Election 2015: Proposition J and the debate over legacy businesses

Oct 29, 2015

This November’s ballot brings with it proposed legislation to battle the city’s affordable housing crisis -- but there’s also a proposition addressing the problem of rising commercial rents, too.

There is no commercial rent control for businesses, which means in this hot rental market more longstanding local businesses are closing, businesses like The Lexington Club, San Francisco’s last lesbian bar, and the 48-year-old restaurant the Empress of China.

Protecting legacy businesses 

Proposition J was created in response to this increase in closures. It seeks to establish a fund that would award grants to legacy businesses and nonprofits in San Francisco -- and to the landlords that house them. But in order to qualify the businesses have to be 30 years or older, and prove that they have “contributed to the neighborhood’s history.”

 

The Roxie Theater on the border of San Francisco’s Mission District is one of the businesses that could potentially benefit if the proposition were to pass. The theater has been around for 106 years -- over the span of many decades, it’s played old Hollywood movies and foreign films and hard to find arthouse films. Over the years it’s struggled to operate as a for-profit business.

 

“It's extremely difficult to run an arthouse cinema for profit,” says Tracy Wheeler. She’s the President of the Board of Directors for the Roxie Theater, which has been operating as a non profit for the last six years.

 

Recently the theater faced an existential crisis of sorts. The lease was set to expire, and the Roxie didn’t think it would be able to survive a considerable rise in rent.

 

“It became a really complicated conversation because the landlords seeing the huge rise in the rents in the Mission felt like they no longer needed it to be a movie theater as we had hoped they would be, and were willing to open it up to the highest bidder,” Wheeler explains.

 

In the end, the owners were able to extend their lease for another three years at the same rate through a hidden clause in their contract, but the incident underscored the Roxie’s commitment to Proposition J. If it were to pass, the Roxie Theater could be granted $500 per year for every full time employee. Not just that -- their landlord would get $4.50 for every square foot of space they lease -- if the landlords extend the lease to at least ten years. But there’s a cap -- any business that’s eligible for the grant could get at most $50,000, and landlords would tap out at $22,500.  As Wheeler sees it, even if it’s not enough to significantly offset the cost of doing business, this money serves a symbolic purpose -- one that can ease the tension between landlords and renters.

 

As businesses get older, the fund gets bigger

 

“What it says to other landlords who have these legacy businesses that might feel like on some levels 'wow I bought a white elephant' or ‘inherited a white elephant’  is that the city cares about its white elephants,” says Wheeler. “Because I think it gets a little lonely, and you think why am I doing this?”

The proposition would establish an initial $3 million dollar fund for registered businesses and nonprofits. It would come out of the city’s general fund. Right now, there are roughly 7500 business that could qualify - the Board of Supervisors voted to create a registry back in March. Up to 300 new businesses or nonprofits could be nominated each year.  But as the list of legacy businesses grows, so will the size of the preservation fund. In his analysis, the city controller estimated that in 25 years, the cost of the fund could reach between $51 and $94 million dollars.

“Even though this program is in place, there is a lot of flexibility that the Board of Supervisors have,” says Supervisor David Campos. He’s one of the sponsors of the proposition.

"The board of supervisors may decide that this program is no longer needed, maybe in five years the real estate market is such that there is no longer a need to help these businesses, and if that's the case, the board can decide not to fund the program all together.”

Campos’ district, which includes the Mission, Bernal Heights and Portola, is home to the city’s largest number of legacy businesses. He believes they are good investments. Legacy businesses often hire employees who live in the neighborhood and create a sense of community for local residents. His rallying cry?

“If we can help Twitter why shouldn't we help these Mom and Pop legacy businesses that are going out of business,” Campos says.

Support, but not from everyone

The Board of Supervisors all unanimously back the bill. So does the San Francisco Democratic Party, and neighborhood associations like the Haight Ashbury Neighborhood Council.  But, there are still some vocal dissenters like the San Francisco Republican Party. “Just philosophically the taxpayers should not be subsidizing for profit businesses,” says Howard Epstein. He’s the Vice Chair of Media Relations for the San Francisco Republican Party. “And it's unfair to other businesses . . . they should sink or swim on their own.”

The San Francisco Chronicle and the urban planning firm SPUR both recommended voting no. One of their main concerns is political abuse. The only way to get on the list is if a supervisor or the Mayor nominates your business, which they say might make the fund subject to political abuse. After being nominated, the business or nonprofit has to be reviewed by the small business commission. They’ll evaluate whether the bus has “contributed to the neighborhood’s history,” as the legislation puts it.

How do you quantify a thing like character?

Nancy Charraga is the owner of Casa Bonampak, a 19-year-old store full of fair trade imports made by artisans across Latin America on Valencia Street. She’s one of three folk art stores in the Mission she can think of, none of whom would qualify as a legacy business. “But if you look at the character of the Mission without these three main art stores,” she asks,  “what would the mission be like, without that representation of folk art culture?”

She’s going to vote for the proposition. She believes it’s the start of a conversation about how to help small businesses in the city, but she’s concerned about the nomination process.

“You know is it really about is the business qualified? And do they have significant contribution, or is it going to be about politics, and what have you done for my campaign?”  

With or without Prop J, Charraga will keep doing what she’s been doing for almost 20 years, along with all the other small business owners here in San Francisco, working hard, to try and stay afloat.