Open Thread: Should Taxpayers Compensate Businesses for Construction Losses?

SFMTA painting the transit-only 'Red Carpet' lanes on Mission. Photo: SFMTA.
SFMTA painting the transit-only 'Red Carpet' lanes on Mission. Photo: SFMTA.

The Mayor and at least three members of the San Francisco Board of Supervisors are working on proposals to offer financial compensation to merchants impacted by city projects, notably those in Chinatown near the Central Subway construction.

As reported in the San Francisco Examiner:

City leaders are looking to boost efforts to aid merchants in Chinatown after it was revealed that the Central Subway may open 10 months later than originally planned. In addition to $575,000 planned by the Mayor’s Office to enhance access to Chinatown during the construction, and attract more customers, Mayor Ed Lee directed city staff to “develop a range of additional options to assist impacted Chinatown merchants” in the wake of the delay, the Mayor’s Office told the San Francisco Examiner.

The Chronicle, in its coverage, adds that “Under the program, businesses could apply for subsidies of between $5,000 and $10,000 from the city, but the money would have to be used for certain improvements, like fixing up a facade or purchasing a new credit card system.”

“We do have a Chinatown-specific supplemental appropriation pending at the Board which would hopefully go to giving the merchants within the Central Subway Impact Zone immediate relief while we flesh out the rest of our long-term, citywide strategy for construction impacts with our colleagues in District 6 and District 7,” wrote Supervisor Aaron Peskin’s Chief of Staff, Sunny Angulo, in an email to Streetsblog.

At first blush, it seems only natural that the city should help small businesses survive the damage that can be done to their bottom line from construction projects, especially major projects that are delayed, such as the Central subway.

“We’re supportive of expanding assistance–small grants, or low-interest loans–to small businesses to restore or improve facades, signs, awnings, and grilles, especially if these building features are brought up to current standards for transparency, energy efficiency, size, brightness, and compatibility with historic buildings. Good building frontages enhance walkability, street safety, and neighborhood character, benefiting both local businesses and area residents,” wrote Tom Radulovich, Executive Director of Livable City, in an email to Streetsblog. “Decreasing community resistance to streets and transit projects can help expedite project approvals and schedules, which saves money.”

There’s precedent for this.

PolicyLink, which has offices in Oakland and several other cities, did a breakdown of similar programs in Seattle, the Twin Cities, and Cleveland. Los Angeles also has programs for its rail construction.

That said, Streetsblog fears this policy could set a dangerous precedent if not used sparingly and under the strictest criteria. Construction costs are high enough without forcing taxpayers to compensate everyone who might suffer impacts. As Peskin was quoted as saying in the Chronicle, the city has to be careful not to open a Pandora’s box. “There should be a threshold for business that relies on pedestrian traffic, low margins of cash, or are new,” said James Rojas, an urban planner and activist based in Oakland.

And if the merchants accept direct compensation, what about when the Central subway finally opens? No doubt, they’re going to receive a windfall from the subway’s estimated 35,000 boardings. Shouldn’t they have to pay the tax payers back, with interest?

Of course, the simplest way to avoid opening a Pandora’s box is not to open it.

Do you think the city should give direct compensation to merchants hurt by construction projects?

Post below.

  • uniblab_2.0

    this is an example of too little too late. the Central Subway has been beset with significant delays and well documented cost overruns and budget problems. This is just to appease the Mayor’s base with a few bucks.

    It’s interesting to note such large payments are not being offered to the merchants on Irving who are going to be seriously impacted by the massive repairs to the streets etc for the next two years, and that process was delayed in part due to NIMBY activists who will likely sue to block said process, delaying it further and creating more costs.

    I’m guessing from the tone of your article you don’t think any such subsidies are ok, and that if businesses have a problem they can suck it.

  • Roger R.

    Thanks uniblab. Not at all. If a business can show that it’s really getting clobbered by the construction (as opposed to other factors), I don’t see why a loan is out of order. But if the project is then finished and for the next five, 10, or 20 years the business does much better than it did before the project started (which is likely in the case of the Central Subway) then don’t they owe that money back to the tax payers?

  • asheemm

    There is definitely pain for those businesses affected by construction in a city. But there is also pain for all the residents who depend on those businesses. this is true whether the construction is done by a government or a private entity. Either way – I don’t think compensation should be provided (loans are not compensation).

    Change, and specifically change involving construction, should be a constant in a dynamic and busy city like San Francisco. We should first demand more of it, and get used to it. Removing the unnecessary impediments to construction would be the right way to help everybody involved – construction would be cheaper, and completed faster (hopefully on time).

    Instead of handing out money as compensation or through loans, we should help the businesses earn revenue during the impacted time.
    A city program or non-profit for impacted businesses should help come up with alternative ways to continue operations, or find alternative revenue streams.

    Take the example of a restaurant – they could be helped to run a food truck, get a stall on a city lot or entry into the local farmers market. This change would be useful for the business even after construction is completed.

    Instead of compensating for the loss of business, lets help businesses adjust to the changing environment.

  • sebra leaves

    A cheaper solution is to stop digging multiple holes in multiple streets. Start and finish one project at a time. There is no logical reason to tear up two adjacent streets. There is no logical reason to break ground on another project while hundreds are not finished. We are already seeing permanent damage to merchants on Castro, Mission, and North Beach after the projects are complete. We are also aware of many mistakes being made by contractors and subcontractors due to the too fast too soon pace. What is the rush? Slow down and do the job right. And stop inflicting new projects on neighborhoods that are barely able to cope with the ones they are dealing with now.

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