuring the city’s government to make community-led economic development a priority. We propose creating a City economic planning department and associated commission to set policy and strategies for, exercise fiscal authority over, and oversee all related departments, agencies and offices with an economic, housing, workforce or community development program. This department will serve to better align and coordinate highly decentralized City resources, and to maximize community impact by exercising strategic, policy and budget oversight over all entities. The economic planning commission would be informed by neighborhood- and constituency-based committees, creating more democratic opportunities for economic governance. The new municipal bank would fall under the oversight and coordination of this Department.

Affirming the Public Sector

Ask most San Franciscans what the biggest economic sector in the City is, and they will undoubtedly answer: tourism.  Wrong.  The biggest economic player in San Francisco is government, the public sector. At $6.6 billion, city government is the No. 1 industry, while tourism accounts for only $3 billion. Local government is the prime supplier of vital transportation services such as MUNI; physical infrastructure such as sewers and roads; essential social services such as public health care; and affordable housing.

According to the Planning Department in 2008 over 15% (87,800) of the 570,000 jobs in San Francisco were in the public sector. The first and second largest employers in San Francisco are the City and County of San Francisco (29,000 jobs) and University of California, San Francisco (18,000). Of the top 10 employers in the City, 5 were in the public sector – the two already cited, plus the State of California, the San Francisco Unified School District (5,600), and the US Postal Service. San Francisco State University (3,600 employees) is the 12th largest, City College (3,500) the 14th, and the Veterans Administration Hospital (2,000) the 17th largest employer in the City. All of these public sector employers beat Safeway (18th), AT&T (19th), Marriott (23rd), the Hilton (24th) and Levi Strauss (25th) in employing workers in San Francisco. At the end of last year, approximately 12% of California’s 16 million jobs were in the public sector, with a whopping 77% of those in local government. Like in San Francisco, the majority of these public sector jobs are in education with 56% of all local government jobs and 77% of all state jobs being in education. Health and human services makes up the next largest group of public sector employees.

The great economic tragedy of the current economic collapse is that local governments, hemmed in by Proposition 13 and other State-mandated limits on local revenue, must lay off workers and cut programs, the majority of which are in health, education and human services. The history of the Great Depression shows that it is exactly these lay-offs and service cuts that tend to move a Great Recession into a Great Depression. But even more devastating at a time of global change, when the very fabric of the economy is being transformed, it is exactly these services in education, health care and human service that offer the greatest potential for economic transformation and employment opportunity.

While the current administration looks elsewhere (as many of its predecessors have), it doesn’t acknowledge that the public sector is THE main economic driver, and must be key to the solution. Government investment can’t be off-shored. The questions are not just how do we focus on public sector jobs, but also how do we direct public sector investments into wider, permanent economic development that achieves the goals of local ownership, community control, and high wages for SF’s existing population.

Create a Green New Deal community jobs program. While workers go without jobs, important work is left undone in our communities. We should put people to work restoring our environment, providing childcare and tutoring, cleaning up abandoned houses and more. These are not replacements for existing public jobs. In addition to using the Municipal Bank and Municipal Development Corporation to support local job creation, the city should make lobbying State and Federal Gov’t for funding and developing such a program a priority. A key factor would be that such a program not threaten existing unionized city jobs, but that it provide immediate employment opportunities to those most in need. While the administrations talks about “jobs stimulus” programs that essentially gut funding for public infrastructure, we believe, as most economists do, that the right kind of stimulus in a recession is direct jobs creation. We propose a Green New Deal, a local municipal jobs program modeled on the WPA and CETA. This jobs program would be linked to the city’s goals of stimulating a Green Economy, but rather than taking an incentives and regulation approach, takes a radical break in centering the development of economic infrastructure on a government-led works program.

Support affordable housing as economic development. Key to any vital local economy is quality affordable housing that meets varied needs – of single residents, couples, families, people with disabilities. The housing working group of the Community Congress has prepared an extensive list of polices and recommendations related to affordable housing. We plan to integrate the economic development and housing components as the Community Congress moves forward.

Community-based Economic Development

The “economic development” model for city policymakers has been to put scarce government resources, tax breaks and other incentives, to “attract” what they have identified as the so-called “experience” industry (tourism and condo-buyers attracted to the SF “experience”), and the “knowledge” industry ( dot-coms, biotech, clean tech, etc.), and to attract the attendant future workforce required for these activities, rather than to supporting the infrastructure of San Francisco’s own strengths. What if the city spent as much in resources to support our local small businesses as they do seeking trade ties with China or seeking to attract biotech campuses or high-rise developers? What if they focused on existing businesses in the city’s industrial areas, and in vulnerable commercial corridors and retail districts, rather than prioritizing the central business district and “new” non-existent neighborhoods?

The reason the experience and knowledge industries come to San Francisco is because it has a rich infrastructure of cultural production and of small backstreets businesses that are the actual productive backbone that support other virtual economies. The small, neighborhood-based creative and cultural organizations, many of them in the southeast sectors of San Francisco, are at the root of what gives the city its global appeal. Small backstreets light-industrial businesses are not only indispensable for the finance, IT, biotech and other industries, they are also the businesses that are still employing San Francisco’s blue-collar workforce, providing critical jobs for working-class, immigrant, and people of color communities in San Francisco’s south-east districts. Nonetheless, these are often seen as marginal activities, vulnerable to economic whims of investors, banks, and rising real estate costs. These enterprises are small, extremely varied, and many rooted in very specific cultures, neighborhoods, and local histories. They mostly lie dispersed throughout the city’s southeast neighborhoods and a few other commercial corridors..

The new economic development agency must develop programs and support new and existing neighborhood small business networks to meet the needs of key communities and constituencies. The starting point for our discussions on economic development for San Francisco are based on economic development models that:

  1. Have maximum local multipliers,
  2. Support San Francisco’s existing workforce, and have the potential to provide living wage jobs at all educational levels
  3. Support and strengthen the existing networks of locally-owned small light-industrial and hybrid businesses and creative organizations, neighborhood-serving businesses, as well as emerging “green jobs” sectors,
  4. Have a strong grounding in cultural equity, and
  5. Connect workforce development and education to these businesses and networks, and
  6. That support alternative community- and worker-ownership models, including those that might employ recent immigrants.

We’ve outlined these approaches into four issue areas:

Prioritize locally-owned small businesses. In addition to neighborhood-serving retail, the small, locally-owned “Back Streets businesses,” small to medium light industries, are the backbone of San Francisco’s economy, and the real infrastructure for the “knowledge” and “experience” sectors (i.e., the externally-focused economic sectors that City agencies currently gravitate toward), and the reason those sectors locate in SF. These businesses provide sustainable (i.e., not bound to boom-bust cycles) city revenue and great numbers of working-class employment and entrepreneur opportunities. Development of these back streets sectors will be key to the peak oil economy, emphasizing local production, green manufacturing, recycling, and cultural production. Economic development investments should strengthen the existing local networks of small businesses and arts/cultural/creative industries, and support the recirculation of money within the local economy. Efforts should be made to support (through zoning, preferences in city contracts, etc.) business that are owned locally and keep profits within the city. One critical need is access to credit, and the municipal credit union is key to promoting industries, providing, for example, a first-time business-owner program similar to the first-time homebuyer programs, and linking access to municipal credit with economic development standards (wage standards, hiring, ownership, etc.).

Develop the infrastructure for a Green Economy, Green Jobs, and Urban Agriculture. The twin economic and emerging ecological crises demand a comprehensive approach to developing a green economy. The green economy should develop from a lens of environmental justice (in particular, that all development should reduce pollution to local communities and develop healthy opportunities), not just lowering emissions. The approach to lowering San Francisco’s carbon footprint needs to emphasize a reduction in long-chain imports, and creating more resilient systems for self-reliance. This is not just “clean tech,” but includes sectors that employ the city’s existing workforce, such as green retrofits of the city’s existing housing and infrastructure, the recycling and reuse sector, urban agriculture, and emerging green manufacturing sectors that are location-specific and can’t be easily off-shored. It should be a priority of the city to create access to sustainable locally grown food for low-income communities. There are a number of great urban agriculture examples in San Francisco and in the Bay, but they are small, underfunded, and dependent on volunteers. The city needs to be able to reach the scale necessary to ensure real food security and healthy food for low-income communities. The idea would be to take the Alemany Farm model to a larger scale, looking, for example, at underutilized school properties and other underused sites.

Support the arts and cultural economy. We see the arts, culture, and creative industries as an integral part of San Francisco’s economy. Arts organizations employ about 7,800 people, with another 5,200 people employed through the off-site spending related to arts activities. An economic development priority should be to promote cultural and artistic economic activity, but not just at its end-product stage (as tourism “attraction”), but at its root as business and workforce development. An arts component of a progressive economic development agenda require comprehensive City policies that address the arts as a driver of economic and workforce development, with the goal of integrating existing San Francisco residents, especially economically vulnerable populations from the south and east of San Francisco, into an equitable “creative” economy. The City’s arts programs should be restructured with a focus on community and cultural equity arts, with a clear mandate of building on the city’s existing strengths as the location of neighborhood-based cultural economic activity. Chinatown is an example of  a neighborhood that has a vibrant internal cultural economic activity, that also benefits from bringing in outside dollars without entirely remaking the neighborhood as a tourist spectacle, and which has maintained its population and culture without becoming gentrified. The creative economy, particularly cultural activity based in San Francisco’s ethnic and working-class communities, is one of San Francisco’s unique competitive advantages, and should be strengthened and supported as a sustainable economic engine for the city, not linked to external boom/bust cycles of global capital.

Support the emerging solidarity economy. Emerging solidarity economy enterprises, including worker-owned cooperatives and community-owned corporations, should be one of the priorities for a City seeking a sustainable economic development model. The Cleveland model of supporting emerging cooperative networks through assistance, loans, and socially responsible procurement policies is something we should be learning from.

Our Challenge

Our challenge in this Community Congress is not only to city leaders and policies—it is a challenge to each and every one of us concerned over the future of San Francisco.  Everywhere one looks, capitalism imposes false divisions and choices that we must transcend if we are to move forward equitably and sustainably. This is why we believe it is imperative to come together, dare to think “outside the box”, search for innovative ideas and challenge ourselves to think about how to re-envision how we do economic development. Please join us in this timely and urgent endeavor.

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