Arizona's new legislation, signed into law Friday, makes being in the country illegally a crime punishable by up to six months in jail and a $2,500 fine.
San Francisco City Attorney Dennis Herrera said that his office already has started investigating if any contracts between San Francisco and Arizona could be severed without penalty.
This tactic has been used against Arizona before with success, he said.
Arizona was one of the last states to adopt a holiday honoring Martin Luther King - a reluctance that led to a boycott in the 1980s that cost the city hundreds of conventions and Super Bowl XXVII in 1993. The pressure, and the financial pinch, led the state to put the holiday on the ballot. Voters approved the measure, making Martin Luther King Day a holiday.
Steps like the one proposed by San Francisco would remind the state's lawmakers their decision could have economic and political consequences, Herrera said.
Some of the companies headquartered in Arizona include Best Western, U-HAUL, Cold Stone Creamery, PetSmart, and U.S. Airways