SF sees 15% of office workers WFH permanently, spelling uncertainty for taxes

Business tax revenue projected to grow by just 1 percent in the coming year

SF sees 15% of office workers WFH permanently, spelling uncertainty for taxes
SF Mayor London Breed (Getty, iStock)

About 15 percent of office workers in San Francisco will still be working remotely as its economy recovers next year, making it harder to estimate future business tax revenue, a new update of the city’s five-year financial plan found.

That revenue source is expected to grow by just 1 percent, to about $967 million, from the current fiscal year to the next, which starts July 1, the Jan. 12 report said. It’s expected to surpass $1 billion in each of the next three fiscal years, topping the pre-pandemic peak of about $918 million in 2018-19. The San Francisco Chronicle reported details of the update earlier.

The impact of continued telecommuting in the city’s office sector is expected to continue to drive “significant” losses of business tax revenue, although those losses are expected to wane through the fiscal year 2025-26 and occur at a lower level than the city’s last projection, the update said. “As this is an entirely new dynamic for office work, there is a high degree of uncertainty about telecommuting in the future, which creates uncertainty in the revenue forecast as well,” said the report, which was authored by the mayor’s and controller’s offices as well as the board of supervisors’ budget analyst.

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While the outlook for business tax revenue is murky, San Francisco’s budget is doing better than expected, the Chronicle said. City officials said last month they expect a surplus of about $108 million over the next two years, the first time that’ll happen in more than two decades. Deficits, meanwhile, are estimated to be about $39 million and $149 million during that time, both lower than previous projections, the Chronicle reported.

And unlike business tax revenue, sales tax revenue is expected to surge through the upcoming fiscal year, to about $184 million from $146 million. That 26 percent estimated increase can be attributed to more workers and shoppers returning to the city, the Chronicle said. Even still, pre-pandemic sales tax revenue was about $200 million a year, meaning it may take at least another year before it reaches that level.

[The San Francisco Chronicle] — Matthew Niksa

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