By Patrick Monette-Shaw
Dreaming of middle-class affordable housing? Forget it!
You'd figure that a Mayor who wants to entice voters into approving a $250 million housing bond next November — and re-electing him — would be forthcoming responding to requests for records of his housing accomplishments.
You'd be wrong. This Mayor's Office of Housing keeps thumbing its nose at reasonable records requests. This can only be seen as a new definition of hubris: Expecting voters to pass a bond measure and re-elect the Mayor, but totally unwilling to provide basic records.
You know San Francisco's affordable housing production faces a severe crisis when almost half of voters disapprove of Mayor Ed Lee's performance.
You know San Francisco's affordable housing production faces a severe crisis when almost half of voters disapprove of Mayor Ed Lee's performance.… One probable reason for the Mayor's high disapproval rating may be directly tied to his Mayor's Office of Housing and Community Development (MOHCD), which is notorious for its lack of transparency.”
A poll conducted by Public Policy Polling between April 2 and April 5 for Larry Bush — an aide to former Mayor Art Agnos, a founding member of Friends of Ethics, a former San Francisco Examiner columnist, proprietor of CitiReport.com, and a member of San Francisco's 2013–2014 Civil Grand Jury — concluded that 46 percent of 569 voters disapprove of how Mayor Ed Lee is running the City, and only 38 percent of survey respondents approve of the job Lee is doing.
One probable reason for the Mayor's high disapproval rating may be directly tied to his Mayor's Office of Housing and Community Development (MOHCD), which is notorious for its lack of transparency.
This article first explores four documents totaling 268 pages: The 2014 Civil Grand Jury report on MOHCD, the Planning Department's 2014 Housing Inventory Report, MOHCD's belated Annual Report for FY 2012-2013 and 2013-2014, and the City Controller's Biennial Development Impact Fee Report for FY 2012-2013 and 2013-2014. Second, it then explores some relevant concerns about the state of housing in San Francisco.
Emperor's New Clothes: Four Opaque Reports
To understand the wither of housing being built in San Francisco you need to wade through reading at least four reports to piece the cookie crumbs together.
In November 2014, voters passed Proposition “K,” the Affordable Housing declaration of policy that Supervisor Jane Kim agreed to water-down with the Mayor that replaced her proposed November 2014 ballot measure for affordable housing. The declaration of policy regurgitated the Mayor's January 2014 State of the City speech in which he pledged to construct or rehabilitate at least 30,000 homes by the year 2020, claiming 50% of the housing will be affordable for middle-class households, and at least 33% would be affordable for low- and moderate-income households.
Those goals were already the Mayor's stated policy goals, so the declaration of policy was unnecessarily redundant. Supervisor Kim was simply snookered by the Mayor.
As City Controller Ben Rosenfield noted in the 2014 Voter Guide for Prop. “K”:
“A declaration of policy cannot bind future Mayors and Boards of Supervisors to provide or reduce funding. Budget amounts for affordable housing or any other purpose or program depend on decisions made through the City's budget and fiscal processes as specified in the [City] Charter.”
No declaration of policy can trump the City Charter or the City's budgeting processes.
Civil Grand Jury Report
In June 2014, San Francisco's 2013–2014 Civil Grand Jury released a report titled “The Mayor's Office of Housing: Under Pressure and Challenged to Preserve Diversity.” In many ways, the Grand Jury report is a damning indictment of the lack of transparency at the Mayor's Office of Housing and Community Development (MOHCD).
The Grand Jury report focused its research on the 2014 Affordable Housing goals Mayor Lee announced in his January 2014 State of the City speech. The Grand Jury was interested in learning whether the housing targets are achievable, whether there is sufficient transparency so the public can accurately assess whether Affordable Housing objectives are being met, and whether fairness is being applied when Affordable Housing units become available for occupancy.
Among its conclusions, the Jury noted that proper public notification should be served for any diversion of Housing Trust Fund uses approved by voters in the November 2012 Proposition “C.” The Jury was apparently worried that Housing Trust Funds might be diverted to provide additional financing for the successor agency to San Francisco's Housing Authority and used to rebuild public housing, rather than affordable housing that voters were promised.
Another of the Jury's conclusions was that “Below Market Rate (BMR) programs administered by MOHCD place a costly and time-consuming burden upon developers and property agents, which may discourage outreach and fair access.” The Grand Jury noted that MOHCD's communications with the public, including “the MOHCD Annual Report, quarterly reports of [housing being developed in] the housing pipeline, Affordable Housing achievement data, funding data and operational metrics are in the public interest but are not easily found nor produced with any regularity.”
The Jury found MOHCD had not issued an Annual Report since 2009. This suggests that whomever in City Hall is tasked with tracking whether all City departments are issuing their annual reports on time — that is, annually — has been asleep at the wheel for at least the past five years. As an aside, how many other City departments fail to publish annual reports each year? Of note, within nine months of the Grand Jury's report, MOHCD recently got around to issuing its combined Annual Report for 2012-2013 and 2013-2014.
Unfortunately, the Civil Grand Jury got it wrong on at least two points. First, among other proposals to increase and preserve the City's housing stock, the Jury inappropriately recommended “requiring that some portion of the City Employees' Retirement System help finance Affordable Housing projects as a local social investment strategy.” This is simply wrong. Pension funds are there for the sole use of providing retirement benefits for retirees and City employees who are required to contribute up to 13% of their current income towards their eventual retirement. The Pension Fund is held in trust as a Trust Fund for retirees, not as a fund to be tapped to fund housing projects.
Second, in discussing challenges facing MOHCD, the Jury wrongly noted that the Housing Trust Fund — which I've reported will divert $1.3 billion to $1.5 billion from our General Fund over the next 30 years — “may need to provide stabilization funding to the Housing Authority for emergency repairs” [to public housing projects]. Later in its report, the Grand Jury wrote:
“The Jury supports the notion that any diversion or loan of funds [from the Housing Trust Fund] to the Housing Authority plan should not result in a permanent loss in HTF funds available to MOHCD to achieve new affordable housing goals for traditional low and moderate income populations as originally voted on in 2012.”
Clearly worried about diverting HTF funds to Housing Authority “Re-envisioning” projects — given the Jury's acknowledgement that the City Charter provides that MOHCD has sole discretion on HTF disbursements — the Jury then cautioned that the City's Administrative Code only requires that MOHCD report to the Board of Supervisors every fifth year, beginning in 2018, five years after the initial FY 2013-2014 $20 million HTF allocation.
By the time the Board of Supervisors holds its first hearing from MOHCD in 2018, MOHCD will have been handed a total of $128 million into the Housing Trust Fund from the City's General Fund to use at its sole discretion during its first five years. Given MOHCD's dubious track record, the Board of Supervisors needs to legislatively reduce the five-year period to two years, and schedule its first hearing in 2015.
As I wrote in April 2014, voters were told in 2012 that the Housing Trust Fund would be used to 1) Create, acquire, or rehabilitate rental and home ownership, including acquisition of land, 2) Fund $15 million for down-payment loan assistance programs for public safety “first responders” and other non-first-responders, 3) Fund another $15 million in assistance to reduce the risk of loss of housing and to make their homes safer, more accessible, energy efficient or more sustainable in a Housing Stabilization Fund, 4) Accelerate the build-out of public realm infrastructure needed to support increased residential density, and 5) Allocate an amount sufficient to cover administrative costs of the Trust Fund, including legal and personnel costs.
Voters were not told in 2012 before they cast ballots that the Housing Trust Fund would be used for emergency repairs of Housing Authority properties.
The Jury's report noted its policy concerns for affordable housing parity and fair distribution of housing built for all income tiers. Looking at it by household income as a percentage of AMI, the Jury noted in Table 1 that the City achieved 113% of market rate housing (those earning greater than 120% of Area Median Income, or AMI) between 2007 and 2014 identified in the Regional Housing Needs Allocation goals, a state-mandated planning document. During the same period the City achieved 65% of housing for extremely-low and very-low households (those earning less than 50% of AMI).
But the City only produced 16% of the housing goal for low-income earners (50% to 79% of AMI), and 25% of housing needs for moderate-income earners (80% to 120% of AMI).
Looking at it by income distribution, Table 3 in the Jury's report notes that high-income earners (over 120% of AMI) comprise 38% of all households in San Francisco, and reached 113% of housing production, while the extremely-low and very-low earners make up 30% of all households and saw 65% of their housing construction goals, and while those considered “middle income” (50% to 120% of AMI) make up 32% of all San Francisco Households, but saw just 20% of their housing construction needs met.
No wonder the Jury included findings that “housing development over the last decade has fallen far short of regional need targets,” and noted that “housing construction for middle-income households in not meeting regional housing targets,” either.
The Jury's report noted the $1.3 billion Housing Trust Fund would receive $20 million in its initial first year in FY 13–14, with 70% ($13.8 million) of the $20 million budget allocated to “provide local financing for construction and major rehabilitation of affordable multifamily housing.” Nothing suggests that 70% of the HTF's initial allocation was spent in the first year, as is discussed below in the section on MOHCD's Annual Report released after the Grand Jury report.
Planning Department's 2014 Housing Inventory Report
The Planning Department's 2014 Housing Inventory Report reveals a host of data that is disturbing, at best.
In an introductory highlight titled 2014 Snapshot, Planning reports there was a net addition of 3,514 total units to the City's housing stock in (presumably) calendar year 2014, but only 757 of them — just 21.5% — were new “affordable housing” units. Clearly, the 21.5% figure is far short of the Mayor's stated policy goals and the Prop “K” declaration of policy adopted by voters for 33% of affordable units for low-and moderate-income households, let alone the goal of 50% to be affordable for middle-class housing.
Of the 757 new affordable units, Planning claims 267 (35%) were considered to be “on-site inclusionary” units, but the 267 inclusionary units represent just 7.6% of the total 3,514 net addition. The Inclusionary Affordable Housing Program that became effective in 2002 requires developers to either build affordable housing units on- or off-site of the principal development project, or pay an in-lieu inclusionary fee. Inclusionary units are rental units for households that earn up to 60% of Area Median Income (AMI), or first-time home buyer households with incomes between 70% and 110% of AMI.
For renters, 60% of AMI is $42,800 for a one-person household and up to $55,000 for a three-person household. For first-time buyers, 70% to 110% of AMI ranges from $49,950 to $78,500 for a one-person household and $64,200 to $100,850 for a three-person household.
And Planning says 83% of the 757 affordable units constructed in 2014 are rental units for very-low-income (20%) and low-income (63%) households. During the past five years, just 707 inclusionary units were developed since 2010, including the 267 constructed in 2014.
Just 17% — 131 units — of the 757 new affordable units in 2014 were for “moderate-income” households. “Moderate” is defined by the Planning Department as earning less than 120% of Area median Income (AMI). Not too surprisingly, Planning reports that rent for a two-bedroom home increased by nearly 40% in 2014 to $4,580 monthly in the greater Bay Area. Talk about middle-income housing withering on the housing production vine!
Planning notes that fully 78.5% of the 3,514 new housing are market-rate housing and just 21.5% are new affordable units. Just 33 single-family units were added in 2014, representing only 1% of all new housing construction. Fully 91% of new units were constructed in high-density buildings with 20 or more units.
Planning reports that during the ten-year period dating back to 2005, there have also been 18,398 new condos constructed, including 1,977 in 2014. There were an additional 730 condo conversions in 2014, up fully 98% over the 369 condo conversions in 2013.
Planning notes that of the 3,514 new affordable units built in 2014, fully 96% were built in 10 eastern neighborhoods, including South of Market, Mission Bay, the Financial District/South Beach, Hayes Valley, Potrero Hill, Nob Hill, Castro/Upper Market Street, the Tenderloin, Bayview Hunters Point, and the Mission District. Just 4% — merely 145 new affordable units — were built throughout the rest of the City.
In Table A-1 showing major market-rate housing projects completed in 2014, Planning lists 17 projects by street address location totaling 3,358 market rate units built plus another 267 “affordable” units, for a total of 3,625 units, but didn't specify whether the affordable units were built on- or off-site. The 267 affordable units represent just 7.4% of the 3,625 total units.
Of the 3,625 units, 614 (18.3%) are earmarked for ownership, 2,646 (78.8%) earmarked as rental units, and the remaining 98 units (2.9%) are a combination of ownership and rental units.
The market rate units built for ownership (rather than rental) range in initial sales price from $500,000 to $3.5 million, with the majority of them priced over $1 million. The market rate rental units range from $2,500 to $6,876 monthly for a studio unit, and $3,482 to a staggering $13,121 monthly for a two-bedroom unit. (The $13,121 is not a typo.) Fully 499 of two-bedroom units built will charge rent of over $6,880 monthly. Among the 27 projects, only 8 of 14 rental projects listed the planned number of two-bedroom units. A total 499 of two-bedroom rental units will be built, unless some of the other rental projects will also include two-bedroom units.
In Table A-2, Planning lists another 12 major affordable housing projects completed in 2014, totaling an additional 431 units, all of which are rental units for very low-income or low-income — and none for middle-income — households.
Finally, Planning reports that “In-Lieu” housing fees paid by developers totaled $116.8 million over the decade since 2005, including $29.9 million in partial payment of in-lieu fees in 2014 alone. Planning said it did not know how many units were not built, with developers opting to pay almost $117 million in In-Lieu fees across the past decade, instead; Planning said MOHCD should know how many units were not built.
Dryly, Planning notes housing policy implications may arise from data presented, which it didn't address in its report. There are additional data in the Planning Department's 2014 Housing Inventory report of interest — including housing production trends, housing demolition, and housing stock by Planning District — but is too detailed to cover here.
MOHCD's Annual Report for 2012–2013 and 2013–2014
MOHCD's belated Annual Report for FY 2012-2013 and 2013-2014 is riddled with nonsense. Of the five permitted uses for the Housing Trust Fund voters approved in 2012, MOHCD boasted that only four Downpayment Assistance Loan Program loans for first responders (police officers, sheriff's deputies, and firefighters) were issued out of 10 planned loans for the first year in FY 13-14, and only four low-income homeowners had received assistance for remediation of lead issues. Other Housing Trust Fund components received anemic funding and anemic results, as well.
As I have previously reported, MOHCD's Annual Report also acknowledges that Mayor Lee approved incurring bonded debt using the Housing Trust Fund as collateral. That's like tapping into Grandma's credit card from taxpayers to fund additional debt.
For openers, MOHCD's Annual Report for the two fiscal years issued in early 2015 comically reported that key milestones for the Housing Trust Fund through June 2014 involved “The bulk of [the] FY 2013/2014 [$20 million General Fund investment] was spent defining and launching programs,” and that “$3,256,000 of the Housing Trust Fund was spent in its first year.” Basic math suggests that $16,744,000 — the bulk of its allocation — was not spent in its first year, by MOHCD's own admission.
MOHCD apparently didn't stop to consider that $3.2 million in spending represented just 16.3% of its first year allocation, leaving the bulk of 83.7% unspent in its first year. This correlates to my reporting in April 2014 that the City Controller had noted that almost nine months into Fiscal Year 2013-2014, fully 92.8% of MOHCD's first year Housing Trust Fund allocation — $17.5 million — had remained unencumbered (i.e., unspent).
So which is it: The “bulk” was spent on defining and launching programs as MOHCD asserts, or the “bulk” was not spent at all, as MOHCD variously claims? Or is it that the Grand Jury was overly optimistic that 70% of the initial budget allocation would actually be spent financing actual housing projects?
The Annual Report notes the Housing Trust Fund will invest $15 million during its first five years for down-payment assistance loans at 0% interest over the life of the loans. But the report neglects to note that each loan is tied to a formula requiring repayment to the City a computed percentage of appreciation in the value of properties purchased to be repaid, along with the principal amount of the loan to the City, by subtracting the purchase price from the sales price, and applying a formula to the appreciated value based on the loan amount to the purchase price. The repaid loans have had to pay 12% to 30% of the net appreciation back to the City for the privilege of having been awarded a loan. This can hardly be considered interest free, 0% loans.
Indeed, MOHCD separately provided a list of 157 Downpayment Assistance Loan Program (DALP) loans issued between June 1998 and January 2013 and subsequently were repaid; the list shows that of $9,583,879 in DALP loans issued, on re-sale of the properties the City's share of appreciation netted the City $4,572,156 in addition to the loan repayments. The City's share of the appreciation represents 47.7% of the $9.58 million in loans MOHCD issued.
If this isn't a classic definition of “usury” — the lending of money at exorbitant interest rates — I don't know what else is. The City can claim all it wants that the loans are interest-free, but “sharing” such a large percentage of the appreciation with the City suggests otherwise. Is this Mayor Lee's “sharing prosperity” agenda in action?
In contrast to the Grand Jury's policy concerns about affordable housing parity and fair distribution of housing built for all income tiers, the MOHCD Annual Report includes data about housing “entitled” in the City's housing development pipeline (i.e., projects approved by the Planning Commission, but construction permits have not yet been issued by the Department of Building Inspection).
Although the Grand Jury noted the City had achieved 113% of market rate housing between 2007 and 2014 identified in the Regional Housing Needs Allocation (RHNA) goals, had achieved 65% of housing for extremely-low and very-low households (those earning less than 50% of AMI), and the City had only produced 16% of the housing goal for low-income earners and 25% of housing needs for moderate-income earners, MOHCD reported not only units constructed between 2007 and 2014, but also units approved and “entitled” in the housing pipeline.
As an MOHCD table below shows, when housing units “entitled” are added in, market rate units jump to 197% of all housing being developed, but just 26% were built and entitled for moderate income earners, and 62% of units have been built or entitled for low-income households. Wow! Almost 24,244 market-rate units (nearly 200%) constructed or “entitled,” or in development, but only 7,941 (26%) middle-income units? Does this sound like “parity” to you?
That “middle income” housing only reached 26% of units built or entitled during the 2014 Q2 pipeline, it's clear that the goal of building 50% of new housing for the middle-class is falling far short of the Mayor's stated policy goals and Supervisor Jane Kim's declaration of policy “affordable” goals. More middle-class housing withering on the vines?
Additional data in MOHCD's Annual Report are of interest — including MOHCD's involvement in rebuilding public housing through the HOPE SF program, HUD's Rental Assistance Demonstration Program (RAD), and housing revenue bonds — but is too detailed to cover in this article.
City Controller's Biennial Development Impact Fee Report
The City Controller's Biennial Development Impact Fee Report for FY 2012-2013 and 2013-2014 report lists a whole host of development impact fees charged to developers as a condition of approval for any given development project. The impact fees range from open space fees, bicycle parking in-lieu fees, to water capacity charges, school impact fees transit impact fees, child care fees, public art fees, street trees in-lieu fees, various neighborhood impact fees, along with both an Affordable Housing Job–Housing Linkage fee for commercial properties and residential Affordable Housing “Inclusionary” fees. Only the latter inclusionary fees are addressed in this article.
Of note, since FY 1988–1989, the City Controller reports that the City has collected affordable housing jobs-housing linkage fees of $73.995 million, and another $89.42 million in Affordable Housing Inclusionary Program fees, for a combined total of $176.68 million, including $13.26 million in interest earned. Across the two fees, $45.9 million remained unspent at the end of June 2014.
Both fees are deposited into the Citywide Affordable Housing Fund which is administered by MOHCD, and are used to provide assistance to low- and moderate-income homebuyers to finance eligible affordable housing projects, and to redevelop and rehabilitate affordable housing. Housing developers typically are awarded 55-year, low-interest loans.
Disturbingly, of the $89.4 million in Affordable Housing Inclusionary Program Fees collected since the program was introduced in FY 2005–2006, $40.7 million remained unspent at the end of December 2014. Even more disturbingly, there is no explanation offered as to why the Planning Department reported that $116.8 million has been collected in “in-lieu” inclusionary fees over the decade since 2005, but the City Controller is reporting the same program has only collected $89.42 million. What's with this unexplained $27.4 million variance?
Neither the City Controller nor the Planning Department count fees returned to developers who do not move their projects forward. Oddly, of $39,900,664 paid into the Inclusionary Fee program in the four years between FY 10-11 and FY 13-14 ending in June 2014, the Controller reports that none of the fee revenue collected was expended at all. The Controller offered no explanation as to why none of the Inclusionary Fee fees collected were expended during the past four fiscal years.
Nearly $40 million collected during the past four years, and MOHCD can't find anything to spend it on?
Troubling State of Housing
As if the four reports discussed above aren't troubling enough, there are other concerns about the performance of the Mayor's Office of Housing, and the state of housing production in San Francisco.
City Floats Housing Revenue Bonds
In addition to the $1.5 billion Housing Trust Fund, and the separate Affordable Housing Fund, MOHCD is involved in hundreds of millions of dollars in housing projects to rebuild the City's public housing. On April 8, 2015 the Board of Supervisors Budget and Finance Sub-Committee meeting included 14 separate agenda items to rehabilitate residential rental housing projects throughout the City that will be funded by floating housing revenue bonds (that don't require voter approval to issue). The 14 projects committed $544 million in housing revenue bonds to rehabilitate 1,424 units that are believed to be public housing.
The revenue bonds are thought to be repaid from rents paid by tenants over the life of a bond.
Two weeks later, on April 28 the full Board of Supervisors agenda included a multifamily housing revenue note for an additional $61.4 million to construct another 200 rental units at 588 Mission Bay Boulevard North. That brings the total to $605.4 million in just a one-month period for revenue bonds and revenue notes for a total of 1,624 units, only 200 of which are “new.”
It is not yet known how many other housing revenue bonds and housing revenue notes the City has approved in recent history, but the practice of issuing revenue bonds and notes is expected to continue.
MOHCD's Failure to Respond to Records Requests
The Civil Grand Jury is not the first to have noted MOHCD's rotten record keeping. The Jury's report noted:
“The inability of MOHCD to collect documents was a concern for the Jury. It calls into question internal record keeping procedures for completed projects and public transparency. The Jury was also surprised to find that no routine post-project evaluations were undertaken by MOHCD, a best practice in project management methodology.”
On January 19, 2015, I placed three separate records requests to 1) Obtain updated information on the number of DLAP loans and loan amounts issued to first responders for FY 13-14; 2) Obtain information concerning the number of first-responder DALP loans issued to date in FY 14-15, and whether the planned loan amounts remain limited to $100,000 loans, or whether they were increased to $200,000 loans; and 3) To obtain information on the new non-first responders DLAP loan program implemented in FY 13-14, including the number of non-first responder loans that were issued to date, the number of applicants, the number of loans that remain under consideration, and the amount of each non-first responder loan issued.
On January 27 MOHCD's point person, Eugene Flannery, finally got around to responding. Notably, Flannery provided just one Excel file listing loan applications received dating as far back as December 2011, data that I had not requested. There is no way to filter the codes in Excel for the type of loans to isolate the non-first responder loans that began in FY 14-15, and no way to judge how many applicants had applied for the non-first responder loans under the Housing Trust Fund.
This reporter has filed 15 e-mail requests for public records to Olson Lee since March 18, 2014, and have received eight “read” receipts in 2015 that he ostensibly opened and read the records requests. He has not responded to any of the 15 e-mails, relying at his own peril on Eugene Flannery to respond, instead. Surely Mr. Lee knows that the Ethics Commission ruled on August 8, 2014 that John Rahaim, Director of the Planning Department had violated Section 67.21(a) of San Francisco's Sunshine Ordinance because Rahaim's employees had failed to provide records without unreasonable delay, and by virtue of Rahaim's supervisorial role over department staff, he was responsible for the Planning Department's bungled response for public records.
Why should this be any different for Mr. Olson Lee?
Flannery pointedly advised me that a request that a Department create records to respond to a request for information or answer a series of questions is not a public records request, and neither the Public Records Act nor the Sunshine Ordinance requires a Department to reply to a series of written “interrogatories.” The data I requested in the three separate records requests were not “interrogatory” questions, but requests for very specific data sets and documents.
A year earlier, Flannery had, however, reluctantly provided data regarding the first-responder DALP loans for FY 13-14 in March and April of 2014.
For Flannery to now hide behind the issues of “interrogatories” is, simply, nonsense, and as the Grand Jury suggested, calls into question MOHCD's internal record keeping procedures for completed projects and public transparency. Two formal Sunshine Ordinance Task Force complaints have been filed over MOHCD's failure to provide meaningful public records.
Flannery's reliance on “interrogatories” is ridiculous, since many other City departments, including the City Controller's Office, routinely respond to follow-up questions raised about information in public records. Why can't MOHCD do the same?
Where's the $170 Million in “Inclusionary Housing Fees” Paid?
The Mayor must be hoping that when voters cast their ballots in November 2015 on his proposed $250 million housing bond, voters won't remember that $170 million has been assessed against housing developers for in-lieu Inclusionary Housing projects that developers opted to pay in fees, rather than construct.
A separate records request to Chandra Egan in the Mayor's Office of Housing on May 3, 2015 unearthed a list of Inclusionary Housing Program Projects dating back to December 2002. The list shows that of 54 projects since 2002, developers were assessed inclusionary housing program fees on a total of 3,949 units subject to Planning Code Section 415 governing on- and off-site housing vs. the in-lieu fees.
It appears developers chose to pay $170.5 million in in-lieu fees, rather than building 485 units on the principal project sites. The in-lieu fees paid to date (as of February 12, 2015) totals $113.5 million, with $57 million outstanding due to fee deferrals. Provided that none of the planned units are scrapped, the deferred fees will ostensibly be paid eventually.
But this begs several questions: What has MOHCD done with the $113.5 million in inclusionary fees it has collected to date, and what are its plans for the outstanding $57 million in deferred fees? It needs to show us the money!
And MOHCD needs to explain whether the $170 million includes the Affordable Housing Job–Housing Linkage fees, in order to reconcile data provided by the Controller's Office.
MOHCD's Second-Year Budget Performance
A separate records request to the City Controller unearthed MOHCD's second-year HTF budget “actuals.” Although the budget was expected to total $22.8 million in funding, surprisingly, the second-year budget soared to $39.1 million by rolling over almost $16 million — $12,947,101 in an unencumbered balance, plus $3,381,512 in encumbered funds that were never spent — from its prior year budget in FY 13-14.
How does MOHCD get away with failing to spend the HTF in the years appropriated, for two years in a row? Surely they must have heard San Francisco has a housing crisis, so what kind of stewardship is this?
A quick analysis of the revised budget reveals several troubling issues showing that the planned uses of the Housing Trust Fund sold to voters in 2012 are not being met. As of this writing, nine months into the current FY 2014-2015, (July 1, 2014 through March 2015) a cross-tab analysis of the second year HTF budget “actuals” shows:
The Mayor is so hell-bent on rebuilding public housing as quickly as he can that he's diverting affordable housing funds for the middle-class, to fund public housing improvements. Therein lies the danger of handing MOHCD sole discretion on how the $1.5 billion Housing Trust Fund will be spent over the next 30 years.
This is the same Mayor who wants voters to approve his $250 million housing bond next November and to re-elect him. Given the Mayor's track record, why would voters do either?
The Board of Supervisors needs to quickly schedule a hearing on MOHCD's performance with the Housing Trust Fund in 2015 and not wait until the fifth year to do so in 2018. And the Supervisors need to create some sort of Board or Commission having oversight over all of MOHCD, which currently does not have one. After all, the displacement of thousands of San Franciscans and the state of San Francisco's housing crisis suggests the Supervisors need to move quickly to improve MOHCD's transparency.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California's First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter's James Madison Freedom of Information Award in the Advocacy category in March 2012. Feedback: mailto:monette-shaw@westsideobserver.
After this article was submitted to the Westside Observer for print publication, additional information surfaced that is also troubling.
First, an MOHCD PowerPoint presentation prepared in 2013, after voters approved the Housing Trust Fund in November 2012, was located on MOHCD's web site. The PowerPoint presentation was apparently created by MOHCD for a presentation to the San Francisco Family Support Network (SFFSN). SFFSN bills itself as a “unique partnership of stakeholders in the Family Support field.”
One slide in the presentation describes the Affordable Housing Pipeline, including “target populations” that includes the “homeless, transition-age youth, seniors, families, the disabled, moderate income homeownership, and public housing replacement.”
Disturbingly, another slide asserts that the Housing Trust Fund will play a critical role in funding “completion of 3,000 units for the chronically homeless,” ostensibly as part of the City's 10-Year Plan to End Chronic Homelessness, and completion of 400 units for homeless Transition Age Youth.
Just as voters were not told before November 2012 that the Housing Trust Fund would be raided to provide funding to the Housing Authority successor agency, voters were also not told that the Housing Trust Fund would be tapped to develop supportive housing, complete with services, for the homeless.
Second, a “Draft 2015-2016 Action Plan” submitted to the U.S. Department of Housing and Urban Development's Office of Community Planning and Development was also located on MOHCD's web site. The Action Plan includes preliminary funding allocations, including from San Francisco's General Fund that will presumably be awarded, contingent on Board of Supervisors' approval of the Mayor's proposed budget for FY 15-16 starting July 1, 2015.
The Action Plan clearly states the Housing Trust Fund will have a $50.6 million allocation for the HTF's third year budget “of which $25 million is borrowed and will be repaid from future HTF allocations.” There you have it, not only did Mayor Lee decide in 2014 to permit incurring bonded debt using the Housing Trust Fund as collateral, it appears he has also approved borrowing against future General Fund allocations to the HTF to scale up the HTF annual budgets.
Voters were told in 2012 that $2.8 million would be added each year to the HTF's previous year budget, and that it would take fully 12 years until the General Fund would begin providing $50.8 million annually to the HTF. In an effort to quickly scale up to $50 million annually, the Mayor is borrowing against future year General Fund allocations to rapidly get to the $50 million annual threshold.
The HTF's third-year budget should have been just $25.6 million, but will reach $50.6 million in its third funding cycle by “creative” borrowing against future HTF allocations.
The Action Plan also appears to report that a new line item for MOHCD's HOME program may be included in the HTF annual budget for FY 15-16 totaling $6.12 million for the HOME Housing Development Pool.
According to HUD's web site, HUD's HOME Investment Partnerships Program (HOME) provides formula grants to States and localities that communities use — often in partnership with local nonprofit groups — to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rent or homeownership or providing direct rental assistance to low-income people. HOME is the largest Federal block grant to state and local governments designed exclusively to create affordable housing for low-income households.
The Action Plan notes that $1,875,343 of the $6.12 million HOME allocation will come from HOME program income (presumably a HUD block grant). It is not yet known whether the balance of the $6.12 million HOME allocation — $4,244,293 — will come from the City's General Fund or other sources of funding, or whether the HTF will be tapped to flesh out the $1.88 million HOME program income.
Sadly, the Action Plan makes no mention of how many units of housing may (or may not) be developed using the $6.12 million HOME Housing Development Pool.
The Action Plan also includes additional funding recommendations to use an additional $1,605,000 from the Housing Trust Fund in FY 15-16 for three goals for Objective 1, “Families and Individuals Are Stably Housed,” and one goal for Objective 2, “Communities Have Healthy Physical, Social and Business Infrastructures.”
Of this $1.6 million pot of HTF funding recommendation:
It's clear that voters in 2012 were not told the Housing Trust Fund would subsidize providing “supportive services” to homeless people along with developing 3,000 units for the chronically homeless, in addition to never having been told that the Housing Trust Fund would divert affordable housing funds for the middle-class to fund public housing improvements, instead.
Given the Mayor's performance with the Housing Trust Fund in its first two years — all at the sole discretion of MOHCD — and given a glimpse of preliminary planned funding allocations for the Housing Trust Fund's third year, it's clear voters were snookered into believing the Housing Trust Fund would actually develop affordable housing, including for middle-income households.
It's painfully clear that middle-class housing production in San Francisco is rapidly withering on the vine.
By Patrick Monette-Shaw
When San Francisco Mayor Ed Lee rolls out his $250 million general obligation bond measure for the November 2015 election, don’t say you haven’t been warned.
A year ago I covered Mayor Ed “Affordability Mayor” Lee’s housing bait-and-switch in April 2014. Redux, he’s brought back Olson Lee, Director of the Mayor’s Office of Housing and Community Development (MOHCD).. What a pair!
In 2012 voters handed the Mayor creation of the Housing Trust Fund, which will divert $1.5 billion in general fund revenues to the Housing Trust Fund over the next 30 years. Apparently the $1.5 billion isn’t enough, and three years later the Mayor is back, hat in hand, asking for another $250 million bond measure and $100 million from the City employees’ retirement fund, pushing the combined total to nearly $2 billion.
The Mayor is using the Housing Trust Fund as credit card debt to float bonds, with no public oversight of the bond funding terms and details, and no oversight of what the bonds will be used for, without approval by the voters.”
$1.5 Billion Trust Fund “Leveraged”
Voters were not told prior to the November 2012 election that the $1.5 billion Housing Trust Fund would be “leveraged.” Although the Mayor wants voters to approve the November 2015 $250 million general obligation bond, it is highly unlikely that the Mayor will tell voters prior to November that during 2014 he approved issuing bonds against the $1.5 billion Housing Trust Fund, with the trust fund as collateral. According to page 5 in MOHCD’s annual report for FY 2012–2013 and FY 2013–2014:
“In June 2014, Mayor Lee directed his budget office to incur bonded debt with HTF [the Housing Trust Fund created by voters in 2012] as the repayment source for the purpose of accelerating MOHCD’s affordable housing pipeline and more expeditiously addressing the City’s housing needs. The result is a doubling of the HTF’s second and third years’ available funds, from approximately $25 million to $50 million each year [emphasis added].”
There you have it: The Mayor is using the Housing Trust Fund as credit card debt to float bonds, with no public oversight of the bond funding terms and details, and no oversight of what the bonds will be used for, without approval by the voters. What is this? A raid of the general fund to float bonds?
No Middle-Class Rental Housing
Despite the Mayor’s assertions that he has a plan to address the housing crisis in San Francisco (presumably including for the middle-class), Olson Lee admitted during a public meeting that the middle class apparently isn’t in the plan. As Jon Golinger’s op-ed article “Voter’s revolt is two decades in the making” published in the San Francisco Examiner on March 15, 2015 reported, when asked about City Hall’s plans to create desperately needed middle-class rental housing, Olson Lee replied, “We don’t have a program right now to build middle-income rental housing.” At last, a candid admission.
The production of affordable housing during the past seven years has been deplorable, according to an op-ed Supervisor David Campos published in the SF Examiner on February 25, 2015, titled “It’s still called trickle-down economics, even in San Francisco.” Campos noted that over the last seven years, 23,000 luxury units have been built in San Francisco compared to just 1,200 units for middle-class families; Lee has been mayor for three-and-a-half of those seven years.
Mayor’s Proposed 2015 Housing Bond
When the Mayor delivered his “sharing prosperity” agenda during his State-of-the-City speech, his staff issued a press release that, in part, announced an “Affordable Housing Bond” for the November 2015 municipal ballot claiming:
“The proceeds of this bond will support our ambitious plans to rebuild SFs public housing, and will fund the acquisition, rehabilitation, and construction of homes for a range of households, from very low income to middle class, working families.”
Elsewhere, the Mayor’s public relations staff has been promoting this bond measure, but has claimed it will be for low- to middle-income housing, with no mention that the bond is intended to rebuild public housing for the successor agency to the SF Redevelopment Agency. It will likely downplay rebuilding public housing.
MOHCD’s Plan for Bond Use: Option 1
A series of e-mails obtained under public records requests includes a chart showing that as of January 27 MOHCD had proposed one set of planned uses for the $250 million bond, including allocating $166 million (66% of the bond) for approximately 710 low-to middle-income housing units (52.2% of the proposed 1,360 units), just $70 million for 350 middle-income housing units (25.7% of the 1,360 units), and $15 million for 300 upper-income housing units (22% of the 1,360 units) for households that earn up to $203,800 of area median income for a family of four (or up to $142,700 for a single person).
Why is a general obligation bond to rebuild public housing proposing to set aside funds to build 300 units of upper-income housing for three-person households who may earn up to $183,400 (200% of the area median income), or higher?
Of the $166 million targeted for 710 low-to middle-income housing units, $20 million (12.1% of the $166 million or 8% of the total $250 million) is listed in the table as “Catalyst Fund Top Loss” program providing 100 units of housing for low- to middle-income housing. The Catalyst Fund is a problem in its own right.
Plan for Bond Use: Option 2
A week after MOHCD’s January 27 proposal was e-mailed to various staff, the Mayor’s Budget Director proposed a different allocation of the bond on February 3. An extract from a presentation to the Mayor shows a second proposal that reveals a different picture of the planned use of the $250 million bond. For starters, while MOHCD proposed spending $30 million to accelerate and shorten the HOPE SF housing program schedule from 20 years to 17 years, the Director’s presentation proposed spending $80 Million on the same acceleration of HOPE SF. So which is it: $30 million, or $80 million?
You can almost count on two probabilities: 1) That the language in the official ballot measure will be completely vague and not itemize precisely or accurately how the bond will eventually be spent, and 2) That there will be a clause in the bond language giving the Mayor’s Office of Housing sole discretion over how the bond money will be spent.
Even More “Leveraging”
The Mayor, his Budget Director, Kate Howard, and Olson Lee at MOHCD are using multiple forms of “leveraging” that when combined, are very worrisome.
Alphabet Soup: IFD’s and COP’s
First, the Mayor plans to create an Infrastructure Financing District (IFD) to leverage an increment at Potrero and Sunnydale. The presentation on February 3 notes that planned sources of revenue for housing in the pipeline includes creation of an IFD. IFDs are Tax Increment Financing (TIF) financing structures without redevelopment. IFD’s are used as a strategy to leverage additional non-City resources. IFD revenues may only fund “public facilities” but cannot fund actual housing, except when facilities funded by an IFD demolish housing.
Second, the presentation also reveals an increase in revenues for housing in the pipeline by issuing additional COP’s for HOPE SF. In addition to up to $80 million from the November bond for HOPE SF, an as-yet undisclosed amount of COP’s will be issued for HOPE SF.
COP’s — Certificates of Participation — are a financing gimmick that the City of San Francisco developed to creatively bypass having to ask those pesky voters for approval at the ballot box to issue general obligation bonds (GOB), and to circumvent the maximum amount of GOB’s that can be issued simultaneously at any one time.
Off Balance-Sheet “Catalyst Fund Top Loss” Fund
The Mayor’s January 15 press release also claimed that he would create a new investment fund to launch more affordable housing projects:
“The Mayor will create an accelerator fund, with private and philanthropic partners, to accompany bond financing, seeding public-private partnerships that will enable nonprofits to act quickly and complete [sic; “compete”] on the open market to purchase land for construction of affordable housing and buildings to be improved as permanently affordable units.”
It is thought that the proposed “accelerator fund” is the “Catalyst Fund Top Loss” program. A “Findings and Recommendations” document prepared by the Mayor’s Housing Work Group 2014 reports that a “Housing Affordability Fund” — ostensibly separate and distinct from the Housing Trust Fund approved by voters in 2012, or within it — will be established via a public–private partnership.
The Housing Work Group report states the accelerator fund will leverage limited public dollars for housing by pursuing development of the Housing Affordability Fund as an “off balance-sheet” fund. The Housing Affordability Fund would target leveraging a public and philanthropic investment at a rate of 4:1 or higher. Here comes trouble.
Investopedia.com’s summary that explains off balance-sheet investing reports:
“For anyone who was invested in Enron, off-balance sheet (OBS) financing is a scary term. Off-balance sheet financing means a company does not include a liability on its balance sheet. It is an accounting term and impacts a company’s level of debt and liability.”
Other sources indicate that the term “top loss” refers to the liability structure in the mix of debt and equity in investment fund activities. They explain that various:
“… categories in a liability structure represent layers in the creditor hierarchy, with the top layer being the first to absorb a loss. Once a layer has been depleted, further losses are applied to the next layer and so on. This means that the liability categories closest to the top of the structure are the riskiest for investors and attract correspondingly higher rates of return. These instruments are also the most expensive sources of funding.”
Given San Francisco’s already overextended reliance on general obligation bond financing, to some observers it appears that the Mayor’s Housing Work Group is well aware of the risks of off balance-sheet funding schemes, may already be anticipating losses to the Housing Affordability Fund, and determined that a “top loss” layer of funding may be necessary in such a public–private partnership.
The Mayor’s January 15 press release also claimed he would expand the City’s pipeline of middle-class housing:
“The Mayor will initiate the Public Lands for Public Good program, building mixed-income housing on surplus public land, including permanently below-market housing and housing for San Francisco’s middle class.”
How can a Public Lands for Public Good program develop housing for the middle-class, since this conflicts with Olson Lee’s claim that the City doesn’t have a program to build middle-income rental housing? What is this? More smoke and mirrors from the Mayor’s office?
Of note, MOHCD staff members Kate Hartley and Olson Lee; the Mayor’s Budget Director, Kate Howard; the Mayor’s Deputy Chief of Staff, Jeff Buckley; and the Mayor meeting on February 3 to discuss the pipeline of housing projects. Ms. Howard’s PowerPoint presentation discussed above reveals other worrisome details.
First, fully 20% of affordable housing units in the housing pipeline will be set aside for the homeless. It’s too bad there’s not a matching 20% being set aside for middle-class housing.
Will the Mayor tell voters — honestly — that his $250 million bond measure in November will steer fully 20% the bond to our homeless?
Pitting Pensioners Against Low-Income Housing
The Mayor’s January 15 press release also claimed he plans to tap the City employee’s retirement fund for $100 million to increase down payment loans for moderate- and middle-income San Franciscans:
“With the support of San Francisco’s Retirement Board as a partner, we will increase loans for first-time homebuyers by $100 million dollars over the next 10 years. This will translate directly into homeownership for up to 150 more families every year.”
First, three months after the Mayor’s premature claim he plans to tap the retirement fund to invest in downpayment loans, the San Francisco Retirement Board still hasn’t formally considered approving pension funds for potentially risky and highly illiquid loans, or approved of such investment of pension fund assets, pitting pensioners relying on their pensions against low-income people seeking housing.
Second, the pension fund is there to pay pensions to former City employees. Using it for downpayment loan schemes is simply wrong, and an unwise investment.
Show Us the Money
The Mayor and City Hall owe a full accounting of how MOHCD is spending money in the housing trust fund (HTF).
For starters, the MOHCD annual report notes on page 2 that the HTF has received $42.8 million between July 1, 2013 and July 1, 2014, and will receive another $25.8 million on July 1, 2015. During its first three years the HTF will have received a total of $68.6 million. What was it spent on?
Next, considering that the Mayor approved in 2014 issuing bonds against HTF revenues as collateral, the “doubling” of revenue to the HTF in Years 2 and 3 to $50 million each year (a $25 million increase each year by issuing bonds against the Housing Trust Fund), that suggests the fund has been leveraged to a total of $118.6 million. What is that $118.6 million being spent on?
Burned (More Than) Once, Twice Shy
As I reported in April 2014, Harvey Rose — the Board of Supervisors Budget and Legislative Analyst — weighed in, however unintentionally, on performance of the Mayor’s Office of Housing and Community Development. Rose uncovered that MOHCD couldn’t account for what happened to $2 million from a rent stabilization fund entrusted to it.
If MOHCD can’t accurately account for $2 million of its funding, why do voters believe MOHCD will be a judicious fiduciary steward of $1.5 billion in Housing Trust Funds, plus $250 million in a bond measure in November 2015 and $100 million of funding from the retiree’s pension fund if the Employee’s Retirement Services board of directors grants approval to tap the retirement fund at the Mayor’s whim, and various “leveraging” schemes being advanced at City Hall, including IFD’s, COP’s, and “off balance sheet” top-loss schemes?
As I asked in April 2014, over the next six years as the City drags its heels on the Housing Trust Fund, how many more thousands of San Franciscans will no longer be living in the City displaced by the bait and switch in the Mayor’s “affordability agenda” (and his new “sharing prosperity agenda”), given the glacial inaction in — and the ineptness of — the Mayor’s Office of Housing?
Voters have been warned: If for no other reason, given the absence of an oversight board or commission monitoring either the operations of the Mayor’s Office of Housing and Community Development or its Housing Trust Fund, vote against this $250 million bond measure come November.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award in the Advocacy category in March 2012. Feedback: mailto:monette-shaw@westsideobserver.
By Patrick Monette-Shaw
In his haste to reappoint Wendy Paskin-Jordan — wife of former Mayor and former Police Chief Frank Jordan — to the San Francisco Employees’ Retirement System’s (SFERS) Board of Directors, Mayor Ed “Shared Proposperity Agenda” Lee sloppily ignored vetting his reappointment recommendation required through the San Francisco Board of Supervisors Rules Committee where public testimony and a Rules Committee recommendation to approve or oppose mayoral appointees are then forwarded to the full Board of Supervisors for consideration.
... City law prohibits Retirement Board members from investing with “managers of private equity, limited partnerships and non-publicly traded mutual funds that are doing business” with the City’s retirement system.”
Paskin-Jordan has a number of conflicts of interest that should have disqualified her from reappointment. Mayor Lee just turned a blind eye. Later, the Board of Supervisors turned a blind eye, too
As widely-respected financial journalist David Sirota noted in an International Business Times article on December 13, 2014, Paskin-Jordan “appears to have blurred the lines between her responsibility to the city and her personal financial interests.” Sirota reported “Paskin-Jordan has invested her personal funds in a firm called GMO, which also manages almost $400 million of the San Francisco pension system’s money.”
Sirota reported that “San Francisco has rules designed to prevent people who manage pension systems from placing personal money in the same entities in which public funds under their supervision are invested.” In addition to concerns about her relationship with GMO, it’s unclear whether Paskin-Jordan and her clients have also invested in Northern Trust by aggregating personal funds with SFERS’ pension funds, a key question all but ignored by San Francisco’s Board of Supervisors when it held a second hearing on her reappointment on January 7, 2015. She had been a no-show at the Board of Supervisors first hearing on December 16, 2014.
Paskin-Jordan’s investment firm — Paskin Capital Advisors, LLC — has $627 million in assets under management for her clients. Her activities have raised serious concerns about her fitness to be an SFERS Commissioner.
Two Conflict-of-Interest Ethics Complaints
When Mayor Lee recommended handing Paskin-Jordan a five-year reappointment to SFERS Board, he had to have known that two conflict-of-interest complaints against Paskin-Jordan had already been filed with the City’s Ethics Commission.
Luckily, the Board of Supervisors were aware of the two separate formal anonymous complaints about Paskin-Jordan’s Form 700’s Statement of Economic Interests (SEI) that had been filed with the Ethics Commission in 2014.
The first Ethics complaint filed on April 3, 2014 to SFERS, with copies to the Ethics Commission, alleged Paskin-Jordan had potentially received reduced fee structures for her account and her client’s accounts by aggregating SFERS’ fund balance with that of her and her clients accounts, saving her millions of dollars in investment and transaction fees. The complaint also claims she had received favorable fee structures for her business, and her clients doing business, with Northern Trust between September 2011 and September 2013.
The second ethics complaint alleging Paskin-Jordan’s financial misconduct dated September 2, 2014 involves a violation of the Statement of Incompatible Activities applicable to SFERS Board members, regarding Paskin-Jordan’s investments in GMO’s Quality Fund. SFERS Executive Director Jay Huish forwarded the second complaint to San Francisco Ethics Commission Executive Director, John St. Croix on December 8, the same date the Mayor reappointed her to SFERS.
As John Coté reported in the San Francisco Chronicle on December 15, 2014, the September complaint “centers on her investment of between $100,001 and $1 million in Grantham, Mayo, Van Otterloo and Co., an international investment firm headquartered in Boston known as GMO that has a minimum investment threshold of $10 million.”
Coté noted that City law prohibits Retirement Board members from investing with “managers of private equity, limited partnerships and non-publicly traded mutual funds that are doing business” with the City’s retirement system. GMO describes itself on its website as “a private partnership,” although San Francisco Employees’ Retirement System staff considers GMO a “manager of public market assets,” despite the $10 million minimum investment threshold.
Not only does GMO consider itself a “private partnership,” and not a “public market,” GMO notes on its web site that:
“[GMO] serves a primarily institutional client base. Although we do have a small number of high net worth clients, GMO is an investment manager and does not offer investment advisory services that one might find at an organization that is dedicated to servicing high net worth individuals.”
As Supervisor John Avalos noted during the Board of Supervisors hearing on December 16 on Paskin-Jordan’s reappointment, GMO is not listed on eBay as an investment opportunity open to run-of-the-mill public investors. The GMO fund does not appear to be a “publicly traded mutual fund,” but when the Supervisors finally grilled Paskin-Jordan on January 7, the question of whether GMO was indeed a publicly-traded investment Paskin-Jordan was entitled to invest in, the question didn’t garner sufficient scrutiny by the 10 City supervisors. Paskin-Jordan claimed several times on January 7 that GMO was a “public mutual fund,” despite the fact GMO itself notes it’s a private fund that trades in hedge funds, not exclusively in mutual funds.
Indeed, she failed to report her investment in the GMO Quality Fund — an equity fund investment — on her Form 700 for the period ending December 31, 2011 in April 2012, and only got around to reporting in March 2013 that investment on her Form 2012 for the period ending December 31, 2012, fully 16 to 19 months after acquiring it in August 2011.
Gaming the System?
In addition to Paskin-Jordan’s questionable conflicts-of-interest, other observers also question whether she feels entitled to game the system.
First, Mayor Lee noted in a short biography of Paskin-Jordan attached to his reappointment letter, that she served on Barclays Global Investors’ board of directors until it was acquired by BlackRock. The Mayor claims she serves as a Trustee of various funds of BlackRock Funds. She probably should have rescued herself — but didn’t — from a key SFERS vote involving BlackRock Investments during a full SFERS Board meeting on May 8, 2013, when the Board entertained a motion to terminate BlackRock Investments from a currency overlay program that did involve hedge funds. Although she cast a vote to terminate BlackRock, she shouldn’t have voted at all, given her probable conflict of interest.
Given SFERS’ involvement with BGI, her affiliations as a Trustee of various BGI money market funds should have been thoroughly investigated — which the Board of Supervisors completely failed to do — in part because BGI was one of SFERS’ currency overlay managers that contributed to the $60+ million in SFERS losses over eight years.
Pensions & Investments columnist Randy Diamond reported on December 17, 2014 that Huish said Paskin-Jordan had received a “threshold waiver” to invest with GMO [to get around the $10 million minimum investment threshold]. SFERS has repeatedly claimed that she had received this “waiver” before becoming an SFERS Commissioner, trying to justify why she had waited until a year after being appointed to the SFERS Board before finally exercising her “waiver.”
Who’s Aggregating Whom?
Oddly, during a Labor Video Project interview on January 7, Paskin-Jordan belatedly claimed that her firm (Paskin Capital Advisors) had reached the $10 million threshold by aggregating funds. She didn’t reveal any details about who she or her clients had aggregated investments with to apparently reach BGI’s $10 million threshold.
The Board of Supervisors failed on January 7 to dig deeply enough into the question of who Paskin-Jordan had aggregated funds with, and when. Hopefully the Ethics Commission will not ignore her admission that she had aggregated funds as the Ethics complaint against her had alleged.
Board of Supervisors Rubber-Stamps
Despite all of the ethical concerns raised regarding her reappointment, the Board of Supervisors unanimously approved reappointment of Paskin-Jordan on January 7. They did so without probing into any of these questions, other than discussion of whether she needs to recuse herself in the future from voting on any of SFERS’ banking-related issues involving Northern Trust.
Unfortunately, during the Board’s January 7 hearing, not one City supervisor inquired about the allegation that she may have had aggregated investments in Northern Trust, GMO, or any of the 43 firms listed in the April 3 Ethics complaint. The Board of Supervisors should have stopped her reappointment dead in its tracks. Instead, they handed her a get-out-of-jail-free card.
When Supervisor Avalos asked Paskin-Jordan on January 7 whether she had a “relationship” with Northern Trust, she replied, “I do have a relationship with Northern Trust. I work in [Northern Trust’s] Trust Department,” explaining that is very different than SFERS’ work with Northern Trust’s custodial banking or securities areas. She appears to have used poor phrasing, since observers think she doesn’t actually work at Northern Trust, she simply works with Northern Trust.
It’s clear by her own admission that her firm, Paskin Capital Advisors, uses Northern Trust. What’s left unclear is whether she or her clients obtained “volume discounts” by way of aggregation.
Towards the end of the Board’s hearing, Deputy City Attorney Givner indicated the City Attorney’s office will work closely with SFERS to make sure she recuses herself from voting on contracts before SFERS involving Northern Trust. Oddly, Givner didn’t specify whether Paskin-Jordan would be monitored involving all recusals from matters involving BGI or other external investment managers.
Experience With Hedge Funds
Corporate-controlled Mayor Ed Lee and his billionaire financier pals want to get their hands on the City employees’ pension funds by pushing investing in hedge funds that have obscene fees, using fee speculators and union busters who want to grab pension funds with their sticky fingers.
Surprisingly, Paskin-Jordan said at the end of the Labor Video segment: “I personally do not invest in hedge funds that we [SFERS] intend to use [invest in] …”
This is an amazing admission, if you think about it. She said this on January 17, nearly a month before the SFERS Board voted on February 11 to approve investing in hedge funds. How could Paskin-Jordan have known in January which hedge fund managers SFERS intends to use, which wasn’t even discussed on February 11 when SFERS’ Board approved investing in hedge funds?
Paskin-Jordan’s Form 700’s on file with the Ethics Commission reveal she has had some experience with hedge funds. Her Form 700 for the period ending December 31, 2010 lists a $100,001 to $1 million investment in the Daedalus Qualified Partners hedge fund. Oddly, the Daedalus investment quietly vanished from her annual Form 700 for 2011 for the period ending December 31, 2011.
Her Form 700’s for the years ending in December 2011, 2012 and 2013 list another $100,001 to $1 million investment in Harvest Growth Capital’s alternative investments, which may or may not include investments in hedge funds. And her form 700 for 2013 lists a private equity investment in emerging hedge fund firms via an investment in the Harvest Fund.
Form 700 instructions for Schedule A-1 stipulate that the disposal of personal investments must be reported, including the date disposed of. There’s no record in Paskin-Jordan’s Form 700’s indicating when she disposed of the Daedalus investment. Why Paskin-Jordan failed to report the date on which she appears to have finally disposed of the Daedalus hedge fund investment is another symptom of how she games the system and flouts disclosure rules.
This begs the question: Which oversight body will seriously consider and dispose of the ethics allegations against Paskin-Jordan? The Board of Supervisors? The Ethics Commission? The Retirement Board?
Clearly it’s not the Board of Supervisors, which failed miserably to conduct a meaningful investigation. The Ethics Commission, for its part, will undoubtedly drag its feet investigating the two ethics complaints filed against her, and it will take a year or longer for Ethics to rule on the two complaints.
That leaves the Retirement Board. Under Roberts Rules of Order, and various codes of ethics that apply to SFERS Commissioners, the Retirement Board could mount its own investigation under provisions to censure Board members. Since her behavior reflects so negatively on SFERS’ Board, a reasonable person would assume the Board would have conducted its own investigation by now, open to members of the public. Why hasn’t SFERS’ Board moved to protect its own reputation?
It is time to protect the City’s pension fund by eliminating all conflicts of interest. Paskin-Jordan could help out by doing the only ethical thing: She should resign from SFERS’ Board, immediately.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award in the Advocacy category in March 2012. Feedback: mailto:monette-shaw@westsideobserver.
By Patrick Monette-Shaw
Mayor Ed “Sharing Economy” Lee just proposed in his State-of-the-City speech sharing prosperity by tapping into City retiree funds for use in his down payment loan assistance program.
The plan beneficiaries were warned by Matt Taibbi in his September 2013 article “How Wall Street Hedge Funds Are Looting the Pension Funds of Public Workers,” that Wall Street firms are making millions in profits off of public pension funds nationwide. “Essentially it is a wealth transfer from teachers, cops and firemen to billionaire hedge funders.”
How benevolent of him. Retirees must be thrilled that he wants to “share” their pensions so untold recipients can obtain mortgages.
Despite recent warnings from billionaires Warren Buffett and George Soros against investing public employee pension money using hedge funds, some members of San Francisco's Employees' Retirement System (SFERS) board of directors and SFERS' “chief investment officer” appear to know more than Buffett and Soros.
SFERS continues to consider investing in hedge funds, after a state pension fund (CalPERS), a Danish pension fund, and other prominent players pulled out of their respective hedge-fund investments in recent history.
Apparently, some of SFERS Board members and staff think they are smarter than Soros and Buffett, and know more.
That's why 81% of the City's 23,000 City retirees who have a monthly pension of less than $2,500 (under $30,000 annually) rightly worry about investment decisions made on their behalf, without significant means to influence those investment decisions.
They have good reason to worry about decisions affecting their retirement income, since there are multiple plans to tap into the retirement fund, including a claim presented by Mayor Ed Lee during his State of the City speech on January 15 to tap $100 million from the retirement fund for a down payment loan assistance program that appears to be a premature claim, devoid of details.
Normally, investment advisors and trustees of public pension plans — such as the San Francisco Employees' Retirement System (SFERS) Board of Directors — whose clients (beneficiaries of the pension fund) reject investment recommendations, have fiduciary obligations, and ethical and legal obligations, to back off.
SFERS Commissioners are considering both various proposals to sink $3 billion or more of the Pension Fund's $20 billion portfolio into hedge funds, and are being asked by the mayor to eventually consider allocating $100 million to a new proposal to support his call to use the retirees' pension funds for questionable down payment loan assistance programs administered by the troubled Mayor's Office of Housing.
Despite a resounding 2,300 signature petitions, e-mails, letters, phone calls, and public testimony from current and retired City employees objecting to investing in hedge funds that were submitted to SFERS' Board members prior to its December 3, 2014 meeting, SFERS' Board continues to consider investing in hedge funds that Plan beneficiaries strongly object to, ignoring their fiduciary duties to honor objections raised by their clients — the Plan's beneficiaries.
Raiding San Francisco Retirees' Cookie Jar
The smell of billions of dollars in municipal funds lures predators of every stripe seeking to get a slice of the pie. Particularly drawn to the smell of money are billionaires plotting to convert municipal assets into their incomes.
In the current case, a pot of $20.1 billion in the San Francisco Employees' Retirement System (SFERS) pension fund is under assault. The lure of those billions draws strange bedfellows. SFERS' pension fund is a tiny fraction of $2.6 trillion in public pension funds nationwide. The smell of trillions causes lots of rats to crawl out of the woodwork.
In January 2014, SFERS lured Bill Coaker into returning to SFERS as its Chief Investment Officer. Prior to returning to SFERS, Coaker was the senior managing director of public equities in the University of California's Office of the Chief Investment Officer for just over six years, earning $505,939 in 2013 helping manage the university's $90 billion pension, endowment, and campus assets portfolio.
Many observers believe Coaker was lured back to SFERS in January 2014 for his so-called expertise with hedge funds and the “endowment model” of investing. A public records request revealed Coaker earned just $99,975 at SFERS between January and June 30, 2014; a second records request for data through December 31 is pending, but will probably reveal oaker earned approximately $200,000 during 2014.
Coaker's Successor at UC Regents Undoing Coaker's Portfolio?
Other observers now wonder whether UC Regents is in the process of undoing Coaker's work during his tenure at the university. Randy Diamond reported on Pension and Investments On-Line on January 29, 2015 that the university's new Chief Investment Officer, Jagdeep Singh Bachler has named Scott Chan as Coaker's replacement as the university's senior managing director of public equities. Chan will manage the university's $30 billion public equities portfolio.
Notably, Diamond reports that Bachler has been engaged during his nine-month tenure as CIO in a major restructuring of the equities portfolio Coaker managed at UC Regents following Coaker's departure in January 2014, reducing the number of external equities managers from 70 to 40 “because of concerns that the system was paying excessive fees and owned too many securities,” according to Mr. Bachler. Bachler didn't comment on the equities portfolio's performance under Coaker.
Who Is Bill Coaker?
Coaker had formerly been a Senior Investment Officer at SFERS for just over two-and-a-half years between June 2005 and January 2008 managing SFERS' “domestic and international emerging market” strategies before leaving for his six-year stint at the University of California. Prior to first joining SFERS in 2005, Coaker had been the Chief Investment Officer (CIO) at the Roman Catholic Diocese of Monterey for a stint of 13 years managing the Dioceses' pension, endowment, and corporate assets programs.
Why Coaker left the University of California and the Monterey Diocese to take a significant pay cut to be in charge of managing SFERS' much smaller pension portfolio isn't known, leaving observers wondering about a downward spiral in his career. Who would be willing to take a $300,000 pay cut — from $505,939 at UC Regents to just $200,000 at SFERS — to manage SFERS' pension portfolio that is one-quarter the size of the University of California's Office of the CIO?
Coaker's Linked-In profile indicates his focus at both the University of California and the Monterey Diocese was to implement the “endowment model of investing,” including investing in “absolute returns,” a financial industry “deconstruction” buzz word for hedge funds designed specifically to obscure the risky nature of hedge fund investments. His Linked-In profile also states that he recommended implementing an “endowment model” of investing at SFERS on his return in 2014.
Coaker's Various Hedge Fund Proposals
So it was not much of a surprise that shortly after returning to SFERS in January 2014 Coaker submitted a proposal to SFERS' Board of Directors in June to invest up to 15% — a cool $3 billion — of SFERS' current Pension fund in hedge funds, drastically altering SFERS' pension portfolio asset allocations. Coaker also presented “Mix 6B” on October 8, 2014 as an example of investing up to 36% — $7.2 billion — in hedge funds using an “endowment model” used by various private universities, illustrating the lunacy and weakness of industry-standard “optimizer” software that does not take into account public pension plans vs. private endowments, or the true risk of hedge funds and their illiquidity.
Between June and December 2014, SFERS' Board has been presented with information on no less than 12 alternate asset allocation mixes suggested by SFERS' staff, its consultant, and members of the Retirement Board, including at least six different hedge fund proposals.
Coaker's various proposals have languished for almost a year without gaining approval from a majority of the Retirement Board to risk investing in hedge funds. And his various proposals have run into stiff opposition from Pension plan beneficiaries, the 54,823 current and retired City employees keenly interested in the health of their pension fund.
On June 1, Coaker first recommended allocating 15% to hedge funds. His proposal also ran into stiff opposition and intense scrutiny by one SFERS Board member. Although the agenda for SFERS' December 3 meeting stated that the Board would again discuss Coaker's recommendation to invest 15% in hedge funds, the Commissioners instead discussed — without adequate advance notice to members of the public and Pension plan beneficiaries — three alternate proposals that were not properly “noticed” on the agenda.
Two of the alternate proposals were developed by SFERS' Board president, Victor Makras: One to allocate 3% to hedge funds, and a second proposal to invest nothing (0%) in hedge funds. At the beginning of SFERS' December 3, 2014 meeting, Commissioners were handed a third alternate proposal dated the same date of the meeting (December 3) that was reportedly developed by the trio of Makras, SFERS' Executive Director Jay Huish, and Coaker to invest 5% in hedge funds.
Across the various hedge fund proposals Coaker has presented, each of them anticipate a 6.5% return from any of the hedge fund investment proposals (whether investments in hedge funds of 3%, 5% or 15%).
Plan beneficiaries believe the 5% hedge fund proposal is still too risky of an investment and lacks adequate transparency. The financial industry periodical Pension and Investments On-Line reported December 3 following SFERS' meeting that Huish believes a 5% hedge fund investment “would be inadequate,” and that he and Coaker hope the allocation will double to 10%, the minimum they believe needed for meaningful hedge fund investments, if they prove they can successfully administer hedge funds.
On the very same day as the 5% proposal was introduced, Coaker and Huish went back on the 5% proposal developed with Board president Makras, showing their agenda for a much larger percentage! Huish asserted the 5% proposal would “be a good start,” signaling that once the door is opened to hedge fund allocations, the door will be kicked open to allow incremental increases to 10% or perhaps 15%, leaving Plan beneficiaries worried that Coaker will get what he wants, despite the warnings from billionaires Buffett and Soros that hedge funds are inappropriate for public pension plans.
Notably, SFERS Board member Malia Cohen — the Board of Supervisor's ex officio appointee to SFERS — is concerned SFERS' Board may not have enough information regarding hedge fund investments. Tim Redmond's web site, 48 Hills On-Line reported on December 3 following SFERS meeting that Cohen said “We have not had a solid conversation about our priorities and risks. I'm not going to articulate my position today.”
SFERS' Also Considering “Funds of Hedge Funds” Investments
Pulitzer-prize winner Gretchen Morgenson wrote in “Slamming a Door on Hedge Funds” in the New York Times on September 20, 2014 that former Securities and Exchange Commission lawyer A.H. Siedle has observed so-called “funds of hedge funds” — essentially, just collections of other hedge funds — are especially inappropriate for public employee pension plans. Despite this, SFERS' Board is considering investing in fund-of-hedge-funds. Funds-of-hedge-funds charge additional fees, and often duplicate investments in other hedge fund portfolios. Fund-of-hedge-funds have higher illiquidity (inability to quickly convert to cash or dispose of), with a minimum one-year lockup limiting the ability to get out quickly, and are less transparent than “direct” hedge funds.
Prior to December 3, none of SFERS' staff and Angeles Investment Advisor's proposals had rejected funds-of-hedge-funds as a viable investment opportunity. By report, SFERS' staff favored direct hedge funds where Coaker would make the decisions directly. And these hedge funds would likely be approved by the Retirement Board in private closed sessions, without scrutiny from the public, or Plan beneficiaries.
But on December 3, SFERS Board members openly discussed using funds-of-hedge-funds. There was no discussion that funds-of-hedge-funds typically charge 3% in fees and 30% of profits on the investments, compared to the 2% in fees and 20% of profits charged by “direct” hedge funds.
The Board may be considering funds-of-hedge-funds because SFERS staff will reportedly then not be able to pick and choose which hedge funds to invest in — in part because of a lack of confidence in SFERS' staff. This is simply a poor justification to use funds-of-hedge-funds.
Morgenson also reported in the September 20, 2014 New York Times that according to Preqin Ltd., a London research firm, hedge funds vastly underperformed the Standard and Poor's (S&P) 500 stock index over the last one-, three-, and five-years, and lag on a 10-year basis, too. She reported fund-of-hedge-funds performance is even worse.
When Angeles Investment Advisors initially recommended that SFERS invest in hedge funds, Angeles failed to inform SFERS' Board members that it concurrently runs a hedge fund operation out of the Cayman Islands, perhaps to avoid Security and Exchange Commission (SEC) scrutiny, as many hedge funds do. It turns out Angeles Investments' hedge fund is a “fund-of-hedge-funds.”
In response to a records request placed with SFERS to obtain correspondence received by SFERS opposing investments in hedge funds and SFERS responses to the objections, of interest was an
e-mail SFERS Commissioner Herb Meiberger submitted to Huish and Makras on October 24, 2014. Meiberger wrote:
“One of the advantages of hedge fund registration in the Cayman Islands is the cloak of secrecy. Hedge fund managers avoid the regulations of the Securities and Exchange Commission and other regulatory agencies.
This glaring fact never came up in staff and the consultants ‘due diligence' of hedge funds. Registration in the Cayman's exponentially increases the possibility of insider trading and harm to our pension fund.”
Pension Funds Are Not Endowments
Morgenson further noted in her September 20 New York Times article that public employee pension plans are not endowments due to different cash-flow requirements, public pension funds are obligated to make regular payments to retirees, and unlike pension funds, endowments are more likely to have sophisticated staff to monitor investment managers.
If nothing else, the failure of SFERS staff to monitor its first foray in hedge fund investments in its so-called currency overlay program (see below) illustrates that SFERS' staff has not demonstrated the skills and expertise required to monitor hedge fund investment managers.
Given the lack of due diligence with its currency overlay program, how can anyone believe SFERS staff's due diligence monitoring hedge funds would be any different?
Disaster Waiting to Happen
Information from Coaker's Linked-In profile and a “Letter of Introduction” he submitted to SFERS' Board and interested parties dated February 6, 2014 possibly in the first week after being re-hired — the latter of which contained a dash of Coaker's hubris — paints a disaster waiting to happen with hedge fund investments.
First, Coaker's Linked-In profile claims that as SFERS' new Chief Investment Officer (CIO) he recommended SFERS should implement the “endowment model of investing.” There's one small problem: A year after his arrival in January 2014, that model of investing has not been implemented as of January 2015 because it has faced SFERS Board member and Plan beneficiary's opposition. Meet the emperor's new clothes.
Apparently, Coaker skipped attending the class that taught that pension funds are not endowments, as he mistakenly brags on his Linked-In resume that he recommended implementing at SFERS.
He also claims that “absolute returns” — an interchangeable term for “hedge funds,” when hedge funds are getting bad media coverage — have a lower volatility, but most observers believe hedge funds are highly volatile, as many hedge funds have lost nearly 100% of their value.
Second, his Linked-In profile claims that his first gig as SFERS' senior investment officer between June 2005 and January 2008, he had increased International and Emerging Markets Equity asset allocations in the first quarter of his employment, and over the two-and-a-half years of his first tenure between June 2005 and 2008, both international and emerging market stocks had outperformed the U.S. Equity market by 37% and 106% respectively.
But various data from SFERS paint a very different picture, and some observers disagree with Coaker whether international and emerging markets had outperformed domestic equity shortly after he had fiddled with asset allocations during his first stint at SFERS. First of all, it takes time to fund various investment managers and more time for investment results to materialize, so where Coaker obtained data that his recommendations had performed better by the end of 2008 is questionable, at best.
According to SFERS' consultant Angeles Investments, policy decisions that did not work so well for SFERS during Fiscal year 2009 (July 1, 2008 to June 30, 2009), included that “the international equity portfolio was a drag on [SFERS Plan] performance.” Angles also reported that “SFERS' allocations to U.S. stocks [equity] benefited [overall Plan] performance.”
A Northern Trust analysis for the period ending June 30, 2009 showed that International Equity had a negative 33.23% return for the one-year period ending June 2009.
Second, in the five-year period between October 2009 and September 2014, one of SFERS' emerging market managers, Mondrian and Wellington had the lowest five-year return of any of SFERS' international stock managers. U.S. Equity managers did far better than International Equity, returning 15.6%. Also, for the five-year period ending September 30, 2014, SFERS' bond portfolio returned 7.96% per year.
So during his first two-and-a-half-year job at SFERS, Coaker appears to have chosen to increase allocations to the poorest performing asset classes.
Coaker's February 2014 “Letter of Introduction” starts off saying he is “humbled” to serve as SFERS' Chief Investment Officer, and he hopes to serve with “class.” Do we need his hubris?
He goes on to state that SFERS incurred a “peak-to-trough” decline of a negative 32% during the FY 2008–2009 Great Recession. He bemoans the fact that SFERS' portfolio has not generated “excess returns (meaning “alpha”) over the past ten years, and SFERS's total return has been completely dependent on the beta exposure of its asset allocations.” By chasing alpha, Coaker is again inviting hedge fund investment disaster.
He asserts that SFERS needs to generate “attractive excess returns” (a.k.a., “alpha”) and that SFERS should “not be dependent on the markets to provide [SFERS] with good returns.”
Both alpha and beta are backwards-looking analyses of risk metrics, using calculations made with data that happened in the past, which obviously is no guarantee (or prediction) of future results. The excess return of an investment relative to return of the benchmark index used is a fund's alpha. Alpha is the abnormal rate of return on an investment in excess of what would be predicted. Beta is a measure of the volatility, or risk, of an investment in comparison to the market as a whole.
His letter ends saying he planned to recommend changes in SFERS investment policies in 2014 that “should result in strong excess returns in the future.” [Editor: By “should,” Coaker means optimistically “might.”] It's clear that Coaker believes he is better qualified to chase after excess alpha than Buffett or Soros.
What Coaker didn't anticipate during 2014 was that billionaires Buffett and Soros would come along and recommend that public pension plans not invest in hedge funds at all.
Between June 2009 and June 2014, SFERS' Pension Plan's net assets grew from $11.9 billion to $20.1 billion — an increase of $8.2 billion — without needing to rely on, or chase, “excess alpha” returns. The $8.2 billion increase would have been $60 million higher, had SFERS not invested in a currency overlay hedge fund at the urging of SFERS' “expert” Commissioner Joe Driscoll.
Of note, two recent articles illustrate why Coaker's optimism of a 6.5% return on any hedge fund investments disregards industry experts. First, an article titled “Hedge Funds Really Did Underperform in 2014” on the Institutional Investors Alpha web site reported on December 29, 2014 that hedge funds had anemic average gains of the first 11 months in 2014 ranging from 2.85% to 4.61%, while the S&P 500 was up 11.9%.
Institutional Investors Alpha also reported on December 29 that the London-based research firm Preqin found that two-thirds of investors seek annualized returns of 4% to 6% from hedge funds. How Coaker expects to eke out a 6.5% return is one 800-pound gorilla. Institutional Investors Alpha says the other 800-pound gorilla in the room is a question of whether hedge fund fees are justifiable for lower returns, lower volatility, and less correlation. Institutional Investors Alpha conveniently neglected to note another 800-pound gorilla: Whether exorbitant hedge fund management fees are “justifiable” that billionaires Buffett and Soros warn against.
Institutional Investors Alpha also reported on January 27, 2015 that despite the “recent run of relatively lousy performance by some high-profile hedge fund managers and consistent underperformance among hedge funds in general since the end of the financial crisis of 2008,” hedge fund fees are falling, but not by much.
Second, Pension and Investments On-Line reported on January 22, 2015 that hedge funds saw tepid returns in 2014. A number of named hedge funds returns for calendar year 2014 ranged from 2.5% to 4.5%, with one hedge fund returning 6.1%. Pension and Investments On-Line reported that “Broad hedge fund index returns were well below the 13.7% return of the S&P 500 in 2014 and also were significantly lower than [returns for hedge funds in] prior years.” Why Pension and Investments On-Line and Institutional Investors Alpha reported different returns for the S&P 500 in 2014 is not known.
But what's clear is that hedge funds performed poorly in 2014, and will probably perform poorly into the future, now that two major public employee pension funds — CalPERS and Dutch pension fund PensioenfondsZorg en Welzijn — have both pulled out of hedge fund investments. The trend to divest from hedge funds will likely snowball in 2015.
Two Billionaires Recommend Against Investing in Hedge Funds
On May 6, 2014 Warren Buffett advised SFERS Board member Herb Meiberger: “I would not go with hedge funds — would prefer index funds.”
As recently as Thursday, January 22, 2015, David Sirota reported in his International Business Times column that another towering figure in the financial industry — Soros Fund Management chairman, George Soros, who recently retired from his currency-focused hedge fund business — warned to “beware of investing retiree money in hedge funds,” during a session of the World Economic Forum in Davos, Switzerland (yes, the same Davos conferences that former Mayor Gavin Newsom is so fond of attending). “Soros cited management fees charged by hedge funds in arguing that steering billions of dollars of public employees' money in such products is imprudent.”
Sirota reported that Soros noted that current market conditions are difficult for hedge funds. Despite the advice of two towering billionaire figures in the financial industry advising not to invest pension funds in hedge funds, rookie Chief Investment Officer Bill Coaker thinks he knows better than the two billionaires.
Apparently Coaker has the concurrence of rookie cop Brian Stansbury, rookie investor Joe Driscoll (who's been woefully wrong before), and conflict-of-interest conflicted Wendy Paskin-Jordan, all SFERS Commissioners hoodwinked that they and Coaker know better than the two billionaire experts.
Recent Media Coverage
A whole host of recent media reports illustrate that the “emerging markets,” interest rate swaps, hedge funds, and other “derivative” high-risk investments preferred by Coaker and SFERS Commissioner Joe Driscoll have taken drastic downturns in the recent past.
CalPERS Just Opted Out of Hedge Funds; Why Would SFERS Opt In?
SFERS has made no effort to reach out to ask CalPERS why on September 15, 2014 it had opted out [pulled out] of its entire $4 billion investment in hedge funds. CalPERS' $4 billion hedge funds investments represented a tiny 1.3% of its total $300 billion pension portfolio, and cost it $135 million in fees annually. Why would SFERS opt in, and go against the documented experience of others?
Remarkably, on September 29 Pension and Investments On-Line also reported that Michael Rosen, Chief Investment Officer and a principal at Angeles Investment Advisors LLC claimed that CalPERS' rationale to divest its hedge funds investments was “not credible.” How could Rosen know this without discussing it with CalPERS?
Angeles Investment Advisors is SFERS' current general consultant and may earn additional fees if SFERS invests in hedge funds. As such, Rosen may have a conflict of interest in driving SFERS to invest in hedge funds by bad-mouthing CalPERS.
CalPERS isn't the only public pension to have divested from hedge funds in recent months.
Pensions and Investments On-Line reported on January 9, 2015, that the Dutch pension fund PensioenfondsZorg en Welzijn (PFZW's ) eliminated its $5 billion hedge fund portfolio during 2014 because the hedge funds did not fully meet new investment criteria. Jan Willem van Oostveen, PFZW's financial and investment policy manager said the “high cost” of investing in hedge funds “can only be justified if the returns are high.” He added that “with hedge funds, you're certain of the high costs, but uncertain about the [rate of] return.”
Downturns in Alternative Investments
In September 2013, Matt Taibbi published “Looting the Pension Funds” for Rolling Stone magazine. He noted in relation to the Great Recession of 2008–2009 meltdown of the economy that:
“This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.”
More recently, the New York Times reported on November 12, 2014 that some of the world's largest banks were fined $4.25 billion for having conspired to manipulate foreign currency markets in a currency-rigging scheme. Clearly, the currency overlay program SFERS Commissioner Joe Driscoll had strongly advocated for in 2005 may have involved unsafe and unsound practices in the currency trading by some of these same banks, including Barclays, which withdrew from a settlement with the U.S. Justice Department due to the bank's concerns that the settlement would resolve only a fraction of Barclay's liabilities in the case.
On February 3, 2014 CNN Money reported that investors yanked more than $6.3 billion from emerging market equity funds the week before. Emerging markets refer to developing countries in Eastern Europe, Africa, the Middle East, Latin American, the Far East, and Asia. Investing in emerging markets – as Coaker advocates doing — is relatively high-risk.
When it comes to the interest-rate swaps SFERS' Commissioner Driscoll had advocated investing in, readers should carefully read Matt Taibbi's article “Everything Is Rigged: The Biggest-Price-Fixing Scandal Ever ” in Rolling Stone magazine's April 25, 2013 issue. It details many of the world's too-big-to-fail banks caught manipulating global interest rates.
Taibbi reports that interest-rate swaps “are a tool used by big cities, major corporations, and sovereign governments to manage their debt,” and notes that interest-rate swaps were a $379 trillion market in 2013. It's an area ripe for corruption. Tabbi reports the scheme to fix the prices of interest-rate swaps involve the same banks, including Barclays and Bank of America. His reporting is not to be missed.
SFERS' Disastrous First Foray in Hedge Funds: “Currency Overlay”
SFERS' staff's previous failure to perform adequate “due diligence” on its so-called “currency overlay” program that lost upwards of $60 million was a complete disaster. Aware from meeting minutes and agendas of SFERS Board meetings that SFERS had completely terminated its failed currency overlay program, this author placed a records request to obtain any and all documents prepared by SFERS' staff — not documents prepared by its highly-paid consultants — regarding due diligence of the currency overlay program performed by SFERS staff.
Wikipedia reports that currency overlay is a financial trading strategy conducted by specialist firms that manage the currency exposures of large clients. Currency overlay managers conduct foreign-exchange hedging on their clients' behalf, selectively placing and removing hedges to achieve the objectives of the client. So-called currency overlay “pure alpha mandates” [asset allocations] are set up to allow the manager as much scope as possible to take speculative positions. As such, they are similar in nature to foreign-exchange hedge funds in terms of objective and trading style. Why would a public pension fund with long investment horizons do this?
L'Affaire FX Concepts
A financial industry periodical, InstitutionalInvestor.com, reported on August 8, 2005 that SFERS Board member Joe Driscoll had prominently advanced and “pushed SFERS to become one of the first public pension plans to invest in ‘emerging markets',” including a $100 million investment in a fund investing mainly in sovereign debt instruments, including defaulted loans, and a second SFERS $75 million investment in 2002 in an emerging markets local-currency debt fund that held positions in interest rate swaps and other derivatives.
Finally, InstitutionalInvestor.com reported Driscoll had “pushed for [SFERS'] new currency overlay program that began July 1, ,” a program that relied heavily on hedge funds.
As an aside, SFERS' Executive Director Jay Huish is currently using spin control to deconstruct whether the currency overlay program had involved using hedge funds, which of course it had, as documented in the New York Times, Institutional Investor on-Line, and other investigative journalism venues. Huish is clearly attempting to write revisionist history. Huish was referring to an outfit named FX Concepts, which only does hedge funds, as Reuters noted in 2013.
Comically, Huish denied during a media interview — posted on YouTube following the January 7 Board of Supervisors hearing to reappoint SFERS Commissioner Wendy Paskin-Jordan — that SFERS' failed “currency overlay” program had not involved hedge funds. Of course it had, but Huish wants us to believe that “had” is the new definition of “had not,” a claim ludicrous because newspapers around the country had all acknowledged the currency overlay program was administered by a hedge fund manager. Huish creatively claimed the currency overlay program was a different “product line” of the manager and not hedge funds, but it appears the investment manager had a single line of business: Hedge funds.
Huish may be the only person on the planet who has not heard the old adage “If it looks like a duck, walks like a duck, swims like a duck, and quacks like a duck, then it's a duck.” FX Concepts, one the world's biggest currency hedge fund, once managed more than $14 billion in assets.
The currency overlay program initiated in 2005 was plagued with losses and high fees. On May 8, 2013, the SFERS Board voted to terminate the hedge fund managed by BlackRock because SFERS was its last client. SFERS' staff and its consultant recommended re-allocating the $450 million investment to an outfit called FX Concepts. Five months later, FX Concepts declared bankruptcy.
One of SFERS' currency overlay managers was Barclays Global Investments (BGI), the same outfit that SFERS Board Member Wendy Paskin-Jordan is currently embroiled in regarding her potential conflict-of-interest status as a Trustee of various BGI money market funds, among other problems.
In 2013, SFERS finally pulled out of its first hedge fund investment in its so-called “currency overlay” program. By January 2014, SFERS had completely eliminated its currency overlay program pushed by SFERS Commissioner Driscoll.
Missing Oversight and Due Diligence?
In response to a second records request, SFERS provided approximately 44 documents across two PDF files, with a total of 247 pages of material. Of them, fully 210 pages across 18 documents were authored by Leslie Kautz at Angeles Investment Advisors, a consultant to SFERS, documents which were not requested.
Of the remaining 26 documents totaling just 38 pages authored by SFERS staff, at least 16 pages were “agenda item” scheduling memo's for SFERS' various Board of Directors meetings, leaving a skimpy 22 pages of SFERS staff-authored so-called “due diligence” documents.
A professional familiar with the type of information typically contained in due diligence documents believes the documents prepared by SFERS' staff do not amount to actual due diligence of the currency overlay program at all. Instead, they appear to more properly be some sort of documents administering the currency overlay programs, as opposed to formal due diligence analytical reports, since there were no reconciliation of investment statements and no analyses of investment transactions. Most of the staff documents simply regurgitated materials prepared by Angeles Investment Advisors.
The professional who reviewed the 247 pages concluded that in addition to the lack of reconciliation of investment statements and the lack of investment transaction analysis, the documents also do not show 1) SFERS' Staff's on-going due diligence; 2) Meetings with external investment managers; or 3) Discussions with external investment managers.
A third records request seeking the dollar amount remaining in the currency overlay hedge funds FX Concepts was managing at the time it was instructed on September 13, 2013 to initiate the orderly liquidation of SFERS' account, the date on which the “orderly transition” liquidation was completed (i.e., the date on which FX Concepts stopped any transactions on behalf of SFERS and returned any outstanding balance to SFERS), and the dollar amount of any funds returned to SFERS if any, resulted in a response from SFERS saying there were “no responsive records” to the third records request.
“No responsive records” translates to more evidence of the lack of due diligence. How could SFERS staff not have documentation of the date on which FX Concepts was finally and fully divested?
Additional Lack of Due Diligence
A fourth records request provided the most damning evidence of the lack of due diligence performed by SFERS' staff and the majority of its Board of Directors.
In response to this author's January 11, 2015 fourth records request for any and all correspondence from SFERS Board Commissioners to SFERS staff regarding the staff's due diligence of the currency overlay program between January 1, 2013 and January 2015, the records SFERS provided shows only one Commissioner — elected member Herb Meiberger — exercised fiduciary responsibility to perform due diligence of the currency overlay program.
That could be because Meiberger is a member of the Chartered Financial Analyst Institute, a designation that binds him to a code of ethics requiring due diligence from members of financial investment professionals. CFA members have an overarching duty to exercise reasonable care and prudent judgment for the benefit of their investment clients, and to place their clients' interests above their employer's or own interests.
The CFA's code of ethics requires chartered analysts to exercise due diligence, independence, and thoroughness in analyzing investments, and making investment recommendations and investment actions. This should also apply to Commissioner Driscoll, who is also a member of the Chartered Financial Analyst Institute.
The January 27 response to the fourth records request showed that not one of the Mayor's three appointees to the Retirement Board — Commissioners Victor Makras, Wendy Paskin-Jordan, and Leona Bridges — submitted any correspondence to SFERS staff regarding the staff's due diligence of the failed currency overlay program. Nor had the other two elected Board members, Commissioners Stansbury and Driscoll, submitted any correspondence to SFERS staff. Nor had sitting City Supervisor Malia Cohen — the Board of Supervisor's ex officio appointee to SFERS' Board — submitted any correspondence to SFERS staff regarding SFERS' staff's due diligence.
The January 27 response did uncover that as far back as November 2013, Commissioner Meiberger had requested from SFERS Executive Director Jay Huish, with a copy to Board president Victor Makras, information regarding adherence to SFERS' policies, including due diligence issues.
Between November 2013 and March 6, 2014, SFERS Commissioner Meiberger was forced to place at least three separate public records requests — some of them multiple times, and one three times — to obtain information from SFERS' staff (which records requests from SFERS staff went unanswered).
In a nutshell, it appears that several levels of due diligence were not performed by SFERS' staff, SFERS' general consultant (Angeles Investment Advisors), and the various external program managers involved. Multiple people failed to monitor the loss of key employees at the FX Concept currency overlay manager, and the loss of FX Concepts' key clients.
When asked what aspect of investing in hedge funds he would you most want to educate SFERS Plan beneficiaries about — illiquidity, risk, volatility, transparency, or some other aspect — Meiberger said:
“Like all investments, buyers should know what they are getting. Like all SFERS' managers, I want to know what the [external] investment managers can invest in, what securities they hold, and what their specific transactions are on a timely basis. I want audited financial statements on a timely basis.”
Who's Watching SFERS' Watch Lists?
Both the loss of key clients and key employees are grounds in SFERS' formal Investment Policy Guidelines to have placed FX Concepts on SFERS' “watch list,” but FX concepts was never put on SFERS' watch list. As Meiberger's December 2013 memo to Huish and Makras notes, both SFERS staff and its general consultants (Angeles) failed to place FX Concepts on SFERS' watch list during each of the four quarters in 2012, and the first two quarters in 2013.
Had SFERS staff performed a simple Google search about FX Concepts, they would have found both a major loss of clients and loss of key employees two years before SFERS staff had inexplicably recommended in May 2013 awarding FX Concepts more pension funds to invest in the currency overlay hedge funds. SFERS staff failed to monitor the managers, or to put them on SFERS' watch list.
In an eventual staff memo dated October 9, 2013, SFERS staff finally terminated FX Concepts due to an “emergency” and recommended that SFERS' Board rubber-stamp the staff's decision; the memo failed to note that key personnel had left FX Concepts long before the memo was written, and made no mention of the loss of key clients. An aiCIO.com article as early as March 20, 2012 noted there had been a “mass exodus” of FX Concepts employees. Another February 2013 aiCIO.com article reported the loss of two of FX Concepts' key clients, leaving SFERS as FX Concepts' last remaining institutional client, substantially increasing FX Concepts' business risk and SFERS' investment risk.
SFERS' staff and Angeles Investment Advisors — who are both required by SFERS' November 2012 Investment Policy and Guidelines to notify the SFERS Board of significant changes that may affect investments — failed to notify SFERS' Board of either of FX Concepts' loss of clients and staff.
Most appallingly, SFERS' staff and general consultant Angeles failed to even notify SFERS' Board of FX Concepts' October 2013 bankruptcy.
Meiberger noted in his December 2013 memo that SFERS' Board has fiduciary responsibilities for pension fund oversight, and asked several questions about delegation of oversight of the currency overlay program and responsibility for the watch list, asking what evidence there may have been of SFERS' staff's oversight. Despite having placed multiple, formal Sunshine Ordinance records requests, Meiberger asserted in December 2013 that he had not received a single document produced by SFERS staff regarding oversight. He pointedly asked whether due diligence by SFERS staff was being performed on schedule.
It's a sad day in San Francisco when a Commissioner of any of the City's plethora of Boards and Commissions cannot obtain information from the Board or Commission staff they oversee, and are reduced to having to place public records requests to obtain information. It's even sadder when they are forced to place a records request, and are then told there are no responsive records.
By January 2015, Mr. Huish had apparently never responded at all to a memo Meiberger had submitted 15 months earlier in November 2013. Huish, as the Retirement Board's Executive Director, may be the only City commission director believing he can ignore responding to an inquiry from one of his own Commissioner's for over a year.
SFERS was Angeles Investment Advisor's only client in currency overlay. SFERS' staff and its consultant failed to perform adequate due diligence on either FX Concepts or the overall currency overlay program that Barclays Global Investors (BGI) was involved in. Materials SFERS has distributed since January 2014 supporting investing in hedge funds have made no mention of SFERS' loss of $60 million dabbling in its first hedge fund — the “currency overlay” program.
The complete, multi-layered failure to perform due diligence on the currency overlay program and FX Concepts more than likely involves “nonfeasance” (failure to perform an act required by law) rather than simple “malfeasance” (malfeasance in office, often called official misconduct, is the commission of an unlawful act, done in an official capacity that affects the performance of official duties).
Pension Plan Members Speak: Public Testimony and On-Line Survey Results
As noted at the beginning of this article, trustees of public pension plans with fiduciary obligations — such as SFERS' Board of Directors — whose clients reject investment recommendations have ethical and legal obligations to back off. But despite over 2,300 e-mails, petition signatures, and public testimony presented by Pension Fund beneficiaries over the last six months opposing investing in hedge funds, SFERS' Board and staff are charging ahead anyway with hedge fund proposals, despite thoughtful objections by Plan beneficiaries regarding how their contributions to the Pension Plan will be invested.
Prior to SFERS' December 3 Board meeting, it was hoped that if the Board heard from at least 2,000 Pension Plan members that Commissioners might pay closer attention, and that opposition to investing in hedge funds would demonstrate greater validity. Following the December 3 Board meeting, ex officio Board member Supervisor Malia Cohen acknowledged that the 2,000+ signatures represent significant opposition to the various late-breaking hedge fund proposals submitted by SFERS staff and its consultant.
“Who Are You Trying to Kid?”
In addition to the 2,300 signature petitions submitted to SFERS between June and December 3, 2014 opposing investing in hedge funds, many current and retired City employees have presented thoughtful testimony at a series of SFERS Board meetings and in written correspondence. While all of the testimony and correspondence has been compelling, several prominent firefighters submitted thoughtful opposition.
Take for instance Elmer Carr, a retired Fire Department captain, who wrote to the Retirement Board on July 21, 2014 saying that the Board has an obligation to seek approval of their supervisors, meaning the retired and active members of the retirement system. He noted “We are watching and we are concerned,” about investing billions of SFERS portfolio into hedge funds.
Or take Joseph Soares, another retiree who recommended on September 6 investing in low-cost index funds, rather than hedge funds. He “considers anyone proposing that our pension money be handled by hedge funds, as totally irresponsible.”
Or take Kevin Callanan, another Fire Department retiree, who noted on September 7 that Bill Coaker may have “smoke and mirrored the unassuming Diocese of Monterey, but rest assured retired employees of [the City] will not stand for another carpet bagger raiding our [pension system].”
Or consider retired Fire Department battalion chief John Murphy who noted on September 7 that there is a “storm of protest from pensioners” regarding Coaker's advice to invest 15% of SFERS' conservatively-built pension fund in a risky and expensive venture into hedge funds. For his part, Bill O'Neil noted on October 1 that given CalPERS is dropping its investments in hedge funds, he cannot understand how SFERS' Board is even considering putting money in such financial instruments, and urged the SFERS Board not to include hedge funds in the system's portfolio.
Finally, take retired firefighter Ted Gold, who noted to Huish and Coaker on November 1 that SFERS Commissioner Brian Stansbury had forwarded Elmer Carr a link to an article by Richard Baker on the Institutional Investors Alpha web site that advocated for using pension funds to invest in hedge funds. Gold noted that Stansbury and Baker had “cherry picked” a single positive article about hedge funds, ignoring a slew of seven articles on Institutional Investors Alpha that were negative about hedge funds and describe hedge fund losses of 2.5%, 3.45% and up to 12% during 2014.
Gold wrote sarcastically that he was glad that SFERS is considering going into hedge funds that in Commissioners Brian Stansbury's and Joe Driscoll's words are designed to reduce SFERS' risk. Gold asked “Exactly who are you trying to kid about ‘reducing risk?',” before he recommended not investing in hedge funds.
When news surfaced that San Francisco's International Federation of Technical and Professional Employees (IFTPE) Local 21 had formed an unnamed 12- to 15-member Hedge Fund Advisory Committee to weigh in on proposals to invest SFERS pension funds using hedge funds, Pension Plan beneficiaries became worried that Local 21 had wrongly concluded that only a “small number” of plan beneficiaries opposed investing in hedge funds. Local 21's Advisory Committee ended up recommending investing up to 10% ($2 billion) of the pension portfolio in hedge funds, most likely contrary to its own members' preferences.
So an individual with the pen name of “Publius Poplicola,” (Friend of the People), created three on-line survey instruments to gauge union members concerns about investing in hedge funds: One survey for Local 21 members; a slightly-differently worded survey for public safety employees, including police, firefighters, and sheriff employees; and a third survey for all other “miscellaneous unions,” which cover everybody else from secretaries to doctors, lawyers to librarians, nurses and certified nursing assistants to medical records technicians, etc.
[Editor: The pen name “Publius Poplicola” appears to have been modeled after the pseudonym “Publius” that was used by the authors of The Federalist Papers to publish their articles anonymously between October 1787 and August 1788.]
Results of the on-line surveys show that as of February 7, among the 766 preliminary survey respondents:
Clearly, 83% of Plan beneficiaries (634 of 766 respondents) are not comfortable with SFERS investing any amount of the Pension fund in hedge funds. The remaining 17% (132 of 766) who may have a higher comfort level investing in hedge funds indicated the maximum investment they would be comfortable with: 7.18% indicated 3% ($600 million), 4% indicated 5% ($1 billion), 1.8% indicated 10% ($2 billion), 1% indicated 15% ($3 billion), 0.5% indicated 25% ($5 billion), and — shockingly — 0.8% (6 respondents, 5 of which are represented by IFTPE Local 21) indicated they would Ok with a 36% allocation ($7.2 billion) to hedge funds.
In addition, the survey revealed:
When asked if Local 21's 12- to 15-member Hedge Fund Advisory Committee should make this decision on behalf of all 4,595 active Local 21 employees, plus an unknown number of Local 21 retirees, only 10.6% responded that Local 21 should make this decision for them. The remaining 89.4% percent believe Local 21 should survey all of its members and let the membership decide for themselves.
So much for Local 21's claim that only a small number of current employees and retirees are deeply concerned about how their pension funds will be invested!
It's clear from the survey that Plan beneficiaries overwhelmingly oppose SFERS using their pension funds to invest in hedge funds. While the survey did not explicitly ask whether SFERS should be restricted from doing so in the face of member opposition, SFERS nonetheless has ethical and legal fiduciary obligations to abide with Plan beneficiary's preferences.
It's crystal clear that 91% of Plan beneficiaries believe that their respective bargaining unions should survey their union members to assess whether Plan members approve of investing in hedge funds, and clear that nearly 96% believe SFERS' seven-member Board should not invest in hedge funds without first conducting a survey of all Plan members beneficiaries.
Given the preliminary results of the on-line survey, SFERS' Commissioners have ethical and legal obligations to listen carefully to the preferences of their “clients” (Plan beneficiaries), and SFERS' Board should drop consideration of investing in hedge funds, since the vast majority of Plan beneficiaries strongly oppose investing their retirement fund in hedge funds.
Although Mayor Lee indicated in his State-of-the-City speech on January 15 that Supervisor Cohen and the Retirement Board staff have been “hard at work for months,” developing a proposal to allocate $100 million from SFERS' Pension fund to a down payment loan program, in fact SFERS has made no decision on whether to invest Pension funds in the Mayor's down payment loan assistance program (DLAP). The Mayor clearly reached a premature conclusion that SFERS' Board would approve of investing Pension funds in his down payment loan program.
The Mayor claims this will help up to 1,500 families buy a first home in San Francisco, but he made no mention of “sharing prosperity” for people who are single, and the 66% of San Francisco residents who rent, and are not interested in home ownership. The Mayor may only be interested in families, not people who choose to remain single.
Indeed, in response to this author's January 19 records request to Supervisor Malia Cohen for any and all proposals she may have presented to either SFERS' staff or to SFERS' Board to allocate any of SFERS portfolio toward DLAP, Cohen's office responded on January 20 indicating that she had only made a verbal request to SFERS staff at a Retirement Board meeting last year for SFERS' staff and the Mayor's Office of Housing to evaluate and study a possible $50 million investment in DLAP. How the Mayor bloviated — by doubling — Cohen's $50 million to $100 million is not yet known.
Cohen's office indicated that the two departments are still in the process of reviewing and analyzing the City's current portfolio of loans and have not made any recommendation to either Cohen or the Retirement Board. Once the two departments conclude their evaluation, Supervisor Cohen will reportedly then decide whether or not to move forward with a specific proposal to pursue an SFERS investment in DLAP. Cohen's office has been advised that a SFERS staff decision may perhaps be made in February 2015.
A separate records request on January 22 to Olson Lee, Director of the Mayor's Office of Housing and Community (MOHCD) Development, for any correspondence between Supervisor Cohen and Olson Lee uncovered a series of 16 e-mails between Maria Benjamin, Director of Homeownership and Below Market Rate Programs in MOHCD and Bob Shaw, SFERS' Managing Director of Public Markets. The e-mail traffic dating back to June 18, 2014 between Ms. Benjamin and Mr. Shaw is troubling.
Shaw indicated on June 18 that SFERS “will eventually need to review all of the loans that have been originated under the DALP,” but requested “a ‘test' set [of loan information] to determine what [SFERS's staff would] need for our initial financial due diligence.” Shaw recommended looking at one specific year that was “reasonably seasoned,” and asked for DLAP loan information for 2010 because it involved “a relatively small (17) set of loans, but should provide [him] with the ability to understand the DLAP program.”
By October 17, Shaw indicated SFERS staff had completed its analysis of the sample set, and while results seemed promising, staff needed to examine the full set of loans, apparently to see if the results from the small sub-set reviewed were representative. Shaw indicated that would be critical to any proposal submitted to the Retirement Board and indicted it was too early to determine when SFERS' staff could present an analysis to the Retirement Board, since staff still had due diligence work to complete.
Coincidentally, also on December 3 — the same date of SFERS' Board was presented with three new hedge fund proposals — Ms. Benjamin submitted additional data to Shaw, providing active and repaid loans made since 1998 with DLAP funds. It's not known whether Shaw has completed an analysis of the data Benjamin provided on December 3.
But from data MoH has provided to SFERS, if SFERS' allocates funds to the DLAP program — as the Mayor hopes SFERS' Board will eventually do — it is very clear that investing retiree funds in down payment loans would be highly illiquid, given unknown terms of any such investments.
Whether the pension fund will involve wealth transfer to hedge fund managers, or will be tied up in illiquid down payment loans, Plan beneficiary opposition to both programs continues to grow, opposed as Plan beneficiaries are to the Mayor's “shared prosperity” agenda using their retirement funds.
The plan beneficiaries were warned by Matt Tabbi in his September 2013 article “How Wall Street Hedge Funds Are Looting the Pension Funds of Public Workers,” that Wall Street firms are making millions in profits off of public pension funds nationwide. “Essentially it is a wealth transfer from teachers, cops and firemen to billionaire hedge funders,” Taibbi noted. “Pension funds are one of the last great, unguarded piles of money in this country, and there are going to be all sort of operators that are trying to get their hands on that money.”
It's not just about teachers, cops, and firefighters. It's also San Francisco employees who are nurses, librarians, secretaries, janitors, and bus drivers who rightly worry about the sticky fingers trying to gain access to their retirement fund.
When Meiberger was asked what keeps him awake at night considering his fiduciary responsibilities to Plan beneficiaries, he candidly replied:
“The likelihood of hedge funds managers involved in insider trading investigations and the paralysis that could cause the managers, our staff, the Retirement Board, the damage to our reputation, and to stakeholders has been, and will be, an unending cause for concern and sleepless nights.”
“How would we ever know if any SFERS investment in hedge funds is a ‘success?',” other observers worry.
On December 8, 2014 the San Francisco Chronicle posted an on-line story titled “S.F. pensions should avoid hedge funds.” It appeared the next morning in its print edition under the title “Do not hedge.” The Chronicle reported that SFERS' overseers [SFERS' Board of Directors] are nervous about a bold but risky idea for the city's $20 billion retirement fund: putting a slug of money into high-flying hedge funds.”
Since the conservative-leaning Chronicle is concerned about the risky “high-flying” idea and recommends against it, hopefully SFERS' Board will play closer attention when it considers again on February 11 whether to adopt Coaker's goofy “endowment model of investing” public retirees' funds in hedge funds — against the beneficiary members' substantial objections.
SFERS' beneficiaries must act to protect their pensions, and hold SFERS' staff and the Retirement Board members accountable in exercising their fiduciary responsibilities to prudently manage the trust fund for the exclusive benefit of Plan members and their beneficiaries.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California's First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter's James Madison Freedom of Information Award in the Advocacy category in March 2012. Feedback: mailto:monette-shaw@westsideobserver.
After this article was submitted to the Westside Observer for publication, new information surfaced.
Comically, IFTPE Local 21 changed the name of its Hedge Fund Advisory Committee to the “Pension Advisory Committee,” perhaps to lend it more dignity. The re-named committee chaired by Gus Vallejo — who ran for election to the SFERS Board, but was beaten in the election by SFERS Commissioner Brian Stansbury — now characterizes its unanimous recommendation to SFERS to consider “responsible” investment strategies, including a “minimal investment in hedge funds.” How Local 21 can report to its membership with a straight face that “minimal” means a $2 billion investment is not known.
Not to be outdone, the San Francisco Police Officer Association's POA Journal includes in its January 2015 edition two articles, one by Mike Hebel (a retiree who is the POA's Welfare Officer), who wrote that that despite “consistent poor performance,” hedge funds are widely used by public and private endowments, and he supports use of hedge funds. When did “consistent poor performance” become a valid reason to invest in hedge funds?
In the same issue, the POA Journal carried a second article by Police Officer Lou Barberini from the Mission Station who opposes use of hedge funds, in part due to SFERS' failed currency overlay program experiment pushed for by SFERS Commissioner Driscoll that invested in hedge funds and lost over $60 million in doing so.
The POA Journal carried an article in its February 2015 edition by the POA's president, Marty Halloran, claiming facts should rule SFERS' Board decision-making. Halloran asserts that SFERS has before it “expert advice,” from experts — ostensibly including SFERS' expert Chief Investment Officer, Bill Coaker — who believe that placing some assets in alternative investment mechanisms is the best way to achieve some sort of balance. Halloran asserts that a Pension plan the size of SFERS' $20 billion fund “requires a Board that can support a sophisticated investment strategy.” Is Halloran suggesting that some Board members may not be “sophisticated”?
Halloran says not one word about the presumably sophisticated billionaires — Buffett and Soros — who advise against investing in hedge funds.
Apparently Halloran and Vallejo, along with Coaker, know more about “sophisticated” investing that do Soros and Buffett.
Bloomberg Skewers Coaker's February 11 Proposal
Speaking of Halloran's call for fact-based evidence, despite the fact that SFERS' Board requested on December 3 that Coaker and SFERS staff conduct due diligence on the 5% hedge fund allocation recommended in a proposal developed by SFERS Board president Victor Makras, Huish, and Coaker, a new recommendation from Coaker dated February 11 that he is presenting to SFERS' Board continues to seek a 10% allocation to hedge funds, noting that staff would be Ok with a 5% mix, but prefers a 10% mix in order to reduce volatility of returns on investments.
He asserts a 5% allocation does not reduce the volatility of returns. Interestingly, Angeles Investment Advisors believes a 5% hedge fund exposure would “serve the objective of reducing volatility,” according to a new article on the Bloomberg Business web site posted on February 7.
Bloomberg's February 7 article, however, notes:
“When you stray from traditional structures of asset allocation into hedge funds, you raise volatility and risk profiles,” said David Kotok, chairman and chief investment officer of Cumberland Advisors, a Sarasota, Florida-based investment advisory firm. “If a pension board chases additional yield or performance because they are in a very low interest-rate environment, then they may be adding more risk than the anticipated additional return.”
Speaking of chasing additional “yield,” this brings us back to whether Coaker's plan to chase alpha “excess returns” are realistic.
Coaker's new proposal that he is presenting to SFERS' Board, now available and dated February 11, pooh-poohs objections to investing in hedge funds raised by Plan beneficiaries and interested parties. He says that objections to investing in hedge funds raised to date “are, at best, an incomplete picture.” Coaker then claims “hedge funds have less than half the volatility of the equity market.”
Which hat is he pulling this rabbit out of? But the Bloomberg Business February 7 article noted that investing in hedge funds raises volatility and risk profiles.
Coaker's Hookah Pipe-Dream
Elsewhere in Coaker's new February 11 “due diligence” report back to SFERS' Board, he notes that it takes time to build a high-quality portfolio, since investments can take up to 10 years before any capital is returned to the Pension fund.
Given that Coaker's first stint at SFERS between 2005 and 2008 involved just a two-and-a-half year tenure, and his tenure at UC Regents was just six years, it's difficult to believe that Coaker will even be around 10 years hence to evaluate how his “endowment model” and hedge fund asset allocation recommendations will have played out. As far as that goes, few of SFERS' current Board will be around 10 years from now either to see how things work out, should they approve to invest in hedge funds.
Coaker's new proposal admits that illiquid investments will increase significantly to 35%, and noted illiquid investments from earlier asset allocation recommendations he made in December would have increased to 45%. As senior leaders in SEIU Local 1021 have noted, when you add in what SFERS is planning to invest in “alternative equities” (without calling alternative equities out as a separate asset allocation class), plus a hedge fund allocation at 15%, SFERS may be considering somewhere between 28% and 45% in risky and very illiquid investments.
Amazingly, Coaker's February hookah proposal claims SFERS' staff will “conduct onsite visits to CALSTRS (the California State Teacher's Retirement System), one or two other pension plans, or endowments” to pick their brains on specified allocations to infrastructure. But he says not one word about reaching out to CalPERS to investigate why CalPERS had pulled out of hedge fund investments entirely. Why would Coaker do due diligence reaching out to CALSTRS, but not with CalPERS?
Coaker's February 11 proposal asserts that a 5% allocation to hedge funds would not reduce the volatility of returns, even though Angeles Investment Advisors asserts in the Bloomberg article that it would. Do we have disagreement here on “facts” between Coaker and SFERS' general consultant, Angeles Investments Advisors?
Coaker's February 11 proposal also claims on page 11 that returns from hedge fund investments are projected to be 8.0%. Wait! What?
Where did this come from, since Coaker's previous asset allocation proposals projected a 6.5% return from any of the 3%, 0%, and 5% hedge fund investment options? How did this mushroom from 6.5% to 8% in the two-month period between December 3 and February 11, given that Institutional Investors Alpha reported on December 29 that the London-based research firm Preqin found that two-thirds of investors seek annualized returns of 4% to 6% from hedge funds?
How on earth can SFERS' Commissioners seriously believe Coaker knows better than Buffett and Soros, and believe he can chase alpha that even Preqin doesn't believe will occur?
SFERS' February 11 Board meeting promises to have a fight on its hand, in both the amount of hedge fund investments to be approved, and which type. Coaker's February 11 recommendation claims that “fund-of-hedge-funds” — purportedly preferred by SFERS' Board but opposed by SFERS' staff — have fallen out of favor with “institutional investors” for several reasons. As but one reason, Coaker reports that institutional investors who utilize both direct hedge funds and fund-of-hedge-funds run the risk of “over diversifying” and “hiring too many managers in the aggregate.”
Were SFERS Plan beneficiaries interested in comedy, as opposed to fact-based information and their eventual pensions, this would be comical, were it not so sad. As it is, and noted above, the UC Regents system's new Chief Investment Officer, Jagdeep Singh Bachler has been engaged during his nine-month tenure as CIO in a major restructuring of the equities portfolio Coaker managed at UC Regents, reducing the number of external equities managers from 70 to 40 “because of concerns that the system was paying excessive fees and owned too many securities.”
More alarming, Coaker's February 11 proposal asserts that in approximately two-and-a-half years from now, SFERS can re-evaluate in 2017 increasing asset allocations. It's clear that his goal is to kick open the door to permit increased investments in hedge funds and other “endowment model” high-risk investments, so that once the door is kicked open, he can come back and incrementally increase the risky investment allocations even higher. Perhaps that's the “shared prosperity” the Mayor seeks.
SFERS beneficiaries have been forewarned about Coaker's true intentions. At question is whether beneficiaries can stop him in order to protect their Pension fund by investing in prudent — not high-flying, risky, and dubious — investments.
SFERS' Board and its staff appear to have forgotten that SFERS' pension fund has a long-term horizon, and that they should not be investing in illiquid, unregulated funds with high fees that are oriented towards short-term profits for billionaire hedge fund managers — billionaire managers that SFERS' staff appear to believe are the masters of the universe.
The final 800-pound gorilla in the room is why Coaker didn't submit — and SFERS Board appears not to have asked for — a due diligence analysis of investing in more prudent index funds, as Mr. Buffett had recommended.
Monette-Shaw is an open-government accountability advocate and a patient advocate. He received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award in 2012. Feedback: monette-shaw@westsideobserver.
By Patrick Monette-Shaw
Another example of the dysfunction of San Francisco’s Ethics Commission arose on October 29, 2014 when an ethics complaint filed directly with the Ethics Commission was dismissed by Ethics Commissioners on the grounds that Ethics Commission staff failed to meet its burden to show there was probable cause the respondent had violated San Francisco’s Campaign and Governmental Conduct Code.
Although Pilpel claimed to be speaking as an individual … he switched from using the first person “I,” into using multiple times the third person “we,” again appearing to be speaking on behalf of, and representing, the Task Force.”
Rather than ruling on the merits of the official complaint and hearing the complainants’ allegations in an open, public meeting, Ethics Commissioners ostensibly dismissed the complaint entirely due to unspecified Ethics staff errors regarding meeting its burden, sinking to a new low.
A History of Dismissed Complaints
A June 2012 San Francisco Civil Grand Jury report — “San Francisco’s Ethics Commission: The Sleeping Watchdog” — noted that the Ethics Commission held no public hearings on Sunshine Ordinance complaints referred to it over an eight-year period. An analysis in 2012 of 35 cases against City officials referred by the Sunshine Ordinance Task Force to the Commission alleging official misconduct showed five cases were then still pending, and that the Commission’s Executive Director, John St. Croix, dismissed all 29 of the remaining cases, often citing the most arcane exculpatory excuses to let miscreants off the hook.
Before June 2012, the Ethics Commission had held just one official misconduct public hearing, in July 2011, that was referred to it by the Sunshine Task Force, a case involving Library Commission president Jewelle Gomez. (The Ethics Commission official misconduct hearing against Sheriff Ross Mirkarimi occurred on August 16, 2012.) Although the Ethics Commission recommended that Mayor Ed Lee remove Gomez from the Library Commission, the Mayor failed to do so for over two years. However, the Mayor eventually did not re-appoint Gomez when her term expired, and she was replaced.
The Ethics Commission had also dismissed every complaint during the previous 17 years alleging retaliation for filing whistleblower complaints. This will likely continue until voters demand removal of the Commission’s executive director, John St. Croix, who was paid $148,419 in Fiscal Year 2013–2014 to bury the public’s right-to-know investigations.
Two Clear Violations of Ethics Regulations Dismissed
As reported in the Westside Observer last September, wayward Sunshine Ordinance Task Force member David Pilpel appears to have violated the Statement of Incompatible Activities (SIA) applicable to Task Force members when he spoke during the public comment on a matter under discussion during the Ethics Commission on April 28, 2014 at a meeting that was referred by the SOTF for enforcement, by introducing himself as “David Pilpel, member of the Sunshine Ordinance Task Force.” Asserting one’s affiliation as a member of a given policy body during a public meeting of another quasi-judicial body, or another policy body, is strictly prohibited by the SIA.
As we reported, the SIA applicable to Pilpel clearly provides that no officer may hold himself or herself out as a representative of the Task Force, or as an agent acting on behalf of the Task Force, unless authorized to do so. Pilpel had not requested or received a waiver known as an Advance Written Determination from either the Board of Supervisors, or from the Ethics Commission, exempting him from this SIA prohibition. And the Task Force itself had not authorized Pilpel to speak on behalf of the full Task Force on the matter under discussion.
Pilpel directly interfered with the Task Force’s referral of Sunshine complaint #12-058, Dominic Maionchi vs. Recreation and Parks Department to the Ethics Commission in a case involving Rec and Park’s General Manager Phil Ginsburg over failure to release public documents regarding leases of boat slips, a case that Ethics returned to the Task Force for further factual information. The Task Force is poised to send the Maionchi matter back to the Ethics Commission on December 3.
The first complaint about Pilpel’s probable April 28 violation of the SIA was filed by this author on June 22 and remained a pending Ethics complaint that had not been dismissed — until October 29, when it was suddenly dismissed apparently due to potential Ethics staff errors.
Then, on July 28, 2014, Task Force member Pilpel again spoke before the Ethics Commission during public comment on Sunshine complaint #13-024, Mica Ringel vs. Planning Department being heard by the Commission, committing a second violation of the SIA. Although Pilpel claimed to be speaking as an individual on July 28, within the first minute-and-a-half of his testimony he switched from using the first person “I,” into using multiple times the third person “we,” again appearing to be speaking on behalf of, and representing, the Task Force.
Notice was received on August 15 that the second SIA complaint filed by this author against Pilpel on August 4, 2014 involving the Ethics Commission’s July 28 hearing was dismissed by the Ethics Commission’s Executive Director on August 13. In dismissing the second SIA complaint against Pilpel, St. Croix only cited Section III.A.1, “Activities that Conflict with Official Duties,” of the applicable SIA.
St. Croix made no mention in his dismissal letter of Section III.B.1 of the SIA, “Restrictions That Apply to Officers or Employees in Specified Positions,” which provides that certain activities are also expressly prohibited for individual
When Pilpel addressed the Ethics Commission on both April 28 and July 28, he was clearly engaging in providing advice to the Ethics Commission (as an entity) concerning Sunshine complaints that may appear again before the Task Force, matters that clearly fall inside the scope of his duties as a member of the Task Force.
Communications Violate Fair Hearings
Both SIA complaints against Pilpel adequately documented he was engaging in ex parte communications with the Ethics Commission, defined here as a communication in a quasi-judicial proceeding raised by one person in the absence of, and without representation or notification to, other interested parties, and/or improper unilateral contacts with an arbitrator (in this Case the Ethics Commission itself), or a represented party without notice to the other party or counsel for that party.
Once a Sunshine complaint is filed with the Sunshine Ordinance Task Force, no member of the Task Force should engage in oral or written communications outside of Task Force meetings regarding either the merits of a Sunshine complaint, or the merits of a Task Force Order of Determination and referral to the Ethics Commission for enforcement proceedings. Pilpel’s ex parte communications with the Ethics Commission on both April 28 and July 28 were unnecessary to the conduct of an Ethics investigation or an Ethics enforcement action.
And on both dates, the three of five Ethics Commissioners who just happen to be prominent lawyers — Commissioners Ben Hur, Paul Renne, and Peter Keane — had to have known, first, that Pilpel was engaging in ex parte communications, and second, also had to have known that as Ethics Commissioners they were condoning and allowing ex parte communications that they had a legal obligation to stop, if only to assure fair hearings. They did nothing to stop ex parte communications.
Instead of affording a fair hearing on either of Pilpel’s two SIA violations, the Ethics Commission instead chose to dismiss both complaints without an open-to-the-public hearing. And instead of hearing the merits of evidence against Pilpel’s April 28 violation of the SIA when he introduced himself as a representative of the SOTF before the Ethics Commission, the Commission simply claimed that Ethics staff had not met its burden to show probable cause of Pilpel’s ethical violations.
Ethics Commission’s Complicity
Other observers wonder to what extent the Ethics Commission simply dismissed the complaint against Pilpel to avoid the glaring fact that the Ethics Commissioners had clearly been complicit in permitting Pilpel’s ex parte communications to have even occurred. Clearly, had the Ethics Commissioners ruled in the probable cause hearing that Pilpel had violated the SIA on two separate occasions, the Commission would also have had to acknowledge its own complicity in not having stopped Pilpel dead in his tracks when it had an ethical duty to guard against ex parte communications, but didn’t.
The inescapable conclusion is that by having allowed Pilpel to engage in ex parte communications, the Ethics Commission had also engaged in ex parte communications.
San Franciscans should consider replacing the Ethics Commission with another oversight panel that will actually exercise ethical reasoning. It’s time to go back to the ballot box, and amend our City charter to get rid of the Ethics Commission, and replace it with something that furthers — not weakens — transparency and open government.
Monette-Shaw is an open-government accountability advocate and a patient advocate He received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award in 2012. Feedback: monette-shaw@westsideobserver.
By Patrick Monette-Shaw
San Francisco’s November 2014 election is but one example of the Citizens United ruling allowing wealthy organizations and individuals to drown out other voices in the campaign. It didn’t take much to discover that Mayor Lee’s pals, billionaires Ron Conway and Reid Hoffman, are spending heavily in local and state races to unfairly influence election outcomes, and elect into office legislators who will support their political agendas and financial interests.
Even before the Citizens Untied ruling, San Francisco was rife with “independent expenditure committees” raising funds for their preferred candidates and ballot measures under the pretext that the independent committees would not (wink, wink, wink) communicate and coordinate their activities with actual candidates or official ballot measure sponsors.
...a letter signed by more than 50 women to Chiu’s campaign headquarters demanding that Chiu stop playing politics with
Buying David Chiu’s Airbnb Legislation
As the Westside Observer reported in our October issue, Supervisor David Chiu has taken over two years to develop legislation to “regulate” Airbnb conversion of rental housing stock into short-term rentals — hotel rooms for tourists — driving out San Franciscans who are being displaced out of town. Over those two years, Chiu has met more than 50 times with lobbyists for Airbnb.
Chiu cannot not have known that two of Airbnb’s investors are none other than billionaire venture capitalist Ron Canway and his wife Gayle, and billionaire venture capitalist Reid Hoffman, the co-founder of Linked-In.
According to the State of California’s Cal-Access campaign donor database, Ron Conway has contributed $154,800 to date in 2014, and his wife Gayle has contributed another $94,200 to state elections, while Reid Hoffman has contributed at least $702,350, for a combined total of $951,350. That allows these two billionaires to buy a lot of access to politicians.
In addition, San Francisco’s Ethics Commission campaign data for local elections shows that in 2014 Ron and Gayle Conway, and various probable relatives — including Christopher Conway, Daniel Conway, Michele Conway, and Ronny Conway — have donated at least another $254,500 to local candidates and measures.
The ballot measures Ron Conway is supporting include the Prop “A” MUNI bond, Prop “J” to raise the minimum wage, and Prop “C” to extend San Francisco’s Children’s Fund for another 25 years. Local candidates the extended Conway family have contributed to include at least $2,000 to Supervisor Malia Cohen, $2,500 to Supervisor Mark Farrell, and $1,000 to Supervisor Scott Wiener.
The three supervisors are each up for re-election on November 4, and notably, all three of them voted on second reading to pass David Chiu’s Airbnb legislation on Tuesday, October 21. And all three supervisors, along with Chiu himself, voted against an amendment that would have required Airbnb to pay its past due back taxes before the legislation could become effective. The amendment failed.
Between the Conway’s and Hoffman, they have contributed at least $1,205,850 to state and local elections through Sunday October 20. Add on to that $1,193,000 in contributions made by another mega-billionaire venture capitalist, Sean Parker, who served as tech giant Facebook’s first president.
Parker augmented his $1.2 million in state elections contributions during 2014 with an additional $299,000 to measures on San Francisco’s November ballot, for a combined total of $1,492,000 in contributions.
Ron Conway appears to have donated at least $50,000, and Parker donated $200,000, to help pass the Prop “A” bond measure to raise $500 million for MUNI, perhaps in part because as the Observer predicted last month, Caltrans may be a beneficiary of the MUNI bond.
Both billionaires may want taxpayers to foot the bill via the Prop. “A” bond financing to extend Caltrans to the Transbay Transit Center to assist venture capitalists, investors, and developers of high-rise buildings around the planned Transbay Transit Center who had hired former Mayor “Slick” Willie Brown to help them wiggle out of their tax obligations in the Mello-Roos property tax district.
The San Francisco Chronicle’s Matier and Ross reported on Monday, October 20 that Caltrans is in line to receive $40 million from the $500 million bond in order to “electrify” the system. In previous media reports, Caltrans was reported to be a potential beneficiary of the MUNI bond in order to complete its extension to the Transbay Terminal. Now we’re being told it is to “electrify” Caltrans. It’s unclear at this point whether Caltrans will receive multiple portions of the MUNI bond, to both complete its extension and “electrify” it.
Part of that uncertainty is because there is no precise language in the question being put before voters dedicating how the bond will be spent, other than that Mayor Ed Lee and the Board of Supervisors will be able to carve up the spending any way they please if voters are dumb enough to pass a bond that provides no clear or precise language on how the bond will be spent.
Between the three billionaires — Conway, Hoffman, and Parker — and their relatives, they have sank at least $2.7 million in spending through October 20 on state and local elections, and may contribute more between now and the election on November4.
The flood of their money may well drown out other voices in this election.
Buying a State Assembly Seat
How many so-called “Independent Expenditure Committees” does Supervisor Chiu need to buy himself a seat in the California Assembly?
California’s Cal-Access campaign donor database reported that as of September 30, 2014, David Chiu’s official campaign (“Chiu for Assembly 2014,” ID # 1360422) had received $1,401,737 in contributions, compared to David Campos’ $864,524 (“Campos for Assembly 2014,” ID # 1359298). Late contribution reports filed between after September 30 and before October 20 reveal another $61,100 in contributions to Chiu, and $32,640 to Campos, bringing their official campaign totals to $1,462,837 and $897,164 respectively.
David Chiu has garnered at least four independent expenditure committees — “San Franciscans to Hold Campos Accountable (Opposing David Campos)” (ID # 1366671); “San Francisco Alliance For Jobs And Sustainable Growth”
(ID # 1369934); “San Franciscans For Effective Government” (ID # 1365064); and the “Public Service Coalition, Sponsored By Public Safety, Building Trades and Retail Workers Organizations” (ID # 1371281) — who have combined contributions of an additional $999,282, of which $733,900 came from the “San Franciscans to Hold Campos Accountable” committee Reid Hoffman has so lavishly donated to.
Additional spending on behalf of Chiu includes $374,208 in late independent expenditures not reported above from nine other PAC’s supporting him and $12,136 from the “San Francisco Police Officers Association PAC Opposing Campos,” bringing Chiu’s campaign war chest to at least $2,848,463.
By way of contrast, two other PAC’s supporting David Campos raised $79,339 as of October 20, and another $269,000 was raised by the “Nurses, Teachers and Working Families United to Support David Campos for Assembly 2014 Sponsored By Labor Organizations (Opposing David Chiu)” (ID #1366930), which brings Campo’s war chest to just $1.2 million (actually $1,245,502), less than half of Chiu’s $2.8 million.
Clearly, additional “official” independent expenditure committees supporting David Chiu have skewed the political spending by the elite few having money to burn.
Many observers wonder whether Supervisor Chiu’s official election committee is coordinating messages with various independent expenditure committees to unfairly blame Supervisor Campos for the Board of Supervisors vote to reinstate Sheriff Mirkarimi.
Leading up to the primary election last June, voters were inundated with, nasty campaign mailers seeking to discredit Campos funded by both the Police Officers Association PAC and the “Committee to Hold David Campos Accountable” for his vote on reinstating Mirkarimi as Sheriff. They seek to place the blame for Mirkarimi keeping his job solely on Campos.
This is ludicrous, as I wrote in October 2012 in “Swimming in ‘Official Misconduct’.” At the time, an anonymous analysis of the Ethics Commission’s handling of the Mirkarimi case clearly laid out how the Mayor and Ethics Commission had gotten it wrong charging Mirkarimi with official misconduct. The analysis noted the Ethics Commission was strictly limited to a single legal question: Did a public official commit “official misconduct” as defined in City Charter Section 15.105(e), or not? The Ethics Commission didn’t answer this question.
Chiu, Conway and Hoffman keep using a political tool against Campos, to punish him for having understood that official misconduct laws are there to punish official misconduct, not to remove elected officials the Mayor may have disagreements with.
An official mailer from Campos’ Assembly Committee rightfully notes that three men — billionaire Conway, billionaire Hoffman, and David Chiu right in the middle — are playing politics with domestic violence. Many women reject the negative attacks on Campos, including Kim Shree Maufus on San Francisco’s School Board, former Police Commissioner Angela Chan, and former State Senator Carole Migden.
The San Francisco Chronicle reported on October 16 that a group of domestic violence survivors staged a rally denouncing the smear campaign against Campos, and submitted a letter signed by more than 50 women to Chiu’s campaign headquarters demanding that Chiu stop playing politics with domestic violence. According to the Chronicle the letter reads, in part:
“If you really cared about us, about this extremely difficult and complicated issue ... then you would stop using us to win votes. You would tell your billionaire friends to take the $600,000 they have spent on vicious ads filled with hyperbole and lies and instead use that money to directly help domestic violence survivors like us.”
One signer of the letter, Trisha Fogleman, asserted that Chiu and his billionaire backers are focusing their attacks solely on Campos. She noted “You can’t use it against one candidate and not others,” since Campos’ vote to reinstate Mirkarimi was just one of four votes finding that the charges against the Sheriff were too unconstitutionally vague.
The San Francisco Chronicle also reported on October 21 that Campos’ campaign manager, Nate Allbee, believes this is “pay-to-play politics at its worst. Allbee says “David Chiu’s Airbnb investor friends have realized that their sleazy attempt to use domestic violence to get their friend elected has backfired and angered women.”
Another group — the League of Pissed-Off Voters — also cries foul with David Chiu’s dealings with Airbnb lobbyists. The Examiner reported on October 21 that the League filed a complaint with San Francisco’s Ethics Commission involving a consultant on Chiu’s Assembly campaign, Nicole Derse, who co-founded 50+1 Strategies. The League alleges that Chiu did not disclose the relationship between himself, 50+1 Strategies, and Airbnb prior to the Board of Supervisors vote legalizing Airbnb’s short-term rental business. As I reported in October, Chiu’s two-year delay developing the Airbnb legislation clearly has benefited Airbnb’s prime investors: Billionaires Conway and Hoffman.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award.
Eric Brill’s dispassionate, initially anonymous analysis of the Ethics Commission’s handling of Sheriff Ross Mirkarimi’s case can be found online at rjemirkarimi.blogspot.com/2012/09/ethics-commission-proceeding-against.html. It’s well worth the read, disputing much of the nonsense being raised by billionaires Conway and Hoffman against Campos.
Prop “A” and David Chiu: Just Say No
By Patrick Monette-Shaw
If the idea of sending Supervisor David Chiu off to represent you in the California Assembly in Sacramento doesn’t scare you enough, get ready for being bilked, San Franciscans.
The use of the vague words “could be” and “may be” are no substitute for more precise language that uses “shall be.” The choice of words is obviously no mere accident.”
According to a December 3, 2013 article on StreetBlogSF, you’re being asked to approve half-a-billion dollars for MUNI in 2014 and 10 years from now, the City plans to come back in November 2024 to ask you to approve a second half-a-billion dollars for MUNI, 20 years before the 30-year interest on the first bond will be paid down.
Between the two bonds, taxpayers may have to pay down nearly one billion in interest on the one billion in bonds. Add to that the Mayor’s Task Force recommendation to place a ballot measure before voters in November 2016 to increase San Francisco’s sales tax by a half percent, from 8.75% to 9.25%, designed to help raise another billion dollars for MUNI.
Add onto the mix a ballot measure to raise the vehicle license fee (VLF) from 0.65% to 2% that was planned for the November 2014 election, but which the Mayor pulled off the ballot to make the first $500 million bond for MUNI more palatable to voters hoping for passage of the 2014 bond. Since state law allows San Francisco voters to restore the VLF cut by former Governor Arnold Schwarzenegger, do not doubt that the VLF measure recommended by the Mayor’s Transportation Task Force to raise another cool one billion dollars for MUNI will eventually make it onto a future ballot, perhaps in 2016.
Say No to Prop “A”
If voters approve it, the 2014 Proposition A, the Transportation and Road Improvement Bond, will authorize The City to borrow $500 million by issuing general obligation bonds in order to meet some of the transportation infrastructure needs of the City. The key word is “some,” which is not clearly described.
The Mayor’s Transportation Task Force identified $10 billion in spending on “crucial infrastructure projects” for MUNI earlier in 2014. Proposition “A” funds would be used to address “some” of the needs identified by the task force.
Some observers report the $500 million in General Obligation Bonds will be accompanied by $350 million in interest, for a total debt load of $850 million. Other observers assert that the interest will actually be $500 million.
In both the enabling legislation and the Ballot Simplification Digest in the voter guide, specific projects to be funded are not clearly described. Instead the operative words being put before voters indicate that funds “could be allocated” for transit and roads, or alternatively described as “a portion of the Bond may be allocated to.” Voters beware: The use of the vague words “could be” and “may be” are no substitute for more precise language that uses “shall be.” The choice of words is obviously no mere accident.
There is no mention in either the Board of Supervisors ordinance or in the Ballot Simplification Digest itemizing either estimated dollar amounts, or percentages, of how the funds will actually be allocated across project categories or to specifically-named projects. The City is clearly seeking carte blanche authority for unspecified projects. It wants voters to authorize a half-billion dollar check having a blank memo line so The City can spend the funds anyway it pleases.
MUNI’s Five-Year Budget
Given the five-year history of MUNI’s budgets, voters should be skeptical of handing MUNI any more money using vaguely-worded ballot measures.
Data available on The City’s SFOpenBook web site shows that across the past five years, MUNI’s budget has soared by $172.9 million, up from $775 million in FY 10-11 to $947.9 million for the current FY 14-15 — a whopping 22.2% increase. Of the $172.9 million increase, $93.9 million occurred between FY 13-14 and FY 14-15.
Across the four-year period from calendar year 2010 to calendar year 2013, MUNI added 221 employees pushing its total payroll (excluding fringe benefits) up just $30.1 million, from $375.4 million in CY 2010 to $405.5 million in CY 2013, leading observers to wonder why MUNI’s budget increased $172.9 million between FY 10-11 and FY 14-15 and what the $173 million was spent on, if not on salaries.
There are few signs that increasing MUNI’s budget has improved the system overall, or improved on-time performance.
Looking closer at MUNI’s budget, the category for “Administration” increased by 44.4% across the five-year period — from $55.6 million in FY 10-11 to $80.2 million for FY 14-15. Why did Administration need a $24.6 million increase?
Before voters hand MUNI $500 million in new bond funding via Prop “A,” reasonable questions include whether the agency has too much bloat in its budget; whether it needs a department-wide comprehensive, and independent, audit; and whether the agency has been a good steward of public funds.
Say “No” to David Chiu
Leading up to the June 2014 primary election, readers may recall in-depth reporting about the race between Supervisors David Campos and David Chiu to replace termed-out Assemblyman Tom Ammiano in this reporter’s article “The Three-David Race for Assemblyperson” on the Fog City Journal web site last May. Since then, the race between the two Davids has become neck-and-neck, and additional information has surfaced about why you won’t want to send Mr. Chiu to Sacramento.
Airbnb and the “Sharing Economy”
Although New York City; Berlin, Germany; and other cities are taking steps to ban short-term rentals altogether, Supervisor Chiu continues his attempts to write legislation to “regulate” — rather than ban — short-term rentals in San Francisco. Problems with Airbnb have surfaced in many neighborhoods throughout San Francisco, from West Portal to single-room-occupancy (SRO) hotels in the Tenderloin.
As I reported last May on FogCityJournal.com, Supervisor David Chiu has taken over two years to develop legislation regulating “sharing economy” short-term rentals in San Francisco. Chiu’s two-year delay may have benefited Airbnb and its prime investor, billionaire Ron Conway, who holds considerable sway over Mayor Ed Lee after Conway formed an independent expenditure committee that spent $600,000 towards electing Lee as Mayor in 2011.
Chiu’s delayed legislation has allowed Airbnb to continue refusing to pay the 14% hotel tax, which it has failed to do during the six years since the company was founded. Current estimates project that the City would receive $11 million annually if Airbnb would begin paying the hotel tax; over the six-year period it has refused to pay the tax, San Francisco has lost somewhere between $66 million and $100 million in revenue, a fact that cannot have escaped investor Conway’s notice.
On April 3, 2012, San Francisco Treasurer and Tax Collector Jose Cisneros published an opinion that short-term rental companies and their hosts are required to collect and pay the city’s Transient Occupancy Tax (the hotel tax). On the day Cisneros published his opinion, the SF Bay Citizen reported that Mayor Lee’s office “had urged Cisneros … to postpone applying the rule to give a ‘collaborative consumption task force’ time to consider possible legislation that would apply a lower tax rate” on brokers of short-term rentals. The term “collaborative consumption” is used to describe the so-called “sharing economy” … although “sharing economy” companies such as Airbnb don’t actually pay their fare share of taxes.
Mayor Lee, for his part, has offered no explanation as to why a lower tax rate should be granted to Airbnb and its prime investor, Ron Conway. Perhaps Lee is counting on Conway spending more independent expenditure committee funds to re-elect him to a second term as mayor and doesn’t want to annoy his “angel” investor.
On August 14, 2014, the San Francisco Examiner reported that the Department of Building Inspection’s (DBI) Code Advisory Committee believes that Chiu’s legislation to regulate short-term rentals “still fails to address fire-safety, life-safety, accessibility and occupancy issues,” and argued that DBI should not be an administrative record-keeping agency monitoring short-term rentals by being required to operate a registry of hosts using short-term rental platforms like Airbnb.
The Code Advisory Committee noted Chiu’s legislation doesn’t add safety codes to the short-term rentals beyond what currently exist for residential units, and doesn’t provide for code-compliance checks for issues such as smoke detectors.
Between August 14 when the Code Advisory Committee expressed its concerns and September 15 when the legislation was last heard by the Board of Supervisors Land Use Committee, Chiu had taken no action to include the Code Committee’s concerns.
During the September 15 Land Use Committee hearing, Supervisors pushed David Owen, Airbnb’s director of public policy, for information on liability insurance and the number of nights hosts can rent out their units. Owen, who served as a legislative assistant to former Supervisor Aaron Peskin, creatively claimed that reporting to The City the number of nights each unit is used would violate Airbnb’s “innovations” and violate the privacy of hosts renting out their units. Owen has refused to comment on whether Airbnb will pay its back taxes, despite Cisneros’ 2012 ruling and Aaron Peskin’s belief the back taxes should be paid.
Chiu’s legislation appears to be restricted to a 90-day limit when a host is not present, but the Land Use Committee debated, but has not yet required, that a similar limit should be applied when hosts are present, since without an explicit restriction there’s a clear loophole allowing hosts to be able to rent out portions of their units all year long provided they are present.
Supervisor Jane Kim is concerned that if Chiu’s legislation does not include regulating co-hosted days, and if Airbnb continues to refuse disclosing room rental data, the City will have no way enforce Chiu’s legislation as written.
The Land Use Committee reportedly added a requirement to Chiu’s legislation that tenants must notify their landlord if they register as a “host” on a hosting platform such as Airbnb, a key provision that Chiu failed to include all along, as if landlords have no say in whatever happens in their rental units. Still unresolved is the amount of liability insurance Airbnb and hosts will be required to carry on short-term rental units.
Airbnb’s “sharing economy” business model appears to be based on flouting laws on the books regulating various public accommodations. Take for instance an August 20 article in San Francisco Weekly reporting that Airbnb had launched a pilot program to allow city residents to register for its “dinner party program” in which “hosts” will be able to throw paid dinner parties for total strangers while violating all sorts of regulations that apply to brick-and-mortar restaurants. SF Weekly reported that Richard Lee, head of San Francisco Department of Public Health’s food safety program, noted that for-profit hosts running what amounts to a restaurant out of their homes is completely illegal. That hasn’t stopped Airbnb. It’s another illegal ancillary venture following Airbnb’s illegal venture in short-term rentals.
Chiu’s legislation does nothing to stop Airbnb from encouraging its “hosts” to sell home-cooked meals as an ancillary service, sales from which Airbnb will pocket a cut. Chiu will likely not develop additional regulations governing “sharing economy dinner parties,” perhaps out of deference to his benefactor, Ron Conway.
Forewarned Is Forearmed
Developers, high-tech companies, and “sharing economy” companies don’t want to pay their fare share of taxes — and have successfully avoided paying taxes in San Francisco for years — and want voters to bear the tax burden, instead.
To avoid David Chiu pulling his same stunts in Sacramento affecting the rest of the State, vote for David Campos, and urge your friends and relatives living in Assembly District 17 to do the same. Say “No” to both Prop. “A” and to David Chiu.
Monette-Shaw received the Society of Professional Journalists–Northern California Chapter’s James Madison Freedom of Information Award in the Advocacy category. Feedback: mailto:monette-shaw@westsideobserver.
|Ethics Commissioner PeterKeane, Photo: Bob Butler|
By Patrick Monette-Shaw
The tenuous relationship between San Francisco's Sunshine Ordinance Task Force and the City's Ethics Commission was already the subject of an Ethics Commission complaint filed on June 22 involving probable inappropriate communications from an errant Task Force member to the Ethics Commission that appears to have contributed to conflicting rulings issued by the Ethics Commission.
Ethics Commissioner Peter Keane — a widely respected Professor of Law and Dean Emeritus at Golden Gate University School of Law who was appointed to the Ethics Commission by City Attorney Dennis Herrera — observed that the draft response was too “defensive,” needed substantial edits, and that a “lot of the language in the proposed draft is inappropriate.” Finally, St. Croix’s excessive influence over the Ethics Commission appears to be gradually waning.”
The very next day, the San Francisco Civil Grand Jury coincidentally issued a blistering report on June 23 that is highly critical — once again — of the Ethics Commission.
Civil Grand Jury Faults Ethics Commission — Again
The 2010–2011 Civil Grand Jury issued a scathing 15-page report three years ago, titled “San Francisco's Ethics Commission: The Sleeping Watch Dog,” highly critical of the excessive influence the Ethics Commission's Executive Director, John St. Croix, holds over Ethics Commissioners, leading Commission members to abdicate oversight and their responsibilities to serve as an independent watchdog. The 2011 report contained seven findings and seven recommendations. A new Grand Jury report remains critical of the Ethics Commission.
Among other issues raised, the Jury's June 2011 report focused heavily on the dismissal of all 18 Sunshine complaints referred by the Task Force to the Ethics Commission for enforcement between 2004 — the year St. Croix was first hired — and 2010. Each of the 18 cases was dismissed by the Executive Director; none was ever heard during an open hearing before the Ethics Commission. The Grand Jury's report asserted the Commission's Executive Director controls the “agenda” of the Ethics Commission, and reported that one Commissioner stated that there was an expectation that “… the Commission should support the Executive Director in his decisions to dismiss a case.”
St. Croix's control over the Ethics Commission is a classic example of the tail wagging the dog — a Sleeping Watchdog. The Grand Jury noted its 2011 report was not meant to be a definitive report on the Ethics Commission; that report would be left to a future Grand Jury.
Grand Jury's New Report on Ethics Commission
Fast forward to 2014. On June 23, the 2013-2014 Civil Grand Jury released a 43-page report (excluding several appendices) containing 45 findings, and 35 recommendations, titled “Ethics in the City: Promise, Practice or Pretense.”
Among other recommendations, the 2014 Grand Jury recommended a two-year pilot contract with California's Fair Political Practices Commission to enforce violations of California Public Records Act and Sunshine Ordinance violations; an audit by the City Attorney of potential improper campaign contributions returned to the contributor, rather than forfeited to the City, as required by City laws; a recommendation that the Board of Supervisors enhance the “Citizen's Right of Action” to enforce the City's ethics law; a policy needs to be developed to preserve e-mails and text messages consistent with preservation of other public records; violations of departmental Statements of Incompatible Activities by City employees and members of boards and commissions should be disclosed; and enhancing the Form 700 Statements of Economic Interests City officials are required to submit to make them searchable. There are many more substantive issues raised in the Grand Jury's 2014 report.
The Ethics Commission's draft response to the 2014 Civil Grand Jury appears to have been authored by Mr. St. Croix. Of note, during its August 18 special meeting to discuss the Ethics Commission's response to the Grand Jury, Ethics Commissioner Peter Keane — a widely respected Professor of Law and Dean Emeritus at Golden Gate University School of Law who was appointed to the Ethics Commission by City Attorney Dennis Herrera — observed that the draft response was too “defensive,” needed substantial edits, and that a “lot of the language in the proposed draft is inappropriate.” Finally, St. Croix's excessive influence over the Ethics Commission appears to be gradually waning.
Of concern to the 2014 Grand Jury was the failure of the Ethics Commission to produce an annual report about the effectiveness of San Francisco's ethics laws, an annual report required by the City Charter in addition to the departmental annual report required of each City department, and each board and commission. St. Croix's draft response to the Grand Jury claimed that the additional annual report addressing effectiveness of ethics laws “was not necessary,” and “implementation is not up to the Ethics Commission.”
Initially Ethics Commissioner's were poised on August 18 to allow St. Croix's draft language to stand, until they took public comment and heard from both members of the public and members of the Civil Grand Jury, that the second report is required by the City Charter. Only then did the Ethics Commissioners decide to re-write St. Croix's draft response, agreeing that the Ethics Commission should, in fact, develop and submit the supplemental annual report.
St. Croix's Preservation of the Status Quo
The Grand Jury's finding regarding the “Citizen's Right of Action” involved a simple matter to enhance citizen's rights to enforce all of the City's ethics laws. But St. Croix's inflammatory draft language recommended that the Ethics Commission disagree with the Jury's finding and not implement it; he wrote, “absent a problem with the status quo, there is no compelling basis for specific enhancements.”
St. Croix further noted in the Commission's draft response “To our knowledge, no one has ever attempted to use or even inquired about this right [the Citizen's Right of Action].” St. Croix appears to have the mindset that so long as nobody ever attempted to use the right before, there's no need to change the status quo.
The status quo that has developed at the Ethics Commission under St. Croix's decade-long tenure as Executive Director is troubling, in part due to the status quo of his single-handed dismissal of the 18 Sunshine cases referred to Ethics for enforcement during the first six years of his reign.
For his part, Commissioner Keane astutely noted during discussion of the recommendation on August 18, that the Citizen's Right of Action is a “mom-and-apple-pie issue.” Keane asked, “Why would we disagree with a broader right of citizen's access to ethics laws?” After lengthy discussion, the Commission voted to change the recommendation from “disagree,” to “agree,” and agreed to write the second report.
“Designated Filers” Escape Sunshine Training
The Grand Jury wrongly noted that all Form 700 “Statements of Economic Activities” are filed electronically. They are not. Only City Department Heads and members of boards and commissions are currently required to file their Form 700's electronically; so-called “designated filers,” who file directly with their City departments, do not file electronically.
San Francisco's Campaign and Governmental Conduct Code Sections 3.1-110 through 3.1-457 enumerates a total of 1,524 positions listed by working job titles as being required to file Form 700's with either the Ethics Commission, or to their Departmental “Filing Officer.” Of those, just 533 were required to begin submitting them electronically to the Ethics Commission in April 2014.
Of the 533, there were just 57 City department heads and a few senior managers who filed Form 700's with Ethics (10.7%), 390 members of boards and commissions filed with Ethics (73.2%), and another 86 (16.1%) were filed with Ethics by filers who aren't even enumerated in the Governmental Code.
Sunshine Ordinance Section 67.33 requires Form 700 filers who file directly with the Ethics Commission to also submit an annual “Sunshine Ordinance Declaration” to the Ethics Commission. California Government Code Section 53235 requires Form 700 filers who file directly with the Ethics Commission to also submit a bi-annual “Certificate of Ethics Training.” There is no local regulation requiring other types of Form 700 filers to take either of the two trainings.
This effectively means that approximately 1,077 (fully 70.7%) of the 1,524 positions enumerated in the Governmental Conduct Code who are “designated” filers do not file electronically. No date has been set as to when the 1,077 “designated” filers will be required to start filing electronically, or with whom. Designated filers are not required to submit annual statements that they've taken Sunshine Ordinance Training, or that they've taken the bi-annual Ethics Training required of those who file directly with the Ethics Commission. That's a significant number of City employees who receive little training on Sunshine requirements.
In fact, of the 37,606 City employees in the City Controller's payroll database for CY 2013, fully 37,549 file neither Form 700's nor are required to take Sunshine and Ethics training — 99.98% of all City employees with no such requirement. Only 57 of the City's 37,606 City employees — less than two-tenths of one percent — have such a requirement. It appears 37,549 City employees may never receive any notice that they are required to comply with the Sunshine Ordinance.
Ethics Commission Rejected More From St. Croix's Draft Response
Among other changes described above, the Ethics Commission reversed more of St. Croix's draft responses, including:
· The Grand Jury is concerned that improper election campaign contributions were returned to the contributor, rather than forfeited to the City, as required by City law. The Grand Jury recommended that the Board of Supervisors should request the City Attorney's Office conduct an independent audit to determine whether prohibited campaign contributions were actually forfeited to the City.
Although the Grand Jury didn't ask Ethics to respond, St. Croix included a response anyway, asserting that since August 2008, the Ethics Commission has followed a policy it set (in potential contradiction of City law) to allow campaigns to return donations to donors prior to any action being taken by the Commission. St. Croix asserted that the Commission has authority to waive or reduce forfeitures. Once again, it was Commissioner Keane who introduced a motion to strike out St. Croix's draft language, and recommend that the Board of Supervisors should, in fact, ask the City Attorney to conduct an audit of potential improperly returned campaign contributions rather than forfeitures.
· The Grand Jury made a number of recommendations regarding Form 700 Statement of Economic Interests that are filed after the required April 1 deadline, specifically noting that the Ethics Commission should recommend dismissal for any officer or employee who fails to file their Form 700 within 90 days after the deadline (Recommendation 14b), and should recommend dismissal for employees who file inaccurate Form 700's (Recommendation 14c). The Grand Jury also recommended that all Form 700 filers — including “designated filers” who currently only submit their Form 700 to their departmental filing officer — be required to file them with the Ethics Commission (Recommendation 14d).
Initially, St. Croix's draft response to Grand Jury Recommendations 14b and 14c was “would not be implemented,” as being outside of the Ethics Commission's jurisdiction. But after lengthy debate the Commissioners changed the response to the Grand Jury saying that Recommendations 14b and 14c “will be implemented in amended form,” indicating that the Ethics Commission will instead recommend to the appropriate appointing authority suspension (rather than dismissal) of an employee who fails to file their Form 700 within 90 days of the deadline. In its final response to the Grand Jury, the Commissioners removed St. Croix's claim that dismissal or suspension recommendations of City employees fall outside of the Commission's jurisdiction.
Ethics Commission Fails to Correct Other Flaws in St. Croix's Draft Response
Although Commissioner Keane astutely introduced motions to change many of St. Croix's inflammatory draft responses, several glaring mistakes went unchallenged:
· Sadly, both the Ethics Commission's draft response and its final response to the Grand Jury adopted by the Ethics Commissioners failed to address Grand Jury Recommendation 11 dealing with retention and preservation of e-mails and text message consistent with preservation of other public records. Indeed, in its final response to the Grand Jury, the Ethics Commissioners let stand St. Croix's ridiculous nonsense that “the City's document retention policy does not require retention of correspondence for any specific period of time.”
To the contrary, San Francisco Administrative Code Section 8.3 expressly provides that current records may only be destroyed five years after they were created, and then only if they have served their purpose and are no longer required for any public business. This stands in stark contrast to St. Croix's claim — which Ethics Commissioner's apparently didn't even think to question — that there is no “specific period of time” for records retention.
While the City's overall records retention and destruction policy may not address retention of correspondence, as St. Croix claimed, many individual City department's unique records retention and destruction policies do require retention of correspondence, typically retention for two years. The Commissioners should have recommended that the City's Administrative Code be revised to adopt a two-year retention period, as required by California Government Code Section 34090, which states that the destruction of records less than two years old is not authorized.
Although the Ethics Commission's response to the Grand Jury got it wrong on this point, the Sunshine Task Force's response to the Grand Jury on the same recommendation and same issue got it right: The Task Force rightfully noted that Section 8.3 of San Francisco's Administrative Code should be amended to comply with California Government Code Section 34090. The Task Force should have gone a step further and recommended that a Sunshine training video on the City Attorney's web site also needs to be updated to clarify the two-year record retention period.
The Ethics Commission also got it wrong on this point, because even the City Attorney's misguided Good Government Guide updated on September 3, 2014 — which Commissioner Keane has previously indicated carries no force of law, and is merely an advisory document — clearly notes on page 113 regarding records retention schedules, that State law (citing Government Code Section 34090) “sets a ‘floor' for records retention” of two years.
St. Croix's draft response — which the Ethics Commissioner's again mistakenly let stand in the final response to the Grand Jury — claimed “departments are free to create more restrictive [records retention] rules as they find necessary.” Departments are not “free” to override Government Code Section 34090 on a department-by-department basis (any more than the City's claim that the Sunshine Ordinance cannot “trump” the City Charter, it's clear that department-specific policies and procedure manuals cannot trump State law). At minimum, the Ethics Commission should have recommended that departmental records retention policies be standardized to require the two-year records retention.
In addition, St. Croix's draft response and the Ethics Commission's final response to the Grand Jury completely sidestepped the issue of whether a uniform policy regarding retention of e-mails generated using City-issued e-mail accounts, and on City-issued cell phones and electronic equipment, needs to be developed now, rather than waiting on an eventual California Supreme Court ruling pending before it regarding e-mails and text messages sent using personally-owned digital equipment.
Whatever outcome of the Supreme Court case regarding personal devices used to conduct official City business, the fact remains that there is currently no consistent Citywide policy on preservation of e-mails and text messages, or social media content on City-funded social media accounts, for retention of these materials generated using City-issued e-mail accounts and City-issued electronic devices.
The Ethics Commission completely sidestepped this concern of the Civil Grand Jury in its formal response to the Jury. For its part, the City Attorney's response to the Civil Grand Jury somewhat sidestepped the issue. The City Attorney asserted that developing a policy to preserve e-mails [even those generated on a City-issued e-mail account] is a “policy matter for the Ethics Commission and other appropriate City agencies, such as the Board of Supervisors and the Mayor,” and indicated the City Attorney would “assist” other agencies implement the recommendation to develop a policy, but only if such assistance is requested.
At minimum, such a policy governing City-issued equipment and accounts needs to be developed immediately.
· Unfortunately the Ethics Commissioner's let stand St. Croix's ridiculous assertion in response to Jury Recommendation 20 involving use of an independent hearing officer for complex cases that the Ethics Commission is a “law enforcement agency,” and the Sunshine Task Force is merely an “advisory body.” Both assertions are wrong.
San Francisco's Ethics Commission is not a law enforcement agency as defined for law enforcement agencies. At best, it is an advisory or oversight body that enforces campaign and government conduct laws, but that does not make Ethics a law enforcement agency. Were the Ethics Commission a law enforcement agency, so too would the Sunshine Task Force be, since the Task Force also was created to adjudicate violations of our Sunshine laws.
The Task Force is not merely an “advisory body,” as both Mr. St. Croix and all five of the Ethics Commissioners must surely know (if they don't already know this, they shouldn't even be Ethics Commissioners). In addition to providing advice as just one of its duties, the Task Force's larger duty is as a quasi-judicial body charged with adjudicating disputes between members of the public seeking access to public meetings and public records, and the very City agencies that thwart access to public meetings and public records. Even the City Attorney's Sunshine training video for those required to file their Form 700's directly to the Ethics Commission acknowledges the Task Force is an adjudicatory body, not merely an advisory body.
Ethics Commission Rejects Two Key Issues of Concern to the Grand Jury
The Ethics Commission rejected two key issues raised by the Grand Jury:
· The Grand Jury's first major recommendation was to develop a contract with California's Fair Political Practices Commission on a two-year pilot basis to hear and enforce major enforcement cases, including official misconduct, conflict of interest, campaign finance and lobbying violations, and violations of post-employment restrictions to enforce both state and local ethics laws.
The Ethics Commission's response to the Grand Jury was “Will not be implemented,” under the claim that “the Ethics Commission sees no need for this and it is possible the [City] Charter would prohibit such a contract.” The Ethics Commission did acknowledge that the FPPC has a pilot program with the County of San Bernardino, but that is the only jurisdiction currently permitted such a pilot program under state law. Rather than investigating whether the City Charter was permit such a contract, the Commissioners simply went with the possibility that it might be prohibited.
· Concerned that the Sunshine Ordinance Task Force and the Ethics Commission have legal and procedural differences in their processes and their legal requirements that result in disharmony between the two oversight bodies, the Grand Jury recommended that arrangements should be made to use an independent hearing officer to develop a consistent, legally-sufficient record of any given case.
Again, the Ethics Commission's response to the Grand Jury was:
“Will not be implemented,” saying “The Ethics Commission does not agree with this finding and believes it is in the public's best interest to have the Commission continue to investigate and hear Sunshine referrals and complaints. Further, there is no mechanism in the Sunshine Ordinance to do this.”
First, it would be a simple matter to amend the Sunshine Ordinance to provide a mechanism to hire an independent hearing officer. But the Ethics Commission does not want the status quo changed, as St. Croix observed regarding another Grand Jury recommendation.
It is painfully clear, given St. Croix's track record of dismissing the 18 Task Force referrals to Ethics for enforcement between 2004 and 2010, that he is not interested in changing the status quo, and wants to retain his past practice of finding exculpatory excuses to let City officials off of the hook by dismissing Sunshine complaints filed against them.
Given St. Croix's track record, the best interests of members of the public would be to have an independent hearing officer take over, but that might lead to more public officials being found guilty of having violated our ethics laws, an outcome St. Croix is desperate to prevent. So it is not surprising that the Ethics Commission rejected this Grand Jury recommendation in a turf-protecting move.
The Ethics Commission may want to preserve the City's status quo by retaining the current authority to appointment both Ethics Commissioners and members of the Sunshine Ordinance Task Force. Appointees chosen by the Mayor, Board of Supervisors, and the City Attorney are easier to control than an independent hearing officer. After all, an independent hearing officer may be a wild card the Mayor and Board of Supervisors don't want established who might find and uphold violations of our ethics laws by City officials.
A Wayward Sunshine Task Force Member
On April 28, 2014 Sunshine Ordinance Task Force member David Pilpel appears to have violated the Statement of Incompatible Activities (SIA) applicable to Task Force members when he spoke during the public comment period on a matter under discussion by the Ethics Commission that was referred by the SOTF for enforcement, by introducing himself as “David Pilpel, member of the Sunshine Ordinance Task Force.”
The SIA applicable to Pilpel clearly provides that no officer may hold himself or herself out as a representative of the Task Force, or as an agent acting on behalf of the Task Force, unless authorized to do so. Pilpel had not requested or received a waiver known as an Advance Written Determination from either the Board of Supervisors, or from the Ethics Commission, exempting him from this SIA prohibition.
Pilpel appears to have directly interfered with the Task Force's referral of Sunshine complaint #12-058, Dominic Maionchi vs. Recreation and Parks Department to the Ethics Commission in a case involving Rec and Park's General Manager Phil Ginsburg over failure to release public documents regarding leases of boat slips. Pilpel's testimony on April 28 deprived Maionchiof due process notice that Pilpel intended to advocate before the Ethics Commission to undercut and overturn a prior decision the full Task Force had previously ruled appropriate. Pilpel's testimony on April 28 helped convince the Ethics Commission to reject the complaint and return it to the Task Force for having named the so-called “wrong actor” (Department Head Ginsburg) in SOTF's referral for enforcement to Ethics. Pilpel's testimony ended up letting Ginsburg off the hook when the Ethics Commission ruled against Maionchi.
Although Pilpel has fretted extensively about the due process rights of departmental respondents and the “actors” named as having violated the Sunshine Ordinance and their due process rights, when it comes to the due process rights of complainants, Pilpel appears to be not quite so interested. Pilpel provided no due process notification to Maionchi — or to his fellow SOTF members — that he, Pilpel, intended to advocate against the SOTF referral of Maionchi vs. Recreation and Parks on April 28 before the Ethics Commission.
A formal complaint about Pilpel's probable April 28 violation of the SIA filed by this author on June 22 with the Clerk of the Board of Supervisors that was forwarded to the Ethics Commission on June 25, remains a pending Ethics complaint that has not been dismissed.
Notably, Ethics Commissioner Peter Keane observed on July 28 — during Commissioner debate and discussion on the separate, unrelated SOTF Mica Ringel referral to Ethics for enforcement involving largely the same issues in the Dominic Maionchi case — that the Ethics Commission may have erred on April 28 when it found Ginsburg had not violated the Sunshine Ordinance, after the Ethics Commission determined on July 28 that in a very similar case, John Rahaim, Director of the Planning Commission, had violated the Sunshine Ordinance, essentially involving the same underlying issue of naming department heads as ultimately responsible for the actions or inactions of their subordinates. Keane suggested that the Ethics Commission may have erred in April “punting” the Maionchi matter involving Ginsburg back to the Task Force for “further factual information.”
The Ethics Commission's ruling sustaining the Task Force's Order of Determination finding that Planning Director Rahaim had violated the Sunshine Ordinance was an historic moment, since it was just the second time that the Ethics Commission upheld a Task Force referral for enforcement, and was the first time that the Commission ruled a department head had, in fact, violated the Sunshine Ordinance. And the first time the Commission issued a cease-and-desist order involving Sunshine Ordinance violations.
Phil Ginsburg and “Further Factual Information”
Four months after the Ethics Commission referred the Maionchi matter back to the Sunshine Task Force on April 28 for further factual information about whether Phil Ginsburg was the properly-named respondent in the Maionchi complaint, Ginsburg suddenly responded when the matter was scheduled for preliminary re-review at the Sunshine Task Force's September 3 regularly-scheduled meeting.
During the full year between May 1, 2013 (when the Task Force first heard Maionchi's December 12, 2012 complaint) and April 28, 2014 when the Ethics Commission finally considered the Task Force's referral for enforcement naming Ginsburg as responsible, Ginsburg had never appeared at either multiple Task Force hearings or at the Ethics Commission hearing, instead sending subordinates to fall on his sword during hearings to defend him.
So it was surprising that on September 3, Ginsburg finally submitted a letter to the Task Force defending himself for the first time, perhaps hoping he could influence the “further factual information” requested by the Ethics Commission. Ginsburg admits in the letter he was aware of Maionchi's records request and subsequent Sunshine complaint, but that the records did not rise to the level of calling for the “time and attention of [Rec and Park's] General Manager” and he was not personally involved in the redaction of information provided to Maionchi. Instead, Ginsburg asserts he is fully supportive of his staff who decided to redact the records provided to Maionchi. Ginsburg claims the redaction is consistent with “widespread City practices” guided by long-standing “public advice” in the City Attorney's Good Government Guide.
Ginsburg twice referred in his September 3 letter that the Good Government Guide has long provided “public advice,” all but ignoring that the advice may not be accurate “legal advice,” and simply public advice. No matter how “long-standing” or “widespread” the practice has been doesn't automatically justify the past practice, nor make the “public advice” valid legal advice. And Ginsburg may be unaware Ethics Commissioner Keane has stated publicly that the Good Government Guide carries absolutely no force of law. The Guide is a flawed guideline, not law.
Observers now wonder whether Ginsburg submitted his September 3 letter only after the Ethics Commission issued its cease-and-desist letter against Planning Director Rahaim finding that Department Heads are, of course, responsible for the actions and inactions of their subordinates. Others wonder whether Ginsburg only submitted his letter after Commissioner Keane indicated on July 28 that the Ethics Commission may have erred three months earlier in the Maionchi case punting it back to the Task Force.
Could it be that Ginsburg is now worried that if the Task Force returns the Maionchi case back to the Ethics Commission asserting that the Ethics Commission can't have it both ways ruling differently between the Maionchi case and the Ringel case, that Ginsburg may eventually be found by Ethics to have also violated the Sunshine Ordinance, just as Ethics found Rahaim had?
The Task Force asserted during its September 3 meeting that it will not re-adjudicate the entire matter again in light of Ginsburg's unexpected September 3 letter, and will focus instead at its next meeting on how to respond to, and return the case to, Ethics.
A Second SIA Violation
On July 28, 2014, Member Pilpel again spoke before the Ethics Commission during public comment on Sunshine complaint #13-024, Mica Ringel vs. Planning Department being heard by the Commission. Although Pilpel claimed to be speaking as an individual, within the first minute-and-a-half of his testimony he switched from using the first person “I,” into using multiple times the third person “we,” again appearing to be speaking on behalf of, and representing, the Task Force.
Pilpel again questioned whether the “right” actor had been referred to the Ethics Commission, and suggested he wasn't sure City Departments could be named as having violated the Sunshine Ordinance, rather than naming an individual who may have violated the Sunshine Ordinance.
The Ethics Commission had none of it with Pilpel's July 28 line of reasoning.
Instead, a nondescript, unprintable Enforcement Summary posting buried on the Ethics Commission web site notes that on July 28:
“The [Ethics] Commission found that John Rahaim, Director, Planning Department, non-willfully violated Sunshine Ordinance section 67.21(a). The Commission found that there was not sufficient evidence to support a finding that there was a violation of Sunshine Ordinance section 67.29-7. But the Commission ordered Director Rahaim to cease and desist from failing, without unreasonable delay, to permit public records to be inspected and examined. The Commission ordered [its] Executive Director [John St. Croix] to post on the Commission's website the Commission's finding that Director Rahaim violated the Sunshine Ordinance. The Commission ordered [its] Executive Director to issue a warning letter to Director Rahaim and inform the Planning Commission of the violation.”
The Ethics Commission can't have it both ways, ruling against Maionchi and rulingfor Ringel in two similar cases in which Department Heads had been named as responsible for Sunshine violations in Task Force referrals to the Ethics Commission.
Notice was received on August 15 that a second SIA complaint against Pilpel involving the Ethics Commission's July 28 hearing was dismissed by the Ethics Commission's Executive Director on August 13. In dismissing the second SIA complaint against Pilpel, St. Croix only cited Section III.A.1, “Activities that Conflict with Official Duties,” of the applicable SIA.
St. Croix made no mention in his dismissal letter of Section III.B.1 of the SIA, “Restrictions That Apply to Officers or Employees in Specified Positions,” which provides that certain activities are also expressly prohibited for individual officers and employees holding specific positions, notwithstanding Section III.A.1.
Section III.B.1 expressly prohibits officers and members of the Task Force from providing advice concerning Sunshine Ordinance complaints to other entities, such as the Ethics Commission. Section III.B.1 states:
“Unless otherwise expressly permitted by state or local law and regulation, no officer or employee may assist, advise or represent other persons or entities concerning Sunshine Ordinance complaints or concerning matters that may appear before the Task Force, regardless of whether the activity is compensated.” [emphasis added]
Because Pilpel has no way of knowing whether any given referral sent to the Ethics Commission for enforcement will be returned to his jurisdiction as a member of the Sunshine Task Force, he should not be providing advice to the Ethics Commission on a matter that may well end up subsequently appearing before him again.
Pilpel is clearly entitled to his own First Amendment rights to free speech on any other issue or matter outside the scope of his duties on the Task Force. For example, he is entitled to appear and testify before the Planning Commission as a private citizen on a matter that may affect his neighborhood. But when it comes to matters involving his duties as a Task Force member, he loses Free Speech rights to comment wherever he likes about matters that fall inside his Task Force duties, particularly when those matters may be returned to the Task Force for his further consideration as part of his duties.
Ex Parte Communications
St. Croix's dismissal of the second SIA complaint against Pilpel without considering SIA Section III.B.1, and without considering prohibitions against ex parte communications, is troubling.
The Sunshine and Ethics training provided by the City Attorney's office in the “Sunshine & Ethics Training Video” from 2014 on the City Attorney's web site that Mr. Pilpel is required to have watched as part of his annual and bi-annual filings, indicates that boards and commissions such as the Sunshine Task Force may act like an adjudicative court, and must protect the parties due process rights. Commissioners — and members of the Sunshine Task Force — must act like judges, including following procedural rules such as bans on ex parte communications.
Pilpel's ex parte communications to the Ethics Commission does not illustrate to Sunshine complainants that he is unbiased, nor do they illustrate that he will be a fair “judge” hearing current or future Sunshine complaints.
The Ethics Commission Executive Director's dismissal of the second SIA complaint also did not address prohibitions against ex parte communications.
To the extent that Pilpel testified to the Ethics Commission on July 28 regarding the Ringel vs. Planning Department Sunshine complaint — whether as a member of SOTF or as a member of the public — he was clearly engaging in providing advice to the Ethics Commission (as an entity) concerning a Sunshine complaint that may appear again before the Task Force, which is clearly a matter that falls inside the scope of his duties as a member of the Task Force.
Since the Task Force will, in fact, discuss how to respond to the Ethics Commission's request for “further factual information” on the Maionchi case at its September special meeting, Pilpel should rescue himself from the discussion and voting, given his April 28 ex parte communications to Ethics concerning a case returned to the Task Force that falls inside the scope of his duties.
When Pilpel testified on July 28, he appears to have either concealed information or possibly misled the Commission. Pilpel failed to inform the Ethics Commission on July 28 that during a Task Force committee meeting on January 13, 2014 he had voted in support of a motion to refer the Ringel case back to the full Task Force's jurisdiction, which passed 3 to 0. Pilpel also failed to inform the Ethics Commission on July 28, that on February 5, 2014 a motion was introduced during a full Task Force hearing to find John Rahaim, Director of the Planning Department, in violation of the Sunshine Ordinance for willful failure to comply with the Sunshine Ordinance Task Force's Order of Determination dated October 23, 2013, and to refer Sunshine Complaint 13-024 to the Ethics Commission on a vote of 7 to 1, with Pilpel being the lone dissenter.
Once the full Task Force had ruled to refer a willful violation to the Ethics Commission for enforcement, Pilpel should not have engaged in ex parte communications with the Ethics Commission on July 28 by arguing during his testimony that the wrong “actor” had been named by the Task Force in the Ringel referral to Ethics and seeking to substitute his minority opinion for the majority opinion of the full Task Force's decision.
Due to potential improprieties in St. Croix's August 13 dismissal of Pilpel's probable second SIA violation, an appeal of the dismissal will be submitted to the Ethics Commission at its September 22 meeting.
One former Chairperson of the Task Force who spoke on condition of anonymity noted: “I am more and more convinced that censuring Pilpel is something the Task Force should seriously consider. He appears to be attempting to sabotage the Task Force before the Ethics Commission.”
A second former Chairperson of the Task Force who also spoke on condition of anonymity observes:
“I find that Pilpel's conduct during the Ethics Commission meeting rises to the level of warranting censure by the SOTF. He clearly and without question held himself out to the Ethics Commission during a hearing on a Task Force referral as being able to represent how the Task Force had assessed the Sunshine complaint. Pilpel was directly interfering with the Task Force's referral to the Ethics Commission without authorization from the Task Force to do so. Censure is more than appropriate to ensure the integrity of Task Force findings, since censure is an option allowed under Roberts Rules of Order.”
It is thought the Task Force may soon consider whether to censure Pilpel. If they do, he will earn the distinction of being the sole member of the Task Force across its 20-year history to be considered for censure.
Starving the Sunshine Task Force
One of the quickest ways City government uses to silence its critics is to reduce budgets. That may explain why the Sunshine Task Force appears to function on a shoestring budget of less than $200,000 to $300,000 annually, which stands in stark contrast to the $2.2 million to $2.6 million Ethics Commission budget.
So it came as little surprise when the City attorney assigned to the Sunshine Task Force, Deputy City Attorney Nicholas Colla, announced during the Task Force's July 22, 2014 meeting that beginning in August, his superiors were reducing his hours to provide legal advice to the Task Force, that he would no longer be attending the Task Force's occasional second “special meeting” in any given month, and would only attend the Task Force's regularly scheduled meetings, given budget concerns.
This sudden change came as a surprise to the Task Force members, and strangely, the news was not reported in the Task Force's July 22 meeting minutes.
But it's surprising, in part, because approximately two years ago, this reporter bumped into City Attorney Dennis Herrera in the lobby of City Hall while talking with Westside neighborhood leader George Wooding. When asked in 2012 whether he would work at strengthening the Sunshine Task Force, Herrera replied that the Task Force's biggest problem was its minuscule budget.
The Task Force does not have its own City budget. Instead, it relies on “work order” support from the Board of Supervisors for clerical and administrative support, and from the City Attorney's Office for legal advice. Ironically, efforts to obtain the actual budgeted dollar amount provided to support the Task Force have been stymied by the City Attorney's Office itself.
Although Clerk of the Board Angela Calvillo promptly responded on July 29 to a records request placed on July 27 by providing the requested budget data for the current year (FY 14-15) and the previous two fiscal years (FY 12-13 and
FY 13-14), the City Attorney's Office has failed to produce similar requested public records.
Despite seven e-mails to Dennis Herrera's press secretary, lawyer Matt Dorsey, beginning on July 27 and eight e-mails to Gabriel Zitrin — who has a City Job Classification code of 8150, Claims Investigator but uses a working job title of “Deputy Communications Director” for the City Attorney's Office — a complete response to a relatively simple records request remains incomplete six weeks after placing the initial request.
Zitrin's first response provided not budgeted data, but actual billed dollar amounts. When subsequently asked to provide budgeted hours and budgeted dollar amounts as initially requested, Zitrin eventually provided just budgeted attorney hours, with no information on how to convert the budgeted hours to budgeted dollars, and failed to include budgeted hours for
Based on calculating budgeted hours for the City Attorney, it appears SOTF's budget for FY 13-14 was just $156,253:
Zitrin and Dorsey provided no explanation regarding why the actual billed hours for both FY 12-13 and FY13-14 exceeded the budgeted hours significantly, and they failed to explain two months into the current FY that began July 1, 2014 why the City Attorney is reporting budgeted hours to support the SOTF as still “To Be Determined”:
Of interest, Table 2 shows, the City Attorney's actual billed dollar amount to support the Task Force dropped dramatically in FY 12-13 to just $68,576, in large measure due to the six-month period in which the Task Force was unable to meet because the Board of Supervisors had failed to appoint a disabled member to the Task Force. Zitrin and Dorsey provided
no information as to why the actual billed dollar amount for FY 13-14 jumped to $141,497, nearly $50,000 higher than in FY 11-12.
The Deputy City Attorney (DCA) assigned to the Task Force has two functions:
First, to attend Sunshine Task Force meetings. There was just one additional “special meeting” held in FY 13-14, in addition to the 12 regular meetings. There was no appreciable increase in the number of meetings between FY 11-12 and FY 13-14 to justify a $50,000 increase in actual budgeted hours for City Attorney advice to the Task Force.
The DCA's second function is to assess each Sunshine complaint filed and prepare an instructional memo for the Task Force outlining legal issues involved in each complaint prior to an SOTF hearing on a complaint. Additionally, the DCA is occasionally asked by the Task Force to research and report back on legal issues, but this function in rare.
Zitrin and Dorsey provided no information on why the actual billed amount for FY 13-14 suddenly jumped to $141,497, when based on just 225 budgeted hours, the budget should have been approximately $25,967, as shown in Table 1. They also provided no information on why the 225 budgeted hours for FY 13-14 soared to 658 hours, 433 hours higher than budgeted.
And Zitrin and Dorsey provided no explanation as to why the actual billed hours for FY 13-14 was 221 hours higher than in FY 11-12, or what required 658 DCA billed hours in FY 13-14.
Since announcing the reduction in hours he will be allowed attend Task Force meetings, DCA Colla has not attended the second meeting of the Task Force in August and probably won't in September, and has been observed during the Task Force's regular meetings on August 6 and September 3 to leave the meetings at around 9:00 p.m., prior to meeting adjournment. The cutback in his support to the Task Force appears to be restricted to approximately five hours per meeting.
The $50,000 increase in actual billed dollars between FY 11-12 and FY 13-14 to just $141,497 in City Attorney time to support the SOTF pales in comparison to the $41.1 million in total pay (including overtime) paid to City Attorney staff (excluding fringe benefits) in Calendar Year 2013. The $50,000 increase is a drop in Herrera's $41 million salaries bucket.
Rather than expanding the Task Force's budget, City Attorney Dennis Herrera appears to be starving SOTF's budgeted support. But why would he do that?
Analysis of Sunshine Complaints
One possible answer to why the City may be further starving SOTF's budget may be explained by the number of Sunshine complaints filed with the Task Force, even though the SOTF has no control over how many complaints against City departments are filed each year.
As the pie chart below shows, during calendar years 2012 and 2013 there were a total of 150 Sunshine complaints filed, 29 of which involved San Francisco Legislative Branch (Board of Supervisors) and six of which involved the Executive Branch (the Mayor and his various sub-departments). Between them, the Legislative and Executive Branches received nearly one-quarter of Sunshine complaints filed.
Add on to that the 14 Sunshine complaints filed against the City Attorney or the City Attorney's Office, which push the total to 49 complaints between the City Attorney and Legislative and Executive Branches, well over one-third of the complaints.
Then, another 30 complaints were filed against the MTA, MTA's Board of Directors, and five other City Departments who each had four or more Sunshine complaints filed against them.
Between the seven departments — the City Attorney's Office, MTA, the Public Library and its Library Commission, the City Controller's Office, the Community Housing Partnership, Department of Public Works, and the Recreation and Parks Department — plus the Legislative and Executive Branches, fully 79 of the 150 complaints (53%) were against approximately just nine City departments.
By way of contrast, the remaining 71 complaints (47% of 150) were spread across 30 other City departments.
Although the Task Force has no control over how many Sunshine Ordinance complaints are filed, or against which City departments, it appears the Task Force is being starved of budgeted resources to deal with the caseload of complaints.
While the Ethics Commission now seems to be taking back some of its oversight responsibilities and appear to be reigning in Mr. St. Croix somewhat, the problem of Task Force member David Pilpel violating ex parte communications restrictions remains. Both the Ethics Commission and the Sunshine Task Force need to reign in Pilpel, and implement Civil Grand Jury recommendations.
The City desperately needs to increase budgeted support to the Sunshine Task Force. After all, budgeting $200,000 to $300,000 to support the Task Force annually, while providing $2.6 million to the Ethics Commission, is clearly inequitable.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California's First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter's James Madison Freedom of Information Award in the Advocacy category in March 2012. Feedback: mailto:monette-shaw@westsideobserver.
 The Ethics Commission's annual budget hovers at $4.5 million, a significant portion of which is dedicated to public financing of campaigns; the Ethics Commission's actual operating budget for FY 12-13 was $2,256,239, and is $2,625,384 for FY 14-15.
The Big Squeeze: Dys-Integration of “Old Friends”
By Patrick Monette-Shaw
|Laguna Honda Dospital allowed the use of this photo of younger LHH patients as part oa a campaign mailer in 2006 to convince voters not to pass Prop "D" that would have preserved LHH for the elderly, since pshcho-social rehab patients were a priority. Eight years later, where's the City's concern about where the elderly will go?|
Are our “Old Friends” — the elderly and people with disabilities — being dys-integrated right out of San Francisco, along with other populations being squeezed out and displaced out-of-county? Where do they all go?
That's one question.
Other questions involve myriad problems at Laguna Honda Hospital, including broad service reductions. Then there's the question of why the City racked up $3.8 million dollars in City Attorney time and expenses pursuing a lawsuit that recovered just $15 million of $70 million in alleged design and construction errors in the rebuild of LHH's new facility, netting just $11 million after City Attorney time and expenses.
In 1999, when voters approved the bonds to rebuild LHH for our “Old Friends,”… those over the age of 75 was 52%. Not any more…”
In the Westside Observer's March issue, former Laguna Honda physicians Maria Rivero and Derek Kerr summarized Laguna Honda Hospital's (LHH) changing patient demographics, and posed thoughtful questions, including:
“What happens to ‘Old Friends' who can no longer care for themselves? Where do they go? And who checks whether the care they receive elsewhere is comparable to care provided in the new $595 million Laguna Honda [Hospital]?”
Kerr and Rivero's questions are astute, given news that San Francisco's Health Commission and the Department of Public Health are relying on a May 2011 analysis — now three years old, and out of date — prepared by Resource Development Associates, which DPH had commissioned, that projected then a shortage of 700 skilled nursing facility (SNF) beds in San Francisco just over 30 years from now. Given the analysis is sadly out of date, is the 700-bed shortage now much worse?
The report noted that the number of San Franciscans over the age of 75 is expected to increase by almost two-thirds over the next 20 years. Data presented to Supervisor David Campos on March 20 by the Department of Aging and Adult Services shows that just six years from now in 2020, San Francisco's population of residents over the age of 60 will increase by 37,761 — a 26 percent increase. During the same six years, San Franciscans over the age of 85 will increase by 24,600 (a 73 percent increase), representing two-thirds of the increase of those over the age of 60.
Factor in the current trend of conversion of long-term care SNF beds to short-term care SNF beds throughout California, exacerbating the shortage of long-term care SNF beds.
On March 20, the State of California's long-term care Ombudsman for San Francisco — who has jurisdiction involves oversight over skilled nursing facilities and residential care homes — Benson Nadell, testified to the Board of Supervisors Neighborhood Services and Safety Committee, saying:
“This is not just [about] giving people the option of not going to nursing homes, there aren't any [nursing homes]. In addition, there are not any low-income or affordable care homes in the City as well, and so the squeeze is on.”
As in: Squeeze. Squeeze. Squeeze out-of-county.
Where will all of these people go, and how many will be displaced out-of-county? And what about reports of other troubling issues involving LHH?
Patient Demographic Shifts Displace Frail Elderly
In March, Kerr and Rivero reported that for the first time in memory, women and the elderly over age 75 have become minorities in LHH. In 1999, when voters approved the bonds to rebuild LHH for our “Old Friends,” fully 56% of LHH's residents were female. By 2013, female patients dropped by 15% to just 41%, while the percentage of male patients increased 15%, from 44% to 59%. The percentage of patients over the age of 65 dropped 20% between 1999 and 2013, from 67% to just 47%. In 1999, those over the age of 75 was 52%. Not any more, due to a variety of changes at LHH.
In January, the Department of Public Health finally announced that it would begin providing data on the number of Laguna Honda patients being discharged out of county beginning in 2014 and going forward. DPH reported in January that 12% of discharges from LHH between September and December 2013 were to out-of-county locations.
But it has adamantly refused to provide historical data on the number of patients discharged from, or diverted from admission to, LHH that were subsequently discharged or diverted out-of-county since 2003.
Just two weeks after Kerr's article in the March Observer, DPH and the Department of Aging and Adult (DAAS) services made a pitch before the Board of Supervisors Neighborhood Services and Safety Committee on March 20, requesting a $3 million increase in FY 14-15 to funding for the so-called Community Living Fund that was established to provide community-based “supports” to prevent placement in long-term care skilled nursing facilities, or provide services post-discharge from a SNF, or for those who choose to “age in place” at home. While Hinton and Garcia have been unwilling to release data on out-of-county discharges to Supervisor Campos for now going on three months, they nonetheless had the chutzpa to request $3 million in additional funding for the “Community Living Fund,” without telling Campos where the elderly are being discharged to.
Mayor Ed Lee — despite hobnobbing with billionaire backer Ron Conway — apparently didn't lift a finger and didn't request the $3 million increase for the Community Living Fund in his budget submission to the Board of Supervisors. Of the $23 million in adjustments the Board of Supervisors Budget and Finance Committee made re-arranging the Mayor's FY 14-15 budget, the Community Living Fund received an increase of just $200,000. Of $18.4 million in adjustments the Budget Committee made to the Mayor's second-year, FY 15-16 budget, the Community Living Fund received nothing.
Admirably, Supervisor David Campos peppered Director of Public Health Barbara Garcia and DAAS' Executive Director, Anne Hinton on discharge location data in an effort to learn whether patients are being “integrated” into San Francisco communities, or whether they are being “integrated” in out-of-county communities. Both Hinton and Garcia did their level best to claim they had no way of tracking discharge data by location and type of facility, and that the aggregate data (scrubbed of any patient identifiers) might be protected somehow under the HIPPA law protecting patient's medical records, a claim that is complete nonsense. DPH had already provided before March a limited amount of aggregate out-of-county discharge data for 2013, without violating HIPPA.
Hinton at first asserted during Campos' March 20 hearing that she would have no way of knowing any discharge or diversion data, until this reporter testified during Campos' hearing that under the Chambers settlement agreement, a Diversion and Community Integration Program (DCIP) was required by the U.S. Department of Justice. I testified that both DPH and DAAS have seats on the DCIP screening panel that reviews admission packets for requests for admission to LHH, a fact Hinton had to have known.
Hinton quickly changed her tune with Campos, creatively claiming she hadn't understood the question Campos had asked her. She remained disingenuous about availability of the discharge data.
Indeed, it turns out that it was DAAS that had contracted with a company named RTZ Associates to develop a database for the DCIP component. Since 2003, RTZ has been paid at least $5.6 million to develop 10 to 12 different components of the SF GetCare database. How Hinton claimed to Supervisor Campos that she would have no way of knowing this data, when it was her department that had contracted for the DCIP component and continues to pay annual maintenance fees, is not known, but she may have deliberately and intentionally mislead Campos.
Mere Trickle of Data
Following a month in which Supervisor Norman's Yee's legislative aide Olivia Scanlon proved to be not at all helpful in trying to obtain out-of-county discharge data from DPH and DAAS, on April 29 Campos' legislative aide Carolyn Goossen submitted a list of seven explicit question on behalf of Supervisor Campos to Hinton and Garcia seeking data on both discharges from LHH and diversion from LHH admission data between 2007 and May 2014. The seven-year period is significant since the Chambers settlement agreement was adopted in 2007.
True to form, Garcia and Hinton on behalf of DPH and DAAS dragged their feet. Kelly Hiramoto, the Acting Director of Transitions for DPH's San Francisco Health Network, finally responded 30 days later on May 29 to Campos on behalf of DPH. Hinton appears to have never responded to Campos. Hiramoto was ostensibly responding on behalf of Director Garcia, and perhaps Hinton.
Hiramoto claimed on May 29 that “The data that was collected is incomplete. The software program designed to capture the data did not work as designed.” When pressed for details, Nancy Sarieh, DPH's public information officer, wildly claimed on June 9 that the software that didn't work as designed was the SF GetCare database RTZ Associates has been paid $5.6 million to develop and maintain between 2003 and 2014.
If the software doesn't function as designed, why have DPH and DAAS continued to pay for annual maintenance and support to the tune of $5.6 million during the past decade?
Concerned about the potential for reputational harm to RTZ, I contacted RTZ's founder, Dr. Rick Zawadski — who is a nationally-recognized authority on long-term care policy — for comment. Zawadski said on June 23, “RTZ Associates stands behind the functionality and integrity of the software we have developed for the City of San Francisco. Any data fields related to LHH Diversions requested by the City of San Francisco are fully functional and work as designed.”
So much for DPH's nonsense that the software doesn't work.
DPH's Misinformation Presented to Supervisor Campos
For good measure, Hiramoto tossed into her May 29 response to Supervisor Campos, “We did not collect the data in a reportable manner for the years not included.” Hiramoto provided just three years worth of data to Campos, but excluded seven years of data, claiming the data wasn't in a “reportable” format. Hiramoto offered no explanation of how three years of the data could be in a reportable format, but the other seven years were not.
She did send Campos a three-inch, three-ring binder containing reports from the Targeted Case Management (TCM) program that was also required by the Chambers settlement agreement, and two LHH-Joint Conference Committee reports already provided to this columnist, claiming the binder covered the time period requested. That claim was also untrue, since the reports covered only January 2006 to May 2009, and excludes both data between March 2004 and December 2005 after the Targeted Case Management program was implemented, and excludes any data whatsoever between June 2009 and June 2014.
The data that DPH provided to Supervisor Campos' office only in hardcopy format included TCM monthly reports for eight months in 2006 (the May, June, October, and November monthly reports for 2006 were missing), nine months in 2007 (the May, October, and November monthly reports for 2007 were missing), 11 months in 2008, (the November monthly report for 2008 was missing), and just three reports for 2009, including one report for January, a quarterly report for January-February-March, and a third report for April and May 2009.
The hardcopy printouts supplied to Campos shows that between January 2006 and May 2009 there had been at least 143 TCM clients discharged from LHH and an untold number of non-TCM program discharges. Luckily, historical trend-line graphs embedded in the limited reports provided to Campos do show that between March 2004 and May 2009 there were a total of 671 TCM admissions and a total of 262 TCM discharges. And the reports show that in just the two-year period between February 2007 and January 2009 there were another 188 SFGH patients diverted from admission to LHH.
There was no data provided showing diversions from LHH from hospitals and other facilities other than SFGH, but since the TCM and DCIP programs are thought to have tracked referrals from other referring facilities, and patients requesting LHH placement from their homes, there had to have been other diversions from LHH admission between 2007 and 2009, in addition to the 188 SFGH patients diverted from LHH admission that we know about.
And Hinton and Garcia provided no data whatsoever about the number of SFGH or other referring facility “diversion” from LHH admission during the ensuing five-year period between 2009 and 2014.
Between the total TCM discharges and the SFGH patients diverted, we're talking about at least 452 patients that DPH and DAAS are unwilling to admit how many were discharged out of county. As Kerr and Rivero asked, where do these patients go? If the Targeted Case Management program and the Diversion and Community Integration Programs were so successful at placing patients back into the community, why are DPH and DAAS so desperately trying to hide the out-of-county discharge data from both San Francisco's citizens, and our very Board of Supervisors we expect to make informed policy decisions?
Could it be these patients are not being “integrated” into San Francisco communities, but are being integrated into out-of-county communities?
Can it be, as observers suspect, that LHH patients and diverted patients are being dumped out-of-county along with the vast displacement of long-term San Franciscan's displaced out-of-county caused by the hot real estate market? How many people were diverted from admission to LHH over the past decade? Where did they go?
As of the end of June, DPH continues to refuse providing even a simple list of the field names included in the SFGetCare, TCM, and DCIP modules of RTZ's database systems custom-developed for DPH and DAAS, claiming there were “no responsive records” to a request for the underlying “data dictionary” listing the field names. That's hogwash, too, since every database worth its salt has an easily-printable data dictionary underlying the database architecture, as any first-year information technology student knows is true.
RTZ's Robust System Components
On June 9, Nancy Sarieh, Public Information Officer (PIO) for DPH replied to a follow-up public records request that “the software program involved that did not work as designed is SF GetCare.” It appears Sarieh didn't know what she was talking about, and just grabbed spin control out of her PIO kit-bag, clueless.
In October 2003, DPH first contracted with RTZ Associations to streamline Laguna Honda Hospital's discharge planning processes and increase access to community-based services, by developing a software application called “SF GetCare” that initially included a core discharge planning module rolled out in 2003.
Enhancements implemented across the past decade have been vast, and significant. It has evolved into a comprehensive, robust, data information system to coordinate services across various San Francisco county programs, in collaboration with both the Department of Public Health and the Department of Aging and Adult Services.
“SF GetCare” was expanded to include a DPH housing placement component, a component upgraded in FY 09-10, again in FY 12-13, and apparently upgraded again in FY 13-14. The component includes a searchable directory of housing resources for the Department of Public Health's “Direct Access to Housing” program. An optional upgrade for hospital discharge planners and community-based case managers to allow on-line applications for the Direct Access to Housing program was developed, but it is not known whether the Direct Access to Housing application form was added in FY 13-14 to the housing placement component currently used for other components of DPH-supported housing programs.
Another component of SF GetCare is an SFGH placement component to support the identification and disposition of discharge-ready patients to allow nurses, social workers, psychiatrists, eligibility and placement staff, and others to manage the discharge of patients from SFGH, and identify discharge placement settings to meet patient needs and preferences.
During FY 09-10, RTZ designed, tested, and deployed a module at its own expense as an in-kind contribution, an “Administrator on Duty” component for LHH to support hospitalwide communications across the three shifts of staff. LHH has since assumed responsibility for support of this module, but RTZ continues to provide bug fixes until funding for the full features for this component is found.
In July 2008, the Department of Aging and Adult Services contracted with RTZ to develop an information system to support the operational needs of the then newly-developed “Diversion and Community Integration Program” mandated by the Chambers settlement agreement against the City and LHH, and to meet reporting requirements, presumably reports to the U.S. Department of Justice to monitor compliance with the Chambers settlement agreement. The DCIP component includes a discrete sub-system within SF GetCare that pulls information from LHH, Targeted Case Management, and Community Living Fund datasets to create an integrated client management systems. During FY 10-11, RTZ enhanced the DCIP component.
In September 2009, the Department of Aging and Adult Services again contracted with RTZ to develop the California GetCare system to meet local data collection and management needs around state and federal reporting for three specialty-funded services. In FY 10-11 RTZ began developing an intake and assessment (I&A) module to expand the initial features of SF Get Care.
By May 2012, DAAS had determined it needed to expand the I&A module to eliminate duplication of assessments and data entry activities. The new system, launched in March 2013, allows DAAS to complete a single assessment for consumers who need to receive multiple community-based services, including transitional care, community living fund services, home-delivered meals, and in-home supportive services. Phase 1 of a system to allow consumers, caregivers, and discharge planners to create personal accounts to complete intake applications for these multiple community-based services was launched in April 2013.
DAAS had RTZ add a new “case management” component to SF GetCare for community-based case managers to track progress notes, various client assessments, service plans, and medication management, which may have been added to the contract with RTZ.
In April 2012, DAAS contracted with RTZ to develop a “Transitional Care Program” system to support the operational needs and reporting requirements to track “coaching” and care coordination services for patients being discharged from acute-care hospital settings for “Transition Specialists.” A “list bill administration” enhancement was added to this component to ensure that DAAS receives reimbursement from vendors approved by the federal Centers for Medicare and Medicaid Services (CMS) for each case.
An optional, already-implemented, or a pending enhancement to the RTZ suite of system components includes a new component to assist managing “behavioral health” — formerly known as “mental health services” — services that may have been included in the City's contract with RTZ Associates during FY 2013-2014.
Ms. Hiramoto's and Ms. Sarieh's claims the RTZ software didn't “work as designed” is nonsense, in part because of the robust components added to the SFGetCare database over the past decade.
Reasonable observers are now wondering whether the Community Living Fund might have received its full $3 million requested increase, had DPH and DAAS not stalled so long being completely evasive about out-of-county discharge data.
Pathetic Resolution to a $70 Million Lawsuit
In 2011, the City of San Francisco filed a Superior Court case against Anshen + Allen and Stantec Architecture alleging $70 million in defective performance, and design and construction errors on the rebuild of Laguna Honda Hospital. The case was subsequently transferred to Alameda County when the architects' lawyers claimed they couldn't receive a fair trial in San Francisco.
On November 19, 2013, the Board of Supervisors considered an initial proposed settlement with Stantec estimated to recover just $19 million of the alleged $70 million in design and construction errors. By May 2014, the proposed settlement agreement shrank to just $15 million, representing just 21 percent of the $70 million in deficiencies the City had initially alleged.
On October 3, 2013, City Controller Ben Rosenfield advised the Citizen's General Bond Oversight Committee (CGOBOC, pronounced “go-bok”) that if debt service on a bond measure is not paid off, and if “surplus funds” of a bond measure (perhaps recovered during lawsuits) subsequently surface, it may become a policy matter for the Board to determine how to use surplus funds, rather than returning them to the City's General Fund. Rosenfield noted that if there is outstanding debt, remaining balances can be applied to reduce debt service. If the debt service is paid off, the surplus can be applied to the General Fund. Trouble is, the LHH rebuild bond measure debt has not been paid off.
The $15 million purportedly recovered as a result of the lawsuit should have more appropriately been applied to a) Paying down the debt on the general obligation bonds voters approved to construct the new LHH; b) Use to correct remaining construction problems at LHH, or to re-instate elements of the proposed rebuild that were eliminated from the project scope during “scope reductions,” including the ADA-accessible pathway on the top half of the hill to the old main entrance the LHH's now administrative wings that has still not been constructed; or c) Reserving the funds for building desperately-needed assisted living facilities promised to voters in the November 1999 voter guide when voters approved Prop A to rebuild LHH.
The Department of Public Works project manager for the LHH Rebuild project, John Thomas, testified during the October 15, 2013 meeting of the Health Department's LHH-Joint Conference Committee, that the City's lawsuit against Stantec Consulting Services Inc. and Stantec Architecture Inc. to recover $70 million in design and construction errors from the architects hired to design the LHH replacement facility — Anshen + Allen, which was subsequently acquired by Stantec Consulting — was moved to Alameda County Superior Court, with the lawsuit being “fronted” using funds from the LHH Rebuild bond measure.
Thomas' testimony was a shocking revelation that bond money for a capital improvement project was being diverted from actual construction to legal costs instead, an accounting switcheroo that observers believe is not permitted under bond financing rules. Legal fees for lawsuits should come from subaccounts set up in the General Fund to handle legal cases.
After Mayor Ed Lee finally signed the Board of Supervisors ordinance passed June 10 on a “second reading” to settle the lawsuit, the City Attorney's Office admitted on June 24 that it had spent $3.8 million in City Attorney time and expenses — including 11,400 hours of City Attorney time between 2001 and 2014 — mounting and pursuing the lawsuit.
One remaining question is whether the $3.8 million legal tab “fronted” from the bonds to rebuild LHH was restored to the LHH rebuild project budget. Another question is whether the October 2013 proposed settlement of $19 million was reduced to just $15 million, in order to set aside the $3.8 million in City legal costs.
After all, any legal fees diverted from the bond to cover this lawsuit should also be returned to the project budget to restore features to the replacement hospital that were eliminated during scope reduction.
Settling for just 21% of the design and construction errors is a slap in the face to San Franciscans, who are in effect being asked to shoulder over $50 million in design and construction errors on this replacement project, as if $50 million is chump change and not of concern to voters. Surely, Anshen + Allen / Stantec have more culpability for the additional $50 million variance in design and construction errors than it acknowledged.
It appears that the Board of Supervisors took no action and allowed the $15 million settlement to be placed into the General Fund.
Broad Service Reductions at LHH
Service reductions at Laguna Honda have been underway for at least a decade, when the hospital began focusing on short-term care, rather than on long-term care. Since moving into its replacement facility in December 2010, LHH's focus on short-term care has accelerated.
As Ombudsman Benson Nadell testified to Supervisor Campos on March 20:
“There is a crisis. We don't have enough nursing home beds. They are gone. Most of the nursing home beds now specialize in short-term rehabilitation, including San Francisco's Jewish Home and Laguna Honda. The push is to get the people out.
For the past ten years, most of [the Ombudsman's] case [load] has to do with discharge planning and the people being pushed out and returned to the community with inadequate services and inadequate discharge planning.”
Nadell added that there are many patients who cannot participate in the Department of Public Health's system centered on providing services in the community rather than at Laguna Honda. Once patients are discharged from rehabilitation services, they often cannot participate in programs created to supplant care at LHH.
As noted at the beginning of this article, Nadell testified: “This is not just [about] giving people the option of not going to nursing homes, there aren't any [nursing homes].”
Short-Term 60-Day Rehabilitation
Data presented to the Health Commission on January 28, 2014 illuminates LHH's focus on short-term care. Commissioners were informed that LHH has just 49 short-stay skilled nursing facility (SNF) physical medicine rehabilitation beds.
In the three-year period between 2011 and 2013, the focus on “get 'em in, then get 'em out” resulted in an increase of new admissions to the hospital from 380 admissions in 2011, to 449 admissions in 2013. The behind-the-scenes operating philosophy of the physiatrists — a physician specialty focusing on physical medicine rehabilitation — has been for over a decade-and-a-half, “the patient is walking, get them out.”
It's a philosophical mind-set often dismaying to LHH clinicians in other specialties who believe that many patients who had re-learned to walk still had significant unresolved rehabilitation needs, such as upper-body rehabilitation or speech pathology needs to prevent choking while eating, and were being discharged prematurely, potentially leading to re-admission or poorer post-discharge outcomes.
It is not known whether LHH's Chief of Rehabilitation Services, Dr. Lisa Pascual, and LHH's physiatry physicians are permitted to determine during medical records of review of rehabilitation admission referrals whether patients who exceed the 60-day short-term (or formerly, the longer 90-day) rehab length of stay may be denied admission, and whether they have, in fact, denied admission of patients needing longer rehabilitation courses of treatment.
But what is known, is that at least one patient at SFGH who had sought admission to LHH for rehabilitation services was denied admission in recent memory, told that he needed “too much” rehabilitation. He languished for months on an acute-care SFGH unit at acute-care hospital billing rates until he was discharged to Antioch to a skilled nursing facility specializing in dementia patients, socially and culturally isolated from friends and family, and with nobody to communicate with, given the number of dementia patients.
Across fiscal year 2012–2013 to fiscal year 2013–2014, acute rehabilitation admissions to LHH's Rehab Services Department dropped from 40 to just 26.
No data was presented to the Health Commission indicating what becomes of patients who require long-term rehabilitation longer than 60 days, and whether those rehab patients are diverted to the few remaining facilities that provide longer-term rehabilitation. Where do patients who have suffered traumatic brain injuries and need 90-day rehab care go? Out of county?
Functional Maintenance Program Moved to Nursing
Leading up to 1999, the U.S. Department of Justice's Civil Rights Division investigated reports of neglect and premature functional decline of patients on LHH's long-term care wards.
As a result, LHH hired three rehabilitation therapists, one each in Physical Therapy, Occupational Therapy, and Speech Pathology, who were charged with developing a “functional maintenance program” (also known as “restorative care”) to address the DOJ's concerns about patient neglect and premature physical decline.
Following a year researching best practices and developing a staffing proposal, four Rehabilitation Therapy Aides were hired in 2000 for a Restorative Care Level I program centralized in the Rehabilitation Services Department, supervised by licensed rehabilitation therapists. A separate, but companion, Restorative Care Level II program was created in the Nursing Department to provide unit-based daily therapeutic modalities supervised by nurses.
The restorative care program implemented was successful, and the DOJ closed its Civil Rights investigation. The Restorative Care Level I program was expanded over the years, and currently has seven Rehabilitation Therapy Aides.
But that's suddenly about to change, when the Therapy Aides are transferred from the centralized Rehab Services Department to the Nursing Department on July 1, 2014 and will be based on the wards (“neighborhood” units”).
It is not yet clear whether the aides will continue providing Level I rehab treatments as a ward-based program under the supervision of licensed physical medicine clinicians, whether Nursing staff will provide the Level I supervision possibly in violation of State law, or whether those Level I rehab treatment modalities will be eliminated, potentially angering the DOJ's Civil Rights Division and bringing on a new investigation of LHH.
As if preventing premature functional decline of the elderly is no longer of concern to the DOJ, or no longer a core mission of Laguna Honda Hospital.
Health Commission's Failure Preventing SNF-Bed Crisis
Across the past decade-and-a-half, the Health Commission has held several hearings to consider the negative impact on the reduction of skilled nursing beds by private hospitals in San Francisco. St. Mary's, St. Francis, CPMC and other hospital-based skilled nursing facilities have either reduced the number of their licensed SNF beds, or have converted them to short-term rehabilitation rather than to longer-term rehabilitation or long-term care.
Yet the Health Commission has never adopted resolutions asserting that the loss of those beds would have — and already have had — detrimental impacts on the health of San Franciscans. Of course there have been negative impacts, including an untold number of out-of-county discharges.
Indeed, the Health Commission never held a public hearing to assess the detrimental impact of eliminating 420 of LHH's SNF beds from the rebuild of LHH's replacement facility. Instead, during a closed session of the Health Commission on January 22, 2008, the Health Commission voted to accept the Chambers lawsuit settlement that eliminated LHH's 420 SNF beds, and did so without any open-session public discussion of the probable detrimental effects such bed elimination would cause throughout San Francisco.
Now six years later, DPH's Deputy Director and Director of Policy and Planning, Colleen Chawla, presented the Health Commission with an analysis of CPMC's newest proposed reduction of skilled nursing beds sprung on the City after its Cathedral Hill Hospital project was approved and a deal cut to preserve St. Luke's Hospital in the Mission District.
Chawla presented Commissioners with a compelling analysis dated June 12, 2014 that projects a shortage of 700 skilled nursing facility (SNF) beds in San Francisco just over 30 years from now, and the detrimental impact the closure of CPMC's SNF beds will have on San Franciscans.
Chawla astutely notes that a 2012 report issued by San Francisco's Department of Aging:
“… affirms concern regarding San Francisco's ability to meet the long-term care needs of seniors and adults with disabilities. … The number of Medi-Cal funded beds in the City's SNF's has dropped dramatically. As a result, many seniors and persons with disabilities who require long-term care are forced to move outside the city, away from family and friends, becoming socially and culturally isolated in the later years of their lives.
Despite the focus on increasing community-based long-term care as an alternative to institutional care, data from the Health Care Services Master Plan indicates a clear and increasing need for SNF beds in San Francisco. … the industry trend toward conversion of long-term beds to short-term beds means that any reduction of SNF beds, regardless of type, creates an overall capacity risk for San Francisco and is likely to have a detrimental impact on health care service [to San Franciscan's] in the community.”
Although some of Chawla's data are out of date, she's clearly right that there will be a detrimental impact.
Hopefully, the Health Commission will finally pay close attention to Ms. Chawla's dire predictions:
Ombudson Nadell's Other Concerns
As noted above, Skilled Nursing Facility Obudsman Nadell presented oral testimony to the Board of Supervisors Neighborhood Services and Safety Committee on March 20 that there aren't any nursing home beds remaining. Although Resource Development Associates' May 2011 report for DPH reported that by 2050 San Francisco will only have 1,619 SNF beds, Nadell presented his analysis to the Board of Supervisors reporting different data.
He asserts that of 2,225 current long-term care SNF beds, approximately 40% have been converted to short-term rehabilitation beds for reasons of cost, taking long-term care beds “off-line.” He notes 920 Medi-Cal certified SNG beds were reassigned to additional rehabilitation utilization. The adjusted total is just 1,305 Medi-Cal beds, not the 1,619 Resource Development Associates calculated three years ago would be available 36 years from now in 2050..
Nadell reports that over the past 20 years, San Francisco has lost over 900 long-term care Medi-Cal beds.
Nadell included the following vignette in his report:
“In February 2014 Mission Bay nursing home in the Potrero District [closed], with a [loss] of 50 available Medi-Cal beds in the community. [The] remaining residents — all mono-lingual Cantonese speakers — [were] being transferred to nursing homes in the East Bay, where most staff do not speak Cantonese.
So the trend into the future in San Francisco is the increased loss of Medi-Cal nursing homes beds. This is part of the expensive real estate market in [San Francisco].”
The projection that San Francisco will be short 700 skilled nursing beds by 2050 — which Resource Development Associates may not have analyzed three years ago — ignores a key issue involving the number of licensed beds, and the number of beds actually “staffed” or utilized.
DPH's Director of Policy and Planning, Colleen Chawla, presented her June 12, 2014 analysis to the Health Commission, in which she notes that “licensed beds” are the maximum permitted under each facility's license; “available beds” are those that physically exist and are available for use; and “staffed beds” are those that are set up, staffed and being used.
Chawla did not include for Health Commissioner's edification a table of 14 hospitals in San Francisco a list of how many of the total licensed 1,586 hospital-based skilled nursing beds are actually “available” beds' vs. “staffed beds,” but she did provide as one example that of 212 currently licensed SNF beds across CPMCs four campuses, it has just 99 “staffed beds,” which CPMC seeks to slash by 24, to just 75 staffed beds. (This is after CPMC cut additional SNF bed capacity earlier in 2014.)
CPMC admits two amazing facts: First, of its current 99 staffed SNF beds, CPMC's “average daily census” includes just 68 patients, despite having a license for 212 SNF beds. This is a common practice in hospital-based skilled nursing facilities: To keep the average daily census as low as possible.
Second, CPMC testified to the Health Commissioners on June 17 that CMPC's SNF patients among its average daily census have an average “length-of-stay” of 14 to 15 days — just two weeks — far shorter than the 60-day (two month) short-term rehab at Laguna Honda and far shorter than the previous industry standard of 90-day rehabilitation stays.
It is not yet known whether any of the three problems — the lower number of overall staffed beds, the average daily census issue, and the average length of stays — were factored in to the Resource Development Associates analysis projecting a shortage of 700 SNF beds just 30 years from now, or whether those three problems may push the 700-bed shortage far higher.
Exacerbating issues further, Nadell notes, is the loss of bed-and-care beds in the City, also fueled by the hot real estate market. Other types of long-term care facilities are also being scaled back.
Following Nadell's report to Supervisor Campos on March 20, news surfaced that the University Mound Ladies Home —a 72-bed Residential Care Facility for the Elderly (RCFE) located in San Francisco's Portola neighborhood at 350 University Street that has operated for over 130 years — is evicting its 53 residents, most of whom are in their late 80's or early 90's.
University Mound's Board of Trustees — whose president of the Board is Mary Louise Fleming, Laguna Honda Hospital's former Director of Nursing — issued eviction notices to residents, family members, and other representatives in early May, indicating the closure was due to insurmountable debt. The board informed residents that the building was closing, citing debt load, and an imbalance of revenue and expenditures.
At a rally in Civic Center Plaza on May 30, San Francisco Supervisor David Campos shared his support for University Mound residents, saying “the city has an obligation to step in.” Campos indicated he is working with the mayor's office to add $300,000 to this year's budget to keep University Mound open for at least another year, saying that if it closes, it will send the wrong message to the elderly. Campos said he is working to rescind the July 10 eviction deadline.
The Board's Budget Committee adjustments to the Mayor's budget doesn't list any funds to keep University Mound open.
The squeeze is on, all over the City.
CPMC Suddenly Reconfigures St. Luke's
After Mayor Lee proposed a really rotten deal in 2012 granting CPMC permission to build's its “destination hospital” on Van Ness Avenue and build just an 80-bed hospital at St. Luke's in the Mission District, the Board of Supervisors balked at the initial 80-bed agreement the Mayor had negotiated. They balked, in part, because although CPMC had pledged to keep St. Luke's open for 20 years, the original agreement with the Mayor also contained a trigger that would allow CPMC to close St. Luke's if CPMC's systemwide operating margin fell below one percent for two years in a row.
Back in June 2012, the San Francisco Bay Guardian reported that Supervisor Malia Cohen had “criticized CPMC as an untrustworthy negotiating partner. ‘CPMC has an interesting corporate culture,' she said, noting that the company has repeatedly misled supervisors and community leaders, accusing it of being ‘disingenuous in its negotiations'.”
The Bay Guardian reported that Campos had serious concerns of his own, reporting:
“Campos said this latest episode only added to his suspicion that CPMC will play games with its finances to shutter St. Luke's – whose construction must be completed before CPMC can build Cathedral Hill Hospital – once it gets the lucrative regional medical center that it really wants.
How do we know they aren't transferring money out of CPMC into Sutter in order to shut down St. Luke's?, Campos said, adding that he wants to see a clear guarantee that St. Luke's will remain open as a full-service hospital.”
Lead by Supervisors David Campos and Mark Farrell, and assisted by Boudin Bakery co-owner and civic leader Lou Giraudo, who led mediations for the revised agreement, a compromise was announced on March 5, 2013, indicating that the Sutter Health affiliate will scale back the size of its planned Cathedral Hill Hospital from 555 beds to 274, and expand the capacity of a rebuilt St. Luke's Hospital in the Mission District from 80 beds to 120.
Fast forward to 2014, and suddenly CMPC resurfaced, apparently continuing to play its games.
On May 1, 2014 CPMC's CEO, Warren Browner, MD, suddenly notified San Francisco's Health Commission that CMPC intends to “realign our skilled nursing facility services. Browner creatively claimed that the realignment did not “trigger” requirements under Proposition Q that the Health Commission would be required to hold a hearing to consider the potential detrimental impact on health care services to San Francisco, wrongly claiming that “skilled nursing facility services” are not covered by Proposition Q. He's wrong, because the November 1998 ballot measure passed by voters requires under Prop Q that private hospitals in San Francisco provide public notice prior to closing hospital inpatient or outpatient services, eliminating or reducing the level of services provided, or selling or transferring management of any hospital services.
Since CMPC's SNF beds are tied to its hospital license, reducing those services automatically qualifies under Prop Q, no matter what Browner creatively claims.
As Chawla's June 2014 memo to the Health Commission notes, CMPC proposed on May 1, 2014 to eliminate all 46 of its staffed SNF beds on its California campus by transferring 18 of the SNF beds to St. Luke's and 4 to its Davies campus, eliminating the other 24 SNG beds altogether. CMPC admits that if the Health Commission approves CPMC's newest proposal, its next step will to petition the State to permanently reduce its total SNF bed license.
CPMC's May 1 proposal will increase St. Luke's SNF beds to a total of 77 SNF beds — 37 of which will be SNF beds, and 40 will be designated as “subacute care” beds. Subacute care is defined as skilled nursing beds for patients who don't require care in an acute hospital, but require more intensive skilled nursing care that is typically provide to the majority of patients in a SNF. Subacute patients are typically medically fragile and require specialized nursing services such as tracheotomy care, IV tube feeding, complex wound management, or inhalation therapy.
What now alarms activists who had worked long and hard to ensure a new, full-service hospital of 120 beds would be built for St. Luke's will be changed to having just 40 acute care hospital beds and 77 SNF beds, a switcheroo CPMC waited to announce until just last May. Reasonable people understand that you can't run a full-service acute-care hospital with just 40 acute care beds.
Activists remain concerned about what other unannounced plans CPMC may have to reconfigure St. Luke's 120 beds after St. Luke's and CMPC's Cathedral Hill Hospital both open their new facilities, and whether this is just the beginning of converting the new St. Luke's from a full-service hospital to other uses.
All of this flies in the face of the Health Care Service Master Plan (HCSMP) developed by the San Francisco Planning Department and the Department of Public Health that was adopted in October 2013. The HCSMP plan indicated a clear and increasing need for SNF beds in Fan Francisco.
CPMC's sudden proposed “realignment” in use of St. Luke's runs counter to the HCSMP, which warned that any reduction of SNF beds, regardless of type, will create an overall capacity risk for San Francisco, and will likely have a detrimental impact on health care services in the community.
Consider your own potential community dys-integration. Don't just ask “where will they go?”
Ask yourself: “Where will I, or a family member, go?” Or ask, “What about me?”
Unless you have the resources to afford $10,000 monthly for long-term skilled nursing care at high-end private facilities such as the San Francisco Towers, The Sequoias in San Francisco, or The Heritage, you should probably plan to begin your search of where you will go, by looking first at out-of-county facilities.
Then start praying for the best.
|Photo: Luke Thomas - FogCityJournal.com|
By Patrick Monette-Shaw
Nearly two years ago to the day, San Francisco Supervisors Scott Wiener, David Chiu, and Mark Farrell engineered throwing off the only disabled member on the Sunshine Task Force, Mr. Bruce Wolfe, in clear retaliation.
They wrongly assumed Wolfe had single-handedly engineered a referral against four members of the Board of Supervisors — Board president David Chiu and Supervisors Eric Mar, Malia Cohen, and Scott Wiener — to the Ethics Commission alleging official misconduct regarding last-minute amendments to the Park Merced development deal withheld from the public.
The Board of Supervisors needs to stop playing politics with appointments to the Sunshine Task Force, and let Task Force members get on with their job of adjudicating disputes between citizens and City officials who skirt the Sunshine Ordinance”
As payback, Mr. Wolfe was thrown off, and the Task Force was unable to meet for six months, between May and November 2012.
Three toadies appointed to the Task Force in 2012 — Louise Fischer, Todd David, and David Pilpel — set out, but were unable, to quell 19 additional complaints against the Board of Supervisors, its various subcommittees, or individually-named Supervisors lodged against the Board between 2012 and 2014 during the two-year terms of the toadies appointed in 2012. That represents at least 16% of complaints filed with the Task Force over the intervening three-year period. Farrell and the Board aren't happy that Sunshine complaints against them keep rolling right in.
In 2012, the City Hall Family also wanted to quell complaints against the Mayor's office, which racked up 10 complaints between 2012 and 2014, for 5.1% of complaints following installation of the toadies.
The City Attorney's Office had 18 Sunshine complaints filed against it during the same timeframe, for 9.2% of the total. MUNI faced 8 complaints. And the Arts Commission gobbled fully 20.5% of all Sunshine complaints, with a staggering 40 complaints. Combined, 55% of complaints filed between 2012 and 2014 involved just five prominent City departments, nearly half of them against the Executive and Legislative branches of City government. No small wonder Scott Wiener and David Chiu remain pissed off, and in search of toadies.
On Tuesday, June 10, San Francisco's Board of Supervisors are scheduled to consider six more appointees to San Francisco's Sunshine Ordinance Task Force, after the Board of Supervisors left several appointments to the Task Force vacant for over two years in a fit of pique. Of 11 seats on the Task Force, as of June 4, 2014, three were vacant and unfilled.
This has proven to be disastrous for citizens seeking to have their complaints regarding access to public meetings or access to public records heard in a timely manner before the very Sunshine adjudicatory body voters approved be established over 20 years ago.
The mainstream media have failed to report this ugly affair and the Board of Supervisors failure to make appointments to this watchdog body.
On May 20, the Board of Supervisors re-appointed the three weakest possible candidates to the Task Force; the three incumbents re-appointed are considered by open government advocates as fawning, “controllable” toadies. On June 5, the Rules Committee advanced the names of six more applicants to the full Board of Supervisors for consideration and appointment, which it should have done a month ago on May 15.
And still not decided, is which of two applicants who are disabled will be recommended by Rules to the full Board for consideration, since that matter was continued June 5 to a future Rules Committee meeting.
On June 6, the San Francisco Bay Guardian published an article on its blog regarding the Rules Committee's June 5 hearing in which it advanced the recommendations for six of the remaining eight seats on the Task Force.
Dr. Derek Kerr posted insightful comments to that blog noting:
“Everyone wants to turn the page on this sad chapter, but re-writing history won't work. Bay Area journalists, the ACLU, League of Women Voters, government watchdogs and hundreds of engaged citizens know what happened.”
What follows are details about the back story of skullduggery by members of the Board of Supervisors hoping to curtail open government, so corruption can run rampant dancing up and down the halls at City Hall. This article seeks to preserve recent history leading up to the June 10 hearing, since it is expected that there will be a floor fight over some of the six recommended appointees, and a probable continued fight over which applicant will be appointed to the Task Force seat reserved for a member having a physical disability.
Skullduggery? Supervisor Tang comes to mind, along with Supervisor's Chiu and Wiener. Take a peek:
San Franciscans should again be alarmed by continued efforts of the Board of Supervisors to rig appointments to the Sunshine Ordinance Task Force (SOTF), a quasi-judicial body charged with adjudicating disputes between citizens versus City officials and City departments regarding access to public meetings and public records.
On May 15, when the Rules Committee met to consider new appointments to the Sunshine Ordinance Task Force, there were then 13 applicants for the 11 seats. That's when Katy Tang took up the drumbeat asking for more “divesrsity” on the Task Force.
By May 30, when the Board of Supervisor's June 5 agenda was first posted on-line, suddenly a new “diversity” applicant — one Mr. Obia Rambo, a rising African-American supplicant in San Francisco's political circles — suddenly applied for appointment to the Task Force, but quickly withdrew from consideration before June 5, perhaps after he may have learned of the time commitments of volunteers serving on what is essentially, a citizen's oversight body. Rambo may not have wanted to devote so much time away from his other pursuits.
Only three applicants were advanced and recommended for re-appointment to the full Board of Supervisors on May l5 — David Pilpel, Louise Fischer and Todd David — the most questionable of all applicants, given their history, credentials, and competency while serving on the SOTF between 2012 and 2014. The remaining 10 applicants who were not advanced on May 15, but delayed for another round of consideration, were all better qualified to serve in the best interest of the public's right to know laws and the Sunshine Ordinance.
As observers remember, in 2012 the purge of Task Force members by Board president David Chiu — with an assist from Chiu's cohorts, Supervisors Scott Wiener and Mark Farrell — used bogus allegations that previous Task Force members had violated the City's charter in adjusting the Task Force's voting threshold.
Fast forward to May 27, 2014, when once again Wiener raised the same bogus allegations to the full Board of Supervisors, and raised a question about “hold-over” appointments of Task Force members who were not re-appointed, but continue to serve until replacements are appointed. Deputy City Attorney Jon Givner, who advises both the Board's Rules Committee and the full Board, appears to have replied to Wiener without hesitation that the Task Force did not come under any laws under the Charter with regard to holdovers. Thus, if the SOTF is not governed by the holdover rules, then the same may apply for all other rules including the voting threshold, which the Task Force may have been fully within its legal rights to change in 2011, but which is incessantly used against them to justify the 2012 purge, and is the basis for Supervisor Tang's new litmus test of Task Force applicants.
Astute observers suspect that Chiu may have been preventing Task Force appointments for as long as possible so as not to stain his June 3 primary election for California's Assembly. Chiu and others seeking election in November 2014 may fear that if certain applicants are appointed to SOTF membership, their behind-closed-door antics and lack of transparency may be exposed and reported in the media, explaining why Chiu may want to stack SOTF appointments to preserve his secrecy.
As the Westside Observer reported in “Who Killed Sunshine?” (July 2012), Supervisor Scott “The Tinkerer” Wiener single-handedly killed open government by shutting down our local Sunshine Task Force for six months and five days in 2012, leaving San Franciscan's without any citizen oversight of access to public meetings and access to public records, and leaving City Hall wide open for corruption to run rampant.
Along comes déjà vu. Now Wiener, along with District 4 Supervisor Katy Tang and Board President David Chiu, appear to be staging a repeat of attempts to jerry-build appointments to all 11 seats on the Sunshine Task Force using whatever is handy, or whoever is malleable.
To support his false claim that the Sunshine Task Force had engaged in official misconduct of its own and had undermined transparency in government, Wiener failed to provide any evidence and lied at least four times during a full Board of Supervisors meeting on May 22, 2012.
As Dr. Derek Kerr noted in written public comments submitted to the Board of Supervisors Rules Committee for its May 15, 2014 hearing on new appointments to the Sunshine Task Force, two years ago Supervisors Scott Wiener, David Chiu and Mark Farrell led a campaign to purge members from the Sunshine Task Force in 2012. It's painfully clear that Supervisor Scott Wiener is continuing his vendetta against the Sunshine Task Force again, two years later, over the SOTF's ruling in 2011 that he and three other Supervisors had engaged in official misconduct regarding the withholding of Park Merced amendments until just before voting on the Park Merced development deal.
Wiener appears to remain clearly unhappy that his resume or curriculum vitae was besmirched by the Task Force's official Order of Determination referring him to the Ethics Commission for official misconduct in 2011. Aspiring politicians such as Wiener and David Chiu clearly don't want an “official misconduct” charge blotching their records, and their “legacies.”
The 2012 Pretext to Purge SOTF
The four Supervisors fomented a pretext in 2012 to purge Task Force members over an innocent revision to the Task Force's bylaws as their pretext. Wiener went so far as to request a biased and surreptitious audit of the Task Force to justify the purge. Compliant candidates — such as Louise Fischer and Todd David — were recruited at the last minute, resulting in stacking the Task Force with members whose commitment to open government laws were more controllable. In 2012, candidates nominated by the Society of Professional Journalists, the League of Women Voters, and New America Media, were dismissed or not appointed, along with then-incumbent SOTF member Bruce Wolfe, a highly-qualified candidate who was the sole applicant from the disabled community. Supervisor Farrell alienated many people, claiming he was merely seeking “fresh blood” for the Sunshine Task Force.
As a result of Wiener's political vendetta, the Task Force couldn't meet to conduct the business of citizens for over six months in 2012 because, lacking a disabled appointee, the SOTF violated its own bylaws. Following the Great Purge of 2012, the Board of Supervisors never appointed a nominee from the Society of Professional Journalists to Task Force Seat #l reserved for a lawyer, because the City Hall Family did not want the Task Force to receive legal advice from anyone other than a Deputy City Attorney.
And as the Observer reported in “Wiener Out of Control” (September 2012), Wiener went after the Sunshine Task Force because he was clearly peeved that the Task Force had referred him — along with Board President David Chiu, Supervisor Eric Mar, and Supervisor Malia Cohen — to the Ethics Commission for official misconduct over the Park Merced development deal.
Wiener wrongly claimed on May 22, 2012 that the Task Force had exempted itself from the San Francisco Charter, and wrongly claimed the Task Force had said “How dare you shine sunlight on us?,” when the Task Force had never claimed any such thing. Wiener claimed he asked for an “audit” of the costs of compliance with the Sunshine Ordinance, when in fact he asked for a “survey.” Wiener also inflated the average number of times City employees had to attend hearings to resolve Sunshine complaints.
And on May 20, 2014, Wiener signaled he remains perturbed that members of the Sunshine Task Force “had a really problematic history in terms of violating the [City] charter,” when in fact the Task Force had just disagreed with advice from a low-level Deputy City Attorney. It's clear Wiener has enlisted Supervisor Tang to carry his water for him, given that she has repeatedly stated she is concerned the Task Force has gone against advice from the City Attorney's Office.
Flaws in the Glass: SOTF Annual Report
On May 15, 2014 when the Rules Committee considered applicants to the SOTF, Supervisor Norman Yee may have abused his discretion by allowing former Task Force chairperson Kitt Grant to make a presentation — with no notice on the Rules Committee agenda indicating that any presentation was being scheduled. Ms. Grant had by that point already resigned her seat on the Task Force and no longer represented the SOTF, but was apparently invited to make introductory remarks before the hearing got underway, remarks that appeared designed to affect the Rules Committee's deliberations on new appointments to the Task Force.
Grant presented her remarks not so much as a member of the public exercising her First Amendment rights to free speech, as she presented them in her former capacity as a member of the Sunshine Task Force. To the extent Grant passed herself off as speaking in her former official capacity, rather than as a private citizen, she, too, may have violated the same prohibition in the Board of Supervisors Statement of Incompatible Activities that applies to Task Force members, as just-reappointed Task Force member David Pilpel arrears to have violated, discussed below.
Remarkably, Grant essentially presented a draft version of the SOTF's annual report, which has not been approved yet by the full Sunshine Task Force.
We know her remarks were lifted, almost verbatim, directly from the unapproved Annual Report, because a subsequent public records request uncovered a “script” prepared for and used by the 65-year-old Rules chairperson, Supervisor Norman Yee, as a guide on how to conduct the hearing. The Script reads:
“We would like to invite Ms. Kit [sic] Grant, Chair of the Sunshine Ordinance Task Force, to share a brief presentation on the progress of the Task Force's Annual Report.”
Although Yee cleverly didn't read that part of the script into the audio recording of the hearing to alert the public of the source of data Grant presented, the script reveals Grant would be delivering an unauthorized, unapproved annual report without the consent of the full Task Force, and without any advance notice to the full Task Force that Grant was going to “leak” the draft annual report. Another problem is, Grant had already resigned and was no longer Chair of SOTF, and as noted, the draft Annual Report has not been approved by vote of Task Force members. It was clear she was there to bias and influence Rules Committee members by presenting inflammatory, and inaccurate information contained in the draft report.
Grant's testimony before the Rules Committee, appears to report almost verbatim, the draft version of the SOTF's Annual Report that still has not been authorized, or approved.
Indeed, the draft Annual Report suggests that the SOTF appointees during the Great SOTF Purge of 2012 have not been as “efficient” as they wrongly boast being. Over their two-year terms, there should have been two separate annual reports. Instead, four of the Purge appointees — Ms. Grant, David Pilpel, Louise Fischer, and Todd David — have been so hell bent on holding Task Force meetings to the shortest amount of time period, given their busy private lives, that over their two-year terms, they've been unable to complete even a single annual report — the draft annual report Grant had no business presenting to Supervisor Yee until it had been approved by the full membership of SOTF.
Grant' s Flawed Annual Report Data
The pathetic eight-page unapproved draft SOTF Annual Report for 2012–2014 that Kitt Grant presented to the Rules Committee without authorization on May 20 was riddled with misinformation, in stark contrast to the Task Force's 24-page Annual Report for 2010–2011 that was issued on January 31, 2012 by former Task Force chair Ms. Hope Johnson, a paralegal that many observers view as having been the most effective Task Force chairperson across its 20-year history.
Grant asserted only a handful of complainants file multiple Sunshine complaints. Between calendar years 2012 and 2014 (to date), there have been 195 Sunshine complaints filed, by a total of 65 complainants. Fully 17 of the 65 complainants filed more than one Sunshine complaint. While it is true that the 17 people who filed multiple complaints filed 147 — or 74% — of the 195 complaints, the 17 people are by no means “a small handful,” as Grant alleged.
Complaining that many requests come from just a few people is a red herring to distract from information often eventually revealed with persistence. People who file multiple complaints typically have good reason to do so and are determined to uncover the truth when suspicious City officials misbehave.
Take for example the complainant Grant bitterly complained had filed 28 complaints. That complainant — most probably Paula Datesh — had joined with another street artist, William Clark and his twin brother, in filing 40 complaints between 2012 and 2014 alone, and many other complaints prior to 2012, against the San Francisco Arts Commission. As a direct result of their complaints and Sunshine requests for public records, the director of cultural affairs of the Arts Commission, Luis Cancel, may have been forced to resign.
A San Francisco Bay Citizen article on June 29, 2011, reported that Sunshine Task Force member Rick Knee had stated “The Arts Commission staff has shown a pattern of dodging or evading public information requests, and when they do comply they might give some information that is not exactly what the requester asked for.” The Sunshine Ordinance Task Force submitted a letter to the Board of Supervisors — with a copy to Mayor Ed Lee — advising that City officials should give careful scrutiny to the San Francisco Arts Commission's spending policies and practices, and to its requested budget for the forthcoming fiscal year. The Bay Citizen reported Knee didn't recall the Task Force ever having sent a similar letter during his seven-year tenure on SOTF.
At the time, the media reported that Cancel had potentially made some personnel changes and a whistleblower complaint was filed against him for his frequent trips to his second home in Rio de Janeiro. After Cancel resigned, it's not clear what became of an investigation of his activities as a senior member of the Arts Commission. San Francisco's Civil Grand Jury reported that the City Controller had found improper transfers of funds and that the Street Artists Program needed better accounting practices. Both the Grand Jury Report and the Controller's report sounded like sugar coating of improper handling, and potentially misappropriate, of money.
Or take the complainant Grant bitterly complained had filed 24 complaints across the three-year period, more than likely Ray Hartz, Jr. Hartz, along with Library User's Association Executive Director Peter Warfield who has filed just six Sunshine complaints during the same time frame, helped expose along with former Task Force chairperson James Chaffee's research assistance, that City Librarian Luis Herrera had failed to report to the Ethics Commission gifts from the Friends of the Library to the City Librarian on Herrera's Form 700 Statements of Economic Interest over a three-year period. While the asleep-at-the-wheel Ethics Commission predictably took no action against Mr. Herrera wanting to help out members of San Francisco's “City Hall Family,” California's Fair Political Practices Commission did take action, fining Herrera for failing to disclose his gifts from the Friends of the Library.
Grant implied that the complaints by the “core” group of complainants are filed against a handful of City departments, which may be untrue. Of the 195 Sunshine complaints submitted between 2012 and 2014, they involved 56 City departments, the legislative and executive branches, and a host of various policy bodies. Grant completely withheld in either the draft Annual Report, or in her oral remarks to Supervisors Yee and Tang on May 15, that fully 15% — 29 complaints — were filed against the Board of Supervisors, various Board subcommittees, individually-named Supervisors, and the Mayor and various sub-entities of the Mayor's office. Clearly, members of the public are very concerned by the antics of the legislative and executive branches of City government.
Another 9.2% — 18 complaints — of the Sunshine complaints were against the City Attorney, or City Attorney's Office, who is the one offering inaccurate advice to a whole host of City departments on how to evade compliance with the Sunshine Ordinance. Grant left out these messy details, appearing to prefer to fawn before Yee and Tang.
In addition to the complaints filed against the executive and legislative branches and the City Attorney's Office, there were another nine City departments and agencies — including the Arts Commission, City Controller, Community Housing Partnership, Department of Public Works, Municipal Transportation Agency, Planning Department, Police Department and Police Commission, Public Library and Library Commission, and the Recreation and Park Department — who along with the executive and legislative branches and the City Attorney's Office racked up a staggering 152 of the 195 complaints filed between 2012 and 2014 — representing 78% of all complaints filed.
Yet Grant wasted not one word on whether the Task Force has even bothered evaluating why just nine City agencies — plus the Office of the Mayor, various entities of Board of Supervisors, and the City Attorney's Office — were responsible for the lion's share of complaints and citizen's concerns.
More of Kitt Grant' Flawed Annual Report Errors and Omissions
First, Grant brazenly admitted that the Task Force has attempted to restrict hearing only about five Sunshine complaints per full Task Force meetings, a sure-fire way of creating a backlog of complaints heard within the required 45-day period after complaints are filed. Rather than efficiently hearing as many cases per meeting as possible, an artificial limit has been placed on how many will be considered during each meeting.
Grant claims that in order to be “more efficient” the Task Force limits its meetings to extend only until 9:00 p.m. or 10:00 p.m. But fully 60% of Task Force meetings — 12 of 20 —held under her tenure between 2012 and 2014 have been adjourned by 8:55 p.m. And fully 35% have been adjourned before 7:50 p.m. The goal of the Task Force's “efficiency” has been to start its meetings late, and end them early, potentially in order to create more “efficiency” for Task Force members to attend to their private lives, not to public service.
To be fair, the Task Force did extend four of its 20 meetings between 2012 and 2014 until between 10:00 p.m. and 11:35 p.m. Although those four late-hour meetings represent 20% of its meetings, by stark contrast the Task Force has adjourned before 8:00 p.m. 35% of the time. It's not as if the late-hour adjournments aren't offset by the early-hour adjournments.
More judicious middle-ground adjournments may have gone a long way towards clearing up the artificially-created complaint backlog, or hearing cases within the required 45-day window. Perhaps Grant didn't want to bother Tang's and Yee's pretty little heads about this point.
Ms. Grant wrongly claimed “mediation” has been a great boon to the Task Force. She testified 15 complaints had been mediated in 2012, 17 in 2013, and 7 in 1014, for a total of 39 cases mediated — just 19.8%. She neglected to mention to Yee and Tang that the remaining 80% of cases may have had merit and were forwarded for consideration by the full Task Force.
She provided no detail on just how the cases had been mediated, whether in favor of the complainant or respondent, let alone a summary of how the cases were resolved. But a preliminary analysis of Sunshine Task Force Administrator reports for 2013 shows that of 89 cases reported as “mediated,” a total of 15 (16.9%) cases were “resolved” disposed of during mediation, and another 15.7% (14 cases) were either closed or withdrawn, which may or may not happened without “mediation” interventions.
That leaves on the Administrator's reports for 2013 that of 89 cases “mediated,” fully 68% were either advanced to a full Sunshine Task Force hearing, or were pending a decision about whether a hearing would eventually be held.
Grant completely failed reporting to Tang and Yee that Deputy City Attorney Jerry Threat had notified the Task Force as early as April 2013 that if complainants request a hearing, they are entitled to be granted one (discussed below), thwarting the very “mediation” Ms. Grant and SOTF Vice Chair Louise Fischer apparently felt entitled to force upon Sunshine complainants.
Then, Ms. Grant complained about the backlog of cases, indicating there are still a total of 61 cases backlogged from 2012 to 2014, fully 31% of all cases filed. She offered little in the way to justify the backlog, and didn't mention that prematurely adjourned Task Force meetings may have contributed to the “efficiency” problem.
Grant also alleged that the Task Force lacks jurisdiction over many Sunshine complaints, but didn't quantify, let alone describe, how many cases may be beyond jurisdiction of the Task Force. An analysis of how many of Sunshine complaints eventually heard by the Task Force is also underway, but not yet completed.
Ms. Grant Alleged Sunshine Ordinance “Out of Date”
Grant not only alleged that the Task Force's bylaws may be out of date, she also she implied the Sunshine Ordinance itself may be out of date. Later during the Rules Committee's May 15 hearing, Ms. Fischer pretty much asserted the same thing.
The Sunshine Ordinance adopted in 1999 and subsequently amended by voters at the ballot box, is not out of date. It was drafted with the assistance of leading experts, including Peter Scheer of the California First Amendment Coalition, and Terry Francke of CalAware. Our Sunshine Ordinance is the strongest in the nation, and was used to help draft both San Jose's and the City of Berkeley's Sunshine ordinances. Our ordinance is a rock-solid ordinance that has survived the test of time for over 20 years.
But admittedly, the Ordinance may need an update to include a prohibition of use by City officials of their personal e-mail addreses, and private cell phones, neither of which existed 20 years ago when the Sunshine Ordinance was first adopted. Times have changed with the advent of technology, which even Supervisor David Chiu seems all too eager to misuse to his advantage (see below).
Katy Tang's Appointee Litmus Test
Back in 2012, Mr. Wiener falsely claimed the Task Force purported to exempt itself from the San Francisco Charter. The Task Force had done no such thing, and it did not set out to purposefully ignore City Attorney advice. It just reached a different interpretation of the law. That's not stopping Supervisor Katy Tang from now floating the dead-horse idea the Task Force had ignored City Attorney advice back in 2011.
In a San Francisco Bay Guardian blog posting by Steven T. Jones on May 20, Tang asserted she would personally “have liked to see stronger applicants” for current openings on the Sunshine Task Force. She claimed that 10 of the 13 applicants “didn't seem to have a good understanding of the Sunshine Ordinance.” Tang also invoked an alibi that there wasn't sufficient ethnic diversity among SOTF applicants.
But what Tang really means is that what she considers to be “weaker applicants,” are applicants who may be unwilling to swear a loyalty oath to the City Attorney's “advice,” and may hold differing interpretations of applicable law.
Supervisor Katy Tang deployed a new litmus test for applicants to the SOTF at the May 15 Board of Supervisors Rules Committee meeting, namely, a new test of absolute subservience and undying fealty — a feudal tenant's or vassal's sworn loyalty to a lord — to what she apparently believes is inviolate City Attorney “advice.” This suggests SOTF applicants may be required to submit to and defer to whatever rotten “advice” is issued by whichever Deputy City Attorney is currently, or was previously, assigned to the Sunshine Task Force. Tang's litmus test clearly violates the spirit of the Sunshine Ordinance, and may violate the law behind it.
Tang's new litmus test appears to require applicants to swear a loyalty oath to the City Attorney — as if he and his advice are 100% infallible, 100% of the time — before she'll grant her seal of approval to any given SOTF candidate.
“Knowledgeable as attorneys are — whether City Attorneys or private attorneys — they are essentially advocates,” says Dr. Derek Kerr who was wrongfully terminated from City employment for whistleblowing. “If attorney's were infallible, there would be no need for Judges, Courts, or the Sunshine Task Force. If San Francisco's City Attorney holds legal supremacy, there would be no need for the Task Force, and all sunshine complaints could be adjudicated by the City Attorney. The trouble is, voters didn't want that kind of ‘efficiency',” Kerr observes.
It's not yet known whether Tang's new litmus test will be applied to appointees of all City boards, commissions, and “transparency” oversight bodies, or whether the new test will only be selectively applied solely against the Sunshine Task Force.
What is known, is the San Francisco Bay Guardian reported May 20 that Tang asserted she won't support any applicants seeking appointment to the SOTF who had taken part in a controversial vote in 2011 concerning a [probably legitimate] change to SOTF's bylaws regarding the number of members present during any given meeting to rule on Sunshine complaint cases being heard.
More of Tang's Nonsense
Supervisor Wiener is now using additional pretexts in 2014 to claim that the Task Force in 2011 had “violated” the charter. Newbie Supervisor Tang is also beating the same dead horse, telling the San Francisco Bay Guardian on May 20 that the Task Force had acted against the advice of the City Attorney and had defied the City Attorney's Office. In 2012, Wiener wrongly asserted the Task Force had engaged in official misconduct.
Now in 2014, Ms. Tang claimed to the Guardian the Task Force had engaged in “improper” conduct.
Which is it? Improper conduct? Or official misconduct? Either one are complete nonsense.
As testified to Ms. Tang during the Rules Committee's hearing on May 15, 2014, the City Attorney's “advice” is often wrong.
First, there's the problem with City Attorney “advice” involving wrongful termination and discrimination cases brought by City employees against the City. If the City Attorney's advice were inviolate, why would the City have been forced to pay out $12.1 million between 2007 and 2012 to settle 105 cases of discrimination, wrongful termination, and other prohibited personnel practices, and spent another $8.3 million in City attorney billable time and expenses fighting these lawsuits every step of the way, for a combined total of $20 million, had the City Attorney's “opinions” not been found in the end to have been bad legal “advice”?
Second, why is the Board of Supervisors considering settling with Anshen + Allen / Stantec for just $15 million, after the City Attorney used his “advice” to file a lawsuit against the architectural firms alleging $70 million in design and construction errors during Laguna Honda Hospital's (LHH) rebuild? If the City Attorney's “opinion” and advice about the LHH lawsuit had been correct, why isn't the City recovering the full $70 million in alleged defects? Could the City Attorney's so-called “advice” concerning this lawsuit have been shot down by the Appellate Court as fatally-flawed legal advice? Our City Attorney? Wrong again?
Third, as recently as this Spring, some bonehead on the City's bargaining team negotiating MOU's (contracts) with City labor unions, pushed across the table a proposal to prohibit SEIU Local 1021 union members from being able to file discrimination complaints under local, state, and federal law, a proposal SEIU bargaining team members flatly rejected, since local law cannot “trump” federal anti-discrimination laws. Which of the City Attorney's 174 lawyers in the 8177 to 8183 job classification codes that cost taxpayers $28 million in salaries alone in 2013 was boneheaded enough to even “advise” the City's negotiating team that they could even “propose” eliminating federal anti-discrimination protections?
As if a mere labor agreement could somehow “trump” federal laws.
Does DHR have no Deputy City Attorney's assigned to it well versed in labor law to know that such City Attorney “advice” or “opinions” should never have even been proffered, but once proffered made the City the newest laughingstock across America? What kind of “San Francisco values” would the City Attorney be espousing through legal advice to City labor negotiators with such a ridiculous proposal? Notably, although SEIU members rejected this rotten City proposal, nobody is proposing that the SEIU members had “ignored” City Attorney advice, or had “exempted” themselves from such crappy City Attorney advice.
Highly Qualified Applicants
On May 15, the Board of Supervisors Rules Committee considered 13 applicants for the 11 seats on the Task Force. The pool of applicants included at least seven with impeccable credentials to serve:
One of two long-vacant seats, Seat 1 is reserved for a citizen-lawyer nominated by the Society of Professional Journalists. But the Seat has been purposefully unfilled by the Board of Supervisors for fully two years. That seat was designed by framers of the Sunshine Ordinance to counter potentially conflicted City Attorney advice, who may not be as well-versed in open government state and local laws. The Board of Supervisors under David Chiu's “leadership” has kept Seat #1 vacant for fully two years, in part to prevent the Task Force from having its own member-lawyer to provide them with legal advice, and to keep the Task Force subservient only to advice from the City Attorney, or advice from the Deputy City Attorney assigned to the Task Force. Chiu's failure over two years to schedule a Rules Committee hearing to fill this seat is seen as an abuse of his powers. [Note: On June 5, Rumold finally received the Rules Committee's recommendation for appointment and will be considered by the full Board of Supervisors on June 10.]
[Note: On June 5, a fight broke out between Rules Committee members over whether to recommend Mr. Wolfe, or current holdover incumbent Bruce Oka, who is also disabled. Oka has wanted off of the Task Force since early July 2013, and had not even applied for re-appointment to the Task Force in 2014 until Wednesday, June 4, after the Rules Agenda had already been publicly posted that did not list Oka as having applied for re-appointment; see further discussion below.]
At the conclusion of the Rules Committee's May 15 hearing, only three applicants — all toadies favored by Wiener to do his bidding — were forwarded to the full Board of Supervisors to jerry-rig composition of the Task Force. Shockingly, none of the seven highly-qualified applicants were referred for appointment to the full Board of Supervisors for consideration on May 20, although on June 5 five of them finally secured recommendations from the Rules Committee.
Three Hand-Picked Toadies Advance
On May 15, the Rules Committee divided the agenda item, forwarding three applicants to the full Board of Supervisors, postponing recommending the remaining 10 applicants to the eight remaining seats on the Task Force. On May 20, the full Board of Supervisors passed, and appointed, the three applicants referred to them by the Rules Committee.
Just two members of the Rules Committee — Supervisors Yee and Tang, since Supervisor Campos was out of town — ended up recommending to the full Board of Supervisors stacking the SOTF with three fawning candidates who had answered “Yes” to Tang's new litmus test question about blind obedience to City Attorney “advice.” The three nominees recommended by Rules were approved by the full Board of Supervisors on May 20, and are now pending appointment by the Mayor, include:
SOTF Incumbent David Pilpel
Re-appointed to SOTF during the Purge of 2012, Pilpel has resumed his role carrying water for City officials named in Sunshine complaints heard by the SOTF. Pilpel is notorious for researching arcane issues in order to find exculpatory reasons to let City officials named as respondents in Sunshine complaints off of the hook, at the expense of complainants. Pilpel seeks to preserve secrecy in City government. He certainly is not an open government or Sunshine “hero.”
He was appointed in 2012 to help City officials wiggle out of Sunshine violations, and his service made him a shoe-in for re-appointment in 2014. But as just one example of why the Rules Committee should not have reappointed him involves Pilpel's penchant for showing up at Ethics Commission hearings — lacking any authority to do so — to scuttle deliberations of Ethics Commissioners involving Sunshine complaints referred to Ethics for enforcement.
Pilpel's Qualifications Presentation During the May 15 Rules Hearing
Pilpel testified on May 15 that he's on his third nonconsecutive term on the SOTF, which would be six years, but said he's served for ten-and-a-half years out of the 20 years the Task Force has existed. It's unclear whether Pilpel has a problem with basic math.
Although he claims he supports meaningful public participation and open government, he looks for “practical solutions” with City agencies. Pilpel asserted the Task Force is not perfect, and he is interested in having fewer complaints brought to the Task Force.
He testified that he's less interested in resolution of Sunshine complaints — more than likely music to the ears of Rules Committee members considering his re-appointment — and would rather the Task Force be more proactive. Pilpel testified that he wants, and would like, the Task Force to be more involved in legislation going before the Board of Supervisors and legislators in Sacramento, even though the Sunshine Task Force was not created to focus on legislation.
Pilpel claims he has proposed changes to the SOTF bylaw procedures — which changes have neither been discussed in open meetings of the Task Force during the past two years, nor adopted — and wants to focus on “things that matter,” rather than focusing on adjudicating complaints, that by inference he apparently doesn't believe matter. He testified that he believes portions of the Sunshine Ordinance need to be rewritten.
For her part, Supervisor Tang noted that because Pilpel was seeking re-appointment, she wanted to ask him the same question about the SOTF complying with the Deputy City Attorney who staffs the task force, and how much Pilpel values the attorney's role in conjunction with the Task Force itself, in terms of opinions and advice the City Attorney may provide to Task Force members.
Pilpel responded by asserting he absolutely values Deputy City Attorney's opinions and understands fully the role of the City Attorney under both the Sunshine Ordinance and the City Charter, particularly Charter Section 6.102. He asserted the Task Force is subject to the Charter in terms of board and commission voting requirements [although Pilpel may be completely wrong on this point]. He acknowledged that a complaint the Task Force sent to the Ethics Commission last month was sent back because the Task Force had failed to name the right person, and it may happen again next month. Pilpel asserted that the Task Force has not understood where “due processes” attaches.” Had to be music to Tang's ears.
But there's a small problem: Although Pilpel blabbed on May 15 at the Rules Committee hearing that members of the SOTF didn't understand where “due process attaches,” Pilpel withheld telling Supervisors Yee and Tang on May 15 that just 17 days earlier when Pilpel raised the “due process” issue during a Sunshine complaint hearing before the Ethics Commission, Deputy City Attorney Josh White, who advises the Ethics Commission, had to interject and inform the Ethics Commissioners that “due process” didn't apply. Pilpel appears to have misled both the Ethics Commissioners, and 17 days later, members of the Board of Supervisors Rules Committee. Pilpel creatively forgot to mention to the Rules Committee that DCA White had dismissed the idea that “due process” had been applicable, and kept spouting the “due process” nonsense even after DCA White advised Ethics Commissioners that Pilpel was barking up the wrong tree.
It appears it is Pilpel himself who doesn't understand due process. And he also appears not to understand that the only laws the SOTF is charged with enforcing are the Sunshine Ordinance and by extension violations of California's Public Records Act. This appears just one way in which Pilpel goes fishing for exculpatory excuses to let City Officials — in this case Recreation and Parks Department head Phil Ginsburg — off of the hook on allegations of willful misconduct.
Pilpel also appears to have creatively withheld from telling the Ethics Commission on April 28 that he, Pilpel, had, in fact, seconded a motion during the Task Force's September 4, 2013 meeting to continue hearing complaint number 12-058 against Recreation and Park Department's Phil Ginsburg (RPD's department head) to its October 2 meeting in order to submit and provide adequate notice to Ginsberg that he was being requested to attend on October 2. The motion passed 7 to 0 — including Pilpel's affirmative vote — with two Task Force members absent from the September 4 meeting. Pilpel absolutely had to have known — given that he had seconded the motion on September 4 — that Ginsburg had, in fact, been afforded due process “notice” and that the Task Force had not deprived Ginsburg of due process. Pilpel appears to have intentionally misled Ethics Commissioners and the Board of Supervisors on this point.
Potential Violation of the Board of Supervisors Statement of Incompatible Activities?
On May 29, Dr. Derek Kerr posted a germane comment about Pilpel's shenanigans to former San Francisco Bay Guardian Bruce Brugmann's blog article titled “The anti-sunshine gang intensifies its attacks on the Sunshine Ordinance Task Force in City Hall” posted earlier on May 29.
Dr. Kerr commented on SFBG's blog:
“At the April 28 Ethics Commission meeting (1:31:30 on video) Mr. Pilpel presented himself as an emissary from SOTF rather than a private citizen. [Pilpel] warned [Ethics Commissioners] of a ‘procedural problem' in a case referred by the SOTF to Ethics that ‘does not tell you the full story.'
Contrary to the SOTF findings, [Pilpel] asserted that the violation reported was ‘not willful' and that the due process afforded to the respondent wasn't ‘sufficient.' He lamented the SOTF's lack of ‘clarity on what steps needed to happen' before referring a case to Ethics and pleaded to the Commissioners:'I'm fighting a losing battle over there' [at the SOTF]. He went on; ‘I've spent a huge amount of time preparing findings and explanations that I think would have been helpful as part of the referral that the Chair (Kitt Grant) elected not to use.'
Therefore, he declared, [the referral for enforcement] his SOTF peers sent to Ethics ‘was not helpful.' At the Board's Rules Committee meeting on May 15, Mr. Pilpel re-iterated that the SOTF did not seem to understand ‘where due process is attached.' Magic words for re-appointment,” Dr. Kerr noted. [emphasis added]
Pilpel did not explicitly state he was at the Ethics Commission's April 28 hearing as an “emissary” of SOTF, but he clearly introduced himself, and noted he is a member of the SOTF at about 52 minutes and 14 seconds into the Ethics hearing video, when he introduced his public comments saying “David Pilpel. SOTF member.” He didn't qualify his remarks that he was speaking as a private citizen.
The Ethics Commission had not invited Pilpel to its April 28 meeting in order to make a formal presentation about a case on the Commission's agenda that day. By inference, it was clear Pilpel was deliberately trying to make himself look good, tattling on his fellow SOTF members in order to make them look bad. Everything he reported to Ethics was insider information about a matter the Ethics Commission was discussing. Pilpel was not authorized to speak on behalf of the full Task Force to present his personal “minority opinion.”
The timing of Pilpel's tattling to Ethics just 17 days before SOTF appointments were to be considered by the Board of Supervisors Rules Committee on May 15 appears to be more than just mere coincidence in timing. He may have wanted to paint a picture of other SOTF members in order to make them look bad prior to appointment consideration at Rules.
Indeed, both the Board of Supervisors and the full membership of the Sunshine Task Force should consider censuring Mr. Pilpel for his unauthorized appearances at public meetings of the Ethics Commission, during which Pilpel presents his personal, “dissenting opinions” regarding votes adopted by the full Task Force, intentionally to undermine — and adversely impact — the full Task Force's “majority opinion” being deliberated by the Ethics Commission for enforcement. Pilpel may feel he is entitled to engage in this type of subterfuge by virtue of his seat on the Task Force.
Pilpel is not authorized to present his personal opinions under the guise of his SOTF membership regarding a concluded SOTF Order of Determination referring a given Sunshine complaint referred to Ethics for enforcement, during testimony to Ethics as any sort of “emissary” from SOTF.
The Statement of Incompatible Activities (SIA) for San Francisco Board of Supervisors, Clerk of the Board, Youth Commission, and Sunshine Ordinance Task Force unequivocally prohibits Pilpel from acting as any sort of “emissary” from the SOTF.
The Board of Supervisor's SIA applicable to Sunshine Task Force members states in Section IV, Restrictions on Use of City resources, City Work-product and Prestige, Sub-Section C, Use of Prestige of the Office, paragraph 3, “Holding Oneself Out, Without Authorization, as a Representative of the Board, Clerk of the Board, Youth Commission or [Sunshine] Task Force”:
“No officer or employee may hold himself or herself out as a representative of the Board, Clerk of the Board, Youth Commission or Task Force, or as an agent acting on behalf of the Board, Clerk of the Board, Youth Commission or Task Force, unless authorized to do so.
An employee who lives in San Francisco wants to attend a public meeting of a Commission that is considering a land use matter that will affect the employee's neighborhood. The employee may attend the meeting and speak during public comment, but should make clear that he is speaking in his private capacity and not as a representative of the Board, Clerk of the Board, Youth Commission, or [Sunshine] Task Force. [emphasis added]
This Board of Supervisor's SIA is adopted under the provisions of San Francisco Campaign and Governmental Conduct Code (“C&GC Code”) Section 3.218. Engaging in activities prohibited by a governing SIA may subject an officer or employee to discipline, up to and including possible termination of employment or removal from office, as well as to monetary fines and penalties. All City employees and appointees to City boards, commissions, task forces, and advisory bodies are required to re-read their applicable Department's unique SIA's annually.
Pilpel must surely be aware of this annual requirement, and that he is prohibited from holding himself out as a member of SOTF at Ethics Commission meetings, since neither the SOTF nor the Board of Supervisors have authorized him to do so.
The SIA does provide that Task Force members may request an exemption to SIA requirements in writing, by submitting a description either to the Board of Supervisors or directly to the Ethics Commission of proposed activities a member might want to be exempted from, and an explanation of why such activity would not be incompatible under the governing SIA. Any such written request must describe the proposed activity in sufficient detail for the decision-maker to make a fully informed determination whether it is incompatible under this Statement.
Pilpel has neither applied for nor been granted an SIA exemption known as an “Advance Written Determination” from either the Board of Supervisors or directly from the Ethics Commission at any time during his term on the Task Force between May 2012 and today. The Board of Supervisors confirmed on June 2 that Pilpel has never applied for an advance written determination, and the Ethics Commission confirmed on Friday, June 6 that it, too, has no record of Pilpel ever submitting, or having been granted, an advance written determination request from Ethics.
Pilpel's probable clear violation of the Board of Supervisors SIA at Ethics on April 28 should have been sufficient evidence for the Rules Committee to deny recommending him for re-appointment to the Sunshine Task Force, and sufficient evidence that the full Board of Supervisors should not have re-appointed him on May 20. But the full Board of Supervisors did re-appoint Pilpel, despite what appears to be a potential violation of the SIA governing Task Force members.
SOTF Incumbent Louise Fischer
Ms. Fischer's apparent sole qualification for appointment appears to be her involvement and possible membership in the Alice B. Tolklas Democratic Club, a political club under the thumb of Supervisor Wiener, the lead architect along with Board President David Chiu of the 2012 Purge of the Sunshine Task Force. She was brought in to help out Wiener in 2012, and has done nothing on the Task Force in her first two years to warrant re-appointment in 2014.
Indeed, her folksy style as evidenced by her presentation at the Rules Committee on May 15 reminds this author of the folksy style of former U.S. Presidential candidate Sarah Palin that clearly belied Palin's intelligence quotient.
Fischer's Qualifications Presentation During the May 15 Rules Hearing
Fischer was all over the map in a rambling presentation of her qualifications on May 15 that made little sense, and demonstrated little justification for re-appointment to the Task Force. Supervisor Yee had to ask her to wrap up her rambling when she clearly exceeded time limits.
Fischer testified that she is currently the acting chairperson of the Task Force, since former chair Kitt Grant has resigned completely. In her folksy style, Fischer claims she “knows how the sausages are made.”
Fischer claims her first question to Sunshine complainants is whether they received whatever documents they had requested, and if not, she then asks the respondents why they didn't provide the materials. Observers who regularly attend Sunshine Task Force meetings report that they have rarely heard Fischer ask any such line of questioning, so she may have bamboozled Supervisors Yee and Tang on May 15. She may have made this claim up, as she rambled along.
Anticipating Supervisor Tang's question about the City Attorney's role, Fischer said the first thing the new members did in 2012 was to reverse the six-vote rule because it was a violation of the City charter. She claimed it was ironic that the SOTF is in charge of enforcing open records rules, but had violated a rule in the Charter. Fischer suggested that by combining similar complaints into one hearing, the Task Force can become more “efficient.” Echoing Kitt Grant's opening presentation of the un-approved draft Sunshine Task Force annual report, Fischer also complained about three complainants who file too many complaints.
Fischer says she would like to see changes to the SOTF's bylaws, and believes mediating complaints should be the first solution the Task Force considers to lessen the number of cases the Task Force needs to hear during its regular meetings.
Fischer — and a handful of other Task Force members — has all but ignored the fact that Deputy City Attorney Jerry Threet had avised the Task Force that rather than forcing complainants into mediation, complainants are entitled to a hearing if they so request one.
As early as April 16, 2013, then administrator of the Sunshine Task Force, Angela Ausberry announced that “in an attempt to mediate and stave off hearings before the full Sunshine Ordinance Task Force,” the respondents in this author's Sunshine complaint number 13-021 involving the Department of Public Health should respond to a mediation attempt within five business days to avoid having a hearing before the Task Force. After this author responded to Aubsberry the next day on April 17, 2013 that a full hearing, not mediation, was being requested, DCA Threet advised Ausberry — and by extension, advised the full Task Force — also on April 17, 2013, that “If the Complainant [requests] a full hearing [before the full Task Force], they are entitled to [request and be granted] it.”
That has not stopped the current SOTF Administrator, Victor Young, nor stopped either Ms. Fischer or the full Task Force, from trying to force complainants to enter into mediation by dissuading them from obtaining a hearing by the full Task Force, despite City Attorney “advice” to the contrary. Apparently the double-standard involving selectively ignoring City Attorney advice has been completely lost on the hapless, albeit folksy, Louise Fischer.
It appears that Ms. Fischer and a handful of other members of the Task Force believe that they are entitled to ignore the very City Attorney advice that landed the Task Force in trouble with Supervisors Wiener, Farrell, and Chiu in 2012. And stupidly, Supervisors Tang and Yee recommended Fischer for re-appointment to the Task Force on May 15, and the full Board of Supervisors in fact re-appointed Fischer to her seat on May 20, despite Fischer's apparent willingness to ignore Deputy City Attorney Threet's professional advice, by forcing complainants into mediation, in a completely misguided attempt at feigned improvement to the Gods of “Efficiency.”
On May 15, Fischer also testified that she still wants to limit how many times similar complaints can be heard over and over, apparently even if doing so would violate the due process rights of members of the public to file complaints as they see fit, again ignoring DCA Threet's advice that if complainants request a hearing, they are entitled to one, even in Sunshine complaints involving similar issues. That potentially means several separate hearings, one for each complaint.
Notably, Supervisor Tang asked no questions of Fischer, even though Tang had indicated she would ask the same questions of each candidate seeking re-appointment. And if Tang's litmus test demands undying fealty to City Attorney advice, it's more than a tad ironic that Fischer was granted re-appointment, despite being oblivious to Threet's advice.
SOTF Incumbent Todd David
Before getting to Todd David's May 15 Rules Committee presentation regarding his qualifications to be re-appointed to the SOTF, let's get out of the way two issues Mr. David failed to address on May 15, which Supervixsors Yee and Tang must have surely known about, but chose to ignore.
Todd David's Form 700 Failure and an FPPC Warning Letter
A chronology of David's appointment to the Task Force in 2012 is in order.
Supervisor Scott Wiener pulled Todd David out of a rabbit hat during the May 22, 2012 full Board of Supervisors meeting, kicking Bruce Wolfe off of the Sunshine Task Force island. David had not applied through customary avenues, but to Wiener, directly. Mr. David appeared to have had no qualifications to serve on the Sunshine Task Force back in 2012, and his 2012 application listed no qualifications to serve.
In 2012 Mr. David's Form 700, Statement of Economic Interests — a document required as part of SOTF's application process — failed to include the pre-printed form, Schedule B, Interests in Real Property. Instead, he submitted a written statement in lieu of Schedule B in which he neglected to report the appraised value of a multi-family residential property he owns at 384 Eureka Street appraised in 2012 at $2.1 million, and neglected to report rental income he receives from the multi-unit property.
Notably, although the Rules Committee only considered David's typed statement in 2012, rather than the required Schedule B, the Rules Committee did not recommend Mr. David for appointment to the Task Force in 2012. It was Wiener who chose to substitute Todd David during the subsequent May 22, 2012 meeting of the full Board of Supervisors in place of the Rules Committee's recommended disabled candidate, Bruce Wolfe.
Although David applied for a single seat in 2012 (SOTF Seat 9), Wiener's substitution assigned Mr. David to Seat 8, the seat the Board of Supervisors had historically advertised as reserved for a physically-disabled member.
Neither the Board of Supervisors nor San Francisco's Ethics Commission took action in 2012 on David's substitution of a written statement in lieu of Schedule B. So a complaint was filed with the California Fair Political Practices Commission (FPPC) regarding Mr. David's substitution in lieu of Schedule B. The FPPC did take action, and determined David had violated California's Political Reform Act by failing to disclose his interests in real property. The FPPC issued a warning letter to Mr. David on August 22, 2012 after he submitted an amendment including the proper Schedule B.
But because David was then seeking, and continues to seek funding of over $4 million in City funds for his pet project, the Noe Valley Town Square, Wiener engineered appointing David to the Task Force. Since then, both the Mayor and Wiener have been reported in the press as being supportive of the Noe Valley Town Square raid of the Open Space fund.
Is Todd David Campaign Manager for Supervisors Scott Wiener's and Eric Mar's “Surgary Soda Tax Ballot Measure”?
ChooseHealthSF is the “sugary soda” tax measure working its way to the November San Francisco ballot hoping to raise $30 million in funding to benefit kids and parks, and DPH by imposing a tax on sugary-laced sodas popular with children. Supervisors Scott Wiener and Eric Mar have been working on placing such a tax measure before the voters.
But even before it may — or may not — be officially accepted as a Board of Supervisors-sponsored ballot measure later in July, it's a little disconcerting that Mr. David's Linked-In page says:
“The tax will combat type 2 diabetes while funding education and active recreation programs in San Francisco's public schools, Rec and Parks, and Dept of Public Health.”
Googling the phrase “Todd David and ChooseSFHealth,” Google reports that Mr. David is not merely listed as a “Campaign Consultant” as he may have artfully reported to the Elections Department. Instead, Google reports on his Linked-In profile that Mr. David is ChooseHealthSF's ballot “campaign manager,” not merely a campaign “consultant.” Hopefully, the Elections Department and the Ethics Commission will note Mr. David's possible duplicity shielding that he's really a campaign manager carrying yet more water for Supervisor Wiener, not a mere consultant.
What we have here, is the cart before the horse. David claims to be campaign manager for a ballot measure that is not yet placed on the ballot.
David may clearly want a portion of the soda tax to reach the Recreation and Park Department, or at minimum to reach recreation programs for busy parents such as himself who have trouble attending SOTF meetings due to their child-rearing responsibilities, recurring SOTF meetings on the first Wednesday of each month be damned.
Or, Mr. David may be hoping some of the sugary-soda tax revenue will reach the group edMatch that he founded to raise matching funds for schools, a group with its own spotty track record and lack of public accountability regarding how, or even whether, it has actually disbursed matching funds to schools.
And at question may be the propriety of City Board and Commission appointees being involved with ballot measures as a named ballot campaign member, given restrictions on “electioneering” by City employees and agents of the City. If nothing else, it illustrates that Mr. David gets involved in partisan politics, and may not be an unbiased member of the Sunshine Task Force.
Todd David's Absence Record and False Testimony About SOTF Meeting Schedules
It's totally sad that Supervisors Breed and Yee were snookered — by believing — both Todd David and other Sunshine Task Force members who may have misled both Supervisors that the Task Force was not meeting regularly. Observer's wonder whether that was with SOTF Chairperson Kitt Grant's and Co-Chair Louise Fischer's help.
In the absence of checking the Task Force's by-laws (which clearly state the Task Force's regular meeting pattern), all Yee and Breed — or their respective legislative aides earning $100,000 a year in salaries — had to do to ascertain the veracity of Task Force member Todd David's outrageous absentee record during his first two-year term on the Task Force was key in 20 meeting dates of the Task Force into Microsoft Excel. Right-mouse clicking on a column of data in Excel permits formatting of dates to display as both day of the week + date of the month, which shows clearly that the SOTF has a pattern of meeting on Wednesday's.
Then Breed and Yee would have known that the Task Force has a set date-specific pattern for its regular meetings on Wednesdays. By comparing a printout of Excel's automatic formatting of dates to that age-old device known as a hardcopy printout of monthly calendars, Yee and Breed would have quickly learned that full Task Force meetings are typically held like clockwork on the first Wednesday of each month. Yet neither Breed nor Yee sought to verify independently bullshit claims raised by Todd David and his backers that the “Regular Meeting” dates were chaotic.
Indeed, of 20 Regular meetings of the Task Force since it resumed meeting in November 2012, fully 15 (75%) were actually held like clockwork on the scheduled date-certain pattern of the first Wednesday of each month. Of five regular meetings cancelled and rescheduled, four of the five were due to conflicts with official City holidays. The four cancelled and rescheduled meetings represent 20% of the 20 meetings. The remaining regular meeting cancelled was due to a lack of quorum.
Prior to the start of Rules Committee's May 15 hearing, I advised both Supervisor Tang and Supervisor Yee that I would be testifying that Todd David had missed 46% of 13 SOTF meetings in just over the past year documented in the SOTF's absence records, documentation of which I provided to Rules supervisors Yee and Tang prior to the start of the hearing.
After Mr. David presented his qualifications to serve on the Task Force, Supervisor Yee raised a follow-up question to Mr. David regarding David's attendance record. Blatantly, Mr. David responded that the Task Force had been unable to meet for “a couple of months” following the appointment of Task Force members in 2012, and “then we were kind of were shifting around [meeting] dates.” This is patently untrue for a number of reasons.
First, it was not just a “couple of months,” as David falsely testified that the Task Force had been shut down. It was fully six months — fully half a year — between May 2 and November 7, 2012 when the Task Force was forced into not meeting, due to being out of compliance with having a disabled member appointed to the Task Force, a feat engineered by Supervisors Wiener, David Chiu, and Mark Farrell.
Second, Mr. David signaled his upcoming absences by skipping attending the very second meeting of the Task Force (December 5, 2012) after it resumed meetings on November 7, 2012. The first meeting David skipped was scheduled for the typical pattern of the Sunshine Task Force's first-Wednesday-of-the-month date-certain scheduled meetings, and his first absence was not because — as David falsely asserted — that the Task Force had begun “shifting around meeting dates.” Nor was that first absence due to David's further false allegation to Supervisor Yee's follow-up question during the Rules hearing May 15 that there was no way to “easily predict when regular meetings would be scheduled.”
What part of the regular, recurring pattern of full Task Force meetings regularly held the first Wednesday of each month enumerated in SOTF's by-laws did Mr. David not understand? The Task Force has clearly not shifted its Regular Meeting dates at all, since Mr. David was sworn into office.
Mr. David could have “predicted” when he would be required to attend regularly-scheduled meetings, had he just read and understood the Task Force's bylaws. It appears he may not have read them. Had he read them, then he may have been able to negotiate with his wife assumption of child-rearing duties he claims were more important to him than attending meetings at which members of the public expected he would faithfully attend. Todd David's claim I had a sick child my wife couldn't deal with doesn't cut it with members of the public who believe oversight bodies have a special obligation to protect the public interest, the very “transparency” Supervisor Tang claims is important to protect the public.
Then David further brazenly testified to Supervisor Yee in an attempt to justify his own absences from regular Task Force meetings that “sometimes” the Task Force met more twice a month. The Task Force has not. An analysis shows that the full Task Force has held just seven “Special Meetings” since it resumed meeting on November 7, 2012. Of the seven Special Meetings, only one actually involved the full Task Force meeting more than once per month, since subcommittee meetings have never counted towards meetings of the full Task Force.
The full Task Force has only met twice in a single month just once, the second month after Purge appointees were sworn in in 2012.
Five of the Special Meetings were replacement dates for five cancelled Regular Meetings. Just two of the Special Meetings were to have been for an additional meeting in a given month, but one of the Special Meetings was subsequently cancelled due to a lack of quorum. The full Task Force has only met more than once in any given month a single time — in November 2012 — for a single “additional meeting” during the 19-month period since it resumed meetings in November 2012.
The full Task Force has not met more than once a month after the new Purge appointees were installed in 2012 — except once in December 2012 during the second month of their tenure. Since then, during the intervening 18-month period they have made no sustained effort to meet more than once a month. Subcommittee meetings don't count, as noted, since there have always been subcommittee meetings during the 20-year existence of the Task Force.
The Task Force has made no effort to do so again, since December 2012. So much for the nonsense that the 2012 Purge appointees tried to clear up Sunshine complaint backlogs by holding multiple meetings in any given month.
So-called “Special Meetings” of the Task Force have posed no undue burden on Task Force members, as Task Force Chair Kitt Grant, Co-Chair Fischer, and member Todd David may have knowingly misrepresented to Supervisors Yee, Tang, and Breed. It's complete nonsense. Shame on Yee, Tang, and Breed for believing any such nonsense.
Then Mr. David may have falsely testified (under oath?) to Supervisor Yee during the Rules hearing that his (David's) absences were due to being unable to attend meetings that were rescheduled to other dates. Of the five cancelled meetings rescheduled, Mr. David attended four, illustrating he was actually able — not unable, due to child care responsibilities — to attend rescheduled meetings. Indeed, Mr. David's additional six (of seven absences) all occurred on Regular Meeting dates that all followed the same recurring, and clearly predictable, pattern on the first Wednesday of each month.
That Supervisor Yee accepted David's lame, false testimony during the Rules hearing on May 15, and then subsequently at the full Board of Supervisors hearing on May 20, is one problem. Another problem is that Supervisor Yee further asserted that after asking around, “different [Task Force members] confirmed that they moved committee meeting dates [around],” and “didn't have regular meetings on a [date-]certain calendar date.” That's complete nonsense, as Yee's staff could have easily researched for him and included in the “script” prepared to help bumbling Yee conduct the Rules Committee hearing on May 15.
For her part, Supervisor Breed also brazenly stated during the May 20 full Board of Supervisors hearing that her “understanding” was that they [the Sunshine Task Force] don't [sic] have a regular meeting day and regular meeting [dates] changes [sic] consistently … for example — ‘we [the Board of Supervisors] meet every Tuesday,' …. And [regular SOTF meetings] are very random, which makes it difficult for some [Task Force] members to attend.” Supervisor Breed mis-spoke, or was lying: There are no quantitative data, at all, that suggests Sunshine Task Force meetings are held “randomly.” Instead, its meetings are held consistently, not randomly. How could Breed be so wrong?
Were Breed, Tan, Wiener, and Yee so tied up in meetings with SOTF “lobbyists” David, Fischer, and Grant, that the four Supervisors had no time left over to independently very the veracity of the lobbyists' false claims?
Additionally, Deputy City Attorney Jon Givner, who advises multiple Board of Supervisors and its various subcommittees, claimed he didn't know what the Task Force's recurring meeting schedule is. Givner claimed he wasn't familiar enough with the Task Force's bylaws to know what the regular date-certain meeting schedule is. (Givner, if he were worth his salt, could have easily and quickly Googled and pulled up the Task Force's bylaws to ascertain the Task Force's recurring regularly-scheduled meeting pattern during the Rules Committee's May 15 hearing, but chose not to.)
This is comical precisely because Article V, Section 2 of the Task Force's bylaws specifically states that the SOTF's meetings that were previously held on the fourth Tuesday of each month were moved to the first Wednesday of each month. Not only did Givner fail to read this key provision in SOTF's bylaws, it appears so, too, did Member Todd David.
Just as Member Pilpel may not have read and understood the Board of Supervisors Statement of Incompatible Activities that prohibits him from attending other City oversight body meetings and potentially misrepresenting that he is speaking as an “emissary,” rather than speaking as a private citizen.
The meeting date analysis disproves the misinformation presented by Todd David and his supporters. The analysis involved data that Supervisors Yee, Tang, and Breed or their respective staff's could have easily researched and uncovered, as the Westside Observer has — without much effort. The three Supervisors and Supervisor Wiener have much more resources at their disposal to investigate policy matters of concern to San Franciscans, and to San Francisco's Board of Supervisors, than do this reporter or the Westside Observer.
After all, the meeting date analysis was gleaned from meeting postings on SOTF's web site available to the four supervisors, coupled with data from a public records request for Mr. David's absences obtained from the SOTF's Administrator, an employee who is appointed by the Clerk of the Board, Angela Calvillo. If the Observer can easily sift through this data and place a records request, so too could these four miscreant Supervisors have researched prior to casting their votes to reappoint Mr. David, who has grossly abused the SOTF's absence-from-meeting bylaws rules to deal with his child-care issues.
Tang's Double-Standard of Ignoring City Attorney “Advice”
Things just get curiouser, and curiouser.
If Supervisor Tang's new litmus test for appointees to City boards, commissions, and “transparency” oversight bodies is that as a condition of appointment, applicants must swear undying fealty — a feudal tenant's or vassal's sworn loyalty to a lord — to inviolate City Attorney “advice,” as of May 28 Supervisor Tang may now have a big problem on her hands involving two Ethics Commissioners who on May 28 appear to have trotted down the road of ignoring City Attorney “advice” from the Deputy City Attorney assigned to attend Ethics Commission meetings during an open-meeting session.
On the Ethics Commission's May 28 agenda, item #4 claimed it would vote on whether the Ethics Commission should to go into closed session to receive attorney-client advice from the City Attorney involving litigation against the Ethics as the “defendant” in the Grossman v. John St. Croix, Executive Director and San Francisco Ethics Commission lawsuit languishing in the Appellate Court. One problem is, the Ethics Commission is now not the defendant, but the Petitioner.
Following over an hour of public testimony combined between the general Public Comment period and the comment period for Agenda Item #4 on May 28, the Deputy City Attorney advising the Ethics Commission suggested that after hearing public comments, he was concerned that the Commission had, in fact, not provided members of the public with documents that had been provided to the Commissioners prior to the meeting. In, and of itself, this was another violation of San Francisco's Sunshine Ordinance. On the spot, Deputy City Attorney Josh White advised the Ethics Commission to continue and re-calendar the agenda item to a future Ethics Commission meeting, in order to comply with Sunshine Ordinance requirements and perhaps state law.
But immediately, Ethics Commissioner Paul Renne — former City Attorney Louise Renne's husband — suddenly snapped awake, after worried observer's had noted his drowsiness and possible sleep deprivation throughout the meeting. Renne argued to continue hearing the matter right on the spot, despite advice from the Deputy City Attorney who had advised against doing so.
Then, newbie Ethics Commissioner Peter Keane — professor of law and Dean Emeritus at Golden Gate University Law School, who was appointed to the Ethics Commission by his pal, City Attorney Dennis Herrera, hoping Keane will do Herrera's bidding, and was sworn in as an Ethics Commissioner on October 21, 2013 — also quickly argued on May 28 to change the closed-session meeting noticed on the published agenda into a suddenly open-meeting agenda item that the public had not been notified they could attend, if interested.
Keane appeared not all interested in hearing the Deputy City Attorney's advice to the Ethics Commission to postpone and re-calendar the agenda item to a future meeting. Keane sought to ignore the City Attorney's advice, and wanted the Ethics Commission to discuss the item without adequate public notice, also right there on the spot like Commissioner Renne.
Luckily, Ethics Commission president Ben Hur ruled to continue the agenda item to the Commission's June meeting.
SOTF's “Disabled” Member Requirement and Incumbent Bruce Oka
Although Mr. Oka has done a good job as a member of the Task Force, he has long sought to be replaced, and initially chose not to apply for re-appointment in 2014. He appears to some observers to now be providing cover to the Supervisors who implemented the Purge of Task Force members in 20112.
In July 2013, Oka was invited to re-apply to the SOTF and was provided an application form Supervisor Chiu's legislative aide, Judson True. Mr. Oka replied on July 12, 2013 that he was not going to fill out the application since he didn't want to continue serving on the SOTF.
Another analysis of 14 e-mails Oka exchanged with Chiu's aide, Judson True, over the course of 2013 asking to be replaced on SOTF is revealing. Notably, Oka asked at least eight times to be replaced on the Task Force, and asked to be replaced ASAP. Oka had met with True as early as February 2013, just four months into his appointment to the Task Force to discuss Task Force “matters ASAP.” It's not known whether Oka had expressed to Mr. True as early as four months into his Task Force assignment a desire to be replaced.
The e-mails exchanged were obtained by a strong Sunshine advocate who placed a records request to Supervisor Chiu on May 16, the day after the Rules Committee had only forwarded the three recommendations for Pilpel, Todd David, and Fischer to the full Board of Supervisors. Mr. True, responded to the records request by attaching the e-mails on May 27.
It's clear from the e-mails that Oka doesn't want to serve on the Task Force any longer. Elsewhere there are reports Oka may be planning to resign from SOTF by the end of the 2014, before the term expires in April 2015. To that extent, Oka appears to be re-applying for an appointment he doesn't really want, and in the process is blocking the appointment from going to someone who really does want to be appointed: Namely, Mr. Bruce Wolfe.
Notably, as early as July 23, 2013, Supervisor David Chiu e-mailed Supervisor Mark Farrell, asking Farrell:
“Did you ever have a chance to meet with your constituent re: Sunshine Task Force? Bruce Oka wants to step down, and we need to replace him asap.”
The candidate Chiu was referring to was Kate Williams. Ms. Williams had e-mailed Chiu at Chiu's private e-mail address on gmail.com. Attached to the e-mail was a one-line entry from a Google calendar showing an entry for a meeting between 3:30 p.m. and 3:45 p.m. on April 11, 2013 that read: “RSVP: Kate Williams, Sunshine Ordinance Task Force – Office.”
It is not known whether the Google calendar was from Ms. Williams' Google calendar, but observers suspect it was more likely a calendar entry from David Chiu's Google calendar, given that it notes “Office” as the meeting location. This suggests that Supervisor Chiu may be conducting City business using both a Google calendar rather than his City Hall official calendar, and using a private e-mail account on gmail.com on which to conduct official City business.
Since Oka is, in fact, a holdover on the SOTF, and the term of appointment to seat #11 will only run through April 2015, many observer's find it unacceptable that he threw his hat into the ring seeking re-appointment only the day before the June 5 Rules Committee hearing since there are reports he may plan to resign from the SOTF before the end of this year.
Oka wound up on the Task Force in 2012 only after Mayor Lee was unwilling to re-appoint him to an SFMTA transportation committee. There may have been no surprise there, as Oka may have irritated the Mayor over one MUNI issue or another. It appears to have been up to the Mayor to make a formal nomination to re-appoint Oka to the SFMTA committee, and up to Supervisor Chiu to move it forward, but neither of them advanced Oka's clear interest in an SFMTA re-appointment.
At the time, the Mayor rudely didn't have the courtesy to inform Oka beforehand that he had not been re-appointed to the MTA committee. Oka learned of it only when he showed up for an MTA meeting and found the new appointee sitting in his chair. Observers wonder how Oka might continue to believe that magically the Mayor may somehow change his mind and re-appoint Oka to the MTA committee he wants to serve on, the very committee Lee had unceremoniously thrown Oka off.
Surprisingly, although the Rules Committee's agenda published on Friday, May 30 did not include Mr. Oka as an applicant for re-appointment on Thursday, June 5, someone apparently assisted Mr. Oka on June 4 to complete and submit an eleventh-hour application for consideration, too late for consideration the next day, given restrictions on modifying the agenda at the start of the Rules June 5 hearing.
It is unclear why Oka would have submitted — or who talked him into submitting — an application for re-appointment just 24 hours before the scheduled hearing, after Oka has begged for almost a year to be replaced and relieved of his Task Force appointment, leading some to speculate who may have pressured Oka into submitting a last-minute application, and why.
Many observers believe the honorable thing for Oka to do is to officially withdraw his eleventh-hour June 4 application on Monday, June 9 so that Mr. Wolfe can be fairly considered for a seat that he clearly wants, which Oka clearly doesn't want.
Oka has served admirably on SOTF, despite his clear requests to David Chiu since at least July 2013 — nearly a year ago — to be replaced. It's time Oka move on.
It's highly unlikely that Supervisors Katy Tang and Norman Yee did not know of Oka's repeated appeals to be replaced on the Task Force.
Because Mr. Oka has long been a reluctant “holdover,” the failure to appoint a willing and qualified applicant like Mr. Wolfe is indefensible.
Indeed, during the public comment period on June 5, Mr. Oka testified that he believes Bruce Wolfe should be picked by the Rules Committee and recommended to the full Board of Supervisors to fill the Task Force's disabled seat. Oka's recommendation of Wolfe for the seat doesn't appear in the closed captioning transcript posted on SFGOV TV, perhaps because he used the wheelchair-accessible alternate microphone, not the microphone at the speaker's main podium. But Oka's endorsement of Wolfe is clearly audible on the audio recording and in the video recording posted on SFGOV TV.
As well, Supervisor Campos supported the application of Bruce Wolfe during the June 5 Rules hearing, stating, in part:
“I guess [Bruce Oka] has [re-]applied and … just spoke here and basically said that he's [Oka] supportive of someone who is already before us and that's Bruce Wolfe, and so I have a great deal of respect for Bruce Oka and I know he has done a great deal of work, not only on the MTA before [serving on] the Sunshine Task Force. …
But I think he's [Oka is] right, that Bruce Wolf brings to the table the kinds of background, qualifications and expertise that you want, and I say this as someone who, you know, has disagreed with him [Wolfe] at times including a disagreement with him and [Task Force] members as to if they can ignore the [City] Charter and to the extent they were allowed to do that, but I do believe he [Wolfe] will be an important and a really critical addition.”
Campos testified that he thought it was important to move forward Bruce Wolfe's application that day, on June 5.
Unfortunately, despite the endorsements of Bruce Wolfe by both Supervisor Campos, and Bruce Oka, Supervisors and Yee stubbornly refused to consider Wolfe on June 5. Instead Tang and Yee prevailed on a motion to continue consideration of Seat 11 (for either Oka or Wolfe) to a future meeting. Lamely, they moved consideration for Seat 11 to the Call of the Chair or a date-certain date, and then qualified it to say they'd consider the continued item “within the next two meetings,” which could lead to another one- to two-month delay before completing appointment recommendations for both Seats 4 and 11. Yee and Tang are expert at stalling.
Following the Rules Committee's June 5 hearing, Oka gave this reporter permission to approach Supervisor Tang to tell her that the only reason Oka had applied the day before was because he was led to believe Supervisor Yee wanted multiple candidates for each vacancy, and Oka had applied solely for that reason, but wants off of the Task Force.
Oka also requested meeting with Ms. Tang prior to June 10, which Tang confirmed following the hearing that she's open to doing. We'll have to see if Tang brow-beats Oka into remaining an applicant, despite his insistence he doesn't really want to be re-appointed to the Task Force, or whether Tang will honor the wishes of Mr. Oka without brow-beating him.
How is it that Ethics Commissioners can openly seek to ignore City Attorney “advice” using an alternative interpretation of law and advice presented during an open meeting, but the Sunshine Task Force is held to a different standard?
If Supervisor Katy Tang's new litmus test is designed to exclude appointees who don't support City Attorney advice, does that mean the Board of Supervisors will stage a coup, and purge the Ethics Commission of appointees like Renne and Keane who appeared all too willing on May 28 to ignore City Attorney advice?
If not, isn't that a double standard? Can one oversight body — Ethics Commissioners — freely and openly ignore City Attorney “advice,” while another quasi-judicial body — SOTF — cannot, and is held out for retribution and punishment? How might this double-standard play, in, say, Peoria?
Does Supervisor Tang have different “litmus tests” in play for different City oversight bodies? With some appointees being purged from their seats due to litmus tests, while others are not? Or am I missing something in the mixed messages being sent from City Hall?
How does this double-standard play with Supervisor Scott Wiener? Is Wiener OK with Keane and Renne ignoring DCA “advice,” but simultaneously holds SOTF to a different standard?
One thing is painfully clear: The Board of Supervisors needs to stop playing politics with appointments to the Sunshine Task Force, and let Task Force members get on with their job of adjudicating disputes between citizens and City officials who skirt the Sunshine Ordinance.Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California's First Amendment Coalition. He received the Society of Professional Journalists–Northern California Chapter's James Madison Freedom of Information Award in the Advocacy category in March
|Allen Grossman receives the Society of Professional Journalist's Award|
By Patrick Monette-Shaw
In a surprising development in the Allen Grossman v. John St. Croix and Ethics Commission case languishing in the Appellate Court. On April 16, the Appellate Court denied the request of the First Amendment Coalition [FAC] for permission to file a brief as amicus curiae. The Appellate justices offered no explanation.
Essentially, Grossman’s case involves whether a voter-approved ballot initiative in 1999 to strengthen our local open records law — the Sunshine Ordinance can require release of public records that the City Attorney consideres confidential attorney-client communications.”
Grossman’s lawsuit against the Ethics Commission and its Executive Director, John St. Croix, involves the public’s right to know what advice City Attorney Dennis Herrera has been providing to the Ethics Commission regarding access to public records.
Essentially, Grossman’s case involves whether a voter-approved ballot initiative in 1999 to strengthen our local open records law — the Sunshine Ordinance can require release of public records that the City Attorney consideres confidential attorney-client communications. “The Sunshine Ordinance stipulates that such communications are public records when they deal with sunshine or ethics-related matters,” says Richard Knee, a current member of the Sunshine Ordinance Task Force.
Alternatively, the First Amendment Coalition has indicated that at issue in Grossman’s case is “whether San Francisco’s experiment in [public records] transparency will be cut short by restoration of secrecy for its lawyers.” As the Westside Observer reported last March, the Superior Court initially ruled in Grossman’s favor on October 25.
In stark contrast, as the Observer has reported, Deputy City Attorney Andrew Shen has filed on behalf of the City and St. Croix — but not on behalf of the Ethics Commission, since it never formally approved to appeal Grossman’s Superior Court victory.
Six days after the Appellate Court rejected FAC’s request, the U.S. Supreme Court ruled on April 22 in Schuette vs. Coalition to Defend Affirmative Active, a case involving Michigan’s voter-approved initiative banning race-based college-admission preferential treatment. Justice Anthony Kennedy wrote: “Courts may not disempower the voters from which path to follow,” declining to overturn the voter initiative on a 6-2 vote of the Supreme Court. “Courts lack authority to interfere with political decisions made by voters,” Justice Kennedy noted.
Application Denied The First Amendment Coalition (FAC) applied to the Appellate Court for permission to file an Amicus curiae — friend-of-the-court — brief in support of Allen Grossman. FAC is a California-based non-profit organization dedicated to freedom of speech and public access. FAC assisted in drafting SF’s Sunshine Ordinance in 1999, and has both a keen interest in, and expert-witness knowledge of, the subject matter.
In its three-page application, FAC noted that when voters adopted the Sunshine Ordinance in 1999, it reflected public dissatisfaction with the California Public Records Act (CPRA) that, in some instances, gives local agencies considerable discretion in deciding whether to disclose requested public records.
FAC’s application noted that although the City wants the section that deters City agencies from seeking the City Attorney’s advice on how to circumvent state and local open records laws. That section included a provision that requires SF agencies and officials to disclose — notwithstanding other attorney-client privilege protections — only a very narrow category of communications: Advice from the City Attorney’s Office on how to circumvent CPRA and the Sunshine Ordinance.
FAC noted in its application to the Court that voters are entitled to adopt such a limitation.
The City Attorney has suddenly raised a new claim, never raised at the Superior Court level, or in multiple briefs he filed to the Appellate Court, claiming it is the City itself, not the City Attorney, who is permitted to invoke attorney-client privilege. In fact, that privilege rests solely with clients, and in this case rests solely with citizens, not their attorneys. Voters , Grossman maintains, are the ultimate “clients” of the City Attorney. The City Charter wastes not one word — either explicitly, or implicitly — on any definition or assignment of, attorney-client privilege to any City officers, or on the City itself.
Courts are bound to uphold municipal ordinances and bylaws, unless they manifestly transcend powers conferred on enacting bodies. The City Attorney continues to argue that the duty of “confidentiality” is expressly conferred, or “inferred” by in the language as “additional powers and duties prescribed by State law.”
This is a summary of an article posted on the www.westsideobserver.com
By Patrick Monette-Shaw
To believe Mayor Ed Lee’s pledge to build 30,000 housing units in San Francisco over the next six short years, you’d also have to believe P.T. Barnum said “There’s a sucker born every minute.” [It wasn’t Barnum who said it; Wikipedia indicates several sources attribute the aphorism to various con men.]
…voters in November 2012 authorized the Mayor’s new Housing Trust Fund to receive just $36.8 million in diverted-from-the-General-Fund appropriations during the same six-year period. How do you divide $36.8 million in fish and loaves, and come up with $500 million?”
For openers, although the mainstream media reported January 17 details of Mr. Mayor’s seven-point plan to solve the City’s number one crisis (affordable housing), the media failed to note the Mayor’s bloviated claim to issue 2,500 down-payment-assistance loans during the next six years — and increase each loan to up to $200,000 — may end up costing a half-billion dollars. The media didn’t report, and apparently didn’t bother asking, where the Mayor plans to come up with a cool $500 million in order to hand out 2,500 interest-free loans within six years.
|Photo: Luke Thomas /fogcityjournal.com|
Will Google, or Twitter — or Ron Conway, and Danielle Steele’s ex-hubby, Tom “Don’t Persecute Billionaires” Perkins — donate upwards of $450 million out of their collective “tech” deep pockets to make these interest-free loans happen?
After all, the enabling legislation passed by voters in November 2012 authorized the Mayor’s new Housing Trust Fund to receive just $36.8 million in diverted-from-the-General-Fund appropriations during the same six-year period. How do you divide $36.8 million in fish and loaves, and come up with $500 million? Using bloviated fish? By cracking open a magnum of a City Hall mixologist’s “infused” wine?
Unfortunately, public safety employees in San Francisco — and particularly, citizens who vote — appear to have been played for a sucker over the Housing Trust Fund approved by voters in November 2012, a fund administered by the Mayor’s Office of Housing and Community Development.
The Housing Trust Fund appears to potentially be a bait-and-switch all of its own.
Proposition “C” approved by voters on the November 2012 ballot permitted the City to divert $20 million annually from the City’s General Fund towards constructing housing (without explaining what General Fund programs would face the chopping block to free up $20 million annually). The City will add an additional $2.8 million annually to the Housing Trust Fund on a compounded basis for the next 11 years, until 2024-2025.
By the time 2025 rolls around — just 12 years into this program — the General Fund will be tapped for $50.8 million annually for this Housing Trust Fund (again with no mention of what else will be cut from the General Fund). By 2025, a combined $424 million will have been diverted from the General Fund to the Housing Trust Fund.
Between 2025 and 2043 (since it’s a 30-year program), the annual allocation to the Trust Fund will be based on the prior year’s appropriation that will ostensibly start at $50.8 million, adjusted plus or minus an unspecified percentage of change to the City’s General Fund Discretionary Revenues. By 2043 — assuming a flat contribution of $50.8 million annually in each of the next 18 years — an additional $914.4 million will be generated, bringing the total 30-year contributions to the Housing Trust Fund to a staggering $1.34 billion promised for a wide variety of housing, not just down-payment assistance loans.
Raising $500 million for down-payment assistance loans is scheduled to take at least 14 years, not the six years reported in the media. And that would assume that the first $500 million in General Fund contributions to the Housing Trust Fund would be used solely for down-payment assistance loans, and all other housing programs would receive nothing during those 14 years.
In the next six years, will we be any closer to having any of the housing built promised by the Mayor and his Housing Trust Fund? Probably not. Just take a look at the dismal performance of the Housing Trust Fund so far. But first, take a look at the Mayor’s recent past for some context.
Mayor Lee Whipped at the Ballot Box
You wouldn’t know it from the dearth of post-election news analysis by our major media, but there were a number of significant losers in San Francisco’s municipal election last November.
When voters rejected Proposition “B” on the November 2013 ballot by a whopping 63 percent, they rebuffed the developers of luxury condos who had asked voters whether the City should allow development at 8 Washington Street. Mayor Lee was among the official proponents of the ballot measure. The same voters also rejected Proposition “C” at the same time, which was a referendum on whether the Board of Supervisors spot-zoning height increase for 8 Washington should take effect. More emphatically, over two thirds of voters — 67 percent — cast “No” votes.
The biggest loser over Propositions “B” and “C” was Mayor Lee — who lost any hope that his “legacy” project of the Warrior’s stadium planned to be built on the Bay exceeding height zoning would survive voter scrutiny, forcing Lee to go in search of his next “legacy.”
Other losers included the Board of Supervisors, trounced by referendum of the people against the Board’s flagrant use of spot-zoning height increases along the waterfront. The twin losses for Lee and the Supervisors so rattled them, that none of them dared to become the official opponent of the upcoming Proposition “B” on the June 2014 ballot that would require each project proposed for development on the waterfront that would exceed current height restrictions to obtain project approval by voters at the ballot box, beforehand.
A poll conducted for the Harvey Milk Club last December shows 75 percent of likely San Francisco voters favor this June 2014 ballot measure, which will probably pass handily. Also listed in the 2012 voter guide as proponents of the 8 Washington ballot measure, Supervisors Mark Farrell and Scott Wiener suffered an embarrassing loss at the ballot box. No wonder there were no takers to be the voter guide opponent on June’s Prop “B.” Wiener and Farrell hate losing.
And finally, the losers include the California State Teachers Retirement Fund (CalSTRS). As the Westside Observer reported in September 2013, an October 30, 2008 letter to the San Francisco Port Authority pledged that CalSTRS would make an equity contribution in the range of $100 million for project rights to 8 Washington. A February 19, 2009 Port Authority memo stated CalSTRS would have a 99 percent ownership interest in 8 Washington. As of September 2013, CalSTRS had invested $42 million in the 8 Washington project.
It isn’t clear how much the teacher’s pension fund lost when 8 Washington went down to double defeat, but it is known that CalSTRS lost over $100 million in a failed attempt to convert Stuyvesant Town — 11,250 middle class rent-controlled apartments in New York City’s Peter Cooper Village — into high-end luxury housing. Not to be outdone, the California Public Employees’ Retirement System lost $970 million it had paid to Lennar Housing in 2007 for part of a stake in Newhall Land Development Company’s “Newhall Ranch” deal north of Los Angeles that went bankrupt when the housing market crashed in 2008.
You have to wonder why Major Lee is cavorting with Lennar Urban’s massive housing development in the Bayview Hunter’s Point project and Lennar’s development on Treasure Island, given that Lennar’s Mare Island project was reported in July 2013 to also be in bankruptcy. Hopefully, Lee’s legacy will not be “the bankruptcy mayor.”
Housing Trust Fund Components
The November 2012 voter guide stratified how the $20 million Housing Trust Fund would be put to use, terms of which were to determined by the sole discretion of the Mayor’s Office of Housing. First, the voter guide indicated an unspecified amount would be used to create, acquire, or rehabilitate rental and home ownership for households earning up to 120 percent of Area Median Income (AMI), including acquisition of land. The AMI amount as of January 2014 is $67,950 for a one-person household, and $104,850 for a five-person household; 120 percent translates to $81,550 and $125,800, respectively.
Second, the 2012 voter guide indicated that no later than July 2018, the City would appropriate $15 million from the Trust Fund for down-payment loan assistance programs of up to 120 percent of AMI — ostensibly for non-first responders — and an unspecified percent of AMI for public safety first responders. The percentage of AMI for first responders was to be set at the sole discretion of the Mayor’s Office of Housing, but Supervisor Mark Farrell infused himself into the “sole discretion” discussions. Farrell is just one of City Hall’s creative mixologists infusing the wine.
Third, the voter guide reported that also by July 2018, the City will appropriate another $15 million from the Trust Fund for use as “assistance to reduce the risk to current occupants of a loss of housing,” and for use in making their homes safer, more accessible, energy efficient or “more sustainable” under a “Housing Stabilization Program” component of the Trust Fund for residents earning up to 120 percent of AMI.
Fourth, the Trust Fund would be permitted to use funds to operate and administer a “Complete Neighborhoods Infrastructure Grant Program” to accelerate the build-out of public realm infrastructure needed to support increased residential density. The Infrastructure Grants would be used only for public facilities identified by California’s Community Facilities District laws, and would give priority to residential development “project sponsors, community-based organizations, and City departments” for public realm improvements associated with proposed residential development projects. Funding would be restricted to no more than $2 million annually, or 10 percent of appropriations in any given year. [By 2025, 10 percent of the $50.8 million annual contribution to the Housing Trust Fund translates to $5.8 million for infrastructure grants.]
Fifth, the voter guide indicated the City could allocate an unspecified, but “sufficient amount” to cover legally permissible administrative costs of the Fund, including legal expenses and, ostensibly, personnel costs.
But the voter guide never told voters that up $1.34 billion would be provided to the Housing Trust Fund over the 30-year legislation. Still, lured by the smell of money, voters passed Proposition “C” all but ignoring that it contained a poisoned pill buried in the legal text of the initiative: For certain residential projects beginning after January 2013, the City would be required to reduce by a staggering 20 percent the current on-site inclusionary housing obligations of developers to develop “affordable” inclusionary housing.
The voter guide also stipulated that as of January 2013 the City would not be allowed to adopt any new land use legislation or administrative regulations that would require project sponsor’s to increase their inclusionary housing cost obligations beyond those required on January 1, 2013, including the 20 percent reduction.
You’d need to be a land-use attorney to understand which sections of the Planning Code would be subject to the 20 percent reduction to inclusionary housing requirements, which appears to be a reward to developers for not opposing Proposition “C” at the ballot box. After all, the developers are anxious to milk the $1.34 billion Housing Trust Fund.
To the extent Prop. “C” was backed by the Mayor, you have to wonder about his claims concerning “affordability,” given the poison pill in the November 2012 Proposition “C” that reduced affordable inclusionary housing by 20 percent in order to placate developers and investors.
The Eligibility Feeding Frenzy
Within two months of his stinging defeat over 8 Washington, the Mayor’s social media spin doctors had created a new persona for him: That as the “affordability mayor” pushing an “affordability agenda.”
The ensuing food fight that broke out over use of the Housing Trust Fund was nasty. Back in July 2013, just after the City adopted its fiscal year 2013-2014 and 2014-2015 budget, a coalition of advocates tried to broker an agreement that not only would teachers and nurses be eligible for the down-payment loan assistance programs (DLAP) along with police, firefighters, and sheriff employees, but all City workers would be eligible, too.
In particular, public safety dispatchers who dispatch 9-1-1 calls to police officers and firefighters had sought to be included in the first round of loan funding, but were rebuffed, as were the teachers and nurses. Supervisor Farrell fought bitterly with the Mayor’s Office of Housing (MOH) during negotiations regarding eligibility for the so-called “first responders” carve out from the DLAP funds. Farrell had initially wanted firefighters and police officers to be allowed to earn up to 250 percent of AMI, which would have equaled $169,875 for a one-person household, and up to $262,125 for a five-person household.
Supervisor Farrell’s meddling prevented the 9-1-1 dispatchers from eligibility, and dispatchers may not have been informed they could apply under a separate non-first responder’s down-payment assistance loan program, instead.
On July 30, 2013 Farrell spoke at a City Hall news conference flanked by Fire Chief Joanne Hayes-White, Police Chief Greg Shur, and Mayor Lee. Farrell announced that the DLAP loans would be restricted to public safety first responders, with a maximum down-payment loan assistance amount of $100,000. Farrell — like others — hope to entice public safety officers to move back into San Francisco from other jurisdictions. Fat chance.
According to an article in the San Francisco Chronicle the next day, reportedly “more than 45” police, fire, and sheriff personnel had expressed interest in applying for the first responder DLAP loans. The Chronicle didn’t report on whether Farrell mentioned during his news conference that a second DLAP program for non-first responders was also under development.
Farrell doesn’t seem to get it — as most politicians don’t — that without 9-1-1 dispatchers residing in the City and County, police, fire, and other first responders will have insufficient dispatchers directing them to 9-1-1 emergencies. After all, 9-1-1 dispatchers are the City’s first, first responders.
Eligibility Conundrum: 9–1–1 Dispatchers vs. Public Safety vs. Others
The first-responders DLAP program was created in November 2012 to help entice public safety personnel to move back to San Francisco from outlying jurisdictions. Presumably, after the next big earthquake or other disaster, there are too many public safety officers residing out of county, and recovery efforts will be stymied by the inability of staff to get back into the City to provide public safety.
Data from the City’s Department of Human Resources obtained in January 2014 shows that:
Of 2,161 employees in the Police Department, fully 75.5 percent live out-of-county
Of 1,386 employees in the Fire Department, 67.3 percent reside out-of-county
Of 809 employees in the Sheriff’s Department, 76.6 reside out of county
Of the 147 Public Safety Dispatchers in job classification code 8238, 66.7 percent live out-of-county
Of Public Safety Dispatcher Supervisors in job classification codes 8239 and 8240, 77.4 percent live out-of-county, the highest percentage of first responders who do — since ultimately, dispatchers are our first first responders.
The number of police, fire, sheriff, and dispatchers who live out of county is a combined 73 percent, a figure that probably has disaster recovery planners and resiliency planners very worried. Why isn’t Supervisor Farrell worried about reducing the number of dispatchers residing out-of-county? Does Farrell think the police and firefighters can dispatch themselves, given an insufficient number of 9–1–1 dispatchers who currently reside in-county?
And as far as the maximum income levels issue goes, if eligibility for one-person households earning up to 200 percent of AMI is currently set at $135,900, fully 94.4 percent of line-staff dispatchers would qualify and 96.9 percent of dispatch supervisors would qualify, as would 78 percent of Sheriff’s safety personnel. This contrasts starkly to just 46.6 percent of police officers who would qualify, and just 22.4 percent of firefighters and paramedics who would, according to payroll data provided by the City Controller.
When it comes to maximum income eligibility levels for four-person households earning up to 200 percent of AMI currently set at $194,200, fully 100 percent of both dispatch line staff and their supervisors would qualify, as would 98 percent of police officers and Sheriff’s staff, compared to only 75.9 percent of firefighters and paramedics who would.
But with all that said, there is no data available that could be requested from the City to analyze either: 1) How many potentially-eligible police, firefighters, Sheriff’s deputies — or even 9–1–1 dispatchers — may have double- or total-household income levels (including spouses and any other income-earning members residing in their households) that would disqualify them from either the 120 percent or 200 percent of AMI restriction?; and 2) How many of the police, firefighters, and Sheriff’s deputies versus the dispatchers already own homes, and, therefore, may be ineligible under first-time buyer restrictions.
That may explain why Flannery reported that there were just 12 first responders who were drawn in the first-year lottery for the DLAP loans: Their total household income may be far higher than the maximum percentage of AMI permitted, or they may already own homes, making them ineligible under either criteria.
Had dispatchers been eligible for the first-year lottery, perhaps more than four loans may have already been awarded. Or, had Farrell not infused himself as a mixologist during the eligibility food fight, perhaps by having opened up eligibility to nurses or teachers — or to all City employees — it may have yielded a better first-year use of the DLAP funds that remain unspent nine months into the current fiscal year.
Lack of Documentation
On December 29, this author placed a records request to Mayor Lee asking for a list of the first and last names, job classification codes, and City Department of each applicant who had applied for assistance under the Prop. “C” down-payment loan assistance program once the program began accepting applications in August 2013. Also requested was a second list of each applicant who had qualified, and a third list showing each applicant who had actually been awarded a down-payment loan and the amount of each loan awarded.
The next day, Eugene Flannery, an Environmental Compliance Manager in the Mayor’s Office of Housing and Community Development, responded indicating his office needed to consult with other City departments before it could respond. On January 13, Flannery finally provided an initial list showing that of the 12 employees whose names had been drawn from a lottery, eight were firefighters, one was a Sheriff’s Department employee, and three were police officers, but he neglected to include any information loan amounts awarded.
Flannery withheld the names of the City employees who applied for, qualified for, or were awarded assistance under the DLAP program. He claimed that for reasons of privacy, the City closely guards employee’s home addresses and the “general rule” is that the City does not disclose them to the public, ignoring the fact that the records requested had not asked for home addresses.
[This is notable, since later, on March 19, Flannery finally released the non-first responders DLAP manual, which clearly stipulates that the names of DLAP recipients are public records, and the loan applications and all communications involved with the Mayor’s Office of Housing concerning the loans, are disclosable public records.]
On January 22, Flannery provided a second version of his list, which indicated two of the “firefighters” are actually paramedics, and then included loan amounts. Shockingly, of the $1 million set aside for the first-responders DLAP program for July 2013 to June 2014, a total of just four loans had been issued as of January 13, 2014, seven months into the fiscal year. The four loans totaled $393,750, representing just 39 percent of the $1 million initially set aside in the program’s first-year budget. The four loans represent just two percent of the full $20 million appropriated to the Housing Trust Fund on July 1, 2013.
And notably, the non-first responders DLAP component had also been budgeted $1 million for FY 2013-2014, but as of March 2014 — nine months into the current fiscal year — the program had not even launched and ostensibly had no applicants (even from nurses or 9-1-1 dispatchers), and no awards had yet been made from the second $1 million DLAP program for non-first responders. It took the Mayor’s Office of Housing over 16 months to develop and issue the non-first responders DLAP manual between the time Proposition “C” was passed in November 2012 and when the manual was released in mid-March 2014. Wasted time during which no non-first-responder loans were offered, or issued.
On January 13, Flannery had responded to a first records request, saying that only 12 people had applied for the first responder DLAP loans, which came nowhere near close to the 45 public safety personnel the Chronicle had reported in July 2013 were “interested in applying.” Flannery indicated four of the loans had closed; six were “allocated” funds, but had ostensibly not been able to “secure” a property and asked for and were granted extensions to accommodate their search for a home; and two were on some sort of waiting list. He indicated that when the extension period ended, applicants unable to secure a property would be removed from the reservation list and the freed-up slots would be made available on a first-come, first-served basis, with the two applications on the waiting list given priority over new, interested households.
[Editor’s Note: Mayor Lee issued a press release on March 17, saying in part, “However, given the high cost of homes in today’s market, a higher loan amount is need [sic] to enable low to moderate income [sic] borrowers keep up with market conditions.”
The Mayor’s press release also said the first responder’s DLAP component had funded four loans “totaling nearly $500,000, with six other loans in process to close in 2014.” First, the $393,750 issued as of late January for the four loans approach nearly $400,000, not the $500,000 bloviated.
Second, as of late January, Flannery had indicated the remaining six loans in process may not close before the end of June 2014. Assuming those loans close at all, they may not occur in the fiscal year intended, but may be rolled over into the first two quarters of a subsequent fiscal year. This suggest there may be some slippage to the timelines and goals for each fiscal year.
Alternatively, if the six loans don’t close by June 30, 2014 in the first fiscal year these first responder DLAP loans were appropriated, they may simply be rolled over into a subsequent fiscal year’s budget, making them more difficult to track across funding cycles.]
When asked on February 1 how his office would identify other employees who might potentially want to bid on the vacated or unused lottery drawing, Flannery started clamming up. He indicated two days later on February 3 that his office would make announcements regarding the remaining down payment assistance in the first-responders program in March. Here we are at the end of March, and it’s unknown whether any new announcements have been pushed out to potentially-eligible public safety or first responder staff.
Flannery did provide a sample notification letter, but creatively failed to answer a follow-up question about who the sample letter had been sent to, or when. And he creatively claimed a day later on February 4 that there were “no responsive records” to a request for a “waiting list” of those who sought first responder loans in FY 2013-2014. First, Flannery used the term “waiting list” several times in January. Then he said in February no waiting list exists. Which is it? He hasn’t explained.
When asked for program manuals for the overall Down Payment Assistance Loan Program required by Charter Section 16.110(d)(2) following passage of Prop. “C” in 2012, the manual for the “Housing Stabilization Program” required by Charter Section 16.110(d)(3), and any another other program manuals or policies and procedures for the Neighborhood Infrastructure Grant Program and the Affordable Housing Development program, Flannery provided four documents on February 14: A “Cal Homes” policies and procedure manual, a “Healthy Homes” write-up, a “Single-Family Tenant-Occupied Loan Program” write-up about providing affordable financing to rehabilitate one- to four-unit properties occupied by low- and moderate-income tenant households, and the first-responders DLAP manual.
While the Healthy Homes and rental rehabilitation programs are two of the 10 separate program components within the “Housing Stabilization Program,” Flannery provided no other information regarding the other eight sub-components, and it appears that despite the 16 months since Prop. “C” passed in 2012, an over-arching manual for all 10 components of the Housing Stabilization Program may not have been developed yet, despite the Charter’s requirement.
As far as that goes, Flannery provided no manual for the Complete Neighborhood Infrastructure component, or the Affordable Housing Development component of the Housing Trust Fund.
And Flannery provided no “manuals” or procedures regarding stabilizing at-risk rent-controlled units, or the Mayor’s plan announced two weeks earlier during his State-of-the-City speech on January 17 promising to build only market-rate rental units. What? No procedures to help “affordable” or low-income renters at all?
Initial Two-Year Housing Trust Fund Budget
To his credit, Mr. Flannery did provide the two-year Mayor’s Proposed Budget for use of the Housing Trust Fund in FY 2013-2014 and FY 2014-2015 authored by the Mayor’s Office of Housing and Community Development. It paints a disturbing picture.
It shows that for the first year, just $2 million — just 10 percent of the initial $20 million diverted to the Housing Trust Fund — would be split equally between the separate first responders and non-first responders DLAP program components. The Housing Stabilization sub-program was budgeted to receive 14.1 percent, or $2.8 million. The Neighborhood Infrastructure program was budgeted to receive just one percent, a paltry $200,000. “Program delivery” — ostensibly including personnel, “overhead,” and legal expenses — fared much better, at 5.8 percent, or $1.15 million of the initial $20 million.
Shockingly, fully 69 percent — $13.8 million — was budgeted for “affordable housing development,” the same Affordable Housing Development component for which Flannery provided no program manuals or write-ups. Nobody has explained what the Affordable Housing Development component will do — or how over two-thirds of the first $20 million deposited into the Housing Trust Fund in July 2013 will be used.
When the City starts kicking in the additional $2.8 million in FY 2014-2015 on July 1, 2014 in the second year on top of the first $20 million required by Prop. “C,” the allocation to each major sub-component shifts, ever so slightly. The non-first responders budget will double to $2 million (at the same time the initial two–year budget provides no increase to the $1 million set aside for first responders which will remain at a flat $1 million), so both DLAP components will rise to 13.2 percent of the $20.8 million; funding to the Housing Stabilization program will see a modest increase of just $300,000, dropping it to just 13.6 percent of the mix; the Neighborhood Infrastructure funding will quintuple from just $200,000 to a full million, jumping to 4.4 percent; and the Affordable Housing “Development” component will see a $700,000 increase to $14.5 million, but will drop to just 63.6l percent of the second-year budget.
Across the first two-year budget of $42.8 million for all uses of the Housing Trust Fund, this brings us to a two-year combined total of:
A mere $5 million across both DLAP programs ($2 million initially budgeted for first-responders, and $3 million for non-first responders), representing 11.7 percent of the initial two-year budget.
An also-paltry $5.9 million — 13.8 percent of the initial $42.8 million — for the so-called Housing Stabilization” program component.
Just $1.2 million — 2.8 percent of the initial $42.8 million — for the “Complete Neighborhoods Infrastructure Improvements” component.
A staggering $28.3 million — 66 percent of the initial $42.8 million — for the so-called “Affordable Housing Development” component, with no explanation whatsoever of what the Mayor’s Office of Housing intends to use those millions for, when, and with whom.
[Editor’s Note: Just before the Westside Observer went to press for this issue, Flannery provided the second two-year Housing Trust Fund proposed budget for Fiscal Years 2014-2015 and 2015-2016, too late to fully analyze for this article. It shows however, that in the third year of the Housing Trust Fund’s existence, the Mayor’s Office of Housing had proposed awarding the “affordability housing development” component another $14.87 million, while the Controller’s Office also provided an apparently revised budget for the same period showing an increase for the “affordability housing development” component to $17.3 million — bringing the three year total for affordability housing development use to an even more staggering $45.6 million, with no explanation for its use.
Rocky Road of Performance
Data from the City Controller’s Office and the Board of Supervisors Budget and Legislative Analyst — Mr. Harvey Rose’s outfit — paint a troubling picture of the Mayor’s Office of Housing and Community Development.
In response to a records request placed with the City Controller, it turns out that as of February 18, 2014 fully 92.8 percent — $17.5 million — of the total $20 million transferred from the General Fund to the Housing Trust Fund for its first year of funding remains unencumbered (unspent) fully nine months into the current 2013-2014 fiscal year.
Of the $1.15 million set aside for program delivery including personnel and legal expenses to administer the Trust Fund, fully 86 percent — $991,797 — remains unencumbered nearly nine months into the current funding cycle.
More shockingly, of the $20 million diverted from the General Fund to the Housing Trust Fund, the City Controller’s data shows that either the Board of Supervisors, the Controller’s Office, or the Mayor’s Budget Office had tinkered with the Mayor’s Office of Housing and Community Development’s proposed budget submission for FY 2013-2014 by moving $1 million from loan assistance programs to “community-based organizational services.” The Community-Based Service budget line item has encumbered about 42 percent of its revised budget to date in the fiscal year (after the Board of Supervisors tinkered adjusting its budget), the sole program to have encumbered a significant portion of its budget.
Which “community-based services” may have been recipients of this encumbered largesse, is not yet known.
But it stands in stark contrast to the Controller’s data that shows not only that the line item index code for “loans issued by the City” was reduced from $17.8 million to just $16.8 million, with the reduced $1 million apparently moved to “community-based services,” but also that $16.4 million of the remaining $16.8 million for loans “issued by the city” remains unencumbered, fully 97.6 percent of the funds the Controller said had been budgeted for “loans.”
Not explained by the Controller’s Office is why the Mayor’s Office of Housing may have submitted a proposed budget listing five separate main components of the Housing Trust Fund, but the Controller’s “index codes” for FY 2013–2014 and FY 2014–2015 contained just two major categories for “community-based organizational services,” and “loans issued by the City,” as if “neighborhood infrastructure” and “affordable housing development” projects have no separate index code to track their programmatic costs and can just be lumped together in a single index code apparently labeled “loans issued by the City.”
[Editor’s Note: Just after this article was submitted to the Westside Observer for publication, the Controller’s Office provided an updated two-year proposed budget for the Housing Trust Fund for FY 2014–2015 and FY 2015–2016. It now provides separate breakouts for the two categories for contracts for Community Based Organizational Services (the “Complete Neighborhoods Initiative” and the “Housing Stabilization Program”), and now lists four separate breakouts for the various categories of loans (including the “First Responders DLAP,” the non-first responders DLAP, a new “Housing Development Pool” and a “Small Site Acquisition/Rehab Program”). The “Housing Development Pool” loans — which Flannery provided no program description of — continues to receive the lion’s share of funding, at $14.5 million in FY 2014–2015 and $17.3 million in FY 2015–2016.]
And the Controller’s Office hasn’t explained whether the $13.8 million requested in the Mayor’s Office of Housing’s proposed budget earmarked for “Affordable Housing Development” in the first year (FY 2013–2014) has been rolled into a single line item for $16.4 million for “loans issued by the City.” The November 2012 voter guide made no mention of using any portion of the $20 million Housing Trust Fund for “Affordable Housing Development,” but here we have the Mayor’s Office of Housing’s budgeting $13.8 million in the first fiscal year towards that purpose, while the City Controller’s Office may have lumped any such expenditures into an index code designated as “loans.”
Affordable Housing Development “loans”? To whom are these loans being shopped to? No explanation has been forthcoming from Flannery, or his boss Olson Lee.
If the $13.8 million in “affordable housing development” loans in FY 2013–2014 are not being disbursed to either first-responder or non-first responder loan applicants, who are the “loans” being awarded to? Or will that money just be rolled over into a subsequent fiscal year and spent later?
Mr. Flannery, and his boss Olson M. Lee (not a relative of Mayor Ed Lee), aren’t saying. And they haven’t provided a program manual or write-up describing any program to underwrite “affordable housing development” loans, terms of such loans, repayment provisions, or qualifications required to even apply.
Comparing the Mayor’s Office of Housing’s Proposed Budget for the Housing Trust Fund against the City Controller’s line-item index codes, reveals a host of unanswered questions.
Take, for example, public records obtained from both the Mayor’s Office of Housing and the Controller’s Office after this article was submitted for publication.
Different public records show that for the two-year budget cycle for FY 2014–2015 and FY 2015–2016 now being hashed out at City Hall for adoption July 1, 2014, that although the Office of Housing had requested $14.87 million in FY 2015–2016 for the so-called “Affordable Housing Development” component, the City Controller’s Office is now showing that component has been increased to $17.3 million, a $2.4 million increase over what had been requested by the Housing Office.
To do that, the City Controller’s data is reporting the requested $2 million in the second year for the “Neighborhoods Infrastructure” has been reduced by half, to $1 million. Similarly the City Controller’s data shows that the $3 million requested for “Small Site Acquisition/Rehab” has been reduced by one-third, to $2 million. Overall, the Controller’s data shows the “Housing Stabilization” component has been reduced from the requested $4.45 million to $3.1 million, with the difference being squirreled away to fatten up “Affordable Housing Development,” which will apparently take the form of “loans,” but loans to whom, when, and for what purpose remains unexplained by Flannery and Olson Lee.
Again, it’s unclear whether it was the City Controller, the Board of Supervisors, or the Mayor’s Budget Office that moved funds around in the Mayor’s Office of Housing’s proposed budget.
When Harvey Rose Speaks, People Listen
In a development unrelated to the Housing Trust Fund per se, but closely related to the “affordability crisis” that has resulted from Mayor’s Lee’s focus on luring tech sector “jobs,” and that has resulted in massive displacement in San Francisco, Harvey Rose — the Board of Supervisors Budget and Legislative Analyst — has weighed in, however unintentionally, on performance of the Mayor’s Office of Housing and Community Development.
In February 2014, Rose submitted an analysis to the Board of Supervisors who were considering a $2 million increase to an initial proposal to divert $2.5 million from the City’s General Fund Reserve account to fund a new “Non-Profit Rental Stabilization Program,” increasing the proposal to $4.5 million.
Rose noted such a decision might be premature, since the criteria for awarding stabilization funds to individual nonprofit organizations, any limitations on use of the funds, limits on the amount of funds to be awarded, and “administrative and selection procedures” had not yet been decided, and won’t be until after a planned report from a so-called “Nonprofit Displacement Work Group” is completed and presented, presumably on April 11, 2014.
Rose claimed it was simply a “policy matter” for the Board to consider increasing the raid of the General Fund Reserve account, reducing General Fund reserves from $44 million to just $40 million, which the San Francisco Examiner later creatively titled a news article as being a “gift” to the City, albeit being a raid of the City’s reserve coffers, not a philanthropic “gift.”
Rose claimed this, after first admitting that way back in 2000, the Board of Supervisors had approved two ordinances to appropriate $1.5 million from the City’s General Fund Reserve to provide rent subsidies to nonprofit arts organizations in immediate danger of being evicted or displaced by rent increases.
Rose reported on February 26, 2014, that the Mayor’s Office of Housing and Community Development claims overall expenditures, including administrative costs of the arts rental assistance program, are “not currently available.”
Wait! What? The Mayor’s Office of Housing has no information available at all about how $1.5 million may (or may have not) have been spent?
Apparently, Mr. Brian Cheu, Director of Community Development in the Mayor’s Office of Housing and Community Development advised Rose’s team that “approximately” 12 grants for rental subsidies were provided under the arts rental assistance program during an unspecified time frame. More apparently, “approximately” was as close as Cheu could get, which Rose appears to have accepted and the Board of Supervisors appear to have later swallowed at face value.
A million-and-a-half dollars vanishes, and nobody knows where?
Rose’s report provided to the Board of Supervisors noted that Mr. Cheu in the Mayor’s Office of Housing and Community Development advised Rose that there was also “no information” about the $500,000 portion of the rent subsidies to nonprofit service and advocacy organizations. How’s that for empty (as in bloviated) record-keeping?
Surprisingly, Rose uncharacteristically included in his report a damning statement, saying, “… such that it appears that the City may have never implemented this portion of the program.” Really? No implementation? And no records? Where’s the money?
With record keeping like that in the Mayor’s Office of Housing and Community Development, what else are they declining to disclose — or hiding? Perhaps its director, Olson M. Lee, knows.
More “Office of Housing” Nonsense
As recently as March 17, Mayor Ed Lee’s director of the Mayor’s Office of Housing, Olson M. Lee, was quoted in a San Francisco Chronicle article saying that the Mayor’s doubling of the down-payment assistance loans to $200,000, from $100,000 would be “a lot more helpful.” Olson Lee was reportedly referring to market-rate housing.
For the first time, we have an admission via the Chronicle that the loans appear to be reserved for buyers of “market rate” homes, not “below market rate” or “affordable homes” buyers, and then only for those earning up to 120 percent of AMI.
A San Francisco Examiner article March 17 noted Mayor Lee had proposed a $15 million increase in “new contributions” from the city’s “main spending account” [would that be the City’s General Fund?] should be added over the next five years, ostensibly to the non-first responders DLAP funding.
After the Examiner reported that the maximum DLAP award would be increased to $200,000, and that $15 million in new contributions might accrue to the Housing Trust Fund, imagine this tenacious reporter’s surprise after placing yet another records request.
Asked whether the proposed number of loans to be issued would be reduced from ten $100,000 loans to only five $200,000 loans, MOHCD director Olson Lee again clammed up, allowing Flannery’s non-answers to go unanswered a second time.
[Editor’s Note: Notably, Mayor Lee’s March 17 press release contained spin control over the doubling of DLAP loans to up to $200,000 each loan, up from the first year’s $100,000 loan limit. It appears the increase to $200,000 loans may well reduce the total number of loans to first responders from ten a year, to just fivc.
The Mayor’s press release claims that in the first five years of the DLAP program for first responders and non-first responders “will help at least 100 households buy their first home.” On close examination, the press releases’ bloviated claim falls apart.
To date during the first year of the first responder loan program, just four loans have actually closed.
Because the second and third years of the first responder DLAP component remain flat-funded at $1 million annually, but the loan ceiling is raised to $200,000, this may portend that with the increase to $200,000 loans, only five loans annually may happen in Year 2 and Year 3, not the ten loans anticipated at $100,000.
If Year 1 yielded just four loans, and Years 2 and 3 net five loans at $200,000 each year, that gets us up to a not-too-staggering 14 loans, just for first responders.
Assuming Year 4 and Year 5 also stay flat funded at $1 million each year for first responders, perhaps another 10 loans may be made by the end of Year 5 (but don’t bet on it), bringing the total to 24 loans for first responders over the initial five-year period.
Turning to the DLAP component for non-first responders, the Mayor’s Office of Housing and Community Development dawdled for the first year, and it only belatedly launched the non-first responders DLAP program in March 2014. It’s unlikely that any loans for non-first responders will close in the next three months before the end of the current fiscal year.
For the second and third years, the non-first responder’s DLAP proposed budget stands at $2 million each year, suggesting a total of twenty $200,000 loans may be made across Year 2 and Year 3 (ten loans in each year). If Year 4 and Year 5 also stay flat-funded at $2 million each year, another twenty $200,000 loans may be issued to non-first responders. If that happens, it may bring the total of non-first responder loans to just 40 loans.
Between the first responders and non-first responders, that may bring the toal DLAP loans across five years to just 64 — not the 100 loans blabbed about in the Mayor’s March 17 press release.
Unless the Mayor starts using bloviated fish-and-the-loaves, he stands no chance that 100 DLAP loans will be issued in just five short years, as his March 17 press release misleads the public.
After all, the Mayor’s March 17 press release indicated that between the first responders DLAP program and the non-first responders DLAP program, it would help “at least 100 household buy their first home” within the next five years.
Let’s do simple math. One hundred households who could each qualify for $200,000 would require the Housing Trust Fund to have $20 million available in these two DLAP component budgets during the next five years.
In Years 1 through 3, only a combined total of $8 million for DLAP loans has been presented in proposed budgets, which are headed towards being appropriated (raided from the General Fund) across both DLAP components. If the Mayor really expects to divide the fish-and-loaves, he’s going to have to come up with another $12 million in Year 4 and Year 5 to reach a $20 million goal for the DLAP loans.
This probably isn’t going to happen, because in Years 2 and 3, only $3 million has been allocated across both DLAP components. If Years 4 and 5 are flat-funded at the current $3 million level each year, Mr. Mayor is likely to be short-sheeted $6 million of the needed $20 million.
Unless Google and Twitter — and airBnB, Uber, Lyft, and “Tech Inc.” — stop donating money to fund free MUNI rides for kids, and start kicking in “corporate giving” towards helping out the Mayor’s troubled DLAP program to help solve the housing problem that has resulted from the Mayor’s focus on “jobs, jobs, jobs” — mostly “tech” jobs.
Asked of Olson Lee on March 18 whether the Examiner’s article was reporting a new $15 million increase over and above the already-pledged $20 million-plus annual allocation increases, or whether the so-called “new” $15 million increase is simply the same dollar amount increase of $2.8 million previously authorized to be accumulated during the same five-year period, Flannery inappropriately answered with a one-word “No,” to what was an either-or question.
So it was unclear whether the Mayor plans to add $15 million to the Housing Trust Fund in new money beginning July 1, 2014 beefing up the pot, or whether his social media spin meisters are merely double-counting the annual $2.8 million increase in each of the next five years already required by Prop. “C” that will yield almost the same $15 million.
When Olson Lee was asked about Flannery’s inappropriate answer of “No” to a clear either-or question, Mr. Lee had his deputy, Maria Benjamin, Director of Homeownership and Below-Market Rate Programs, reply on his behalf.
Ms. Benjamin further clamed up, saying that the Brown Act, California’s Public Records Act, and Proposition 59 — and by extension, San Francisco’s Sunshine Ordinance — only require public agencies to provide existing documents. Not explanations.
In other words, Ms. Benjamin, Mr. Flannery, and Mr. Olson Lee collectively appear to be unwilling to simply answer either-or questions, implying they will produce only specific documents requested, not any explanations to specific questions involving elaboration about the Housing Trust Fund.
But the second two-year Housing Trust Fund budget this columnist received just as the Westside Observer was going to press for this edition, shows that through Fiscal Year 2015-2016 there is no new portion of a $15 million increase in the next two-year budget, suggesting that the $15 million increase being creatively spun as “new money” by the Mayor’s press staff is actually the same pot of money from the $2.8 million increase times five years already budgeted.
So much for the “trust” side of the “in the public trust” equation.
Instead, we appear to have an Office of Housing and Community Development hell bent on hiding from the public, just how it is spending hundreds of millions of dollars meant to spur affordable housing development.
Housing in the Wild, Wild West
Although the mainstream media have reported Mayor Lee wants to issue up to 2,500 down-payment assistance loans of up to $200,000 each loan over the next six years — which may require funding as high as five-hundred million (yes, a half-billion in “loans” — nobody’s talking about the fact that issuing just four loans per year (as the City did in the first year of the program), it will take 2,500 applicants a total of 625 years to perhaps receive loans, given the glacial speed of the Mayor’s Office of Housing.
Bumping it up to even forty $200,000 loans per year will take the Mayor’s Office of Housing a full 62.5 years to issue 2,500 loans, not six years. After all, if the Mayor really plans to issue 2,500 down-payment-assistance loans during the next six years, his Office of Housing will need to process, approve, and issue 417 loans each year, not four each year.
The Mayor would have to quickly come up with $500 million within six years that he hasn’t explained to the electorate where such inflated spending will come from. And he may have to explain why the mainstream media have been reporting that DLAP loans appear to be restricted only to market-rate homes.
The Mayor’s Seven-Step Plan reported in the media in January claims that 30 percent of the total housing goal would be reserved for lower-income residents, for example a family of four earning less than $50,000 annually. There’s no mention in the program manuals provided by Flannery that the Housing Trust Fund will dedicate 30 percent of its total funding for four-person households earning less than $50,000 annually.
The media also reported in January that 25 percent of Lee’s Seven-Step Plan housing goals targets middle income families of four earning between $100,000 and $150,000.
That brings the lower- and middle-income beneficiaries to just 55 percent of the housing goals. Creatively, the major media made no mention of the remaining 45 percent of the housing goals in Lee’s Seven-Step Plan.
Presumably, fully 45% of the remaining housing goals will be targeted to four-person (or other) families earning more than $150,000 annually, presumably to upper-income residents.
In fact, there’s no mention at all in the documentation Flannery provided — and no mention in the enabling legislation in the legal text of Proposition “C” passed by voters in 2012 — on how the Housing Trust Fund may be permitted to split percentages between lower-, middle-, and upper-income residents.
Five years ago, the San Francisco Bay Guardian carried a story titled “Lennar’s housing scam, redux,” reporting misrepresented promises by Lennar to build 32 percent affordability into its 10,500 homes being built in Bayview Hunter’s Point. Observers noted back then that the main rationale for building so much market-rate housing is callously for the property taxes they will bring to the City’s coffers.
This reporter also noted back in 2009 that there was nothing in the legal text of the 2009 Proposition “G” ballot measure awarding Lennar the development rights in the Bayview that guarantees any precise percentage of housing that will be designated as “affordable.” Indeed, Lennar’s development plan for Parcel “A” in the Bayview had initially promised low-income rental units. Lennar single-handedly changed the composition of the first 1,600 units to be built, all of which will be at market rate — with no low-income rental units. We’ve been warned: Lennar may end up building only market rate units.
The first 1,600 units are expected to each sell for San Francisco’s then median price of $836,000 in 2008 dollars. That will net Lennar $1.38 billion in homes and condos on Parcel A. Every day of delay by Lennar is designed to drive up the median prices of housing in order to increase Lennar’s profits.
Given apparent early failures of the Mayor’s Housing Trust Fund, one wonders whether the Bay Guardian might now, five years later, write another article, perhaps titled “The Mayor’s housing scam, redux.”
After all, the 2012 voter guide indicated that the Housing Trust Fund would include “uses” for rental housing. Given that approximately 64 percent of San Franciscans are renters, it’s troubling that the Mayor’s Office of Housing and Community Development’s first-year proposed budget for FY 2013–2014 and FY 2014–2015 included just $200,000 (or of $20 million) for rental eviction defense, and nothing from the Housing Trust Fund itself for rental unit rehabilitation. In the second year in FY 2014–2015, the Housing Trust Fund is budgeting to add $200,000 for rental unit rehabilitation, and will double that to $400,000 in FY 2015–2016.
Adding the $600,000 the Housing Trust Fund has budgeted for rental eviction defense across the three-year budget periods between FY 2013–2014 and FY 2015–2016 to the total of $600,000 budgeted in the second and third years for rental unit rehabilitation, the Housing Trust Fund appears to have budgeted just $1.2 million — just 1.75 percent — for any sort of rental assistance, out of the total $68.4 million that will be appropriated during the first three years of the Trust Fund budgets. In a City where over 64 percent of the residents are renters.
Despite City Hall’s bleating that the Mayor would beef up rental eviction defense funding (following the 2013 Ellis Act eviction of Poon Heung Lee and Gum Gee Lee and their disabled daughter debacle), the eviction defense and prevention budget in the Housing Trust Fund’s budget appears to be flat funded at $200,000 in each of the first three years. How many more Poon Heung and Gum Gee Lee evictions will there be, before the eviction defense fund is actually beefed up, not simply flat-funded?
This is despite a San Francisco Examiner article in October 2013 that Mayor’s Office of Housing had increased funding for tenant counseling services “by 63 percent, to $700,000, bringing the total to more than $2.3 million in eviction prevention services.” How do you inflate just $600,000 in Housing Trust Fund monies in public-record budgets for renter assistance programs, into $2.3 million? Is this more bloviated bread and fish, and infused wine?
Playing Voters for Suckers
Typically, San Francisco voters are a pretty savvy group. Voters appear to have been snookered in 2012.
After all, we passed a ballot measure in March 2002 creating the Citizens General Obligation Bond Oversight Committee to monitor use of hundreds of millions in general obligation bonds earmarked for a variety of capital infrastructure improvement projects. Voters also passed the same year in November, a measure creating a Revenue Bond Oversight Committee to monitor issuance of Revenue Bonds for the San Francisco Public Utilities Commission, given the billions at stake in various Hetch Hetchy, water system, and sewage system projects.
Although both oversight committees created in 2002 have had only marginal success, riddled with political appointees to both bodies, there is at least a perception of oversight. Not so with the Housing Trust Fund, which has no oversight.
Voters were played for suckers when Proposition “C” was put before them creating the Mayor’s Housing Trust Fund. Without clearly being advised that the Housing Trust Fund would be managing upwards of $1.3 billion for a whole host of housing programs, voters weren’t offered any opportunity to have an Oversight Committee established to monitor use of the Housing Trust Fund. Not only do voters have no oversight of use of the Housing Trust Fund, they also have no oversight of the $1.34 billion in cuts that will be made to the City’s discretionary General Fund that will then be diverted to fund the Housing Trust Fund.
On January 17, the major media reported the Mayor claimed in his State-of-the-City address that 2,500 DLAP loans would be issued within six years — $500,000 million not even remotely available in his bank. Following numerous public records requests placed about the DLAP programs in January and February, Hiz Honor now seems to have changed his tune.
Just three months later, Mayor Lee’s March 17 press release reduces DLAP loans to just 100 loans over five years — not 2,500 — still unsure whether he even has $20 million in this bank to cover such a commitment of funds.
Did Flannery, Olson Lee, or someone else at City Hall suddenly realize that bloviating 2,500 loans was just too far over the top, even using spin control, and that’s when they de-blovitated expectations by re-christening 100 DLAP loans as the new 2,400 DLAP loans three months later?
This just adds insult to injury, since not only have voters been excluded from overall decision-making on how the Housing Trust Fund’s money will be spent, they also appear to have been excluded from any decision-making regarding who the eligible applicants will be. They’ve also been excluded from any decision-making regarding how the trust funds will be split between low-, middle- and upper-income applicants, among other decision-making exclusions.
Although we’re told checks and balances of our government are necessary to defend our democracy, there’s no provision of any sort of checks-and-balances over this Housing Trust Fund. How do you provide the citizenry with trust regarding Housing Trust Fund trustees, when there are no checks or balances over the trustee’s decision-making?
If I were a betting man, I’m not convinced I’d wager the Mayor’s seven-point “housing affordability” plan will come to fruition. P.T. Barnum — or whichever con man came up with the aphorism — provided fair warning about not being played for a sucker.
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