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A Bond Dressed in Emperor's Clothes

By George WoodingGeneral Hospital Brick Bldg.

As November’s election rapidly approaches, San Francisco officials grow increasingly desperate to pass Proposition A to rebuild San Francisco General Hospital (SFGH). The City must convince two-thirds of voters for passage, but support is vanishing by the minute, just like the Emperor’s new clothes. What happened?

Virtually every supporter and opponent of the project agrees the City needs a seismically-retrofitted hospital. The City dawdled 14 years planning the project. Utilizing vast special-interest money, the City hired high-powered lobbyists and PR experts to promote Prop. A. TV commercials air daily; brochures and flyers flood mailboxes. SFGH’s dedicated doctors, nurses, and administrators appear in hospital uniforms at every neighborhood groups endorsement meetings.

Despite the San Francisco Chronicle’s current news black-out on opposing arguments to Proposition A, it brazenly contacted Proposition A opponents, asking them to purchase political ads costing between $2,200 and $32,000.

Whitehurst Campaigns, a local PR firm, submitted 37 of the 39 paid ballot arguments supporting Proposition A. House Speaker Nancy Pelosi and Senator Dianne Feinstein, along with local medical workers and SFGH patients, were among those signing arguments. All but one of the 39 arguments were funded by the Committee to Rebuild General Hospital, which is primarily funded by Service Employees International Union (SEIU). The 39 paid ballot arguments cost just under $20,000. SEIU also plans deploying union members to pass out flyers door-to-door. Are voters being asked to save union jobs, or patients?

November’s SFGH bond measure is the most expensive in City history. San Franciscans don’t mind paying for a seismically-upgraded hospital, but we’re tired of paying for poorly-planned general obligation bond projects, after the City has sponsored one overpriced bond disaster after another. San Francisco politicians continually promise one thing to voters, then deliver completely different projects at costs higher than promised.

Laguna Honda Hospital’s (LHH) initial $401 million budget for a 1,200-bed facility has soared to $641 million for a 780-bed facility, and may climb higher. It’s painful imagining what the City will build with SFGH’s $1.7 billion budget. Sadly, before the election voters will neither know what the City will actually build nor how much it will finally cost. Current floor plans for SFGH’s project are one design change away from becoming an expensive Mirage.

Just like LHH’s rebuild, the same politicians promoting SFGH’s bond today will be quietly distancing themselves from SFGH snafu’s tomorrow. The June 2008 Civil Grand Jury report warns voters the City has continuously underestimated costs of general obligation bond projects by 35% to 67%. Costs for SFGH’s construction have already jumped $265.4 million from $622 million in 2006 to $887.4 million now, a 30% increase.

The Jury’s report concludes the Mayor’s Office, the Board of Supervisors, and the Controller’s office have been unaccountable, demonstrating insufficient financial oversight over City bond measures. City politicians have chosen to ignore the Grand Jury’s report, and haven’t implemented any of the financial controls recommended before introducing SFGH’s bond measure. Unfortunately, voters will be left holding the bag, having to pay for each and every design mistake.

Privately, even people connected to local government are questioning why the ninety-foot high, glass walled, oval hospital is being wedged forty feet or less between two 93-year-old, eighty-five-foot high, non-seismically retrofitted red brick buildings. It’s being placed in the fall zone of both brick buildings, and may be damaged and possibly inoperable following a catastrophic earthquake. SFGH must comply with SB 1953, which mandates hospitals must be able to withstand an earthquake and also remain operational. One state official admitted his surprise San Francisco chose re-building an earthquake-compliant hospital in such a risky location. A retired City safety employee knowledgeable about SFGH’s structural issues is concerned an earthquake stronger, and lasting longer, than Loma Prieta’s 1989 quake that strikes closer to San Francisco will topple both brick buildings. The City admits both red brick buildings need seismic retrofitting, but doesn’t plan doing so until after 2015.

SFGH is backpedaling on its shifting $75 million estimate for furniture, fixtures, and equipment (FFE). Previous FFE estimates ranged from $150 million to $234 million. SFGH now claims previous estimates were based on square footage, claiming the suddenly-reduced $75 million estimate is based on actual equipment costs. Rather than purchasing the FFE, SFGH may lease the FFE. Ignoring that leasing adds yet-unfunded annual FFE financing in addition to the $887.4 million bond. In contrast, the LHH project chose purchasing, rather than leasing, FFE to lessen project expenses.

Proposition A proponents are employing scare tactic propaganda, frightening voters that if the bond fails San Francisco will lose its General Hospital. However, state law SB 306 grants cities extensions until 2020, and beyond, to complete hospital rebuilds. Proponents also claim each year lost re-building SFGH escalates costs $40 million annually. If true, the City’s 14-year delay has already cost $560 million due to political foot-dragging. Many communities, including San Mateo, successfully completed seismically upgrading hospitals by 2002.

Mayor Newsom is reportedly worried Proposition A will be rejected by an unlikely alliance of informed taxpayers, renters, and the City’s big landlords. Landlords are using Proposition A as a bargaining chip to achieve a 50% pass-through of sewage charges to tenants. The Coalition for Better Housing filed election papers forming a “No on Proposition A” committee to oppose what they call “the largest bond in San Francisco history” and to support a less-expensive hospital plan. Political consultant Jack Davis has jumped in, questioning the soundness of this bond. Newsom is worried a well-financed campaign against Proposition A, especially one highlighting long-term costs to voters, will doom bond passage.

Whatever their motivation, the City’s big landlords are actually right about Proposition A. The only way it will pass is if voters don’t understand underlying hospital rebuild issues. Newsom is also correct: The more voters know about this bond, the less they will support it. The City must correct project flaws before construction, build the less expensive hospital, retrofit both red brick buildings beforehand, and adopt the Grand Jury’s accountability recommendations.

This bond wears the Emperor’s imaginary clothes. Vote No on Proposition A.

George Wooding, Mid-Town Terrace Home Owners Association

October 2008

Boondoggle II: General Hospital Rebuild

The San Francisco General Hospital (SFGH) rebuild, — Proposition A on this November’s ballot — is being aggressively marketed to San Francisco voters.

Almost every political organization, local politician, union, and special interest group in town will either endorse Proposition A, or will be pressured into not being “against” the bond measure. The City, already worried about the tremendous $1.7 billion cost of this bond, has gone to great lengths to ensure the SFGH rebuild is the only general obligation bond measure on the ballot.

costs haven’t been considered or discussed publicly: $30 million preparing the bond; $640 million to service the debt repaying interest; and $157 million for furniture, fixtures and equipment — all of which seem to have been forgotten.

The future costs of seismically retrofitting the rest of the hospital campus haven’t been mentioned. And bond costs are open-ended because by the City’s own admission, the project may be underfunded by $55.6 million, if the City’s projections that construction costs may reach $943 million prove accurate.

Voters who own property will be annually taxed $59 for every $100,000 of property assessments over the next 23 years. Due to a 50% pass through clause, renters face annual $100 to $300 rent increases.

The City’s public relations machine is set to inundate voters with slick brochures, mailers, and automated phone messages. The local media will start placing favorable SFGH stories between September and the November 4 election. The City’s main arguments to voters will be emotional, because the facts and the City’s numbers simply don’t add up. Voters are going to be hearing a lot of public relations propaganda about “Compassion,” “desperately needed,” “no time left,” and “State law requires.”

Has anyone heard that the Titanic is about to leave the dock?

Voters should support SFGH’s healthcare mission and want a seismically-safe hospital. But the proposed SFGH rebuild is a poorly planned, poorly located, and an overpriced “trophy” hospital. The project should be re-thought, and re-designed, before asking voters to approve bond financing.

In 1994, state law SB1953 created new seismic standards for hospitals. Current California standards require hospitals should be able to withstand an earthquake without collapsing. But SB1953 created a second, higher compliance standard that requires hospitals to also be able to continue to operate, and function, after an earthquake.

The proposed new, 90-foot-high, glass-walled SFGH hospital will be wedged forty feet, or less, between two non-seismically retrofitted brick buildings built in 1915. The 93-year-old brick buildings are 85 feet high, and aren’t scheduled to be retrofitted until sometime after the year 2015. The proposed hospital sits within the fall-zone of both brick buildings. In the event of a catastrophic earthquake, the brick buildings will collapse on the new hospital and render it inoperable.

The City is claiming that a large basement underneath the hospital called a “super-floor” will supposedly allow them to build the hospital at this location. This super-floor does not actually retrofit the two red brick buildings.

When asked about the strength of the non-retrofitted brick buildings, Gene O’Connell, SFGH’s CEO, stated on August 13 that “the brick buildings did not collapse during the 1989 Loma Prieta earthquake,” and said she felt that they would not collapse in a future earthquake. The City needs to retrofit the adjacent red brick buildings before building the proposed replacement hospital.

In 2006, the proposed design for the SFGH replacement was a rectangular building, estimated to cost $622 million. The Department of Public Health then reconsidered the design, and chose a more aesthetic, oval shaped hospital with glass walls. The redesigned building added $265 million dollars, including $7 million for art.

The proposed hospital’s bed capacity is insufficient for future needs. The project only adds an additional 32 beds, increasing 19 neonatal ICU and pediatric beds, and eliminating 16 medical/surgical beds. The City’s final project report does NOT discuss emergency room capacity. The hospital was designed before the DPH’s commissioned Lewin report cited a citywide shortage of 533 acute hospital beds by 2030, 24% below the City’s projected needs.

The same DPH administrators who planned the disastrous Laguna Honda Hospital (LHH) rebuild are also in charge of the SFGH rebuild. This should give voters absolutely no confidence that the SFGH rebuild is well planned. LHH’s ten-year rebuild is currently $241 million (60%) over budget and 420 beds (35%) smaller than originally promised.

Voters were led to believe that LHH’s primary mission would be to provide long-term care for our frail elderly and severely disabled. Suddenly, LHH’s new primary mission will be to provide 90-day stay short-term and rehabilitative care.

The City and the DPH have no accountability to voters. Who knows what the DPH will do or accomplish with the SFGH rebuild money, given its track record.

The 2013 deadline for completing the hospital is manmade. Senate Bill 306 (October 2007) provides building extensions to 2020 and beyond.

The City should take the time to correct project flaws before constructing the replacement hospital. The City must reconsider using the original plans for the rectangular hospital, increase bed capacity, and retrofit the brick buildings adjacent to the proposed SFGH hospital location.

Vote No on Proposition A. It’s a poorly planned, poorly located, and overpriced hospital bond measure.

George Wooding, Mid-Town Terrace Home Owners Association

September 2008

General Hospital Rebuild Questions Remain

By George Wooding

The San Francisco Department of Public Health (DPH) has proposed a $887.4 million General Obligation Bond measure for the rebuild of San Francisco General's Hospital and its Level 1 Trauma Center. The November 2008 hospital bond ballot measure will be almost three times larger than any other bond measure in San Francisco’s history. The bond measure requires a two-thirds (66.67%) majority vote to pass.

But the City needs to rebuild SFGH responsibly.

The DPH’s administration has already proven to be completely inept with the Laguna Honda Hospital (LHH) rebuild. Good doctors are not necessarily good stewards of public funds or public planning. The DPH has a sad history of misleading the public, changing bond projects, creating enormous cost overruns, favoring special interest groups, and disrespecting the will of the San Francisco voters. In 1999, the DPH told San Francisco voters that LHH was going to be a 1,200-bed, long-term care health facility for the frail elderly and severely disabled. The nearly completed LHH will only be a 780-bed facility for 90-day stay, short-term rehabilitation patients. At last report, the LHH rebuild budget is at least $152 million dollars over budget and they have not even completed two-thirds of the rebuild. After the LHH rebuild fiasco, it is difficult for voters to believe that DPH’s administration can be trusted to do a good job with the San Francisco General Hospital (SFGH) rebuild.

The actual costs of the SFGH rebuild are staggering. The City will spend $30 million preparing for the bond. The general obligation bond will cost $887.4 million. The hospital’s furniture, fixtures and equipment will cost approximately another $157 million. The debt service on the general obligation bond will cost an additional $640.3 million. Providing there are no project cost overruns and everything is perfectly planned, the cost for the 284-bed facility will be approximately $1.7 billion, at a minimum. Just based on the $887.4 million bond figure, the average cost of each room will be $3.1 million. Just four years ago, the Health Commission was told that the industry average was $1 million per room, not $3.1 million.

$7.0 million will be spent on an art enrichment plan at SFGH.

The costs of building the new 284-bed acute care facility and Level 1 Trauma Center will impose a substantial tax on San Francisco property owners and renters. The $887.4 million bond will feature a 50% pass through to San Francisco tenants. No matter how the City sugarcoats this bond measure, the SFGH rebuild bond will consume a large portion of San Francisco’s future property taxes and rent increases. The City is claiming that the property taxes that will pay for general obligation bonds will be capped at the fiscal year 2005–2006 annual gross property tax rate of 12.0%.

The City’s current general hospital and trauma center was built to a high seismic safety standard in 1974, but does not now comply with new California hospital seismic guidelines created in 1994 after the Northridge earthquake damaged hospitals in Southern California. The State’s new seismic standards require California hospitals not only be able to survive an earthquake, but must also be able to operate after an earthquake. San Francisco General must either have the new hospital rebuilt by 2013, or file for a seven-year extension to complete the acute care rebuild by 2020. The DPH dragged its feet for 14 years planning the SFGH rebuild.

The City was not able to attract any qualified general contractors in 2007 when the SFGH rebuild project was first put out to bid. The City then began negotiations with Webcor, a local, general contractor which is 70% owned by the Obayashi Corporation, a Tokyo-based global construction holding company. In 2008, WebCor signed an interim agreement with the City and has since been participating in project meetings with its subcontractors and the design firm Fong & Chan Architects to arrive at project costs for the SFGH rebuild.

The SFGH rebuild costs are just the beginning of the indebtedness cost increases to City voters. The SFGH rebuild is just one of three hospital projects proposed under the SFGH Institutional Master Plan Update. Other projects include the medical helipad proposed on the rooftop of the main hospital (Wing C), and the proposed installation of emergency generators for backup power supply to the entire hospital campus. The generators have to conform to the same seismic timetable as the hospital rebuild and their replacement costs were not included in this bond.

If accountability to the voting public were an issue, the San Francisco Department of Public Health’s administration would never be allowed to manage another dollar of a hospital bond rebuild. Only in government does failure lead to promotion.

Unlike private enterprise, there is no fiscal accountability nor fiscal responsibility at the DPH. So what if LHH is $152 million over its rebuild budget — let’s go to lunch. If DPH administrators had been fired or held responsible for what happened to the LHH rebuild bond, the public could begin to trust the DPH.

Instead of taking responsibility, the DPH has spent almost $250 thousand over the last 12 months on public relations salaries and a ”soft-branding” public relations campaigns.

The DPH administration has lost the trust and respect of the voters If the DPH cannot take responsibility for its past failures and mismanagement of voter bond money, it is doomed to make the same failures with the $1.7 billion SFGH bond measure.

San Francisco voters really need to ask themselves if it is wise to hand $1.7-billion dollars to the same group of DPH administrators who orchestrated the biggest general obligation bond disaster in the history of San Francisco.

George Wooding, Mid-Town Terrace Home Owners Association

June 2008

Dangerous Precedent Involving Laguna Honda Hospital

By George Wooding

The City of  San Francisco is using “friendly” litigation to create public health policy.  Voters will end up paying for new and untested public health policies drastically different from what we approved at the ballot box.

As I noted in last month’s Observer, the future of Laguna Honda Hospital remains threatened by the Chambers settlement agreement, an obscure lawsuit overturning the will of voters who passed Proposition A to rebuild Laguna Honda.  The Chambers settlement agreement is a symptom of bigger problems within San Francisco City government.

Never has a legal settlement agreement involving major policy changes in San Francisco been so shrouded in secrecy or so welcomed by the Board of Supervisors, the Department of Public Health (DPH), and local non-profit contractors seeking lucrative City contracts to provide community-based services.  The City quickly capitulated to the terms in the Chambers settlement and never fought the settlement agreement. 

The Chambers settlement agreement is the City of San Francisco’s attempt to set public health policy through a lawsuit.  The Examiner’s March 27 editorial, “Medi-Cal cuts are budgetary fake,” stated “more often than not, making budget policy in the courts is a bad idea.”  The Chambers settlement is a “friendly” lawsuit, which the City appears to have potentially colluded in to avoid public scrutiny of major public policy changes. 

If the Board of Supervisors accepts the Chambers settlement as currently written, they will be creating a huge open-ended public health and housing entitlement program that will eventually drain the City’s discretionary portion of the General Fund, restricting future Supervisors’ legislative control of the City’s discretionary funds.

At the time of this writing, neither the City Controller or the Board’s Budget Analyst have performed a fiscal analysis, nor has the Board’s Legislative Analyst performed a legislative analysis, of the Chambers settlement.  Supervisor Michela Alioto-Pier sponsored a ballot measure in November 2004 that passed, requiring an Economic Impact Review (EIR) of all pending legislation.  She noted, “We can’t afford to pass legislation that creates hidden costs.”  But no EIR to uncover the hidden costs in the Chambers agreement has been performed.

Every budgetary set aside, every entitlement, and every lawsuit (the Chambers settlement) diminishes the Board’s powers over discretionary spending, weakening their legislative ability to effectively represent San Francisco voters.  Voters don’t want the Board’s legislative power usurped by the judiciary branch through “friendly” lawsuits.  When the legislative branch becomes weaker than other branches of City government, voters become disenfranchised.

Although Supervisor Sean Elsbernd claims the City can “revisit” the Chambers settlement terms anytime within the next five years, nothing is further from the truth.  Section XX of the agreement explicitly stipulates it can be changed only with approval of the United States District Court.  Sections II and XX stipulate that once approved by the Court, the agreement will be contractually binding upon all parties and their “successors and assigns,” and the City.  Without the District Court agreeing to suddenly reopen the Chambers terms, the City cannot unilaterally revisit the settlement at any time.

Elsbernd also claims the Chambers settlement is “a tried and true concept of good government.”  But the lead counsel in the Chambers lawsuit, Elissa Gershon, an attorney with Protection & Advocacy Inc., has stated she’s not aware of any other city doing this.  San Francisco is the first and only City in the country adopting this program, so it cannot be “tried and true,” as Elsbernd misasserts.

Elsbernd has stated his belief San Francisco has been “fair and responsible” with the 139,000 voters who passed Proposition A.  A companion article in this month’s Observer shows the total budget of the replacement project to rebuild all 1,200 beds is currently $704 million, $303 million over the $401 million initial project budget, representing a 75.6% increase.  But only 780 beds have been approved to date.  This isn’t what San Francisco voters were promised by our City fathers, and it’s neither “fair” nor “responsible,” as Elsbernd incorrectly claims.

The concept of legislation through litigation is a very bad idea.  Whatever the intentions of the Chambers plaintiffs, their “friendly” lawsuit with the City and its open-ended set-aside for housing and public health entitlements, is a direct attack on the powers of the Board of Supervisors’ legislative authority and the will of San Francisco voters.  The Board’s legislative authority over housing and public health will be limited, and voters will have been betrayed by the City and DPH. 

The Chambers agreement establishes judicial and budgetary “fake.”  This creates a dangerous precedent before the upcoming San Francisco General Hospital bond measure.  Please contact City Supervisors, urging them not to accept the Chambers settlement as currently written.

George Wooding, Mid-Town Terrace Home Owners Association

May 2008

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