San Francisco residents protest dotcoms

The problem: The technology companies are moving into industrial and other lower-rent neighborhoods and displacing families, artists' groups and nonprofits, who can no longer afford to stay. Critics say the process is undermining the city's economic and cultural diversity. Consequently, 30,000 San Francisco residents have signed a petition that will put a measure on the November ballot to limit the growth of technology companies in the city.

The dotcom businesses contend that they help the local economy and profess astonishment at the vitriol hurled their way. "They call us dotcommies, dotcommunists, even e-holes," says Alex Clemens, newly appointed director of community relations for high-speed Internet access provider Northpoint Communications Group Inc., which has its headquarters in the city's South of Market district.

The effects of the controversy are especially noticeable in the city's Mission district, a largely Hispanic, working-class area where a freshly baked scone can be had for 30 cents. On Tuesday night, hundreds of artists and dancers rallied in the streets there to support a moratorium on dotcom development and to protest the closing of a dance studio that couldn't meet a rent hike.

"Landlords are jumping on the bandwagon, they have to live in this expensive town too,'' said 33-year-old artist Tim Crowe, who lives above a loft-style art gallery. Mr. Crowe said he is moving his studio out of the neighborhood -- and the city -- to a cheaper warehouse in Oakland. "I understand raising rents but not tripling them, which is what's happening."

At the heart of the matter is Proposition M, a 1986 voter-approved initiative under which building downtown is capped at 950,000 square feet a year. Prop M allows space to be "banked" during years of low demand for use when demand is high, like now, but even that banked space hasn't satisfied recent demand. The result: Developers are converting warehouses and industrial sites in the Mission and other neighborhoods into Internet, multimedia and software office space, labeling their projects "manufacturing,'' "business service,'' and "research and development'' facilities -- all of which are exempt under the current ordinance.

In the Mission, residential evictions last year were more than double the figure in 1995, the year the Internet took off, according to the city's rent arbitration board. "We've definitely seen a major increase in the reporting of evictions, 17% of all are occurring in the Mission," says Joseph Grubb, the board's executive director. Also of concern to city officials is that clusters of nonprofit organizations housed in individual buildings have been displaced by a single Internet company.

"These are historically low-rent districts, and we've heard of rents rising from $1 to $35, $55, $65 a month," says Pamela David, director of the mayor's office of community development.

Tensions are starting to run so high in the Mission that the new owners of the building that housed the ousted dance studio enlisted 40 city police to protect it Tuesday night, barricading the storefront with plywood. "The last thing we need is a riot,'' said owner Evan Sagerman, an architect.

Meanwhile, self-described anarchists like the Yuppie Eradication Project have roamed the area keying parked sports-utility vehicles and slashing their tires. "Our group is calling for an 'Endangered Culture Act,' " says Todd Edleman, a community organizer who helped coordinate another Mission protest last weekend. "You see, there's a species out there -- artists -- that are being removed. We need to enact laws to keep them around." Mr. Edleman's group calls itself AARGH! short for All Against Ruthless Greedy Gentrification.

Satisfying the competing demands of those groups and developers facing a hungry market won't be easy, civic leaders say. "We have a problem that any other city would kill to have, as this new industry that wants to come here is very aptly suited to San Francisco," says Jim Chappell, director of the San Francisco Urban Planning Association.

In the middle of the fray is San Francisco Mayor Willie Brown, who has introduced a no-growth measure of his own. Critics say the mayor's measure makes too many concessions to developers, but City Hall says it will better control growth.

Both ballot initiatives would rein in long-term technology-business development. The activists' proposition, dubbed Daughter of M, seeks to ban new projects in certain working-class neighborhoods currently favored by Internet companies, like the Mission. It calls for planning studies before any new projects are approved in other industrial, working-class areas. And it would reclassify multimedia, e-commerce, Web design and other Internet companies as office space, bringing them under the cap.

The mayor's plan would do that too, but impose looser controls in those and other neighborhoods currently off-limits to office development and reserved for light-industrial uses. Key: It also contains a one-time adjustment to the office-growth cap that, in effect, doubles the cap for new office construction in the city over the next 15 months.

Dotcom businesses contend that much of the criticism directed their way is unfair in that they are helping lagging neighborhoods by bringing the New Economy home. Joshua Silverman is the 31-year-old chief executive of evite.com (www.evite.com), an online activity organizer that has set up shop in a cutting factory in the city's Portrero Hill neighborhood. The factory had gone out of business. "We took this space for that reason," he says. "We didn't displace or force anyone to move. Before, this space provided $4-an-hour wages. We're creating jobs with far greater opportunity for members of the local community."

Still other companies say they are actively reaching out to their new neighbors. Addressing the dotcom push into the city's lower-rent districts, Mr. Clemens of Northpoint Communications, says: "I wouldn't call it overexpansion. But we do need to find some measured middle ground to balance San Francisco's need for economic expansion and maintain the extraordinary diversity of the city we all love." Northpoint is donating $2 million in high-speed Internet access technology to HUD-sponsored facilities in the markets where it does business, he says.

Marching last weekend beneath a hand-drawn sign of a popular cell phone with the logo Noklu and the message GO AWAY, longtime Mission resident Roger Strobel said the dotcom crowd doesn't understand the impact of their presence. "The attendant services for the high-tech industry do generate cash, but the new money spends it in upscale services outside the neighborhood -- except perhaps at a few local take-outs."

Still, not all local residents feel the invasion of the dotcoms is necessarily bad. "They come and fix up the run-down places, that's good," says Alicia Gutierrez, whose family has operated La Reyna Bakery in the Mission for 23 years. "Otherwise, no one would pay attention."

Write to Ann Grimes at ann.grimes@wsj.com