Morris Tabak, assistant chief of the San Francisco Police Department, is one of the highest-paid employees San Francisco has ever had.

Tabak earned $425,558 in 2009, according to city payroll records. After 32 years on the force, he announced his retirement this month. His annual payment from the city’s pension fund will be approximately $225,000. With that and San Francisco’s generous retiree health care package, compensation to Tabak will quickly climb into the seven figures.

But there is a hidden cost to the city beyond Tabak’s generous salary and pension benefits: Tabak owns a home, pays property taxes and, presumably, does most of his shopping in a residential community in San Mateo County, about 20 miles south of the city.

The net effect is that most of the economic activity generated by Tabak’s salary and benefits will take place outside San Francisco.

Tabak, who declined to be interviewed, is hardly alone. An analysis by The Bay Citizen of San Francisco’s payroll and employee-residency data shows that the city’s highest-paid employees tend to live outside the city limits, while the lowest-paid ones, on average, make their homes in San Francisco. According to the data, 56 percent of public employees — and three-quarters of the police officers — reside outside the city.

The data appear to contradict the common belief — asserted most recently by Mayor Gavin Newsom during a visit to The Bay Citizen newsroom — that few public employees can afford to live in notoriously expensive San Francisco.

By law, San Francisco’s public employees (though not the city’s elected officials) are free to live wherever they want. A section of the state’s Constitution bars local governments from requiring residency for public employees, though they can be required to live within a “reasonable distance.”

But the flight of so much capital — San Francisco will spend $2.6 billion this year on salaries, benefits and pension-fund contributions — adds another dimension to the city’s efforts to grapple with one of the worst budget crises in its history.

It has long been known that San Francisco’s public employees are well-paid, averaging $87,000 a year. But the data indicate that most of that income leaves the city with the evening commute. According to calculations, the net outflow this year will be $1.8 billion. Workers may buy lunch and lattes, or an occasional dinner or drinks, near the Civic Center, but the bulk of their income is spent near their homes.

“The main advantage of having employees reside within the city is that a good chunk of their personal and family spending would be localized,” said Sean Randolph, president of the nonpartisan Bay Area Council Economic Institute, a business-oriented public-policy group. A disadvantage to their living outside, Randolph said, is that those employees end up paying taxes to other communities.

The $1.8 billion outflow is certainly not the cause of the city’s budget shortfall, but it does not help. The cost of supporting these public employees is largely borne by San Francisco’s 700,000 adult residents. The $2.6 billion in employee costs does not include the city’s pension fund disbursements: $742 million to more than 23,000 beneficiaries in 2009. Nearly $500 million of that was sent to pensioners living in other cities.

Then there is another $4 billion in unfunded retiree health-care liabilities, which is “an immense number,” said Eric Hoffmann, a San Francisco-based senior vice president with Moody’s Investor Service. “San Francisco is very generous in its post-retirement benefits.”

Moody’s has a “negative outlook” on the city’s creditworthiness. If that rating is downgraded, San Francisco will pay higher interest on its debt payments, which are about $300 million this year.

The issue is not unique to San Francisco. Other municipal governments have tried over the years to devise ways to capture income from workers who do not live in the cities that employ them. These measures have taken the form of residency requirements, commuter taxes and higher payroll taxes. But these terms are not presently part of the political or economic vocabulary of the Bay Area.

“We are not hostile to people who do not live in the city,” says Tony Winnicker, spokesman for San Francisco Mayor Gavin Newsom. “Non-residents—including city workers—contribute billions to our city on an annual basis.”

That doesn’t mean that the city doesn’t see potential benefits in requiring other, private-sector employers to hire local. The mayor’s office has been working with Supervisor John Avalos, who is preparing legislation to require private contractors and developers working on city-financed construction projects in San Francisco to employ crews made up at least half by city residents.

“We are trying to make sure we are keeping money in San Francisco,” Avalos said. “When those jobs go to San Franciscans, we know the money stays in the local economy. There is a multiplier effect.”

Employees of the city and county of San Francisco earned more than the county average in all nine Bay Area counties in which they reside, the data show. In San Francisco, where the average 2008 income was $72,712, roughly 10,000 municipal employees residing within the city made an average of $83,000.

The average San Francisco city employee residing in Sonoma County made $118,000. That is about two-and-a-half times the county average per-capita income, according to 2008 United States Commerce Department data.

In Solano County, the 914 San Francisco city employees made an average of $87,000 — more than twice the county average. The nearly 5,300 San Francisco employees residing in San Mateo County earned $89,000 — 21 percent more than the county average.

As San Francisco’s budget woes mount, the city is embroiled in a fight over whether to force existing public employees, most of whom live outside the city, to make greater contributions to pay for their pensions and other benefits. (New hires already face higher contributions, thanks to a health care measure that was passed in 2008 and a pension measure passed in June 2010.)

Proposition B, the November ballot measure, would require greatly increased contributions. Its lead proponent, Jeff Adachi, the public defender, said it would save San Francisco $120 million to $170 million a year. Public-employee unions and most political leaders vehemently oppose Proposition B. No matter where they call home, city employees are upset about the toll the measure would have on their finances.

Lorraine Thiebaud, a 63-year-old trauma nurse for more than two decades at San Francisco General, personifies the complexity of the issue. She earned $128,000 last year — but she is the sole breadwinner for a family of four, and the high cost of living in the Bay Area drove her and her family far afield.

Raised in the Inner Sunset district, Thiebaud said she could not afford to live in San Francisco in the early 1980s, so she and her husband, a general contractor, settled in Berkeley. When the economy soured, Thiebaud’s husband was out of work, and they moved even farther from San Francisco to save money.

Thiebaud now commutes via Amtrak from Placer County, northeast of Sacramento, to work double night shifts at San Francisco General, while her husband stays home to look after their two school-aged daughters. Thiebaud estimates that if Proposition B passes in November, she will face $12,000 to $15,000 in increased pension and health-care contributions.

Thiebaud is working with her union to defeat Proposition B. But, in a phenomenon related to the fact that most city workers live outside San Francisco, the city’s public employees are a tiny voting bloc in San Francisco, at most 2 percent of registered voters.

So while Thiebaud’s fate is tied to the political wrangling of San Francisco, she will not vote against Proposition B. She is registered in Placer County, 125 miles away.

(Click here for The Bay Citizen's Data App on where city employees live and how much they earn.)