SAN FRANCISCO—San Francisco’s sales tax revenue, a key metric of economic activity, dipped during the last three quarters of 2023 compared to the same period the prior year, according to data released on April 15 by the Controller’s Office.
Citywide sales tax in the last three quarters of 2023 totaled $105,755,003. It fell 5.3 percent compared to the same period in 2022.
The consecutive quarterly decline, considered an alarming sign of economic struggle, broke the trend in which the city’s economy was slowly reviving after the COVID-19 pandemic.
However, the sales tax in the first quarter of 2023, usually the lowest of the year, reached $32,878,206, a 6.1 percent increase compared to Q1 of 2022.
The total sales tax in 2023 was $138,633,209, amounting to 85.7 percent of the pre-pandemic level ($161,712,264 in 2019).
San Francisco attracted 23.1 million visitors in 2023, a 5.2 percent year-over-year increase. Visitor spending grew by 18 percent to $8.8 billion, according to the San Francisco Travel Association.
Ted Egan, chief economist of the city, attributed the sales tax tumble to the massive layoffs, mainly in high tech and retail sectors.
“The citywide slowdown in sales tax revenue is most likely related to the downturn in employment we have seen since the tech layoffs started in mid-2022,” Mr. Egan told The Epoch Times in an email.
There were 10,200 permanent layoffs in 2023, according to the WARN notices filed to the San Francisco Office of Economic and Workforce Development.
As one of the slowest-recovering major metro areas after the pandemic in the United States, San Francisco is still suffering from the exodus effect.
Over 55,000 people left San Francisco in 2020, the first year of the COVID-19 pandemic, according to the U.S. Census Bureau.
The trend didn’t stop until July 2023, when the Census Bureau estimated a 0.15 percent population increase compared to the lowest estimated population in 2022. There was a 7.6 percent dip in 2022 compared to the census issued on April 1, 2020.
The shrinking customer pool from local residents, regular visitors, and tourists triggered the exodus of a slew of luxury stores from San Francisco, including Nordstrom Stores, Gap, Banana Republic, H&M, and others.
Westfield Mall announced on June 12, 2023 that it will not keep operating its location in downtown San Francisco.
The gross sales of the Westfield Mall at 865 Market Street plunged from $455 million in 2019 to $298 million in 2022, while other Westfield Mall locations had an increase in sales over the same period, the company stated.
During the same period, people lined up waiting to get into the Ross Dress For Less store just across 4th Street. At that time, some stores still mandated the social distancing policy, so excess customers often had to wait outside.
Ross Stores Inc., the third largest chain of off-price department stores in the United States, had a solid 5 percent growth in 2023, or $20.4 billion in sales, compared to the prior year, according to the 2023 financial report for shareholders.
The sales total of that company surpassed pre-pandemic numbers in 2021. It reached a 27.5 percent increase in 2023 compared to 2019.
The continuing de-gentrification followed by economic deterioration hit San Francisco’s downtown even more. The location that was hit the hardest, the census block around Mid-Market Street where X’s headquarters are located, has dropped 83 percent to $163,675 compared to the $959,618 in sales tax revenue in 2019.
The city’s attempt to revitalize Mid-Market came to an end. The plan, which started back in 2011, intended to bring an economic boom by keeping Twitter’s headquarters at Mid-Market as an anchor, with a 10-year payroll tax break.
Some visitors in this neighborhood nowadays have reported a deja vu feeling of going back to the days of the Great Recession.
The city reported on Dec. 4, 2023 that a 35 percent decrease in shoplifting occurred in the first six months of 2023 compared to the same period of 2022, the largest decrease among cities in a study by the Council on Criminal Justice.
However, also in the first half of 2023, a flagship Whole Foods store at 1185 Market Street was closed permanently due to public safety concerns.
In 2023, the Financial District/South Beach, South of Market, and Tenderloin, historically the biggest contributors to the city’s sales tax base, were respectively 28, 32, and 38 percent short in sales tax revenue compared to the numbers in 2019.
A wave of closures in San Francisco’s Union Square has continued in 2024. Some notable closures in the first quarter of 2024 were Lacoste at 172 Geary Street, The North Face at 180 Post Street, and Jeffrey’s Toys at 45 Kearny Street.
The retail vacancy rate in San Francisco reached a record high of 7.9 percent in the first quarter of 2024, mainly due to worsening conditions in Union Square and nearby downtown areas, according to a report by real estate company Cushman & Wakefield.
Macy’s announced in February that it plans to close its iconic flagship location in Union Square as part of a broader strategic restructuring by the company to optimize its store portfolio. The department store will remain open until it finds a new buyer for the building.
“There has been some growth in apartment rents this year, which may be [a] further sign of a recovering population. If so, that would be good for sales tax,” Mr. Egan stated.
