Why won’t SFMade support Prop. X?

A seeming anomaly of San Francisco’s current election season is the opposition to Prop. X, which seeks to preserve manufacturing space in the city, from SFMade — the city’s preeminent nonprofit advocate of urban manufacturing.

Prop. X is the San Francisco ballot measure that requires developers to replace space for light industry and the arts, a.k.a. space zoned for Production, Distribution, and Repair (PDR), that would be demolished or converted to other uses by new developments in SoMa and the Mission.

Considering that both SFMade and the supporters of Prop. X think that San Francisco has an alarming dearth of space for light industrial uses, the organization and the proposition would appear to be made for each other.

Instead, Blanca Torres wrote in the San Francisco Business Times, “A proposal that aims to ask San Francisco voters to safeguard space for manufacturers has drawn opposition from a surprising source: the city’s largest trade group for manufacturers.” SFMade Executive Director Kate Sofis is one of the three signatories to the Opponent’s Argument Against Proposition X in the Voter Information Pamphlet.

In fact, Sofis’s opposition was predictable, given SFMade’s selective representation of PDR, its coziness with the city’s power players, including some of its biggest developers and most glamorous tech firms, and numerous grants from and tight collegiality with Mayor Ed Lee’s Office of Economic and Workforce Development.

Only the P in PDR

The Biz Times reporter mischaracterized Prop. X. The measure asks San Francisco voters to safeguard space for PDR, not just manufacturing. As indicated by its full name, PDR encompasses the gamut of light industrial uses—production and distribution and repair. It’s a capacious designation. Chocolatiers, garment makers, and jewelers fall under the sign of PDR. So do auto repair shops, laundromats, and restaurant suppliers.

When SFMade talks about the kind of land its clients need, it uses the terms “industrial users” and PDR. But in its nearly seven years of existence, the organization has focused almost exclusively on P—production, especially artisanal production.

That focus may partly explain why SFMade was nowhere to be found during two recent fights to save PDR space and jobs — the struggle to keep the Flower Mart from being displaced and destroyed by Kilroy Realty Company’s massive office project, and the campaign to keep the showrooms at the San Francisco Design Center (2 Henry Adams) from being displaced by Pinterest offices. Both the flower vendors and the showroom tenants are Distribution kinds of PDR (designer showrooms are officially warehouses).

Indeed, that’s how Sofis explained to me SFMade’s non-involvement in these fights: “We focus on manufacturers, and neither project currently includes manufacturing at any significant level.”

SFMade’s ties to the real estate and tech industries

A more salient factor in SFMade’s truancy may well have been the organization’s close relationships with Pinterest and Kilroy.

The controversy over Pinterest’s impending move into the Design Center—the fabulously successful online bulletin board company had already signed a lease with the landlord—went public in early June, 2014. 2 Henry Adams is zoned for PDR, which means no offices are allowed. But a loophole in the zoning code permits offices if a PDR-zoned building is declared a historical landmark. Supervisor Malia Cohen, whose district includes the Design Center, had drafted a proposal to landmark the building. It never got out of Board of Supervisors Land Use and Economic Development Committee, thanks to the Design Center tenants’ strenuous pushback and the fact that Cohen was up for re-election. By early July, the Pinterest deal was dead.

Meanwhile, SFMade and Pinterest were planning to co-host a holiday sale featuring goods made by 40 of SFMade’s members, to be selected by Pinterest. The event would take place on November 22 at Pinterest’s headquarters at 580 7^th Street. On July 25, 2014, SFMade invited its members online to apply to be vendors at the sale. Criteria for selection included the need for “a diverse range of products,” especially “holiday-specific;” “appropriate price points;” “ability to accept credit cards; and “companies with active Pinterest boards.”

Likewise, SFMade’s Kilroy connection overlapped with the battle to save the Flower Mart. That fight stretched from late July, 2014, when Kilroy bought the Flower Mart site, to June 26, 2015, when the San Francisco Flower Mart Tenants’ Association signed an agreement with Kilroy and the market’s master tenant, the San Francisco Flower Mart LCC. The agreement got the tenants guaranteed annual rents, a ground-floor location in Kilroy’s development, exact specifications as to the amount of space for the Mart in the new location, and an en masse relocation during construction, to be paid for by Kilroy.

On July 8, less than two weeks after signing the agreement, the real estate company, one of the largest REITs (real estate investment trusts) in the U.S., announced that it had paid Daniel Murphy’s UrbanGreen Devco LLC about $78 million for a 3.3-acre self-storage facility at 100 Hooper, located at the foot of Potrero Hill next door to the California College for the Arts and a few blocks from the Design Center. The land came with a fully entitled and fully designed mixed-use project that had been approved by the Planning Commission on January 22, 2015, smack in the middle of the Flower Mart fight.

The Planning Commission had approved the replacement of the existing mini-storage facility by a hybrid office/PDR/retail development comprising three new four-story buildings: a stand-alone 100% “PDR Building” of about 56,000 sf, and two buildings that would contain about 87,000 sf of high-ceiling PDR space on the ground floor and about 284,000 sf of office/institutional space on the upper floors, as well as retail associated with the PDR.

In designing the project, Murphy, its original sponsor, had partnered with CCA and SFMade. Sofis was among the speakers who presented the project to the Planning Commission. The project’s Draft PDR Business Plan, attached to the staff report, says that SFMade “will assist with PDR site planning, building design and functionality, PDR branding, and community outreach and engagement,” and that the four-story stand-alone PDR building “is intended to be owned, operated or otherwise controlled by a 501(c)3 non-profit to ensure long term affordability.”

What the Draft PDR Business Plan does not make clear is that the non-profit owner-operator would be PlaceMade, a subsidiary of SFMade that was created in 2013, self-described as “San Francisco’s first affordable industrial real estate developer.” Instead, the Plan coyly states that “[t]he management structure is being designed such that PlaceMade or a similar mission-driven non-profit, will own and operate the stand-alone 56,500 gross square foot PDR building.”

Nor does the Draft PDR Business Plan say that the land on which the four-story stand-alone PDR building would stand would be donated to PlaceMade. Perhaps this last condition didn’t apply in January 2015. It was however part of the terms of Kilroy’s purchase, reported J.K. Dineen in the Chronicle.

I emailed Kilroy Executive V.P. Mike Sanford, asking how much the land Kilroy donated was worth. He hasn’t replied, so I did my own calculations and came up with $9.5 million. (If he’d like to provide another number, I’d be glad to report it.)

“The PlaceMade building,” Dineen wrote, “will cost about $20 million” and will offer manufacturers below-market rents. It will house SFMade’s headquarters and two hundred PDR jobs.

Sofis told Dineen that 100 Hooper

would be a national model[,] as creative cities like Boston and Seattle and New York try to figure out a way to hold on to blue-collar companies that pay well but can’t compete with the rents that tech firms can pay. The fact that the project was bought by Kilroy—a publicly traded real estate investment trust with a market cap of over $6 billion—shows the model works.

Certainly the model will work for Kilroy. Sanford assured Dineen that the industrial component wasn’t a deterrent to the deal, since tech companies such as GoGoogle and Autodesk, which “do some manufacturing and prototyping along with more typical tech office-type work,” are looking for space—in other words, can pay market-rate office rents for the ground-floor space in Kilroy’s two buildings.

The model will also work for SFMade and PlaceMade, and for the men and women who get the 200 PDR jobs in the PlaceMade building.

But it’s hard to see how it will help the thousands of men and women who ply their trades in the city’s small, blue-collar businesses that are at risk of displacement in SoMa and the Mission, displacement that’s being driven by the commercial gentrification spurred by the likes of Kilroy.

A little context: the Planning Department’s 2014 Commerce & Industry Inventory reports that in 2013 the city had a total of 81,519 PDR jobs, including 17,969 jobs in manufacturing (food: 2,286/2.8% of the industry sector; apparel: 1,559/1.9%; printing and publishing: 6,722/8.2%; other manufacturing: 7,372/9%); transportation and warehousing: 16,837/20.7%; and construction: 17,000/20.9%.

(The manufacturing figures do not include artists, whose workspaces also fall under PDR and whose replacement would also be required by Prop. X. San Francisco artists’ numbers are obscured by the Inventory’s use of the North American Industry Classification System (NAICS), which lumps “Art” together with “Recreation.” In 2014 the city had 5,430 jobs in Art & Recreation, down from 10,477 in 2008.)

Taking a stand in the Flower Mart and Design Center fights would have forced Sofis to choose between two unpalatable options: defend the threatened light industrial users and thereby strain SFMade’s relations with its corporate patrons-partners; or defend those patrons-partners and thereby sully SFMade’s reputation as the champion of San Francisco PDR. She chose a third course: stay out of the fray, leaving the flower vendors and Design Center tenants to fend for themselves (fortunately, they called in former Mayor Art Agnos and then-former Supervisor Aaron Peskin) and cultivate SFMade’s ties to the industrial users’ adversaries, Big Property Capital and Big Tech.

Those ties extend far beyond Kilroy and Pinterest. SFMade’s board of directors includes Alicia Esterkamp Allbin, a principal and partner at Pacific Waterfront Partners (think 8 Washington), and Jonathan Knorpp, Managing Director of the San Francisco Giants Development Services, which is overseeing the company’s Mission Rock development. The Giants and Pacific Waterfront Partners also helped to sponsor the 2016 SFMade Week. Other sponsors included Airbnb, Forest City, Autodesk, Colliers International, TMG Partners, UrbanGreen Devco, Orton Development, and Kilroy.

A fuller view of SFMade’s orbit discloses the nonprofit’s affiliations with the two other signatories to the Opponent’s Argument against Prop. X, Housing Action Coalition Executive Director Tim Colen, and SPUR Executive Director Gabriel Metcalf. Colen was one of the speakers who presented 100 Hooper to the Planning Commission in January, 2015; SPUR submitted a letter in support of the project. Sofis has often participated in SPUR forums and other public events. SPUR has donated $9,000 to the No on X campaign.

SPUR and Colen’s HAC, a project of Greenbelt Alliance, are two of the most vocal pro-development voices in San Francisco. The rosters of their business members—architects, “home builders,” attorneys, consultants, contractors, p.r. firms, building trades locals— read like roll calls of the high-end Bay Area building industry.

Attached to the January 2015 staff report for 100 Hooper was a letter from Murphy’s lawyer, Daniel Frattin of Reuben, Junius, and Rose, the go-to law firm for developers seeking retroactive authorization of their illegal PDR-into-office conversions. On July 18, 2016, another Reuben, Junius, and Rose attorney, Chloe Angelis, joined Sofis and others who spoke in opposition to the proposed Prop. X at the Supervisors’ Rules Committee.

You get the picture: SFMade is a beneficiary of the city’s power structure, an assemblage whose members are united in a quest to maximize their investments in the current tech-driven real estate boom. By requiring developers to replace PDR space that their projects would otherwise eliminate, Prop. X hinders that quest. Toeing the power elites’ line, SFMade opposes the measure.

The price of Ed Lee’s patronage

Given SFMade’s ties to San Francisco’s private power brokers, its opposition to Prop. X was only to be expected. That opposition was even more foreseeable in light of SFMade’s symbiotic relations with the city’s public power brokers—above all, Mayor Ed Lee and his Office of Economic and Workforce Development and Planning Department.

Since 2010, OEWD has given SFMade $847,000 in grants. The money has funded programs in garment manufacturing and fashion, high school classes, studies of the city’s food and beverage sectors and of manufacturing workers commutes, technical and real estate assistance, and workforce development. In Fiscal Year 2015-2016, for the first time SFMade addressed the D and R in PDR, subcontracting $25,000 of an $80,000 OEWD grant to another nonprofit, Urban Solutions, to survey and interview thirty to forty distribution and repair companies in San Francisco, create a list of D and R businesses in the city, and assess the business needs and capacity of selected firms in the D and R sector.

Lee’s staff also provided SFMade with a critical policy initiative. The hybrid PDR/office project at 100 Hooper was enabled by a new zoning law that OEWD drafted in collaboration with SFMade and Supervisor Malia Cohen’s office, and that was passed by the Board of Supervisors in June, 2014.

Besides money and zoning, the mayor has bestowed on SFMade the invaluable gift of legitimation. Using her considerable marketing skills, Sofis has used that acknowledgment as leverage for support from foundations, banks, and other private sources. In February the James Irvine Foundation gave her and Todd Rufo, Executive Director of OEWD, joint Leadership Awards for having “formed a public-private partnership in San Francisco that is invigorating urban manufacturing.” The awards came with $200,000 for each of their organizations.

But Lee’s backing has a price: the need to accredit him as a benefactor of PDR. To accomplish that assignment, Sofis has to paper over a problematic reality: Lee’s administration has injured San Francisco’s light industry by encouraging the conversion of industrially zoned land to higher-end uses:

• When landlords have illegally converted their PDR-zoned space into tech offices, the Planning Department has either looked the other way or facilitated a retroactive authorization of the illicit change.
• Until protest by environmental attorney Sue Hestor and others put a stop to it, planners significantly discounted the official development impact fees associated with both illegal and legal instances of such conversions.
• Most important, the city’s planners have incited major speculation and property value inflation by proposing to remove protections for PDR in Central SoMa, an area bounded by Market, 6^th Street, Townsend, and 2^nd Street, exclusive of areas in the Downtown Plan, in behalf of massive upzoning for new office, residential, and hotel development. Though the plan’s EIR has yet to be published, much less certified, since at least early 2014 planners have been citing its proposed upzoning in their staff reports to the Planning Commission recommending approval of new projects.

Sofis has spun this record of dereliction in three ways.

First, she’s stayed out of the public fights over the Planning Department’s neglect, if not subversion, of PDR’s zoning and other legal protections, just as she stayed out of the fights over the Flower Mart and the Design Center. To the best of my knowledge, in the three years that I’ve been covering PDR in San Francisco, Sofis has not objected to a single retroactive authorization of an illegal PDR-into-office conversion. She was not among those who came before the Planning Commission to ask that the Planning Department stop discounting development impact fees for conversions of PDR space into offices. Rather, the parties who’ve regularly advocated light industry’s cause at the Planning Commission have been Hestor, the late SoMa Leadership Council President Jim Meko, and representatives of TODCO, the Mission Economic Development Agency, and the Council of Community Housing Organizations. In 2014 Sofis was also absent from the debate over Supervisor Jane Kim’s proposed temporary moratorium on PDR conversions in her district, which encompasses SoMa.

Sofis’s second palliative tactic, albeit one she rarely deploys, is to justify the Planning Department’s decimation of existing PDR space. In August 2013 she participated in a SPUR lunchtime panel about “Finding Space for Manufacturing in Today’s Modern Cities.” The other panelists included OEWD’s Ken Rich, who oversaw the team that rezoned the Eastern Neighborhoods, along the way quietly eliminating a requirement for new PDR space to be created in the Urban Mixed Use (UMU) zone; Corey Teague, from the Planning Department; Jack Sylvan of Forest City, the developer of the gigantic 5M project; and Robin Petrovic from Heath Ceramics.

“I can speak for Mayor Lee,” said Rich, stating that the mayor “is behind all these efforts” to ensure “a place for industry”—a challenging task, considering that “we are running out of space for PDR.”

Sofis echoed Rich’s observation about the space crunch. She said that small firms hoping to lease space at the American Industrial Center typically spent a year on a waiting list, and that less than 17^%  of the companies that came to SFMade looking for space could be placed. (In SFMade’s 2015 report that figure is 13%.)

When Q & A began, I raised my hand and got called on. I cited the story that appeared in the November 2012 SF Business Times that marked the conflict between the Eastern Neighborhood zoning for PDR in SoMa and the upzoning proposed in the Central Corridor [now renamed the Central SoMa] Plan, which would allow offices on PDR-zoned lands where they were now prohibited. I asked the planners to reconcile the mayor’s professed enthusiasm for manufacturing proposed removal of protections for SoMa PDR, and asked Sofis if she had a position.

Teague said that the Central Subway “changes the context for that corridor”—and little more.

Sofis shrugged off my query about the loss of PDR in SoMa, averring that “very few folks would be impacted,” because “SoMa is no longer the destination for our manufacturers.” Except for sewing factories in mid-Market, SFMade was “not seeing much displacement.” In any case, the buildings in the areas proposed for upzoning “are not ideal for manufacturing.” Shifting the subject to mid-Market, she said that the mayor supported SFMade’s Fashion San Francisco program, which has helped six factories to re-locate to other parts of the city.

What I didn’t know at the time was that Sofis was then working with OEWD and Supervisor Cohen on the hybrid office/PDR legislation that would affect sites in the Mission and Potrero Hill, including the block on which 100 Hooper is located.

Sofis’s third and customary ploy is to offer City Hall fulsome public thanks for assisting SFMade. Ed Lee has repeatedly been a featured speaker at SFMade’s annual State of Local Manufacturing Breakfasts, where he expresses affection for “Katie” and locally brewed beer. In a long and informative 2013 interview, Sofis said that while SFMade “is independent of the city government, the City is our best partner.” She reiterates that point in the Irvine Foundation video, attesting that “[w]e are able to deliver far superior results faster, because we have all of the City family of departments on our side.” According to SFMade’s 2015 State of Local Manufacturing Report, presented at the 2015 Breakfast, those results include five straight years of sectoral expansion, leading to 650 local manufacturers in the city employing about 5,000 people and generating $614 million to the economy in 2014.

The 2014 Commerce & Inventory Report gives a figure of 17,969 manufacturing jobs in San Francisco, which means that SFMade, with its focus on “makers” and consumer production, is dealing with only 28% of the city’s manufacturing workers. Yet thanks to its innovative programs and superb marketing, plus the current vogue for things artisanal, SFMade has achieved widespread prominence as the leading advocate of the city’s manufacturing sector per se—prominence that, as the Irvine award indicates, redounds to the credit of Lee’s administration.

The urban manufacturing Kool-Aid

Sofis is playing a shell game. Touting SFMade’s role in the city’s expanding manufacturing sector, she distracts observers, especially those from outside San Francisco, from the major challenge facing the local manufacturers and other industrial entrepreneurs: the decimation of existing PDR space by high-end development and the Lee administration’s complicity in that destruction.

Urban Solutions’ current assignment is a case in point: extending business assistance to Distribution and Repair firms is a good idea. But doing a study on the needs of these firms is unwarranted.

The definitive study, “Made in San Francisco,” was done in 2007 by the city’s Back Streets Businesses Advisory Board. Covering the P, the D, and the R in PDR, this still-timely report demonstrates light industry’s indispensable support to San Francisco’s main economic drivers and inimitable contribution to its economic diversity. The report also makes dozens of hands-on recommendations to the Board of Supervisors that treat not only business assistance, business retention and attraction, workforce development, business alliances, and infrastructure—the stuff of SFMade’s agenda—but also and above all land use controls.

I’d hoped to ask Urban Solutions’ new Executive Director Lisa Zahner, who previously worked at OEWD, if she was familiar with “Made in San Francisco,” but despite my repeated efforts to reach her by phone last week, we never connected.

Ignored by the Newsom administration and its successor, “Made in San Francisco” should be taken off the shelf and adopted as a guide to light industrial retention and promotion in the city.

If Sofis supported Prop. X, she’d have to abandon the fiction that Ed Lee’s city hall is protecting San Francisco’s light industry. She’d need to grapple with the research showing that SoMa still has a significant number of businesses that need PDR space—not just small blue-collar businesses but also longtime artists who workspaces are at risk of elimination by new development—as well as those who have already been pushed out. Given that history and threat, failing to protect existing industrial lands and just crusading for new PDR space is irrational.

Indeed, in co-signing the Opponent’s Argument, Sofis joined a critique of Prop. X—the spaces it would provide would only work for small “boutique” businesses—that betrays the reported needs of her own clientele.

From the Draft Business Plan for 100 Hooper: “Of the companies placed into space by SFMade in 2012, the majority of space searches were under 5000 square feet, and the 1500 square feet ‘starter space’ was in highest demand….[T]here are few stand-alone buildings offering such small spaces.”

And from SFMade’s 2015 State of Local Manufacturing Report: “Companies with 1-4 employees now comprise 83% of SFMade’s membership.”

It’s true that Prop. X won’t provide the large venues needed by some light industrial businesses. So what? Nothing in the measure precludes planning for such spaces.

I told Sofis I thought I understood her push for new space for urban manufacturing, but that I couldn’t comprehend her reluctance to defend existing PDR spaces that are being lost, and that I wondered if that unwillingness was rooted in her working and political relationships with the forces that are driving the real estate boom in San Francisco.

She replied: “You couldn’t be more wrong about our  intentions and how we operate,” specifically, the implication that SFMade is “somehow influenced by outside ‘for profit’ factors.” She categorically denied having discussed her position on Prop. X with Kilroy or Pinterest. Citing SFMade’s youth and education programs, low-income hiring efforts, and “first new permanently affordable PDR building at 150 Hooper,” Sofis said she was “proud of all that we have done and yet to do to grow manufacturing” in San Francisco.

At the end of the August 2013 SPUR forum, Tiffany Garcia, describing herself as “the manufacturing advocate at City Hall,” piped up from the back of the room that her job was to see that “the mayor drinks manufacturing Kool-Aid everyday.” The Kool-Aid metaphor was jarring—had Garcia never heard of Jonestown?—but perhaps it was apt.

Urban manufacturing is a fine thing, and we should all cheer its renaissance in San Francisco and other cities. But that celebration shouldn’t blind us to the fact that that the biggest threat to local production and its companion light industrial activities—distribution and repair—is real estate speculation. As long as land use remains unstable, PDR’s future is at risk. Facing the facts, supporters of blue-collar work and enterprise should also cheer efforts to stabilize land use in SoMa and the Mission. Prop. X is such an effort—not the last word, by any means, but an important step. If Kate Sofis would like to give us a real surprise, she’ll stop dispensing the Kool-Aid. In any case, San Franciscans should stop drinking it and vote for the measure.