In 2009, San Francisco’s municipal budget totaled $6.5 billion—$8.6 billion in today’s dollars, adjusted for inflation and population. San Francisco’s budget for 2019 is an eye-popping $12.2 billion, a 10 percent increase just since 2018. The city has failed to match this staggering budget growth with a similar increase in capital investment or services, however, providing an object lesson in the limits of what money can do.
Companies like Google, Salesforce, and Uber, headquartered in and around the city, pour sky-high salaries and stock-option windfalls into the local economy, which has seen real estate values—and the cost of everything else—soar. City coffers overflow with tax revenue. Though the effect has been most pronounced for the past decade, it extends as far back as the first dot-com boom, 20 years ago—in 1999, the city budget was $4.2 billion, equivalent to $7.7 billion today. The excess budget above inflation and population growth over those 20 years totals an astonishing $23 billion.
What has San Francisco done with this wealth? Not much. The Municipal Transportation Agency (“Muni”), which runs the busses and metro, has struggled with failure after failure this year. The housing shortage in the city is so bad that it is driving people to live in cars and even boats. Homelessness is up 14 percent in the past 6 years. Dirty streets, with needles and worse on the sidewalks, were an issue in last year’s mayoral race. A city seemingly rich enough to pave its roads with gold finds them covered in trash.
San Francisco has squandered its fortune. Proclaiming itself a “Transit First” city, density and geography make it one of the U.S. cities best suited for public transport. The city could have used its $23 billion excess to build dozens of miles of subway. Instead, it dug just 1.6 miles of the Central Subway, still not open. San Francisco did build a downtown train station, the Salesforce Transit Center, billed as the “Grand Central of the West”—except that it didn’t fund a tunnel to the station, so no trains go there yet, only busses.
San Francisco politicians also claim to care about affordable housing. Even at the inflated rate to build such housing in the Bay Area—up to $700,000 per unit—$23 billion could have built 33,000 units in the past 20 years. The total number of subsidized units in the city was only about 33,000 in 2018, and just 3,741 of them came from city programs like public housing or the mayor’s office. The rest came from federal, state, or private investment.
San Francisco also claims to care greatly about green energy and rising sea levels. With $23 billion, it could have installed solar panels on every building in the city at no cost to the owner, with almost $16 billion to spare for coastal defenses. Instead, San Francisco offers an anemic $1,500 credit for a typical solar installation, and seawalls have gotten no further than an “action plan” and a “vulnerability and consequences assessment.”
It wasn’t always this way. In the 20 years from 1917 to 1937, San Francisco dug the Twin Peaks and Sunset tunnels that remain central to its metro system; completed the Hetch Hetchy Reservoir, which provides some of America’s cleanest water; and built both the Golden Gate and Bay Bridges, which connect it to the region and sustain its jobs. All these projects are still used daily.
There have been some success stories. The city’s OneSF capital plan has been making long overdue improvements to streets and sewers. The Public Utilities Commission has completed several major seismic upgrades to the Hetch Hetchy water system, helping prepare for the eventual major earthquake. Two parks bonds, in 2008 and 2012, led to spectacular renovations of city parks and playgrounds. But these largely represent good governance and incremental improvements, not the fruits of billions of dollars of spending. With no grand projects to point to, it’s reasonable to wonder where all the money has gone.
Municipal employment has eaten up a large share. Salaries and benefits account for almost 45 percent of the budget, averaging $175,004 per employee, in a city where median household income is $96,265. The city employs 31,830 people, one for every 28 residents and six employees for every city block. The $873 million spent on grants—payments to nonprofits or other groups for various social services—almost equals the total spent on capital projects and facilities maintenance combined.
The larger issues, however, are political indifference and bureaucratic mismanagement. San Francisco carries principal debt of $3.63 billion, which could have been paid down since 2015 with millions to spare. Instead of making this long investment in the city’s financial future, San Francisco’s leaders have grown used to revenue that grow without effort and issued more than $1 billion of additional debt. The current budget is now burdened with $1.6 billion of debt service.
The paltry results from exceptional budget growth are also a story of mismanagement. The Central Subway, though one of the most expensive subway projects in the world, has almost run out of money; its opening was recently delayed another 18 months. Last year, Muni made critical upgrades to the century old Twin Peaks tunnel, requiring additional busses to substitute for trains during the work. Muni didn’t plan for the extra drivers and took them from other routes, leaving the city short on service and causing a system-wide “meltdown.” The “Grand Central of the West,” despite having no tunnel or tracks, still cost $2.2 billion; it closed only six weeks after opening, due to structural cracks. The city spent $2 million to build a public bathroom at $4,700 per square foot, a construction cost similar to high-rise luxury condos. As successful as the OneSF capital plan has been, searching for a list of projects on its website returns the message, “the requested page could not be found.” San Francisco demonstrates that throwing in more money will compound mismanagement, not solve it.
The story of San Francisco’s budget over the past two decades shows that the city’s leadership doesn’t really value many of the issues—transit, affordable housing, clean energy—that it says it does. Given how little the city has done with its incredible windfall, year after year, it’s not clear what it values at all.