Is Facebook unfriending California?
“We’re growing primarily outside of the Bay Area,” Facebook CEO Mark Zuckerberg said recently during an internal company Q&A session that was broadcast online. He cited the bad traffic and the high housing prices. “The infrastructure here is really, really tapped,” Zuckerberg said.
Facebook has locations in Burlingame, Fremont, Mountain View, Sausalito, Sunnyvale and two new towers in San Francisco. Zuckerberg said Facebook would continue to invest in the Bay Area to build more housing and ease transit, but he also said the company will focus on expanding in other places.
Like Texas, for example, where in 2017, Facebook opened a $1 billion data center in Fort Worth and has recently invested in a 4,600-acre solar farm north of Odessa. Or New York, where Facebook has been shopping for expanded office space in multiple locations, and where California-based Google is building a new $1 billion campus.
Meanwhile, office space in Austin rents for about half the cost of office space in San Francisco, according to the real estate brokerage Cushman & Wakefield.
The cost of operating in California also includes what companies have to spend to keep government officials happy. The state government is perpetually threatening businesses with legislation or legal actions. Assembly Bill 5, which effectively ends the use of independent contractors except for businesses that have been granted an exemption, is just one example.
Perhaps that’s why the Chan Zuckerberg Initiative, founded by the Facebook CEO and his wife, Priscilla Chan, has donated generously to a PAC that is pushing for a tax increase on commercial property. Through June 30, 2018, Chan Zuckerberg Advocacy, the political arm of the organization, had donated $300,000 to the Schools and Communities First PAC, which is backing the economically devastating split-roll property tax initiative that is headed for the November 2020 ballot.
The initiative would revoke Proposition 13’s protections from business properties. Under Prop. 13, all properties are assessed at their fair market value as of the date of sale, usually the purchase price, plus an annual cost-of-living increase that cannot exceed 2% per year.
But the split-roll initiative would split the tax assessor’s roll of taxable properties into two sections, residential and commercial. Commercial properties would be reassessed to market value at least every three years.
Can you imagine how much the taxes on commercial property in the Bay Area would go up, all at once, if long-held properties were reassessed at today’s market value?
That would be a tax increase so violent and shaking that it would make the 1906 earthquake look a vibrating massage recliner. Companies might start moving out of the state immediately.
But just as it takes some time for an aircraft carrier to make a U-turn, it takes some time to move a tech giant out of the Bay Area. So it’s interesting that about a year ago, the San Francisco Chronicle reported that tech companies in the city were expanding elsewhere.
Salesforce, with 8,400 people on the payroll in San Francisco, took over Indiana’s tallest building for 1,700 employees in Indianapolis. The company opened new towers in London and New York, with Chicago and Atlanta on the way.
Zendesk, a support-software company in San Francisco, now has an office in Madison, Wisconsin. Ride-share company Lyft expanded with 750 customer service employees in Nashville. Slack, a communications software company, signed a lease in Denver. Payment processor Square hired 300 people in St. Louis and signed a lease for 13,000 square feet of office space in Atlanta.
Twitter expanded its offices in Boulder, Colorado, and Yelp, which had 2,000 employees in San Francisco, opened a 52,000-square-foot office in the state of Washington.
Incidentally, the split-roll property tax is only one of the tax increase proposals that have been lurching around, alarming the citizenry. The Legislature is considering a sales tax on services, and the California School Boards Association has talked about an initiative that would raise individual and corporate income taxes on earnings over $1 million.
Regardless of the political views of the executives who run tech companies in California, it appears that many are planning their escape. Everybody has a limit. California is over it.
Susan Shelley is an editorial writer and columnist for the Southern California News Group. [email protected] Twitter: @Susan_Shelley.