By Patrick Monette-Shaw
As I in May's Westside Observer, voters were snookered on last November's $310 million housing bond measure: Only recently has the City finally admitted that fully 20% of that bond — possibly up to $62 million, or a smaller $20 million chunk — is being set aside for housing for the homeless, something voters were never informed about prior to the November 2015 election. More on this, below.
In other words, the City knew last November that the $310 million was an insufficient amount, and were planning on issuing additional COP's to make up the gap. And for all we know, they may issue even more COP's for affordable housing, or for housing the homeless, in the near future.”
Add in the $20 million for homeless shelters in the June 2016 bond, and we're up to $42 million to $82 million in bond financing plus interest for homeless projects, as in "when pigs fly." That $82 million is on top of the Mayor's first-year budget for the new Department of Homelessness and Supportive Housing under newly-appointed department head Jeff Kositsky, who fittingly has a tattoo on his right calf featuring a flying pig and who sports matching socks featuring flying pigs. The department Kositsky will head launches July 1, and will have an annual budget of approximately $165 million and a staff of 110.
And shortly after last November's election, legislation started circulating at City Hall to issue up to $95 million in Certificates of Participation (COP's) for Affordable Housing Projects above and beyond the $310 million Affordable Housing bond measure voters had just approved. The COP's are planning for a Rental Assistance Demonstration Project (RAD), but it is not yet known how many of the units to be constructed or acquired, if any, will be earmarked and set aside for housing the homeless.
In other words, the City knew last November that the $310 million was an insufficient amount, and were planning on issuing additional COP's to make up the gap. And for all we know, they may issue even more COP's for affordable housing, or for housing the homeless, in the near future.
Drunken Sailor's $1.5 Billion in New Debt Since November
As I also wrote last month, between last November's $310 million Affordable Housing bond measure and June's Public Health and Safety bond measure that voters will probably pass, taxpayers are footing $1.13 billion in principal and interest for two bonds. Add in the two COP's nearing approval — the housing RAD project and the Animal Care and Control — that total another $323.3 million, and we're up to a combined $1.45 billion in principal and interest debt service in a short seven-month period since last November for just four additional projects.
Clearly, City Hall's drunken sailors have been on a spending spree.
Laguna Honda Hospital Mortgaged to the Max
In May 2009 I in "Mortgaging Laguna Honda Hospital's Future" that the City was leveraging the "residual rental value" of Laguna Honda Hospital's (LHH) property to issue a COP as long-term debt for doing street improvement projects, and had issued another COP to help pay for the cost overruns of building the new LHH replacement facilities.
I noted in 2009 that the City had issued the two COP's based on LHH having $575 million in market value. Fast forward seven years to 2016, and the City has already issued a second COP for streets improvement and is poised to issue in the next month a fourth COP for the Affordable Housing RAD program, as by the City Controller's Office. In addition to the 1999 bond to rebuild LHH, there will be four COP's "leveraged" against LHH, totalling a combined $981.6 million in principal and interest.
Given LHH's $575 million market value, reasonable people are concerned that the nearly $1 billion in long-term debt financing already leveraged against LHH's property market value is precariously out of sync, and alarming. Should the City default for any reason on the COP's, the lease holders could theoretically seize the very assests — the entire hospital — to guarantee repayment of this excess leveraging. And there's no guarantee that the Animal Care and Control Facility COP's that will be issued by November 2016 will not also name LHH as the lease "asset," since the City is cagily claiming that they don't currently know which City asset will be "leveraged" for the Animal Care COP's.
I'm not buying it that the City has simply no idea in advance (now) of which City asset it will use to secure the lease financing to issue $110 million in principal and interest debt service for the Animal Care facility! And the $1 billion in "mortgages" already leveraged against LHH is dangerous.
Oversight of the November Housing Bond's Rocky Start
In the midst of the worst affordable housing crisis in San Francisco's recent memory, you might think the City would be responding to the crisis expeditiously. You'd be wrong, since meaningful oversight is noticeably absent, despite the fact that last November's voter guide indicated in Section 4-A (Bond Accountability Measures, Oversight) on page 156 that the Citiens' General Obligation Bond Oversight Committee (CGOBOC) would conduct reviews of bond spending. Typically, bond measures are required to report to CGOBOC on a quarterly basis.
Where's the Regular CGOBOC Meetings and the Bond Web Site?
Since the bond measure was passed, just one CGOBOC meeting was held on January 28, 2016 to hear a status update from the Mayor's Office of Housing and Community Development (MOHCD) on progress on spending the bond.
Readers may recall that the Civil Grand Jury was highly critical of MOHCD when the 2013–2014 Civil Grand Jury released a report in June 2014 that was a damning indictment of the lack of transparency at MOHCD, which I reported on in an in May 2015.
The inaugural hearing regarding the November 2015 bond held on January 28 was pathetic, as neither MOHCD nor CGOBOC had thought ahead about what sort of reporting requirements — evaluative "metrics" to report and evaluate various and diverse categories within the bond — would be applied to the Affordable Housing Bond measure to report project progress. The reporting metrics still haven't been developed by May 23, 2016.
At the January CGOBOC meeting, MOHCD's Ms. Hartley provided CGOBOC members and members of the public with copies of an 11-page undated titled "2015 $310 Million Affordable Housing General Obligation Bond Report" containing an "Executive Summary," and also presented a 15-page undated titled "San Francisco 2015 Affordable Housing General Obligation Bond: Assessing Our Needs."
The of CGOBOC's January 28, 2016 meeting reveal the extensive discussion and CGOBOC member questions that occurred regarding reporting "metrics" of the data points CGOBOC expects MOHCD to utilize in reporting progress on the bond were largely omitted from the minutes, reduced to a single sentence, although the minutes do report a handful of goals MOHCD hopes to accomplish. Clearly goals and metrics are not the same thing. How's that for censorhip?
In response to a records request placed on May 19 for all correspondence between MOHCD and CGOBOC agreeing on what reporting metrics will be used in future MOHCD presentations to CGOBOC, and the actual metrics and reporting formats that have been developed and adopted, the Controller's Office responded on May 23 saying only that it was "working on your [records] request and will respond with any relevant records as soon as possible" [emphasis added]. In other words, four months following CGOBOC's January meeting, and six months following passage of the bond last November, the City hasn't finished developing which metrics will be used to assess performance on this bond.
The legal text for the bond measure in last November's voter guide also states in Section 4-B on page 157 that "the City shall create and maintain a Web page outlining and describing the bond program, progress, and activity updates."
On May 16, I submitted a records request to the City Controller's Office seeking information about the web site that should have been set up by now.
When asked for the web site address and which City department is responsible for creating and maintaining it — both relatively innocuous questions — the Controller's Office initially responded by invoking Sunshine Ordinance §67.25(b), citing a need for a 10-day delay in which to respond.
When I replied the same date to the Controller that I was prepared to file a complaint with the Sunshine Ordinance Task Force alleging the Controller was wrongly and falsely abusing §67.25(b) for such a simple records request, the Controller quickly changed his tune, saying on May 18:
"In response to your information request, no bonds have been issued to date under Proposition A ($310 million Affordable Housing Bond); we anticipate approval of the first sale under Proposition A in Fall 2016. Accordingly, the Mayor's Office of Housing and Community Development is working on the website and it is expected to be launched in concert with the first sale under the authorization."
There is absolutely no reason for MOHCD to take an entire year between passage of the Bond in November 2015 and issuing the first bonds possibly as late as November 2016 to finally get around to creating the web site promised in the voter guide. And there seems to be no reason why it is taking MOHCD an entire year to get around to issuing the bond instrument RFP and rapidly moving along construction of affordable housing before more San Franciscans are displaced out-of-county.
So it appears that even before MOHCD will eventually get around to issuing the bond instruments, the City will more than likely first issue the $95 million in Affordable Housing COP's before then, apparently because the City can issue COP's far more quickly than bond instruments.
The 20% to Homeless Housing Set-Aside Snickeroo
Foremost, CGOBOC's January 28 meeting minutes also omitted any mention of comments CGOBOC members made regarding setting aside 20% of the bond — probably at least $20 million, and potentially up to $62 million — for housing-for-the-homelessness programs.
The Executive Summary Hartley distributed on January 28 showed on page 9 that MOHCD's housing programs serve "vulnerable" San Francisco residents, defining vulnerable populations as 1) Low-income working families, 2) Veterans, 3) Homeless individuals and familes, 4) Seniors, 5) Disabled individuals, and 6) transitional-aged youth. But Hartley's PowerPoint presentation on January 28 listed only four of the six catgories (# 1, 2, 4, and 5), omitting homeless people and transitional-aged youth.
What's more, the legal text of Prop A in the November 2015 voter guide also stipulated on page 157 that the bond measure would put the question to voters whether the bond should prioritize "vulnerable" populations as including folks "such as" working familieis, veterans, seniors and disabled persons, but didn't mention homeless people or "transitional youth" in the legal text as being "vulnerable populations."
Leading up to November's election, it is thought none of MOHCD's other documents had included homeless people in the definition of "vulnerable" San Franciscans.
Indeed, CGOBOC's January 28 meeting minutes list the same four vulnerable populations Hartley listed in her PowerPoint presentation, and the minutes also omitted any mention of homeless people or transitional youth in the definition of "vulnerable."
Worse, the verbatim transcript notes that Hartley and MOHCD were hoping to issue the first "tranche" (a French term meaning "slice" of several issues (portions) of the bond to be released in successively numbered series) in the first or second quarter of calendar year 2016, in part because MOHCD wanted to "get out there as soon as possible" on opportunities in the Mission District for site acquistion.
It now appears from records requests to the City Controller that the first "tranche" of the bonds won't be issued until "the Fall" of 2016. The Controller failed to specify whether that means not until the third or fourth quarter, as if there is no urgency to issuing the first portion of the bonds, whether or not it will involve letting a good deal in the Mission go.
There's more bad news in the verbatim transcript: First, MOHCD has no expectations that loans it makes to non-profit housing developers — probably the vast majority of loans for the four main categories in the $310 million bond, with the exception of the DALP and Teacher Next Door loans — will ever be repaid, because the loans are structured as "residual receipts," meaning after the developers pay their operating expenses, if there are any "leftover" funds, then a portion may go back to repay MOHCD. But, typically MOHCD has no expectation of loan repayments over time.
Second, one CGOBOC member wondered whether MOHCD had made the "right" allocation decisions to each of the four main categories in the first place. I smell trouble.
Sadly, the next CGOBOC meeting at which MOHCD will present an update on the status of spending on the $310 million bond has been delayed to Thursday, July 28, 2016. Apparently, there is no haste at City Hall to ensure expeditious oversight and accountability of the Affordable Housing Bond measure, leaving voters snookered, again.
Back in 1996, then Board of Supervisors president Angela Alioto authored legislation to sue Big Tobacco, won her lawsuit, and succeeded in creating the Tobacco Settlement Revenue (TSR) account, which former City Attorney Louise Renne tried to claim credit for having been responsible, which I debunked in an in July 2010.
Future TSR revenue projections not only shrank by 30 years, but also shrank by $743,685,039 from data previously provided this author in July 2010. In response to a records request about the 30-year period, the Controller's lame partial response on May 23 was that projections now only go "through 2030 due to the fact that the City does not have debt outstanding past 2030," which of course is complete nonsense, since the November 2015 Prop A Affordable Housing bond incurs City debt through at least the year 2039, and more nonsensical because the City had previously reported projected revenue through 2060”
A comparative of four Excel files of TSR earned as principal and interest provided by the City Controller's Office since December 2007 reveals contradictory information. In the first file in December 2007 then-City Controller Ed Harrington indicated $149.4 million had been received in the TSR account by then, and the City projected it would earn an additional $790 million through the year 2060, for a combined total of $939.4 million.
In an updated file on July 9, 2010, the Controller indicated $203.8 million had been received through June 2010, and projected an additional $950.5 million but only through the year 2045, for a combined total of $1.115 billion. For unexplained reasons, projected earnings were shortened by 15 years through just 2045.
Another updated file on April 20, 2016 reported actual TSR's received to date had climbed to $303 million, and lowered the projected revenue for future years to just $206.8 million, reducing the projected revenue to just through the year 2030, for a combined total of just $509.8 million, not the $1.115 billion.
Future TSR revenue projections not only shrank by 30 years, but also shrank by $743,685,039 from data previously provided this author in July 2010. In response to a records request about the 30-year period, the Controller's lame partial response on May 23 was that projections now only go "through 2030 due to the fact that the City does not have debt outstanding past 2030," which of course is complete nonsense, since the November 2015 Prop A Affordable Housing bond incurs City debt through at least the year 2039, and more nonsensical because the City had previously reported projected revenue through 2060.
Incredibly Shrinking Interest Earned on the TSR Account
Back in 2007, former City Controller Ed Harrington provided information on the TSR's, and indicated that as of December 2007, the City had already earned $32.387 million in interest on the TSR revenue received. On July 9, 2010, Nadia Feeser, the Controller's Acting Budget Manager, provided an Excel file showing that interest earned on the TSR's as of June 30, 2010 had surged over a three-year period to a total of $40.9 million in interest earned.
So imagine my surprise when I received a file from the Controller's Office on April 20, 2016 showing that the interest earned to date on the TSR account had plummeted to just $14.5 million, representing a loss of $28.2 million in interest earned that had been reported in July 2010. What happened to the previously reported interest of $40.9 million? Couldn't those hundreds of millions have been used towards funding the June 2016 Public Health Facilities bond measure?
The Controller's May 23 lame response invoked another 10-day extension to provide an explanation of why there's a gap of $28.2 million in interest already earned to date that had been previously reported.
Other TSR Anomalies
First, on May 4, the Controller's Office finally provided another Excel file prepared by Hiu Ching "Cherie" Wan, an accountant for the Controller, showing TSR expenditures from revenue received, which appears to contradict other public records from the City Controller. A shows that the TSR account has received $319.968 million through April 24, which is exactly $17 million more than the $302.968 million in revenue the control reported to me on April 20 as TSR revenue through June 30, 2016. How can the Controller's Office be off by $17 million across the two files provided to me just days apart?
The Controller's May 23 partial response to the records request claimed that the difference between the two files is because the March 20 file did not include the $17 million in TSR revenues deposited into the Tobacco and Education Prevention Fund. In fact, whether that $17 million was deposited directly into the TSR account or directly into the Education Fund, the fact remains it is nonetheless revenue earned from the Tobacco Settlement lawsuit, and common sense says it should be recorded as revenue earned from the TSR lawsuit, regardless of which sub-fund it is deposited into.
Second, between TSR revenues and actual expenditures for both the LHH Project, and the debt service on the General Obligation Bond to rebuild LHH, the City has expended $74.5 million less from revenues it received for these two purposes. Shouldn't revenue earmarked for specific purposes actually be spent on them?
And finally, Ms. Wan's file shows that the Controller transferred $52.95 million from the TSR account to the General Fund for the Department of Public Health, possibly for DPH's operating expenses rather than for capital construction expenses, and has expended another $3 million for the City's "Community Living Fund" (CLF). Most observers had believed the CLF allocations were supposed to come from annual appropriations from the General Fund, not from the TSR account.
Between the two expenditures, the Controller appears to have diverted $56 million from the TSR fund for what should have been General Fund appropriations, and that $56 million could also have been used towards funding the June 2016 Public Health Facilities bond measure.
As I have previously written, now more than ever San Franciscans deserve to have a Charter amendment creating a Board or a Commission having oversight over MOHCD. Until that happens, we'll still be getting screwy reporting about, and screwy spending of, scarce Affordable Housing funds, snookering voters even more.
Monette-Shaw is a columnist for San Francisco's Westside Observer newspaper. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at .
June 2016 Election Recommendations
by Patrick Monette-Shaw
[Editor: Recommendations in this article are those of the author, not those of the Westside Observer.]
Several readers asked me to provide recommendations for San Francisco’s June 7, 2016 election. My recommendations are based on reading 87 pages of the five City ballot measure’s legal-language texts, Controller’s statements, Legislative Analyst digests, and other documents, along with media reporting. For what it’s worth, here goes.
Local Ballot Measures
Prop “A”: Public Health and Safety Bond Measure
A San Francisco Examiner on January 31, 2016 indicated $54 million to build a new Animal Care and Control facility initially included in June’s $350 million Public Health and Safety bond was removed in a sudden and unprecedented change of plans. The Examiner reported the $54 million would be used to “modernize homeless shelters and clinics that deal with mental health,” instead. It was unprecedented, in part, because the change was made just two days before the bond measure was to be discussed during a Board of Supervisors Budget and Finance Committee meeting, and in part because typical long-term planning of the timing and composition of bond measures was thrown out the window at the last moment, perhaps along with the baby and the bathwater.
“The money that would have gone to the animal facility will now be split among three initiatives: $20 million for the Department of Public Health to modernize local clinics, including providing mental health services; $20 million for modernizing and transforming homeless shelters; and $14 million for neighborhood fire stations.”
I’m not buying it!
Unfortunately, the of Prop. “A” states that $20 million will be spent for upgrading homeless shelters, but qualifies it by saying a portion of the $20 million may be to “acquire and construct homeless services sites” — not just homeless shelters themselves. Great: Bond funding for more City office “sites.”
Worse, the legal text contains no mention of a $20 million set aside for health clinics modernization. Instead, the clinics modernization are included in the upgrade of other facilities on SFGH’s campus, opening the door that if there are cost overruns or “unforeseen site condition” problems (a recurring issue on bond-funded projects) on the SFGH campus that $20 million may never be used for the clinics modernization, since the legal text doesn’t explicitly set aside the second $20 million, as reported by the Chronicle.
Similarly, there’s no mention in the legal text of $14 million actually being earmarked for neighborhood fire stations; instead the fire stations are rolled up into a $58 allocation to construct a Fire Department ambulance and paramedic deployment facility. Should that deployment facility need the full $58 million — whether or not due to cost overruns or “unforeseen site condition” problems — there may be no remaining funds to improve neighborhood fire stations.
Just $272 million of the bond will be used for upgrading of facilities on SFGH’s campus.
Breed is expected to support the Board of Supervisors in issuing by the stroke of its pen $59.5 million as early as May 25 in another debt instrument that does not require voter approval — so-called Certificates of Participation (COPs) — to fund replacing the Animal Care facility (the COPs Ordinance has already been introduced, and is on track to be approved in early June). COPs also require interest payments, so in addition to the $350 million in principal and the projected $254 million in interest for a total of for the June 7 bond, taxpayers — via the General Fund — will foot the $59.5 million of principal on the COPs plus an estimated $50.5 million in , for a total of $110 million for the COP’s.
So instead of $604 million for the principal and interest on just the $350 million bond, we’re up to at least $714 million by adding in the $110 million in principal and interest for the Animal Control COP’s.
No explanation has been provided why costs for the Animal Shelter have surged from $54 million to $59.5 million, in less than three months.
The January 26 Chronicle article also reported Breed told the City’s Capital Planning Committee “Fifty-four million is a lot of money to spend on any facility,” and Breed also criticized the City for “pouring money down the drain” on projects she said are too big and sometimes unnecessary. How’s that for chutzpah?
Perhaps Breed is more comfortable pouring $110 million down the drain for the Animal Control facility — with the stroke of her COP’s pen, no voters required — rather than the $54 million for it that she helped strip from the bond measure.
Voters were snookered on last November’s $310 million housing bond measure: Only recently has the City finally admitted that fully 20% of that bond — $62 million — is being set aside for housing for the homeless, something voters were never informed about prior to the November 2015 election. [Editor: More on this bait-and-switch in next month’s Westside Observer.] Add in the $20 million for homeless shelters in the June bond, and we’re up to $82 million in bond financing plus interest for homeless projects.
In addition to November’s bond, the City recently introduced a separate COP for an affordable housing Rental Assistance Demonstration (RAD) project that features $83.4 million in principal plus a staggering $129.8 million in interest —155.6% in interest on the principal — for a total of an additional $213.2 million in COP debt service without voter approval. It is not yet known how much of the Rental Assistance COP’s will also be used to house the homeless.
Between November’s $310 million Affordable Housing bond measure and June’s $350 million Public Health and Safety bond measure, taxpayers are footing $1.13 billion in principal and interest for two bonds. Add the two COP’s nearing approval — the housing RAD project and the Animal Care and Control project — that total another $323.3 million, and we’re up to a combined $1.45 billion in principal and interest debt service in a short seven-month period for four projects, not all of which may be capital improvement projects.
I’m tired of being snookered by City Hall. I’m voting “No” on Prop. “A.” You should, too.
Prop “B”: Park, Recreation and Open Space Fund (City Charter Amendment)
Prop. “B” is a bald attempt to increase the Rec and Park Department’s annual budget by $30 million over a 10-year period above its current $67 million annual budget, and also extend the Open Space fund for an additional 15 years. There’s no specificity on what the Open Space set-aside and baseline budget increases will, or shall, be used for.
It’s another slush fund for the Rec and Park Department to spend on whatever they want, with no ability for San Franciscans to weigh in on the use of the increased funds. Everyone wants the best for our parks, and wants resolution of the $1.6 billion in deferred parks maintenance. But there’s no guarantee Prop “B” will solve the deferred maintenance backlog or fix spending of Rec and Park’s annual baseline General Fund allocation. No new funds to this Open Space Fund or to Rec and Park’s annual budget, until we’re told beforehand how the additional funds will be spent!
Prop. “B” will extend the Open Space Fund set-aside and baseline appropriation by 15 years from the current 30-year term to 45 years, and expire at the end of fiscal year 2045-2046. Prop. “B” appears to eliminate the Board of Supervisors power to adopt, reject, or modify any Strategic and Capital Expenditure Plans adopted by the Rec and Parks Department, including its Open Space Fund.
Importantly, the City Controller’s statement assessing Prop “B” notes the Open Space set-aside is not in compliance with a voter-adopted City policy regarding “set asides” that reduce General Fund dollars that could otherwise be allocated to other priorities.
Join the San Francisco Coalition of Neighborhoods, and Open Space Fund community watchdog extraordinaire Nancy Wuerfel, and I in opposing Prop. “B.” Vote No!
Prop “C”: Affordable Housing Requirements (City Charter Amendment)
In November 2012, voters passed the then-Prop. “C” to create the Housing Trust Fund (HTF) to increase funding for housing development. Over the 30-year life of the HTF, the City’s General Fund will contribute $1.3 billion to $1.5 billion to the HTF, not all of which is dedicated to “affordable housing.”
But the 2012 HTF ballot measure contained a “poison pill” — more politely, a “drafting error” — that voters may not have been clearly aware of. The poison pill was a gift to real estate speculators and developers, and involved reducing the on-site affordable “inclusionary” housing requirement by 20% — from 15% to 12% — a change that was incorporated into the City Charter, so that developers and speculators could increase their profits. The 2012 measure prohibited the City from adopting any new land use legislation or administrative regulations to require increasing the amount of “inclusionary housing,” and was enshrined in the City Charter.
The first Housing Balance Report dated July 7, 2015 (required following legislation introduced by Supervisor Jane Kim that was passed) showed the ten-year Citywide Cumulative Housing Balance — the ratio of “affordable” to “market-rate” housing built — was just 21%; the second Report, dated September 4, 2015 showed the Cumulative Balance had dropped to 15%, and the new third Report shows it is now 18%, although Peter Cohen and Fernando Marti, Co-Directors of the Council on Community Housing Organizations, reported in their April 7 Op-Ed in the San Francisco Examiner that the net new affordable housing is down to 13%.
The first two Housing Balance reports in July and September 2015 reported the Projected Housing Balance — projects in the development pipeline — was 11%, and the third report in March 2016 reported the Projected Balance is now 15%.
Between the second and third Housing Balance reports, the number of new housing units produced for moderate income households saw a 28.4% net decline, from 1,550 in September 2015 to just 1,120 affordable units in the March 2016.
Planning Code §303(q)(6) requires that if the cumulative housing balance falls below 30% in any given quarter, the City shall consider contributing additional funds to the Mayor’s Office of Housing and Community Development to fund development of new affordable units, in order to maintain the cumulative housing balance at or above the 30% threshold.
The new Prop “C” in June 2016 would remove the City Charter prohibition, will return the inclusionary housing percentage back to 15%, and will allow the Board of Supervisors to adjust the inclusionary housing percentages by Ordinance in the future, rather than having to ask voters to weigh in on the issue again.
Prop “D”: Office of Citizen Complaints Investigations (Initiative Ordinance)
Prop. “D” simply requires the Office of Citizen Complaints (OCC) to investigate all incidents in the City in which a police officer fires a gun killing or injuring someone, even if nobody files a complaint, and requires Police Department officers and employees to cooperate with OCC investigations of such shootings.
This is a common-sense reform that should be supported, even if it might require the OCC to hire additional investigators to handle any increase in investigations.
As I in “Mayor’s Hiring Binge vs. Retiree Pensions” in the Westside Observer last March, during the four-and-a-half short years of Mayor Ed Lee’s tenure, he added 5,139 full- and part-time employees to the City’s payroll at an increased cost of $567.1 million — slightly over a half-billion dollars. And that’s not including fringe benefits and increased pension costs for the additional 5,139 City employees.
Prop. “D’s” City Controller voter guide notes that the salary and fringe benefits for hiring one OCC investigator is a paltry $140,000, and the OCC’s budget for Fiscal Year 2015–2016 was a mere $5 million. The Controller rightly notes that should Proposition “D” be passed by voters, it would have a “minimal effect” on the cost of City government.
For a ballot measure with minimal cost and many large benefits of greater Police Department oversight, it’s well worth it. Please join me in voting “Yes.”
Prop “E”: Paid Sick Leave (Initiative Ordinance)
District Measure “AA”: San Francisco Bay Clean Water, Pollution Prevention, and Habitat Restoration
This measure will levy a parcel tax of $12 annually in each of the next 20 years for each parcel in the nine-county Bay Area. Over the life of the measure, each parcel owner would contribute a total of $240 towards clean water, pollution prevention, and habitat restoration in the San Francisco Bay Area. The measure says it will raise $25 million annually, and presumably over the 20-year period, will generate a half-billion dollars for a variety of projects.
For the sake of our environment, $12 a year — $1 per month — seems like a bargain to me for owners of these parcel’s, and a small price to pay. Even though I rent, I’d gladly give my landlord the $12 a year. Vote “Yes.”
California State Senator
The State Senator contest between two sitting members of the Board of Supervisors — Jane Kim and Scott Wiener — to replace termed-out State Senator Mark Leno should be a no-brainer: Vote for Jane Kim.
Ultra-moderate Scott Wiener has, among other legislative issues, been a complete disaster on housing issues and re-zoning of large swaths of San Francisco. Wiener’s housing philosophy appears to be “build lots of market rate housing at all costs, and let ‘affordable housing’ trickle down to the masses of citizens.” Given the glut of market-rate housing, and the paucity of affordable housing built in the past 10 years in San Francisco, it’s painfully obvious Wiener’s trickle-down theory isn’t trickling down quite so well.
Jane Kim, on the other hand, has a very strong record on a whole host of legislative issues too long to wade into this article, including taking the lead on sponsoring legislation to require San Francisco’s Planning Department to submit a Housing Balance Report twice annually to the Board of Supervisors.
The most recent Housing Balance Report issued on March 31 shows that although 22,531 units were actually built between first quarter 2006 and fourth quarter 2015, and another 11,140 are considered either “entitled” to be built or have received permits (but have not actually been built, some of which may potentially never be built) for a total of 33,671 potential new units, only 5,934 of the units are considered to be “affordable” (although 10,052 affordable units were built, a total of 4,118 units were removed from the affordable housing stock, including to condo conversions, demolition, Ellis Act evictions, and owner move-in evictions). The end result is that only 17.6% — 5,934 — of the units built during the past decade, or are in the construction pipeline, are considered to be “affordable.”
That’s hardly “trickle-down” in San Francisco, which has added 140,000 new jobs and 50,000 new residents just since 2009. Kim is to be commended for trying to identify the problem of trickle-down housing economics that aren’t working.
At the Board of Supervisors Land Use Committee hearing on April 18, Wiener wrongly accused Supervisor Kim and Supervisor Peskin in a public hearing of having engaged in a “backroom deal,” regarding a mere 200 units involving “grandfathering” (a.k.a. “grandparenting”) of inclusionary affordable housing units for projects in the pipeline. Wiener’s body language during that hearing illustrated just how petulant he becomes at times, a trait not worthy of anybody seeking election to the State Senate.
Wiener’s tizzy about grandfathering just 200 units being unfair to his real estate and developer campaign contributors was comical, at best.
Electing Kim to the Senate would provide a needed balance to San Francisco Assemblyman David Chiu in the State Assembly. Conversely, Wiener in the Senate and Chiu in the Assembly is a recipe for disaster for a really long time. Vote for Kim!
The race for 24 seats on San Francisco’s Democratic County Central Committee (DCCC) is very intense. I recommend most of the 21 candidates endorsed by the San Francisco Bay Guardian, which released a special web devoted to its June 2016 election recommendations.
However, since State Senator John Burton declared he is running for the DCCC in the 17th Assembly District after the Guardian published its endorsements, if you feel strongly about electing Burton to the DCCC you’ll need to decide which of the other 14 candidates the Guardian recommended to eliminate.
The list below shows I recommend voting for Senator Burton, and not voting for Bevan Dufty. In my book, Mr. Dufty’s role in getting Ed Lee appointed as the “interim” Mayor was, and is, unforgiveable.
When the Board of Supervisors voted for an Interim Mayor for a one-year term to replace Mayor Gavin Newsom, Dufty initially cast no votes for anybody during the first two rounds of voting. Dufty then asked for a recess, and during the recess, Dufty suddenly met with Gavin Newsom in the Mayor’s suite in City Hall Room 200, more than likely making a deal with The Gavin for a City Hall job when Dufty was termed out. When the Board resumed from recess, everyone was shocked when Dufty suddenly backed appointing Ed Lee as interim mayor.
Dufty has often been characterized as “flip-flopping” his votes as a former Supervisor, when not characterized as being “fickle.” Dufty is widely seen as a politician at their worst, or alternatively as being “Machiavellian” — using clever lies and tricks in order to get or achieve something, or someone marked by conduct involving cunning, duplicity, or bad faith.
In my book, Dufty’s betrayal led directly to Mayor Lee’s failed housing and economic policies during Lee’s almost five-year tenure that has driven too many San Franciscans out-of-county. Dufty shouldn’t be rewarded for this subterfuge by election to a seat on the DCCC.
17th Assembly District (East Side)
There are 14 seats up for the DCCC on the East Side. Vote for these candidates:
Alysabeth Alexander, Tom Ammiano, John Burton (instead of Dufty), David Campos, Petra DeJesus, Jon Golinger, Prathima Gupta, Frances Hsieh, Jane Kim, Rafael Mandelman, Sophie Maxwell, Aaron Peskin, Leroy Wade Woods, and Cindy Wu.
Do not vote for Joshua Arce, London Breed, Bevan Dufty, Shaun Haines, Alix Rosenthal, or Scott Wiener for a seat on the DCCC’s 17th Assembly District. They’re all bad apples, for various reasons.
19th Assembly District (West Side)
There are 10 seats for the DCCC on the West Side. Only seven met the Bay Guardian’s endorsement criteria, who I also recommend. Vote for:
Brigitte Davila, Sandra Lee Fewer, Hene Kelly, Leah LaCroix, Eric Mar, Myrna Melgar, and Norman Yee.
Do not vote for Joel Engardio, Mark Farrell, or Mary Jung for a seat on the DCCC’s 19th Assembly District. They’re also bad apples, also for various reasons.
Superior Court Judge
There are three candidates running for San Francisco Superior Court Judge: Sigrid Irias, Victor Hwang, and
Henderson has claimed it’s important that an African American who is gay be elected to the bench. Hwang, an Asian candidate, is clearly more qualified than Henderson.
The ultra “moderate” Alice B. Toklas Democratic Club has endorsed Henderson.
Mr. Henderson is currently the Mayor’s Deputy Chief of Staff for Public Safety. Imagine, for example, a lawsuit being filed in Superior Court against the City, and the case is assigned to a “Judge” Henderson. I’m not at all convinced Paul would maintain any semblance of “independence” in judging the merits of such a lawsuit, and I’m very concerned he would, by default, support the City in such a lawsuit, rather than remaining impartial.
As an emissary from the Mayor’s Office at various City Hall events, Henderson makes a great emcee. I’m not convinced having emcee skills is the best qualification to become a judge.
Another example: Were a lawsuit to be filed against the City in Superior Court by a City employee wrongfully terminated for any number of prohibited personnel practices — discrimination based on age, gender, race, or other prohibited actions — I don’t have much faith in a Judge Henderson remaining impartial.
As another example, were a lawsuit filed in Superior Court against the City involving violations of San Francisco’s open government Sunshine Ordinance, violations of the Brown Act, or violations California’s Public Records Act, I have no optimism a Judge Henderson would remain impartial.
Reportedly, two years ago Henderson sought to be appointed to a judicial vacancy by Governor Brown. But reportedly, Henderson hasn’t heard from the governor’s office. If Governor Moonbeam hasn’t been keen on appointing Henderson to a vacancy, I’m concerned. Supervisor David Campos, a gay man who attended Harvard Law School, has endorsed Hwang, as have other elected City officials.
If none of the three candidates win 50% + 1 in the June primary, the top two candidates will be forced into a run-off election in November. That’s why it’s really important to not vote for Henderson, so further debates on the qualifications to become a Superior Court judge can continue.
From my perspective, the more important issue is not a candidate’s race, sexual orientation, or political connections, but their legal experience. Hwang has two decades of courtroom experience under his belt, which Henderson does not. Hwang clearly is the most qualified candidate; vote for him. Hwang’s campaign motto is “Experience Matters.” It should, and does!
Democratic Presidential Primary
This should be a no-brainer: Despite former Secretary of State Madeleine Albright’s and feminist Gloria Steinem’s recent claims there will be a special place in hell for women (and Democrats) who don’t vote for Hillary, I’m going out on a limb, since my inner-woman and inner-child keep whispering in my ear to vote for Bernie Sanders, even if that means: “Hell, here I come,” Madeleine Albright’s and Gloria Steinem’s ridiculous claims notwithstanding.
Hillary Clinton’s “negatives” are way too high, and may well turn out a deciding factor in handing the Republican Party the Presidency for four to eight years, or longer, if Clinton is chosen the Democratic nominee.
Hillary’s, and her husband Bill’s, legacy include disasters such as the military’s “Don’t Ask Don’t Tell” policy (subsequently abandoned by the military); the horrible DOMA (Defense of Marriage Act), in which the Clinton’s failed to support legal marriage of gays and lesbians (eventually struck down by the U.S. Supreme Court); NAFTA (the North America Free Trade Act), which ended up gutting the U.S. job market and outsourcing of untold millions of jobs to other countries; and most egregiously, the Clinton’s support for eliminating Glass-Steagall, which allowed the deregulation of Wall Street that lead directly to the great economic meltdown of 2008–2009.
Glass-Steagall refers to the entire U.S. Banking Act of 1933, which incorporated the Glass–Steagall Act of 1932. It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The Banking Act of 1935 clarified the 1933 legislation. Glass-Steagall was intended to separate commercial and investment banking, and prohibited commercial banks from engaging in the investment business. It did so for almost seven decades.
But after 66 years, both of the Clinton’s thought they knew best when Glass-Steagall was repealed in 1999 by the Gramm–Leach–Bliley Act (GLBA) and signed into law by then-President Bill Clinton, one of Bill’s stupidest acts while president. It took just nine years after Clinton signed GLBA into law for the great 2008 financial meltdown to occur.
Many media journalists believe, and have documented, the 2009 financial crisis might not have happened at all but for the 1999 repeal of Glass-Steagall. U.S. News and World report carried an on August 27, 2012 written by — get this — New York City hedge fund manager James Richards, author of a book titled “Currency Wars: The Making of the Next Global Crisis.”
Richards noted that the oldest propaganda technique is to repeat a lie emphatically and often until it is taken for the truth, and noted that big bank boosters and analysts who should know better are repeating the falsehood that repeal of Glass-Steagall had nothing to do with the Panic of 2008.
From my perspective, Hillary and Bill should both know better, but both of the Clinton’s keep repeating the same falsehood that repeal of Glass-Steagall was good for the country. The “Bill-and-Hill show” clearly know how to use propaganda to their economic advantage.
Mr. Richards asserted that “if there is any hope of avoiding another meltdown, it’s critical to understand why [the] Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time,” he noted.
Hillary continues to oppose re-instating provisions of Glass-Steagall, in part because she doesn’t want to lose her political contributions and speaking engagement fees from Wall Street bankers and speculators. For this reason alone, my recommendation is to cast your vote for Bernie! Otherwise, it is extremely unlikely that the U.S. Supreme Court Citizen’s United decision will ever be overturned, particularly not under a President Hillary.
Then there’s the problem of stigmatizing people HIV/AIDS. According to blogger Michael , Hillary’s presidential campaign web site claims she believes HIV/AIDS should be de-stigmatized. Her web site’s AIDS page says she will:
“Reform outdated and stigmatizing HIV criminalization laws. Discrimination should never be enshrined in our laws. Hillary will work with advocates, HIV and AIDS organizations, Congress, and other stakeholders to review and reform outdated and stigmatizing federal HIV criminalization laws—and will call on states to do the same.”
While Hillary now claims discrimination shouldn’t be enshrined in our laws, that’s exactly what her hubby, Bill, did.
In 1989, as Governor of Arkansas, Bill Clinton signed into law two of the nation’s toughest HIV transmission criminalization statutes. Since then, reports 50 people have been imprisoned in Arkansas for HIV transmission, 29 of whom have been released from prison while the other 21 languish in prison. Nineteen of the 50 received sentences of greater than 20 years, and two (both African American men) received life sentences. Of the 50, 24 were African American’s, 24 white, one was Hispanic, and one was Native American Indian.
Hillary has done nothing to date to have these sentences commuted. Petrelis wrote:
“Presidential hopeful Hillary Clinton needs to address why she apparently said and did nothing to prevent these laws from being signed, nor called for their reform until last month and what she’ll do during campaign to address repealing HIV exposure laws and releasing folks convicted of violations.”
All of those convicted of HIV transmission in Arkansas deserve a second look at their convictions.
Although Petrelis placed an FOIA request to discover how many HIV positive individuals have been charged with HIV exposure violations since November 1989, Arkansas Attorney General Leslie Rutledge has stupidly to respond to the FOIA request, saying Arkansas FOIA law only applies to Arkansas citizens residing within the state, and records will be released only to Arkansas citizens.
Petrelis has found an Arkansas citizen to place the same request, so we’ll see if Ms. Rutledge coughs up the prosecution data during the past 27 years.
Prez Hillary and “First Gentleman” Bill? You’re kidding me, right? Give this pair of propaganda specialists more a “matter of time” to engineer another Wall Street disaster? I don’t trust either of them!
I’m casting my vote for Bernie, and you should, too, whether or not hell may be involved.
Republican Presidential Primary
I’d like to offer sympathy to the Republican Party for its field of three pathetic candidates, who all appear to be unqualified to be Commander-in-Chief. Republicans are on their own here, since for the past eight years of the Obama Administration, the Republican Party has devolved into the “Party of No” and has become largely irrelevant. What were they thinking?
Well, these are my recommendations. You have a month to figure out how you’ll vote.
Monette-Shaw is a columnist for San Francisco’s Westside Observer newspaper. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at .
By Patrick Monette-Shaw
After decades of planning, how can city officials say that there are no beds for elderly and disabled San Franciscans, saying there are not enough skilled nursing facility (SNF), board and care, and post-acute care beds?
A new report from the Department of Public Health (DPH) — "Framing San Francisco's Post-Acute Care Shortage" — calls for yet more planning, since previous planning has been meaningless.
Healthcare providers can't do post-discharge patient follow-up to check on patient outcomes without knowing where patients are...”
The Westside Observer has covered the loss of our skilled nursing beds — and the utter lack of planning for SNF care — in a series of articles over the past seven years, including "Laguna Honda Hospital: Pot-bellies vs. Beds" ()", "Who's Dumping Grandma?" (), "The Big Squeeze: Dys-Integration of 'Old Friends'," (), and "Detrimental Skilled Nursing Cuts" (). Other articles going back to 2004 also touched on the loss of SNF beds.
Despite our previous reporting the situation has y grown worse over the past seven years, since we now appear to be facing a 1,745-bed SNF shortage 14 years from now in 2030.
How did we get to this point?
Media Coverage of New Report
To its credit, the Examiner's in February by Joshua Sabatini discussing the "Post-Acute Care Shortage" report presented to the Health Commission. Unfortunately, it failed to place the story in perspective on a variety of levels.
First Sabatini quoted Sneha Patil, a Health Program Planner in DPH's Office of Policy and Planning, "San Francisco is at risk for an inadequate supply of skilled nursing beds in the future" to inform the Health Commission. But Sabatini missed the context — the commission had previously been warned that the shortage of SNF beds constituted an unmet need for skilled nursing care in the City.
It's not just that there is an inadequate supply to meet demand. It's that the demand isn't being met after years of inadequate and poor planning. How long before the Health Commission "gets"it?
Second, Sabatini reports that "health officials are attempting" to reverse the lack of beds by "working with hospital officials and other health care service providers." There is no evidence whatsoever, that efforts have been made to increase beds, by DPH, or other providers, or that any efforts have been successful, or even exist.
Third, Health Commissioner David Pating, MD — a psychiatrist and Chief of Addiction Medicine at Kaiser Medical Center (appointed by Mayor Ed Lee to the Health Commission in 2014) — appears unaware of the severe SNF bed shortage looming long before he was appointed.
Sabatini quoted Pating that the city had "a gap here that is looking to be solved." The SNF-bed "gap" has been brewing looking to be solved for a decade.
Further, Commissioner Pating said: "It's just not clear to me if we are going to need 500, or 1,000 [additional SNF beds] — whatever the number that we are going to have — [whether we are going to have] enough room in The City to build these number of beds."
Does he know the City owns 62 acres at Laguna Honda Hospital with plenty of room to build more SNF beds (in fact, another 420 SNF beds that had been planned, were eliminated, due to the cost overruns of the new facility)? There would be no additional cost to acquire property to build out more SNF beds.
This isn't about a 500-bed, or a 1,000-bed, shortage. It's almost double that, at a 1,745-bed shortage.
Even worse, Pating said: "I hope we will consider out-of-city [i.e., out-of-county] and maybe even multicounty [discharge placement] options."
More out-of-county patient dumping, including elderly and disabled who need long-term skilled nursing care? Pating also informed Sabtini that hospital officials have difficulty in placing patients in sub-acute care beds. "There are a handful of facilities in the greater Bay Area. But some discharge planners have reported having to send patients as far as L.A. county due to a lack of beds in the Bay Area."
Fourth, Sabatini reported that Abbie Yant, St. Francis Memorial Hospital's Vice President for Mission, Advocacy and Community Health, said that the new report "represents the first time The City is addressing post-acute care at large." Yant continued "We need to protect what we now have. The problem is here today. We do have some urgency around that."
It's a refreshing admission that this is the first time the City addressed post-acute care needs, over 20 years into the crisis!
If we "need to protect what we now have," why did Yant advocate on behalf of St. Mary's to close its SNF beds in 2015? Since her appointment in January 2011 to the Mayor's Long-Term Care Coordinating Council (LTCCC ), she allowed the closure of 90 SNF beds between St. Francis, CPMC, and St. Mary's.
LHH's "Mission" Changed Again
Just before the Health Commission debated the new report on the critical shortage of skilled nursing care beds to care for a quickly increasing population of elderly residents, a Health Commission subcommittee called the Laguna Honda Hospital Joint Conference Committee (LHH-JCC) quietly changed Laguna Honda's mission statement from providing long-term care to "post-acute" services.
It's not a mere shift in semantics.
It allows LHH and DPH to determine which post-acute care services it offers, and it may allow the hospital to say, "Our mission isn't to provide long-term skilled nursing care, so we're not going to admit you and you should go shop elsewhere, even if it means out-of-county placement."
LHH's new mission statement changed from caring for long-and short-term care patients to becoming a "leader in post-acute care." And completely absent from the January 2016 revised mission statement is any mention of long-term care or rehabilitation services, both of which have now been completely excised.
Out-of-County, Out of Mind
|*San Francisco residents discharged from SFGH but not admitted to Laguna Honda Hospital.
** Although DPH's SF GetCare database likely has discharge destination data prior to FY 12-13, the City refuses to provide it
Pating's hope to increase out-of-county and multi-county patient-dumping placements to deal with our so-called "post-acute care challenge" is very troubling, given DPH's own data.
DPH has stalled disclosure for over two years on the aggregate number of out-of-county discharges from LHH, and only in the past month has it provided limited data. DPH and the Department of Aging and Adult Services have shared the SF GetCare database for years, which tracks the discharge destination of patients from LHH and SFGH, or patients who were "diverted" via a court-ordered Diversion and Community Integration Program.
Healthcare providers can't do post-discharge patient follow-up to check on patient outcomes without knowing where patients are, and how to contact them.
Table 1 above shows at least 85 patients from LHH have been discharged out-of-county in the past three-and-a-half fiscal years, alone but DPH may be withholding release of the data. It also shows that, in the same period, SFGH discharged another 76 San Franciscans to out-of-county facilities, bringing the total to 161.
LHH and SFGH operate only 1,172 beds of the estimated 5,483 total beds citywide, but no data is available on the number of out-of-county discharges made in the past three-and-a-half years in the remaining 4,311 citywide beds. Why DPH didn't collect and report complete discharge data for all our hospitals and SNF facilities illustrates it's a flawed analysis that obscures the severity of SNF needs."
On October 2015, 11 people were on LHH's wait list for long-term care, and 100 people were on SF's Jewish Home wait list. The report that also noted that of our ten acute-care hospitals surveyed, including SFGH, approximately 67 patients were waiting to be placed in a SNF.
"For now, out-of-county SNF placement is and will continue to be a reality for San Francisco residents due to limited bed availability, [limited] community-living alternatives, and higher care costs in San Francisco," the report states.
Health Commissioner Cecila Chung, asked if "San Francisco provides assistance to individuals re-entering the City after leaving [being discharged from] their out-of-county placements."
No one provided a direct answer to Commissioner Chung's question. Since many patients dumped out-of-county for short-term skilled nursing care or rehabilitation may indeed want to return to our City, and not be permanently disenfranchised and displaced out-of-county.
Chung's question was astute, in part, because neither the City nor the Mayor's Office of Housing and Community Development (MOHCD) has a preference priority in place for people discharged out-of-county to be eligible for either public-housing, or so-called "affordable housing" to gain access to priority placement and return to San Francisco.
Once they're discharged out-of-county, they are out of mind and essentially handed a one-way ticket elsewhere, expected to never return.
An expanded version of this article is available on www.stopLHHdownsize.com.
Monette-Shaw is a Westside Observer columnist. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at .
By Patrick Monette-Shaw
Once again, retired City employees are wrongly being blamed for Mayor Ed Lee’s looming budget deficit. The Mayor has quietly been on a hiring binge since taking office in January 2011, but seeks help from his media shills to obscure his budget failures by blaming retirees.
Yet again, San Francisco Chronicle gossip columnists Matier and Ross have rushed to Lee’s rescue, using yet more Chronicle spin control.
On December 7, 2015, Matier and Ross reported that “nearly half” of a projected $99 million deficit for Fiscal Year 2016–2017 starting July 1, 2016 “can be chalked up to skyrocketing pension costs.” But Matier and Ross noted that just $42 million is attributable to increased pension costs, which represents only 42.2% — not “nearly half” — of the projected deficit. While Matier and Ross railed against retirees, they neglected a basic duty of journalists to report facts fully, since they didn’t bother reporting other causes of the remaining $57 million projected deficit.
This is Ed Lee’s own doing, not the fault of City retiree’s living longer, despite the misinformation Matier and Ross used to whip up hysteria about increasing pension costs for City retirees...”
Fast forward a month to January 5, when the San Francisco Examiner reported Mayor Lee has requested that City departments cut spending by 1.5% to cover the $100 million deficit for FY 2016–2017, and cut an additional 1.5% in their FY 2017–2018 budgets. The Mayor’s budget instructions claim that the two-year 3% budget cuts are necessary and are “roughly equivalent to the citywide impact of the increased pension costs in each of the next two fiscal years.”
For its part, the Examiner rightly noted that there are other factors driving the budget deficit, including voter-adopted baselines and set-asides, along with projected increases in citywide operating costs, and other factors, which appeared to have been of no interest to Matier and Ross as they rushed to bash City retirees.
Mayor’s Hell-Bent Hiring Binge
Mayor Lee initially took office at the half-way point during FY 2010–2011 when his tenure began on January 11, 2011. During the five years he has held office, he added 5,386 new of City employees across 41 City departments, according to the City Controller’s fiscal year payroll databases, but offset that by eliminating 246 other City jobs across 11 other City departments.
The net change under Lee’s administration is he has added 5,139 full- and part-time employees to the City’s payroll at an increased cost of $567.1 million. And that’s not including fringe benefits and increased pension costs.
As Table 1 illustrates, the 5,139 additional City employees represents a 15.1% increase in headcount and a 22.2% increase to the amount of the payroll during Lee’s tenure. What changed in City government requiring so many more City employees?
Fattening the City Budget and Payroll
When Ed Lee became mayor on January 11, 2011 in the middle of FY 10–11, the City’s total budget as adopted was $6.56 billion. Within just four-and-a-half years, by FY 14–15 the City’s total budget skyrocketed to $8.58 billion, a net change of $2.2 billion — a staggering 30.8% increase.
Nearly 83% — 4,259 of 5,139 — of the increased staffing, and almost two-thirds of the associated salary cost increases, occurred in just seven City departments as shown in Table 2.
Rise in the “Fat Cat” $100,000+ Salary Club
Mayor Lee has clearly been on a hiring binge for City employees earning over $100,000 annually since assuming office.
Interestingly, Figure 1 illustrates that Mayor Lee added 3,127 employees earning over $100,000 to the City’s payroll between FY 10–11 and FY 14–15 at an increased cost of $510.2 million annually.
Why did the City need an additional 1,290 employees earning between $100,000 and $149,999 at an increased cost of $162.7 million? Why did the City need an additional 1,265 employees earning between $150,000 and $199,999 at an increased cost of $220.9 million? For that matter, why did the City need an additional 559 employees earning over $200,000 annually at an increased cost of $126.6 million? What do taxpayers gain with this bloat?
More troubling Table 7 below illustrates salary inequities that have worsened under Mayor Lee. Pay inequity between those earning less than $100,000 annually and those earning over $100,000 annually has dramatically worsened. Table 7 illustrates there has been a 33.3% increase in the number of employees earning over $100,000 between FY 10–11 and FY14–15, along with a 40.4% increase to the City payroll.
The average annual salary for those earning less than $100,000 dropped to $48,715 in FY 14–15 while those earning over $100,000 had average salaries of almost $100,000 more, at $141,704. Can Mayor Lee spell i-n-e-q-u-i-t-y?
Table 7 also shows the inequities for those earning less than $50,000 annually. There was a 16.9% increase — 1,754 — of such employees between FY 10–11 and FY 14–15, but their average salaries plunged by $2,425 to just $17,336, a whopping 12.3% loss in average salaries for those making less than $50,000, even while the 33.3% increase in those earning over $100,000 saw their average salaries increase by $5.3%.
Tables 8 and 9 below show the growth in City managers citywide and additional growth in Muni-specific managers between FY 10–11 and FY 14–15. Between the citywide managers and the Muni-specific managers and transit supervisors, the City added an additional 190 managers, at an increased cost of $39.4 million — fully 7% of Mayor Lee’s additional $567.4 million increase to the City’s budget. One reasonable question is how these additional 190 managers have improved operations of City departments.
City’s Pension Contribution Share Inextricably Linked to Total Payroll
It is indisputable the City has made higher pension contributions between FY 10–11 and FY 14–15. The San Francisco Employees’ Retirement System (SFERS) just released its annual report for FY 2014–2015, which shows in FY10–11 the City’s employer share of retirement contributions totaled $308.8 million and rose to $592.6 million in FY 14–15, for a net increase of $283 million across the four fiscal years.
The $283 million increase more than likely had nothing to do with the three factors Matier and Ross whined about (increased life expectancy of retirees, the supplemental COLA payment, or lower investment returns), since the lower investment returns did not occur until FY 14–15, the supplemental COLA lawsuit was only resolved towards the end of FY 14–15, and City retirees had been having a lower mortality rate for a number of years that was simply not discovered and reported by SFERS’ actuarial consultants.
Instead, dollars to donuts suggest the $283 million increase to the City’s required employer share of pension contributions is more than likely attributable to the hiring binge Ed Lee has been on since taking office, which increased the City’s overall payroll by $567 million during his tenure, resulting in the increased total dollar amount of City contributions towards pension contributions.
You simply can’t have a 15.1% increase in the number of City employees on the payroll, and a 22.7% increase to the City’s total payroll, without a concomitant increase in the amount of City employer contributions that are required to be made.
Since the City’s share of employer contributions is based on a percentage of payroll, it’s obvious that if the percentage of employer contribution remains constant (or even increases), but is applied to a significantly larger payroll (say a payroll that has increased by $567 million), the total employer contribution is going to increase simply because the size of the payroll has increased. This has nothing to do with actuarial estimates of mortality vs. longevity, age at the time of hire, and length of time being a City employee.
As a partially hypothetical example, if the employer contribution rate is 10% and is applied to a year when San Francisco’s payroll was $2.5 billion (San Francisco’s actual payroll in FY 2010-2011), that suggests the City was on the hook to make $250.1 million in pension contributions as the employer’s share. But when San Francisco’s actual payroll jumped to $3.1 billion in FY 2014–2015, when the same hypothetical 10% contribution rate is applied, the City may then have been on the hook to make $306.9 million as the employer’s pension contribution share, for a net increase of $56.7 million extra as the City’s share. [Note: The contribution rate in this example is hypothetical; payroll amounts are not.]
You would think this basic math would have been patently obvious to Matier and Ross.
City Looses Lawsuit
In November 2011, the City placed a ballot measure before voters seeking, in part, to strip City employee retirees of supplemental COLA (Cost of Living) benefits, in part based on bad advice from City Attorney Dennis Herrera, who surely must have a team of labor-relations lawyers on his staff who should have known this gambit wasn’t going to pass muster in a court of law.
After voters wrongly approved restricting COLA payments to retired City employees, a group called Protect Our Benefits sued and eventually won in court, with the City ordered to pay the withheld two supplemental COLA payments, along with interest on the delayed payments.
Of approximately 26,000 retired City employees, the City has agreed so far to restore and pay approximately 17,000 former City employees the COLA benefit who retired after 1996. The City and the Retirement Board are still arguing over whether to extend the COLA back payments to another 7,800 to 8,315 employees who retired prior to 1996.
The upshot is the City had to pay out $40.7 million wrongly withheld from post-1996 retirees, and SFERS did so from funds set aside during the lawsuit (including for the pre-1996 retirees) that had been placed into some sort of “reserve” account. So neither the City nor SFERS is “out” any funds from the Court ruling, since they had already been placed in some sort of a special reserve account.
In the end, the fact remains that rather than blaming City retirees for living longer and trying to assert that the COLA payments are the main cause of the City’s looming budget deficit, the real culprit may be that Mayor Lee has been on a patronage hiring binge, driving up the amount the City has to contribute as its employer share of pension contributions.
This is Ed Lee’s own doing, not the fault of City retiree’s living longer, despite the misinformation Matier and Ross used to whip up hysteria about increasing pension costs for City retirees, while simultaneously ignoring massive spikes in baseline set-asides and other operating cost increases.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at .
By Patrick Monette-Shaw
Just as truth typically becomes the first casualty of war, in the on-going war to enhance San Francisco’s pedestrian safety the truth about pedestrian accidents caused by cyclists appears to be a veracity casualty of San Francisco Police Department statistics.
The Chronicle December 14 millennial cyclist Katrina Sostek felt her $200 fine for running a stop sign at Duboce Avenue and Church Street was unfair. The police officer who ticketed her “could have been doing something worthwhile,” Sostek whined. Puh-leeze, Katrina! Don’t want a traffic ticket? Then simply obey State law and come to a full stop.
How could the Board adopt legislation in the face of no data about the types of moving-violation offenses being committed by cyclists and in the face of data from SFGH’s Trauma Registry?”
When did protecting my life from rogue cyclists become unworthwhile? How did preventing cyclists from receiving mere traffic violation citations become more “worthwhile” than protecting pedestrians like me?
Not to be outdone, Board of Supervisors’ president London Breed was quoted in the same Chronicle article saying “Our limited police resources should be used for more important things” involving public safety. Golly, Supervisor Breed! When did protecting my life become both unworthwhile and less important?
Mayor Vetoes the Bicycle Rolling Stop
After the Board of Supervisors passed its first reading of the rolling-stop bicycle ordinance on December 15 with a vote of 6 to 5 allowing cyclists to slow down but not have to come to a full stop, the San Francisco Bicycle Coalition posted a on its web site three days later, saying (among other things):
“The question raised by SF’s Bike Yield Law remains how best the SFPD can deploy limited traffic enforcement resources. Over 2,000 people have signed our petition in favor of making people biking cautiously and slowly through stop signs the lowest enforcement priority.”
The Bicycle Coalition neglected noting that 2,000 petition signatures seeking “smart enforcement” represents just over two-tenths of one percent — yes, just 0.23% — of San Francisco’s 852,469 estimated population in 2014. That’s hardly a mandate to change the vehicle code.
Police Chief Greg Suhr also disagrees. to the Board of Supervisors’ Land Use and Public Safety Committee on December 4 saying the proposed “rolling stop” cyclist legislation would encourage illegal behavior by those using one specific mode of transportation [bicycles] to violate California Vehicle Code §22450(a) — prohibiting running stop signs — putting others at risk of injuries, ranging from minor to fatal.
Suhr’s December 4 letter documented that in the five-year period between January 1, 2010 and December 31, 2014, cyclists were at fault in San Francisco in 30 percent of injury and fatal collisions — 129 of 427 — due to failure to stop at stop signs, violating CVC §22450(a). Suhr also claimed that during the first nine months of 2015 (January 1 through September 30) there were 447 collisions between bicycles and motor vehicles, including two bicycle fatalities, with cyclists at fault in 46 percent (206) of the incidents.
In an apparent game of “chicken” with the Mayor, the Board of Supervisors voted on January 12 to ignore the Mayor’s warning and passed the rolling stop Ordinance on second reading on a vote of 6 to 4, ignoring endangered pedestrians in favor of “convenience” — or “inconvenience” — to a small, but very politically vocal and loud group of cyclists.
“The so-called ‘Idaho Stop,’ while expedient for some cyclists, directly endangers pedestrians and other cyclists, and I cannot allow it to become law. Trading away safety for convenience is not a policy I can allow this City to endorse. This legislation represents a step backwards on this shared Vision Zero goal, and if it is sent to my desk, I will veto it.”
“This ordinance does not promote balanced public safety for all the diverse users of our streets; rather, it trades safety for convenience. Therefore, this is not a policy I can allow this City to endorse.
I remain strongly committed to Vision Zero, and this law does not move us towards that goal, so I am vetoing it.”
City Department Records Responses
Records revealed disturbing data.
SFGH Trauma Registry Data
Data generated from SFGH’s Trauma Registry database provided by DPH for the five-year period between calendar years 2010 and 2014 showed that although there was a relatively small number of pedestrians — 56 — struck by cyclists and treated at SFGH, their outcomes were disproportionately severe.
Of the 56 pedestrians hit by cyclists, 46.4% (26) were admitted to SFGH, a significantly higher percentage of admissions than either pedestrians hit by autos or cyclists hit by autos. Of the 56 pedestrians hit by cyclists, their two deaths reflected a higher mortality rate than did either pedestrians hit by autos or cyclists hit by autos. That’s 56 pedestrians struck by cyclists too many, and two deaths too many.
And of the 56 pedestrians hit by cyclists, 42.9% (24) sustained a higher rate of head/neck/cervical spine injuries than did either pedestrians hit by autos (17 percent lower) or cyclists hit by autos (half as low, at 21.8%). Notably, head/neck/cervical spine injuries were double the rate for pedestrians stuck by cyclists — whether or not cyclists were travelling at six miles per hour or more — than for cyclists struck by autos.
Of the 4,050 injuries reported by DPH involving pedestrians vs. cyclists, pedestrians vs. autos, and cyclists vs. autos in this five-year period, fully 67.7% (2,743) involved pedestrians going up against bikes and cars; the remaining 32.3% involved cyclists going up against cars. Clearly, pedestrians are at much greater risk of injuries caused by scofflaw auto drivers and scofflaw cyclists, since 81 pedestrians died from being struck by cars or bikes, and only nine cyclists died after being struck by autos.
And that doesn’t count pedestrians killed by cyclists or autos and pronounced dead at the scene, and never transported to SFGH, or transported to other hospitals.
The 17 pedestrians killed in 2014 represented 58.6% of all traffic deaths; the 19 pedestrians killed through November 2015 represent 65.5% of all traffic deaths, with 30 days to go. Clearly, with traffic deaths remaining constant between 2014 and 2015 and more pedestrians killed, Vision Zero appears not to be working so well, no matter what the Bicycle Coalition may want you to believe.
There’s clearly a public health cost — along with patient trauma — from such injuries, which Ms. Breed must be aware is “important,” despite her protestations. Unfortunately, SFGH’s trauma system doesn’t capture data on pedestrians injured by cyclists who were transported to private hospitals, so comprehensive data isn’t collected citywide.
9–1–1 Dispatch Data
Another records request to San Francisco’s Department of Emergency Management revealed the 9–1–1 dispatch system received 3,479 calls between calendar year 2013 and December 21, 2015 regarding automobile vs. motorized/non-motorized two-wheeled vehicle accidents, 56.5 percent of which (1,964) involved patients transported to hospitals during the three-year period. Of those transported, 76 percent (1,485) were transported to San Francisco General Hospital, and the remainder transported to other Bay Area hospitals.
It should be noted the national medical protocol used by San Francisco 9–1–1 dispatchers doesn’t differentiate the type of two-wheel vehicles involved (bikes vs. motorcycles, scooters, etc.), so it’s unclear how many of these accidents involved autos vs. cyclists. That said, the call volume clearly places an “important” strain on 9–1–1 dispatchers, as Breed should know, and impacts patient care at SFGH and other hospitals.
SFPD Cyclist Citations Data
A records request to SFPD placed on December 14 revealed troubling data in its initial, flawed responses. After battling with SFPD for over a month, by January it was clear SFPD’s cyclist data lacks veracity.
There were nearly 5,000 bike vs. auto collisions across a decade. Wow! There were just 289 such incidents back in 2006, which more than doubled by 2013 to 654 incidents, and despite Vision Zero San Francisco hasn’t been able to reverse the trend to pre-2007 levels!
As troubling as SFPD’s collision data are, the dismal enforcement with citations issued by SFPD is more troubling. After pressing SFPD between December 14, 2015 and January 11, 2016 for clarification, a paucity of reliable data was provided by SFPD staff.
Data SFPD initially provided shows fully 3,413 citations were issued to cyclists between 2006 and 2015, but SFPD was only able to stratify by the type of violations just 935 citations issued to cyclists. Why was SFPD unable to stratify the difference — fully 2,478, or 72.6%, of citations — by type of violation, and stratified just 935, or 27.4%, by type of violation?
Of the 935 citations issued that PD was able to uncover the type of violation, only six were issued to cyclists across the three years for just two of the five “Focus on Five” strategies (five citations for running red lights and just one citation for failure to stop at stop signs). Seriously?
In stark contrast, 28 citations were issued to cyclists riding on sidewalks, which is not one of the five Focus on Five strategies, but a danger to pedestrians walking on sidewalks, nonetheless.
Of great concern, SFPD failed to stratify any of the other three Focus on Five enforcement strategies — including violating pedestrian right-of-way, turning violations, and speeding. Are we to believe SFPD issued zero citations to cyclists for these other three “Focus on the Five” enforcement strategies during the last decade since 2006? Seriously?
Fully 95% of the 935 citations were for violating CVC §21200(a), as if SFPD could not identify and include a specific violation documenting a precise transgression of the State’s vehicle code, and simply lumped 95% of all citations issued to cyclists into a broad catch-all category without stratifying which specific vehicle code violation had occurred.
Of note, CVC §21200(a) is not, in itself, a violation of the vehicle code — unless it is documented by an additional violation of some other section of the vehicle code. CVC §21200(a) is simply an identifier that another vehicle code section violation was committed by a cyclist, rather than a motor vehicle driver.
“Seven Ate Nine”: SFPD’s Unreliable Crime Stats
As Joe Eskenazi in his Dec 2014 article in the SF Weekly, titled “Seven Ate Nine: The San Francisco Police Department’s Crime Stats Aren’t What They Used to Be,” SFPD has a troubled history of fudging its crime stats. Discussing an audit of SFPD performed by the City Controller, which was requested by Chief Suhr, Eskenazi reported, in part:
“So, the numbers — the numbers that reveal whether or not crime is going up or down and by how much — are unreliable. And have been for some time.”
For over a month, SFPD attempted to uncover the actual moving violations cited on tickets issued to cyclists, but a disappointing January 8 records update from SFPD did not include further stratification about the types of citations issued. Instead, SFPD claimed that although the bicycle citations issued by the Traffic Company — using electronic handheld devices — were thought to be capable of generating a breakout of the type of citations issued, SFPD was unable to do so.
SFPD claimed it would have to manually print the 1,613 tickets issued to cyclists in 2015 and then have to manually tally the types of citations involved for the CVC §21200(a) tickets. This simply suggests sloppy record keeping at SFPD, or a lack of trained information technology staff to extract the data electronically.
By the time SFPD provided revised data on Jan 8, it turns out the Park Station — which includes the “Wiggle” — had issued just 3.2% (108) of tickets between 2013 and 2015 out of the 3,666 tickets issued to cyclists citywide. The Mission District and the Tenderloin District stations issued fully 41.1% of the 3,666 citations, not the Park District station.
The January update did indicate that the number of citations for violating CVC §٢٢٤٥٠(a) — running stop signs — between January and November 2015 grew from one citation across the entire City, to three citations. Really? Just three citations for running stop signs fueled the Bicycle Coalition’s drama and angst?
Sadly, the January update illustrated the “Seven Ate Nine” phenomena, since SFPD reported there were only 405 citations issued for CVC §21200(a) — the identifier code, for cyclists subject to same traffic laws as drivers — down from 408 SFPD first reported for this article.
So the “Seven Ate Nine” monster is now nibbling on SFPD’s bicycle violation statistics, in addition to SFPD’s crime stats, damaging the veracity of SFPD data every step of the way. It’s unacceptable that Vision Zero has to rely on unreliable SFPD data.
After all, in the absence of stratifying the volume of citations issued by the particular violation infraction committed, how can there be targeted enforcement or targeted education campaigns to change cyclists’ behavior if officials don’t know which sections cyclists are violating?
Inconvenient Truth: Risks of Rolling Stops
Bicycle apologists claim it appears most cyclists who caused collisions during that time frame appear to be, for the most part, injuring only themselves. Nonsense.
“Injuring just themselves” — when SFPD data shows 86 pedestrians were involved in collisions with cyclists — appears to be bicycle advocates just making stuff up notwithstanding clearly disproven by DPH and SFPD data.
Educating cyclists on the fines they face may deter their scofflaw behavior.
Has everyone forgotten that when laws are enforced, they’ll be obeyed, and when they aren’t enforced, they won’t be?
Apparently, millennial Katrina Sostek believes enforcement isn’t worthwhile and she shouldn’t have been singled out for having chosen to disobey the law. Chief Suhr disagreed when he noted it isn’t acceptable to encourage folks (like Ms. Sostek) to break a law that can result in injury or death because it is “inconvenient” for cyclists to come to a complete stop.
Given the paucity of data since 2006, the six Supervisors who passed this Ordinance were completely remiss in declaring these violations the lowest priority. How could the Board adopt legislation in the face of no data about the types of moving-violation offenses being committed by cyclists and in the face of data from SFGH’s Trauma Registry?
The Board of Supervisors now has 30 days to override the Mayor’s veto — until February 18 if it can muster the eight votes.
Contact the Board of Supervisors and urge them not to override the Mayor’s veto.
Your life — and mine — along with pedestrian safety, may depend on it.
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at .
By Patrick Monette-Shaw
After publishing my November describing problems with the trial of “tech” shuttle buses all over the City, including on the West Side, and noting that problems may rapidly worsen if the program is made permanent, that’s just what SFMTA’s Board of Directors did when it approved a permanent program on November 17 ignoring a detailed Secondary Analysis highlighting deep flaws in the October 5 Evaluation Report of the 18-month trial period.
…the problem with blocked Muni zones is about to worsen come February 2016, since the MTA Board also approved … smaller shuttle bus operators who provide free intra-city rides to also use Muni red zones…”
Concerned citizens may want to make a point of reading the full Secondary Analysis on-line.
After MTA’s Board received impassioned testimony from members of the public opposing making the Commuter Shuttle Program permanent, it did so anyway, including allowing the permanent program to expand from 124 shuttle zones to up to 200 shuttle zones.
Not one of MTA’s Board of Directors bothered questioning in depth SFMTA’s Shuttle Project Manager, Hank Willson, about data in the October 5 MTA Evaluation Report concerning problems with commuter shuttles interfering with red Muni bus zones. Worse, none of MTA’s Board of Directors even thought to ask questions about the Planning Department’s second EIR Exemption letter.
Of note, the 41% increase in shuttles the Planning Department anticipates may worsen incidents in Muni red zones, which MTA’s Board didn’t even discuss, let alone discuss in depth. Extrapolating data from MTA’s October 5 Evaluation Report, things may rapidly worsen:
• The report noted an average of 2.7% of shuttle stop-events resulted in blocking Muni bus access to red zones. Of 2,978 daily stop-events, 2.7% represents at least 80 blocked Muni buses daily, which annualizes to 21,629 occurrences per year, and may grow to 30,497 annually if there’s a 41% increase in permanent shuttles.
• The report noted shuttle buses “block other drivers’ views of pedestrians, or block crosswalks, less than 2% of the time they stop.” Of the 2,978 daily stop-events, 2% translates to approximately 60 blocked crosswalks and blocked views of pedestrians daily, which annualizes to 16,022 occurrences per year, and may grow to 22,591 annually if there’s a 41% increase in shuttles.
• The Report noted “shuttles block travel and bike lanes about 35% of the time that they stop.” Of 2,978 daily stop-events, 35% translates to 1,042 blocked travel lanes and bike lanes daily, which annualizes to a staggering 280,379 per year and may surge to 395,334 if there’s a 41% increase in shuttles!
And not one of the SFMTA’s Board of Directors bothered asking whether the Evaluation Report may have low-balled data in the Evaluation Report.
That’s because a public request to obtain data concerning the 1,200 citations issued against shuttle operators mentioned in the Evaluation Report revealed that 394 of the 1,200 citations issued — fully 25% — were for blocking Muni red bus zones. Had the enforcement efforts been scaled up and not restricted to just the 10-person shuttle enforcement team, many more citations against the shuttle operators may have been issued. How SFMTA calculated shuttles blocked Muni buses just 2.7% of the 2,978 daily shuttle stop-events, when 25% of 1,200 citations issued were for blocking Muni bus zones, wasn’t explained and MTA’s Board of Directors simply didn’t ask.
Similarly, of the 1,200 citations issued to shuttle buses, 232 (19%) were issued to shuttles double-parking, and 201 of the citations (17%) were issued to shuttle buses blocking the City’s street cleaning equipment, two issues that clearly affect quality of life in San Francisco that weren’t even mentioned in the October 5 Evaluation Report.
And none of MTA’s Board members bothered asking about an apparently much larger problem with blocked Muni red zones. The same public records request about the 1,200 shuttle bus citations revealed a much larger problem: Fully 6,629 citations were issued to all sorts of vehicle types blocking Muni zones, including limousines, trucks, convertibles, SUV’s, two-door and four-door cars, etc. in the 11-month period between August 1, 2014 and June 30, 2015, in addition to the tech shuttle buses.
Compelling Public Testimony During Hearing
One member of the public who testified on November 17 indicated he is a lawyer who uses the shuttle buses. He noted not only that his tech company employer is able to, but would be more than happy to, pay higher fees to help fund public transportation infrastructure. He testified Muni may have set ridiculously low per-stop-event fees because Proposition 216 requires that voters approve increases to property fees. But “usage” fees, he said, are a different issue, and San Francisco City Attorney’s may have been overly cautious in interpreting fees — property taxes vs. usage fees — that the City is allowed to assess, and he urged MTA’s Board to raise shuttle “usage” fees to help pay their fair share. It’s a no-brainer that the per-stop-event fees should be significantly increased to fund additional shuttle detail enforcement staff!
One reader of my November article noted she has become increasingly vexed by tech shuttles in public bus stops at 19th and Wawona as she drives home northbound from her daughter’s preschool every day. Every shuttle bus she’s encountered takes up part of the lane next to the stop, as well as the stop itself, causing frustrated drivers to make dangerous maneuvers swerving around shuttle buses and moving into oncoming middle traffic lanes. She’s not alone.
For her part, Amy Farah Weiss — who just garnered 23,236 votes in her campaign for mayor against incumbent Ed Lee — testified during the SFMTA hearing on November 17 about why a full EIR is needed before making the commuter shuttle program permanent, in particular how it may be adversely impacting San Francisco’s housing crunch.
Ironically, although the SFMTA was required to accept the Board of Supervisors March 2015 “Labor Harmony Resolution” with tech shuttle operators in order to prevent tech bus drivers striking during labor disputes and picketing in, and blocking access to, Muni bus zones, it appears SFMTA sought no input from Muni’s own 2,706 Transit Operators represented by Transport Workers Union Local 250-A.
Ignoring the Elephant in the Room: Transbay Terminal as “Hub”
Ignoring the elephant in the room, SFMTA has all but turned a blind eye towards considering making the commuter shuttle bus program use a “hub” approach, as most transportation planners have used since the mid-1800’s.
Did SFMTA simply forget that the San Francisco County Transportation Authority and the Transbay Joint Powers Authority (TJPA) are building the $4.5 billion Transbay Transit Center a transportation hub?
San Francisco’s Transbay Terminal is a transportation complex in San Francisco that opened in 1939 but was relocated on August 7, 2010 to build the Transbay Transit Center. Its function during the past 75 years was being a transportation hub.
During public testimony on November 17, at least five members of the public advocated that SFMTA use a central hub location for shuttle bus operators.
Thankfully, after hearing concerns from members of the public about options for utilizing a “hub” approach, one SFMTA Board member thoughtfully asked on November 17 about whether setting more aggressive goals and targets is something MTA could do, and what next steps might be taken in terms of a hub option, or offering hubs around the City, if SFMTA’s Board of Directors approved making the program permanent that day.
For his part, Hank Willson, SFMTA’s Commuter Shuttle Program manager responded, saying in part:
“The hesitation with a hub system is there are not any particular on-street locations that can accommodate the buses. … If we found a parking lot as a place shuttles can gather, dozens or hundreds of buses trying to access a single spot at a time would cause traffic and air quality impacts we felt would be unacceptable to those that live or work near the hubs, so that is why we went toward the middle [ground] — with arterial [street] restrictions.”
In other words, rather than creating one, or a few, central hubs, SFMTA simply turned the major and minor arterial streets of San Francisco all over the City into “spokes” — that poke into the flow of Muni buses and cause greater traffic congestion — and converted up to 200 restricted Muni red bus zones into commuter shuttle “hubs” scattered across the City.
This is nonsense, as transit planners have known since the mid-1800’s. Wikpedia lists 96 Greyhound Bus stations/hubs/ terminals in 32 states alone. Indeed, one Greyhound Bus station was, and probably still is, located in San Francisco’s Transbay Terminal. Then there are probably hundreds of other bus depots and bus terminals across the U.S. run by other regional bus carriers.
The Transbay Transit Center/Caltrain Downtown Extension (TTC/DTX) project was designed to “transform downtown San Francisco and regional transportation well into the 21st Century.” Transbay project goals include, among others:
• Improved access to rail and bus services
• Enhanced connectivity between Caltrain and other major transit providers,
• Construction of dedicated bus ramps from I-80 to the terminal
By opting for a “hub-and-spoke” system for the commuter shuttle buses, SFMTA appears to be undermining several of the Transbay Center’s “hub” goals. Using the Transbay Transit Center as a “hub” for commuter shuttle buses would provide ready access to freeways to San Jose and the Peninsula, and we’d remove the 45-foot-long buses from San Francisco roaming all over the City in a hunt to pick up these “entitled” special passengers.
Many of those Google bus passengers might opt to take Caltrain to the South Bay from the Transbay Center, instead of using a fleet of commercial buses, and it might help alleviate traffic congestion on Highways 101 and I-280 by taking those commercial buses off of our highways, in addition to alleviating hours of vehicle delays on mayor freeways, too!
Given the ready access to the Transbay Transit Center, SFMTA’s project manager Hank Willson appears to be completely wrong.
MTA doesn’t need to find parking lots or other street locations as places dozens or hundreds of commuter buses could converge at a time. Instead, the Transbay Center — in the shadows of San Francisco’s soon-to-be most phallic building, the 1,070-foot-high, 61-story Transbay Tower (eventually renamed “Salesforce” Tower) — is a perfect, and obvious, location for a central “hub” for the commuter shuttle buses.
It’s almost as if Mr. Willson, and SFMTA’s Board of Directors, have complete amnesia that the Transbay Transit Center is currently under construction, bus operations will start in 2017, and is a perfect site for “Google buses” to become an anchor tenant at the Transbay Center.
According to the San Francisco Chronicle on December 3, 2015, these privileged “tech workers” had average compensation of $176,275 in San Francisco in 2014 (up 12.8% from 2013), and average compensation in 2014 of $240,663 in San Mateo County and $211,874 in Santa Clara County. They can well afford travelling to a hub at the Transbay Center to get to their jobs in the South Bay, like everyone else.
Worse, the Chronicle reported many “tech” employers pocketed $34 million in “Twitter tax breaks” in San Francisco during 2014.
On top of that, SFMTA is simply pandering to multibillion-dollar tech companies in giving them cheap access to the public right-of-way by converting up to 200 Muni red bus zones into miniature neighborhood “hubs” so these privileged tech employees can avoid the fuss of having to commute to the Transbay Center to get to their jobs in the Peninsula.
Muni Drivers Locked Out of Process
TWU Local 250-A president Eric Williams testified during the MTA Board’s November 17 hearing, that the shuttle program was a “done deal no matter what we say in here, bought and paid for [by the tech companies].” Williams testified that nobody from SFMTA’s Shuttle Program had “contacted my office as a stakeholder,” and said the tech companies are “subdued because they know everybody is watching,” and the tech buses don’t go in the zones because they are trying to get the permanent program passed. But once the program is made permanent, Williams warned, “you will see buses lined up,” apparently referring to Muni buses lined up waiting behind commuter tech shuttle buses, apparently all over the City.
An MTA Board member subsequently indicated concern hearing from the largest union, Local 250-A presenting Muni drivers, and hearing Mr. Williams’ testimony that he felt Muni drivers were not solicited on how the shuttle program may be working. The process suggests that soliciting feedback from Muni drivers may have been all but ignored.
The Board member questioned Muni’s Commuter Shuttle Project manager, Hank Willson, about whether Williams’ statement was correct and whether there is a plan to get feedback from Muni drivers.
Willson claimed that the Shuttle Project team did talk to drivers and that he had himself “went out and talked to [drivers] on the 12 and 27 [bus lines] because they are impacted at Valencia and 25th and 24th … and we had [staff] talk to [drivers] on the 47 and 49 [bus lines].” Muni’s managers on the Shuttle Project say they asked what the drivers’ experience with commuter shuttle was and how much commuter shuttles may get in the way of Muni drivers. But Willson provided no actual comments or feedback from Muni drivers, and provided no statistics from driver feedback.
Willson admitted that while Shuttle Program managers had apparently talked to a handful of drivers — without stating the precise number of drivers who had been informally contacted — the Shuttle Project didn’t go through the Union structure but would be “happy to go through that.” But rather than wait for formal feedback from drivers represented by TWU 250-A, MTA’s Board of Directors didn’t wait, and approved making the shuttle program permanent.
In hindsight, it’s sad that Mr. Williams and TWU 250-A hadn’t filed a grievance — and may not have even asked for a “meet-and-confer” session to discuss the impact of the commuter shuttle buses on the working conditions of Muni drivers — during the 18-month trial period, and apparently hadn’t asked to have a seat at the table.
It’s even sadder that as of June 30, 2015, Muni had 132 senior managers and deputy directors in the job classification code series 9172 to 9186 who were paid $17.2 million annually in FY 2014–2015, and apparently it didn’t occur to any of the 132 managers or to SFMTA Director Ed Reiskin to formally survey the Muni bus drivers during evaluation processes of the Commuter Shuttle Program’s October 5 premature Evaluation Report.
SFMTA Director Ed Reiskin: “Open Mouth, Insert Foot”
Comically, two days after the SFMTA Board approved making the shuttle program permanent, the San Francisco Chronicle carried an article on January 19 reporting on the MTA’s Central Subway project, in which MTA’s director, Ed Reiskin, noted:
“As the second-most-densely populated city in the country (New York City is first), I think our roadways are nearly at capacity, and our streets are not going to get any wider.”
How can it be that Reiskin knows our surface-street roadways are at capacity, but is OK with allowing the commuter shuttle buses — who appear not to obey sharing the roadway with Muni buses, pedestrians, and people with disabilities — to gobble roadway capacity and flood the streets of San Francisco with “Google buses”?
Perhaps Reiskin hasn’t read the billing data for commercial shuttle operators for October 2015, and hasn’t understood the scope of the problem. In response to a records request placed by this author, SFMTA produced an Excel file on November 24 reporting shuttle operators made 70,356 stops during October 2015, apparently in Muni red zones and perhaps white zones. Extrapolating to an annual volume of “capacity,” that portends 844,272 shuttle stop events annually, simply by multiplying by 12 months.
When pressed for more robust billing data, SFMTA finally coughed up a PDF file (rather than data in Microsoft Excel) on Thanksgiving Eve, November 25. Re-keying of the data shows that between September 2014 and October 2015, shuttle stop-events appear to have increased by 21,134 monthly — from 49,322 to 70,356 — an increase of 42.65% since the program was implemented in August 2014, including an 11.23% increase between September 2015 and October 2015 alone. Neither Reiskin nor the SFMTA Board members discussed this on November 17 before making the program permanent.
While the October 5 Evaluation Report claimed a 30% increase in daily shuttle stop-events since August 2014, this new data suggests it increased nearly 43% during the 18-month trial period, contradicting the Evaluation Report!
If the program actually expands by 41% when it is made permanent in February 2016, does this suggest we'll get another 346,152 additional stop-events annually, pushing the total commuter shuttle bus stops to 1.19 million stops each year — without a full EIR? Does Ed Reiskin and our full Board of Supervisors not understand this impact, or how to mitigate it?
Second EIR Appeal Is Right Around the Corner
Since MTA’s Board approved making the program permanent without conducting a full EIR, many observers have concluded that the streets of San Francisco are going to become even more dangerous for mom’s and pre-schooler’s, along with pedestrians, bicyclists, and passengers. After all, our streets, as Reiskin noted, aren’t going to get any wider, anytime soon.
The Wild West of San Francisco’s misuse of Muni red zones is about to worsen, and we’ll see more Muni passengers and people with disabilities disembarking in traffic lanes!
That’s because the problem with blocked Muni zones is about to worsen come February 2016, since the MTA Board also approved on November 17 allowing smaller shuttle bus operators who provide free intra-city rides to also use Muni red zones, apparently without having to pay any usage fee and without risking fines from citations.
How will Muni buses possibly be able to compete for access to Muni red zones with a glut of commuter and free shuttle buses hogging space? In effect, we’re just trading the Wild, Wild West of unregulated commercial shuttle buses prior to the pilot program stopping wherever they want, for a just-as-ugly Wild, Wild West of upwards of 1.2 million shuttle buses blocking Muni red zones!
Some observer’s remain leery about having additional shuttles operating in public Muni bus stops, and are leery about private enterprise having such cheap access to the public right-of-way.
The permanent commuter shuttle program claims it will curtail shuttles to only arterial streets, but other observers already worry that restricting them to large arterial streets will just concentrate the problem, especially as more and more shuttles get added to City streets. For instance, Apple plans to expand in North San Jose, adding up to 18,000 new employees, many of whom will probably want to, and will opt to, live in San Francisco and commute to San Jose.
And while on the one hand it’s good to restrict where the shuttles can go, on the other hand it’s still illegal for them to pull into Muni bus stops, given that the State’s vehicle code preempts the City from allowing shuttles in red zones.
“Everyone knows tech companies up and down the Peninsula want to offer living in San Francisco as a job perk to their employees, and we all know there’s a lot of expansion going on down there. But there’s still no analysis about the impact of turning San Francisco into a bedroom community for Silicon Valley, and no analysis about gentrification and the impacts of gentrification on sprawl and greenhouse gas emissions,” notes Sue Vaughan.
It is widely expected that the Coalition for Fair, Legal, and Environmental Transit will appeal the absence of a second EIR for making the commuter shuttle program permanent to the full Board of Supervisors, since the potential for unlimited expansion is the heart of the issue going forward.
And for all anyone knows, Superior Court Judge Garrett Wong may — hopefully — rule that a full EIR was required for the pilot program and should have been performed, and a permanent expansion definitely requires a full EIR.
An increase to 1.19 million commercial commuter shuttle buses stopping in Muni red zones, plus an additional as yet unknown number of smaller “free” shuttles” the SFMTA Board approved using Muni red zones, must surely have quality of life, housing displacement, roadway wear-and-tear, and other environmental impacts that must be mitigated through an EIR.
Contact members of the Board of Supervisors and urge them to require a full EIR!
Monette-Shaw is an open-government accountability advocate, a patient advocate, and a member of California’s First Amendment Coalition. He received a James Madison Freedom of Information Award from the Society of Professional Journalists–Northern California Chapter in 2012. He can be contacted at monette-shaw@westsideobserver.
By Patrick Monette-Shaw
When the Department of Elections (DOE) certified results of San Francisco’s municipal election on November 19, I wanted to sympathize with our so-called “consensus Mayor,” Ed Lee. I dredged the barrel, but couldn’t find a drop of sympathy.
…Lee’s approval rating had drooped to 38%, his disapproval rating was 46%, and 16% of voters were unsure. No small wonder Lee managed to garner just 51.85% of votes cast in November 2015. It reflects little confidence in the mayor, not a mandate.”
Lee managed re-election gaining just over a simple majority of votes, in the end capturing under his own sails just 51.85% (105,298) of the 203,069 total ballots cast on November 3.
That’s not much of a vote of confidence, or a mandate, following on the heels of having barely won a 30.72% plurality (just 59,663 votes) out of 194,029 votes cast when he was first elected mayor in November 2011.
When DOE posted preliminary election results November 3 at 10:36 p.m., Lee reportedly won 56.70% (70,715) of the 124,726 of ballots cast for Mayor, while the “1-2-3 to Replace Ed Lee” coalition — Amy Farah Weiss, Francisco Herrera, and Stuart “Broke-Ass” Schuffman — snagged fully 35.75% (44,594) of initial votes. Election night, 7,536 ballots cast no vote for mayor at all.
By adding in 8,964 votes cast for two other official candidates, 453 ballots cast for “unqualified” (defined as not official) write-in candidates, and 7,536 ballots not cast for mayor at all, Lee’s 70,715 votes drooped by 3.23%, to just 53.47% of the 132,262 total ballots cast on election day.
Fast forward to September 19, when DOE released certified election results. Mayor Lee drooped lower, garnering just 51.85% of the 203,069 total ballots cast, a 4.85% slide downward from 56.7%. The “1-2-3 to Replace Ed Lee” coalition surged to 69,948 votes of the 85,099 (41.91%) ballots cast for mayor other than Ed Lee, including 13,387 votes cast for two other official candidates (Kent Graham and Reed Martin), 59 votes for the six official “certified” write-in candidates, and a staggering 1,705 votes cast for the so-called unqualified write-in candidates who didn’t register as “official” write-in candidates with DOE prior to the election.
By the time DOE certified election results, ballots cast with no vote for any mayoral candidate at all had nearly doubled to 13,362, representing 6.24% of the 203,069 ballots cast, apparently unwilling to vote for any official candidate.
Beyond the final election results summary report, the Ranked Choice Voting (RCV) report revealed more information about the lack of confidence in Mayor Lee. Of the 203,069 ballots cast, just 168,232 advanced to being counted as “continuing” ballots in the final RCV results. Fully 34,837 votes — a whopping 17.16% — were tossed out and not counted by the RCV algorithm for the mayor’s race.
A total of 771 ballots were eliminated as “exhausted by over votes,” on which voters marked more than one candidate in the same ranked-choice column. Another 12,741 ballots were eliminated as “under votes,” which includes both blank ballots (in which voters cast no vote for mayor at all) and writing in the name of someone other than pre-qualified “certified” official write-in candidates.
Another 21,325 ballots were eliminated as “exhausted ballots,” which no longer included a “continuing” candidate because no additional ranked choice candidate names were indicated. For instance, if someone cast a single vote only for, say, Amy Farah Weiss, but didn’t include a second or third ranked-choice name, or a candidate is eliminated from advancing, the ballot is summarily deemed exhausted and not counted in RCV results.
An unintended consequence of having had albatross Julie Christensen hanging on for dear life to Mayor Lee’s tailcoats is that in District 3, Christensen may have dragged down ballots cast for Lee in the heavily Chinese-American district, given powerbroker Rose Pak’s annoyance with Lee. With an impressive 50.49% of registered voters casting votes in D-3, 17,544 of the district’s 34,559 voters cast ballots for mayor. Sadly, Ed Lee captured just 55.82% (9,798) of the 17,544 cast in District 3.
The five official candidates, including the “1-2-3 Coalition,” snared 35.91% (6,304) of ballots cast in D-3, but fully 6.84% (1,200) voters in D-3 were “under votes” that apparently cast no vote for mayor at all, two ballots were cast for the “official” certified write-in candidates, and another 184 ballots were cast for someone other than pre-qualified “certified” official write-in candidates. Maybe the mayor isn’t as popular in Chinatown and D-3 as everyone thinks.
Similar results occurred in Chinatown, where 51.9% of registered voters (9,059 of 17,692) turned out to vote. Mayor Lee garnered 59.42% (5,383) of the votes cast for Mayor; all other official candidates, including the 1-2-3 Coalition, snagged 32.03% (2,902) of ballots cast; and 8.54% (774) were either ballots cast for unofficial write-in candidates, or were under-votes and over-votes. Lee’s 5,383 votes represent just 30.43% of all registered Chinatown voters, hardly a mandate, and possibly a symptom of aversion of him in his own backyard.
The candidates other than Lee cobbled together a great ranked-choice voting strategy.
The election’s certified RCV “Pass Report” on November 19 documented that of 83,936 ballots cast for all other candidates other than Lee (and excluding the 1,705 votes for “unqualified” write-in candidates) just 8.84% (7,420) ended up being transferred during the ranked-choice algorithm to Ed Lee, 31.26% (26,236) were transferred to Francisco Herrera, Herrera held on to another 34.22% (his own 28,805 original votes), and 25.41% (21,325) were exhausted by candidates not continuing whose ballots were not transferred to others, most importantly not transferred to Ed Lee.
As for campaign spending in the race, Mayor Lee’s Form 460 posted on the Ethics Commission’s campaign finance database for the period ending October 17, 2015 shows he had spent $1,401,248 during 2015, 31 times more than the $44,439 in combined spending by the “1-2-3 to Replace Ed Lee” coalition during the same period. Lee’s $1.4 million spent garnering his 105,298 votes translates to $13.31 per vote, whereas the $44,439 in combined spending by the 1-2-3 Coalition garnered 60,948 votes at a cost of just $0.64 per vote.
The sad truth is Lee’s approval rating plunged drastically. Back on April 21, 2015, the San Francisco Examiner carried an by Larry Bush that reported Lee’s approval rating had drooped to 38%, his disapproval rating was 46%, and 16% of voters were unsure. No small wonder Lee managed to garner just 51.85% of votes cast in November 2015. It reflects little confidence in the mayor, not a mandate.
The San Francisco Examiner’s October 15 accompanying it’s endorsements for the November 3 election reported Lee had refused to meet with the Examiner’s editorial board. The editorial noted it’s a shame when a sitting mayor can get away with being aloof and disengaged with the civic process during an election season, and without a greater civic dialogue about where we are going and how we intend to get there, The City loses out.
The election results show clearly Mayor Lee has no mandate from voters, just a few Emperor’s new clothes. Indeed, election results illustrate a referendum against our mayor and his many failed policies during the five years he’s served as mayor.
After all, 48.15% (97,771) of voters just couldn’t bring themselves to vote for Lee as their first choice in the 203,096 total ballots cast. And with just 7,420 ballots transferred to him during RCV Lee captured just 113,191 ballots, 55.74% of all 203,069 ballots cast.
Don’t for a minute believe the myth in the final RCV Pass Report that Lee received 67.28% of final RCV votes, and Francisco Herrera received 32.72%. It’s a myth precisely because the denominator was reduced to just 168,232 final ballots, by creatively tossing out 17.15% (34,827) of the 203,069 ballots cast, in effect disenfranchising voters.
Had someone unafraid of Ron Conway’s billions — say State Senator Mark Leno — jumped into the race for mayor, San Franciscans may have gotten a new, anyone-but-Lee, mayor and we wouldn’t see him grinning for four more years.
Hopefully, the election of Aaron Peskin as District 3 Supervisor may help restore some balance of power between the legislative and executive branches at City Hall.
If not, the only option left may be to consider quickly mounting a recall campaign against Mayor Lee, to prevent a complete sell-out of the City to his billionaire backers, including Ron Conway and his ilk, during the next four years.
Monette-Shaw is a San Francisco free-lance journalist. Feedback: monette-shaw@westsideobserver. This article also appeared in the San Francisco Examiner.
By Patrick Monette-Shaw
|The SFMTA’s Evaluation Report does not mention the danger for MUNI’s disabled riders when riders are forced to embark and disembark buses when private buses squat idling in designated bus stops—a major fine for autos Photo: Larry Bob Roberts|
Problems with the trial of “tech” shuttle buses — a.k.a., the “Google buses” — have cropped up all over the City, including on the West Side. And the “trial” may rapidly worsen if the program is made permanent by the SFMTA and Board of Supervisors.
It’s now gotten personal. And I’m angry. I’m 64-½, walk using a cane, and rely on public transportation.
During the past three weeks, I’ve had to exit Muni buses in the middle of traffic lanes at least ten times at the northeast corner of Van Ness Avenue and California Street coming home from work at 5:30 p.m. when tech shuttle buses, sometimes two at a time, are parked in the Muni bus red zones unloading tech workers who likely don’t care whether Muni riders have to disembark in the street.
No comprehensive formal study has been performed on the impact of shuttles on pedestrian and bicycle safety or Muni passengers with disabilities…or blocking traffic lanes for ambulances or fire engines…”
The MTA and City haven’t conducted a full Environmental Impact Report (EIR), which is desperately needed before making the shuttle bus program permanent.
Budget & Legislative Analyst Report
A report titled “” was presented to the Board of Supervisors on March 31, 2014 by the Board’s Budget and Legislative Analyst (BLA), who had been asked by Supervisors to analyze the impact of private shuttle buses on the City’s infrastructure costs, traffic delays, pedestrian safety, and housing costs.
Notably, the March 2014 BLA report clearly indicated a full Environmental Impact Report (EIR) is needed for the private shuttle bus program before it is made permanent.
The MTA and the Planning Department wrongly determined that a “pilot program” allowing the tech shuttles to use some Muni bus stops for an 18-month trial didn’t require an EIR, and that the pilot program was exempt from California’s CEQA environmental review requirements because it would be an information collection and evaluation period, which is utter nonsense.
The BLA report identified many problems with the private commuter shuttle buses. In particular, it noted:
“In other words, all use of City bus zones by private shuttles to date has been in violation of the California Vehicle Code [emphasis added]. In 2014, Muni’s on-time performance declined from 60% to 54%, as private shuttle buses increased.”
Elsewhere in the BLA report, troubling data was reported, including:
Seven “tech” companies that provide regional shuttle for their employees are responsible for approximately 131 shuttle busses in the City each weekday, they make at least 273 runs each day that involve approximately 9,030 boarding’s daily for an estimated 4,105 individual employees. But the BLA noted the actual number of shuttles, trips, boardings, and passengers is probably much higher, since not all shuttle providers have been willing to share this information with public agencies. I have to wonder if tech companies are taking Airbnb’s lead in refusing to provide data to San Francisco city officials.
The 45-foot long regional shuttle buses — which typically have 52 to 81 seats, and weigh between 54,000 pounds to 62,00 pounds (27 tons to 31 tons) when fully loaded — cause more wear and tear on our roadways than even 18-wheel semi-trailers. A typical bus (whether Muni’s or private shuttles) place 7,774 times more stress per trip on our roadways that an SUV places. This means street damage caused by one, large shuttle bus driving along a hypothetical one-mile-long lane is equivalent to 4,700 passenger vehicles driving over the same lane. Clearly, heavier shuttle buses contribute to faster roadway deterioration, and shorten the lifetime of roadways.
No comprehensive formal study has been performed on the impact of shuttles on pedestrian and bicycle safety or Muni passengers with disabilities, including Muni passengers forced to board in traffic lanes when shuttle buses are parked in red zones, shuttles parking in bike lanes, shuttles not yielding to pedestrians, or blocking traffic lanes for ambulances or fire engines, among other issues.
The BLA report noted a February 2014 analysis by graduate students at UC–Berkeley found that 40% of shuttle riders would move closer to their Peninsula jobs if shuttle bus services were discontinued, suggesting the shuttle buses have a major impact on the demand for San Francisco’s housing stock and the displacement caused by our housing crisis. Another Berkeley graduate student determined that rental prices within a half-mile radius of Goggle shuttle stops increased at a faster rate than rental prices elsewhere.
Between June 2014 and July 2015, the number of shuttle bus stop events in San Francisco increased by 46%, from 2,032 to 2,978. According to the SFMTA, there are now 203 shuttles in operation in San Francisco, traveling 118 routes.
CEQA Appeal Rejected by Board of Supervisors
After the Planning Department and SFMTA decided to exempt the shuttle bus program from California’s Environmental Quality Act (CEQA) processes to determine impacts and explore potential mitigation measures, an appeal was filed with San Francisco’s Board of Supervisors.
On February 21, 2014 Tim Redmond an article on 48Hills.org indicating that a group of activists had filed the appeal with the Board of Supervisors regarding MTA’s proposal to allow tech buses to use Muni’s red zones, with a $1 per stop fee. Redmond’s article explored the “wink-and-nod policy” the MTA had with “tech firms to allow them — and nobody else — to break the law [against stopping in Muni red zones] with impunity.”
Redmond’s article reported that Bauer’s vice president for sales and marketing, Michael Watson, e-mailed Muni in January 2014 asking that bus-zone tickets be dismissed because “as I assume you know, we have had a ‘handshake agreement’ [a.k.a., ‘wink-wink’] with SFMTA for many years that allowed [Bauer] to use the stops under a ‘Muni first’ condition.”
Watson asked Muni’s Shuttle Pilot Program manager Carli Paine in January 2014 how Bauer should go about getting future citations waived and a refund for citations it had already paid. Redmond reported Google goes beyond what Bauer is doing, since Google had hired Barbary Coast Consulting, a prominent lobbying firm [founded by San Francisco political operative and registered lobbyist Alex Clemens in 2003], to try to get the City and the Police Department to stop issuing parking tickets to Bauer.
The Board of Supervisors foolishly and ironically on April 1, 2014, April Fool’s day, in an 8-to-2 vote to approve an 18-month pilot project trial period, with only Supervisors David Campos and John Avalos against it.
The Superior Court Lawsuit for Full CEQA Review
Within a month following the Board of Supervisors denial of the appeal, the Coalition for Fair, Legal, and Environmental Transit filed a lawsuit in San Francisco Superior Court on May 1, 2014 in Superior Court, case #CPF-14513627 (Coalition for Fair, Legal and Environmental Transit vs. CCSF).
City Attorney Dennis Herrera and his underlings must know that our Charter City cannot adopt a change like this in conflict with State law. Obviously, the Shuttle project will contribute to pedestrian and bicyclist safety risks, since the intensity of transit services is a well-known, established spatial risk factor for pedestrian injuries. One San Francisco pedestrian has died from a shuttle bus accident.
The lawsuit also notes that substantial numbers of people will face displacement, since rents are rising much faster near private stops than elsewhere in the City. Even the BLA report in March 2014 noted commuter shuttle buses are impacting displacement, and causing rents to soar.
On-Going Media Coverage
On June 2, 2014, Adrian Covert published an in the San Francisco Examiner, wrongly asserting that a group of activists who had filed a lawsuit in Superior Court calling for a full environmental impact report on the 18-month trial period were “anti-tech.”
A few weeks later, Susan Vaughan, who is among the “Coalition for Fair, Legal, and Environmental Transit,” that filed the lawsuit against Apple, Inc. and others, including the SFMTA named as a real party in interest, published a to Covert’s nonsense in the Examiner on June 18, 2014. She noted the plaintiffs in the lawsuit are not “anti-tech.” Vaughan, also chair of the San Francisco Group of the San Francisco Bay Chapter Sierra Club, wrote:
“For one thing, it is illegal for the private shuttles to pull into public bus stops. Case law also indicates that you cannot base a California Environmental Quality Act pilot program on an illegal activity. Furthermore, there is a fair argument — the CEQA standard for triggering an environmental impact report — that the shuttles pose environmental impacts that must be assessed and mitigated.”
On March 5, 2015, Vaughan and Bruce Oka — a former member of the MTA Board of Directors until Mayor Ed Lee unceremoniously removed him from MTA’s board without any prior notice or thanks for Oka’s many years of service — published a joint in the Examiner, noting Muni drivers will tell you shuttle vehicles pull illegally into public bus stops, obstructing service for senior citizens and people with disabilities.
The pair noted illegal stops in Muni bus zones could also be hindering Muni’s on-time performance. They also noted that people who are disabled are excluded from the private shuttles, because the charter buses rarely have wheelchair lifts. Have you ever seen a wheelchair-user board a Bauer or Google bus?
On June 19, 2015, Dan Raile published a on Pando.com that the list of defendants named in the shuttle bus lawsuit filed in May 2014 by the Coalition for Fair, Legal, and Environmental Transit had been narrowed to the City, the Board of Supervisors, the Planning Department, the SFMTA and Mayor Ed Lee, since Apple, Genentech, Google, and various shuttle operator companies had successfully argued in the court that they should be removed from the case entirely, and were. Raile noted the pilot program is set to end on January 31, 2016, at which point it may be made a permanent program.
In response to public records requests Vaughan had placed, e-mail records received reveal City planners repeatedly referred to making the program permanent on a “tight schedule,” and that in an effort of adhere to the tight schedule, some data of the program were made on an “educated guess” basis by planners, rather than relying on real data. SFMTA claimed it disagreed that the program was being “fast tracked.”
Questionable Preliminary SFMTA “Evaluation Report”
On October 5, 2015 SFMTA released a premature regarding the shuttle program trial period. The 18-month program is scheduled to run through the end of January 2016, so why a premature and preliminary report was released four months early is not known, but some suspect the report is designed to squash the lawsuit in Superior Court demanding a full EIR before the shuttle program is made permanent.
There’s plenty of questionable data in it. The report claims on page 25 that of 28 shuttles an hour using the Muni bus stop at Van Ness and California Street, that there were zero blocked Muni buses per hour. That claim is either an outright lie, or simply false information, as I can attest from my daily experience. If it’s not an outright lie, I have to wonder if this is one of many “educated guesses” Muni admitted to making in their e-mails.
SFMTA’s new report appears to directly contradict the BLA and Harvey Rose’s initial estimates in 2014.
The discrepancy between the two reports may be due to the methodology for data collection Muni used during the pilot study: Muni admits field data collection efforts during the trial period observed shuttle and Muni activity at just 20 shuttle zone locations — 10 in the morning (between 6:45 a.m. and 9:15 a.m.) and 10 in the evening (between 5:30 p.m. and 8:00 p.m.) during commute periods.
Muni claimed on page 18 of the report to have used this small sample size to develop a “reasonable sample of total stop-events made by commuter shuttles on a typical day.” From there, Muni staff may have extrapolated on an “educated guess” basis.
Not too surprisingly, on October 8, just three days after the preliminary Evaluation Report was published, the lawyer representing the Mayor and other City defendants in the lawsuit — Deputy City Attorney Audrey Pearson — presented the Evaluation Report to the Superior Court during her deposition. The report shows that 12 months into the pilot project, the City still doesn’t have real-time data flowing from shuttle operators, shuttle operators have failed to provide data regularly and accurately, and SFMTA staff may have naively expected a more concerted compliance from by the shuttle providers to ensure data was submitted properly. It’s hard to justify a project’s exemption from CEQA when more than a year into the program, data is still not being collected. Maybe that’s why SFMTA staff continue to make “educated guesses” about the shuttle program’s adverse impacts.
Take Action: Attend Meetings, Lodge Complaints, and Take Photos!
Part of the preliminary Evaluation Report released on October 5 included data concerning the number and types of complaints MTA has received regarding the shuttle bus program. The report pooh-poohed the small number of complaints filed so far. You can file complaints by either calling the MTA, or calling the City’s 3–1–1 call center.
Photos of the tech shuttle buses blocking Muni access to the red zone bus stops are especially, and urgently, needed. If you can help document blocking of bus stops, the more photos that can be submitted showing passengers boarding and disembarking Muni buses in the street, while the tech shuttles are idling in bus zones, the better! It would be helpful to note the date, time, and location of any such photos.
Two important meetings are scheduled before the SFMTA:
A hearing on MTA’s preliminary Evaluation Report will be heard by SFMTA’s CAC (Community Advisory Committee) on November 5 at 5:30 p.m. in the 7th floor conference room at One South Van Ness.
The permanent shuttle bus program will reportedly be on the agenda for the SFMTA Board of Directors meeting on Tuesday, November 17, 2015 at 1:00 p.m. in Room 400 at City Hall.
The trial of the lawsuit filed by the Coalition for Fair, Legal, and Environmental Transit is scheduled for November 13, 2015 in Department 608 at 9:00 a.m. in the Courthouse at McAllister and Polk streets.
The City’s pretense that “Google buses” are not contributing to the displacement of residents and the loss of affordable housing in San Francisco, and are not worsening pedestrian and Muni passenger safety, needs to stop! That’s magical thinking on the part of the City, albeit untrue.
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–James Madison Freedom of Information Award in the Advocacy category. Feedback: .
by Patrick Monette-Shaw
Ever since being appointed Mayor five years ago in January 2011, Ed Lee has distinguished himself as a court jester, often favoring his billionaire backers.
Do San Franciscans really need, let alone want, another four years of his so-called “consensus leadership” skills on top of the five years we’ve already suffered through?
As part of his jobs-jobs-jobs agenda, Lee appears to have potentially been on a City-jobs buying binge.
Given his plunging approval ratings, voters would be wise to elect anyone-but-Ed-Lee, or cast no vote for mayor. There’s plenty of upside in withholding your vote for mayor.
Let’s hand Ed Lee far fewer than the 59,775 votes he garnered during the first round of ranked choice votes in 2011. Maybe that will send him a signal he needs to rapidly become the “people’s mayor,” not the “developer’s mayor.”
As I reported in the Westside Observer in September, Mayor Lee was quoted in Time magazine in January 2014 as saying “I don’t think we paid any attention to the middle class. I think everybody assumed the middle class was [sic: were] moving out” to explain why very little middle-income housing has been built during his tenure.
As recently as September 24, Emily Green reported in the San Francisco Chronicle that Mayor Lee told the Chronicle’s editorial board he has to “balance out a sentimental numerical goal to a practical, realistic invitation to be innovative in the city,” referring to Supervisor Jane Kim’s initially proposed November 2014 ballot measure that would have required that 33% of housing construction be “affordable.”
A “sentimental numerical goal”? Jeesh! Just how condescending will this bloviated Mayor get? Who needs this guy, given his unbridled hubris?
Lee’s Approval Ratings Droop
In just a short two-year period, Mayor Lee’s approval rating plunged nearly 30%, from 65% favorable approval in 2013 to just 38% as late as April 2015. Concomitantly, his disapproval ratings have soared by almost 20%, from 28% in January 2013 to 46% April 2015. For all anyone knows, his approval ratings may have plunged even further since last April. With numbers like these, who would vote for him?
The San Francisco Chronicle reported that 65% of likely voters had a favorable opinion of Mayor Lee in a poll commissioned by the San Francisco Chamber of Commerce conducted by David Binder Research in January 2013 among 500 likely voters.
On April 21, 2015, the San Francisco Examiner carried an Op-Ed by Larry Bush, which reported Lee’s approval rating drooped to 38%, with a corresponding disapproval rating of 46% and just 16% then unsure. Bush reported the Mayor’s approval rating varied across the City’s supervisorial districts.
In Katy Tang’s District 4, Lee had a 50% disapproval rating. In London Breed’s District 5, Lee had a 51% disapproval rating. In Supervisor Avalos’ District 11, Lee’s disapproval rating last April climbed to 63%. In Supervisor Scott Wiener’s Castro District 8, Lee’s disapproval was at 41%. And in Supervisor Farrell’s District 2, 47% of survey respondents disapproved of Lee’s performance.
“Jobs, Jobs, Jobs”: Patronage City Jobs?
Between the time Lee was appointed Mayor at the half-way point in FY 2010–2011 and the end of FY 2014–2015 in June 2015, the City’s payroll increased by a staggering 13.1%, from 34,576 employees to 39,122 employees, an increase of 4,546 additional City employees, which added over a half-billion dollars in total pay excluding increases in benefits and retirement costs over the five fiscal years during his tenure.
Cushy Management Positions
Digging deeper looking into the City Controller’s payroll database, it turns out that of the addition 4,546 employees, fully 2,971 — 65.4% — are employees earning over $100,000 annually Those 2,971 new employees suck $491,869,027 — 94.1 % — of the increased $522,510,769 in increased payroll costs during Lee’s tenure. They represent 64.5% of new hires, but gobble 94.1% of the increased payroll.
Why did the Mayor need to hire 1,265 more employees earning between $149,000 and $199,999 plus another 559 more employees earning $200,000 and up? Combined, the 1,824 additional employees earning over $150,000 cost $345,405,936 — fully 66% of the $522.5 million increase in the City’s payroll.
The data shows that between citywide senior managers and senior managers at MUNI, the Mayor added 129 such positions, at a cost of $30 million, including 31 additional Deputy Directors and Department Heads at a cost of $7.5 million. Why did Mayor Lee need another 31 deputy directors and department heads to run City government?
Since 2003, when former City Supervisor Tom Ammiano first identified a problem with just 2,918 then-City employees earning greater than $90,000 annually, we now have 11,886 more employees who do — yes, nearly twelve thousand more — costing $1.7 billion more than in 2003.
Also since 2003, the City hired or promoted 620 senior managers citywide — including an additional 124 deputy directors and department heads — costing an additional $100 million annually in salaries alone. Can anyone explain why San Francisco needed 124 more deputy directors and department heads, 25% — 31 — of whom were added during Lee’s five-year tenure?
Allegations of Corruption
When San Franciscan’s reached for their morning copy of the San Francisco Examiner on August 5, they were roundly, and uniformly, shocked to read an exposé of allegations of public corruption — featuring photos of Mayor Lee and Board of Supervisors president London Breed — plastered across the front page.
The story’s headline on page four reading “Mayor allegedly took bribes in exchanges for favors” came as a complete shock to most San Franciscans, despite rumors of City Hall corruption that have circulated for decades.
Evidence presented in the racketeering prosecution of Raymond “Shrimp Boy” Chow reportedly alleged implication of a wide array of City and State leaders — including Mayor Lee — involving alleged bribery schemes, pay-to-play plots, campaign contribution money laundering, and state construction contract rigging, according to a filing in Federal court the day before by “Shrimp Boy’s” attorneys.
“Shrimp Boy’s” attorneys requested the case against him be dismissed due to the alleged selective prosecution of him, but not prosecution of Mayor Lee, among others. The court filing quotes and references FBI wiretaps, body wires, agents and sources. Then San Francisco Human Rights Commissioner Nazly Mohajer was recorded on tape explaining how she laundered Lee’s campaign money.
The next day, on August 6, San Franciscans were even more shocked to read Jonah Owen Lamb’s hardcopy article in the Examiner, which reported “Mayor Ed Lee knew his underlings were arranging campaign money laundering schemes, and they were caught saying as much on FBI wires …” In addition to Mohajer, former Human Rights Commission staff member Zula Jones was also caught on FBI wires saying Lee “knew he was taking the money illegally.”
Reportedly, Lee allegedly met with an undercover FBI agent on April 6, 2012 and discussed the first $10,000 illegal “straw donor” contributions to break up one person’s contributions exceeding donor limits into smaller contributions. During an April 25, 2012 phone call, Mohajer spoke ill of the Mayor, saying she found San Francisco politicians are extremely corrupt and that Ed Lee “is worse than all of them.”
Dueling Media Accounts
One of two articles in the Chronicle on August 6 racing to Mayor Lee’s defense noted Chow’s attorneys accused U.S. Attorney Melinda Haag of failing to prosecute Lee and other City officials because they were politically connected and because of the “perceived negative consequences of going after them.”
On August 7, the Chronicle published an editorial in print, attempting to absolve Mayor Lee.
On August 10, the Examiner reported the Mayor and his campaign have vigorously denied any wrongdoing, since the evidence surfaced in court records on August 4, and announced that tainted campaign contributions would be donated to the City without identifying how much would be donated.
On August 14, Jonah Owen Lamb reported in the Examiner that “Shrimp Boy” Chow’s August 4 motion also asserted that Annemarie Conroy — who is currently in charge of External Affairs for the U.S. Attorney’s Office and has connections to San Francisco City politicians — “used her position of influence to cull political figures out of the prosecution, and selectively prosecute others.” In other words, Mr. Lamb reported Ms. Conroy appears to have spared prosecution of Mayor Lee.
By August 27, the Examiner carried its “Broke-Ass Stuart” (a.k.a., Stuart Schuffman) columnist’s article on how to fix San Francisco’s corruption problem. Stuart — who is running for election as mayor in November — observed:
“The corruption in this town has become unbearable. It’s so blatant that it’s hit a point of arrogance. The mayor and his cronies feel untouchable and because of this, things are getting worse, far worse.”
Stuart’s three-point plan includes:
We need to elect our elected officials. Stuart notes that when City Supervisor’s quit or leave, the Mayor gets to appoint their replacement, and noted that 23 Supervisors have been appointed in this manner. Stuart calls for a special election to replace the Supervisors, instead of allowing the Mayor to appointment interim replacements.
San Francisco needs a public advocate. Stuart says “the public advocate is a badass, whose job is to investigate corruption on all levels and represent the people against the evil armies of bureaucracy.” Stuart says this isn’t a novel idea, since “many other major cities like New York, Seattle and L.A. already have one.”
We need to start giving a shit. Stuart says this is probably the most important one. He says “The people and media of San Francisco can’t just accept this as business as usual. We need to get mad and we need to take action.” He says San Francisco citizens can get involved by “making their voices heard on election day.”
This is precisely the point of my article that you’re now reading, and what voters need to do on November 3, 2015 by not casting a vote for Ed Lee as mayor.
On August 28, the Examiner carried a follow-up article by Jonah Owen Lamb, in which he reported “So right after [Zula] Jones got off the phone with the [FBI] agent, she called him back and handed the phone to [Mayor] Lee” who was apparently in the same room and “who [Lee] thanked the man [the undercover FBI agent] for his contribution.”
“Dialing” for Developer Incentives
As I reported in the Westside Observer in September 2015, there are many problems with the $310 million Affordable Housing Bond measure on the November ballot, since the legal text of Prop A is so vaguely worded, stating that several planned uses “may be allocated” funding, rather than explicitly stating funds “shall be expended” for specific stated purposes.
On September 9, the Emily Green reported in the San Francisco Chronicle that Mayor Lee has announced a plan to build or rehabilitate 10,000 housing units by 2020. Lee is seeking to relax current requirements in the City’s Inclusionary Housing Ordinance, it is thought to provide his developer friends with new incentives — err, profits.
Ms. Green’s article noted the relaxed requirements would allow developers to build affordable units for a broader range of incomes. She wrote: “For example, instead of building 10 units that would be required to rent at $1,000 a month, developers could build 20 [units] to rent at $1,500 a month.”
Great! If developers can set the “dial” to increase rents to $1,500 monthly, who believes developers will continue to building any units at the $1,000 monthly rent? Won’t this just make it less affordable to live in San Francisco?
And developers could add up to two stories to a building in exchange for increasing the number of units to rent or sell to low- and middle-income residents.
On September 15, Laura Dudnick at the San Francisco Examiner provided more details about the legislation Lee and Supervisor Mark Farrell introduced amendments to the City’s Inclusionary Housing Ordinance to the Board of Supervisors. Details of what else will be “relaxed” are troubling, but typical of this mayor.
The legislation apparently allows developers to change the “dial” of what they will build. The package of incentives developers can reset the “dial” for inclusionary housing apparently features:
If this “dial” is approved by the full Board of Supervisors and signed into law by the mayor, you can almost guarantee developers will “dial out” of producing inclusionary housing for those earning less than 90% of AMI.
For re-setting these “dials,” developers will be allowed to increase density, and perhaps bulk, by adding an additional two floors to building projects, apparently bypassing the Planning Commission.
These “dials” are meant to reward the Mayor’s developer friends, but are likely to lead to greater displacement.
Small Site Acquisition
Don’t believe campaign mailers you may receive that state passage of the $310 million Affordable Housing Bond measure will re-fill the reportedly now-depleted citywide Small Site Acquisition fund.
As I indicated in September, documents from the Affordable Housing Bond’s Budget and Finance Subcommittee changed the planned spending parameters of the Mission Neighborhood Acquisition portion of the bond from Mission District neighborhood site acquisition to also include unit rehabilitation and predevelopment, so it’s unclear whether the planned $50 million will be dedicated solely to site acquisition.
The $50 million is supposed to only be spent for site acquisition in the Mission District, but campaign rhetoric is now spinning it that the Bond Measure will replenish the citywide small site acquisition fund. The legal text that will appear in the November 2015 voter guide describing the $310 million Affordable Housing bond measure states proposed uses include subsection 3-H, for acquiring, preserving, or developing affordable housing in the Mission Area Plan.
However, subsection 3-H also contains the vague language that this planned use “may be allocated,” not “shall be expended,” so there’s no guarantee that small sites will even be acquired in the Mission District, let alone replenish the citywide small sites acquisition fund.
Beside subsection 3-H, there is nothing anywhere else in the legal text of the bond measure that involves funding small sites acquisition.
Upside in Not Voting for a Mayor
I recommend that you cast no vote for mayor at all. This will not only send a signal to Lee that voters totally disapprove of his performance, it will also help make placing citizens signature petition initiatives for future municipal elections easier.
Consider this: In the November 2011 election, only 197,242 of 464,380 registered San Francisco voters bothered to vote. Voter turnout in 2011 was just 42.47%, up from 35.6% voter turnout in the November 2007 election when only 149,465 ballots were cast by then 419,598 registered voters.
Given election results in the election of Gavin Newsom for mayor in 2007, just 7,168 valid signatures of registered San Francisco voters were required in 2011 to qualify a proposed signature petition initiative for the ballot, since City Charter §14.101 stipulates the signature threshold is based on 5% of the entire vote cast for all candidates for mayor at the last preceding regular municipal election. Based on the turnout for Ed Lee for mayor in 2011, the signature threshold climbed to 9,862 for the November 2014 election — an increase of nearly 2,700 additional signatures to qualify an initiative for the ballot.
Notably, under ranked choice voting, if you skip filling in a ranked choice slot, a quirk in San Francisco election law transfers your ranked choices. When first-choice ranking is skipped as required, San Francisco Charter Sec. 13.102 states: “If a voter casts a ranked-choice ballot but skips a rank, the voter’s vote shall be transferred to that voter’s next ranked choice,” whether that’s what you intended to do, or not.
By withholding voting at all for mayor in November 2014, you will help drive down the number of signatures required to place citizen signature petition initiatives on future ballots simply by not casting any vote for mayor.
But if you feel compelled to vote for a candidate for mayor, remember than the election is ranked choice. Consider voting for these three candidates, in ranked order: #1: Francisco Herrera, #2: Amy Farah Weiss, and #3: Stuart Schuffman. Or you could write me in as a write-in candidate for Rank #1, and not cast any votes for Ranks 2 and 3, if you’re really compelled to vote for someone for mayor.
Just don’t vote for Ed Lee, who needs to be sent a message voters have completely had it with his housing policies that favor speculators and developers, which is fueling massive displacement of long-time San Franciscans.
After all, the hubris-filled Mayor’s snide remark that requiring 33% of new housing to be affordable is merely a “sentimental number” is insulting to those who’ve already been displaced out of town, and to those who soon will be.
Let’s hand Ed Lee far fewer than the 59,775 votes he garnered during the first round of ranked choice votes in 2011. Maybe that will send him a signal he needs to rapidly become the “people’s mayor,” not the “developer’s mayor.”
An expanded version of this article will appear on www.stopLHHdownsize.com.
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
This is an abbreviated version of Monette-Shaw's report. The complete report is here
Voters last passed a housing bond 19 years ago in 1996, but rejected housi ng ballot measures in 2002 and 2004. They would be wise to reject the $310 million Proposition A bond measure on November 3 as well.
Prop. A is riddled with many significant problems. And it doesn’t openly inform voters that $25 million or more of the planned $80 million portion of the bond set aside for middle-income housing is targeted to “developer incentives.”
Really? Voters are being lured into issuing bonded debt interest on Prop. A to fund developer incentives? For that reason alone, voters should reject this bond. But there’s much more to dislike about Prop. A, starting with the Mayor’s Office of Housing and Community Development (MOHCD), which has a deplorable track record in its own right.
City Hall under Mayor Ed Lee and Olson Lee — Director of the Mayor’s Office of Housing and Community Development — are swimming in unspent housing money”
The Mayor wants you to approve handing him another $310 million. But he doesn’t want to tell you that as of June 30, 2015 he’s already sitting on $95.7 million in unencumbered — unspent — funds between the Housing Trust Fund and the separate Affordable Housing Fund.
Evolving Proposed Bond Uses
Like the eroding sand on Ocean Beach, the planned uses for the Affordable Housing Bond have shifted considerably, often with dizzying speed since its unveiling in January 2015.
The Initial $250 Million Bond Proposal
As I wrote in “Mayor’s Housing Scam, Redux” in the Westside Observer’s March 2015 issue, MOHCD’s Deputy Director Kate Hartley outlined proposed uses of the then $250 million bond measure in a January 27, 2015 e-mail.
A series of e-mails obtained under public records requests included in Hartley’s e-mail showing MOHCD had proposed allocating $166 million (66% of the $250 million 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 conceivably earn up to $203,800 of area median income for a family of four (or up to $142,700 for a single person).
A week after Hartley’s January 27 e-mail, the Mayor’s Budget Director proposed a different allocation of the bond during a meeting with the Mayor on February 3. An extract from a presentation to the Mayor a week later on February 3 shows a that revealed 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 Mayor’s Budget Director’s presentation proposed spending $80 million on the same acceleration of HOPE SF. After soaring from $30 million, it remains at $80 million in the now $310 million November bond measure.
A Competing $500 Million Housing Bond
Although Supervisor John Avalos introduced in late Spring 2015 an Affordable Housing Bond measure for $500 million to compete against the Mayor’s $250 million measure, scant details ever surfaced detailing how Avalos’ measure would allocate proceeds of the doubled bond amount.
Avalos’ measure, however, forced the Mayor and Board of Supervisors to negotiate over the final bond amount to be placed before voters, which grew into a piddley $60 million increase to the $310 million compromise that voters will consider on November 3. Avalos managed to get $50 million added for a fourth proposed use to acquire sites in the Mission District, and he managed to get MOHCD to specify maximum amounts for each of four categories.
Unfortunately, language in the official ballot measure is completely vague and does not itemize precisely or accurately how the bond will eventually be spent. Prop. A’s legal text says $310 million “may be allocated” to various uses, not “shall be spent on …” handing broad spending discretion to the Mayor’s Office of Housing (MOHCD) — which has no Commission providing oversight.
The Mayor’s official argument that will be printed in the November 2015 voter guide ims that “not one cent” will be spent on luxury housing from the $310 million bond. Don’t believe the Mayor’s “not one cent for luxury housing” claim.
Background documents to the bond now claim $80 million will be expended for public housing, $50 million is targeted for site acquisition and unit rehabilitation in the Mission District, $100 million will be spent for low-income housing, and $80 million will be spent for middle-income housing.
The Mayor’s first draft of Prop. “A” indicated it would mostly fund public housing and market rate housing. Without the word “shall” included in Prop. A’s legal text, market rate — not affordable — housing will more than likely be built.
Rotten Record of Housing Production
As I noted in “” in the Westside Observer’s May 2015 issue, the Civil Grand Jury released a report in June 2014 titled “. In discussing challenges facing MOHCD, the Grand Jury wrongly noted that the Housing Trust Fund (HTF) — “may need to provide stabilization funding to the Housing Authority for emergency repairs,” but then offered a caveat:
“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.”
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 eight-year period — in which Mayor Lee has served for five of those eight years — 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).
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 — with Ed Lee as Mayor in 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 November 2014 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.
Swimming in Housing Money
As I wrote in “” in the Westside Observer’s April 2014 issue, in November 2012 voters passed Proposition “C” creating a Housing Trust Fund (HTF) that will divert $1.34 billion to $1.5 billion from the General Fund to HTF over the next 30 years, handing MOHCD sole discretion over HTF spending. MOHCD admitted 83.7% — $16,744,000 — of HTF’s first-year $20 million allocation was unspent.
The Mayor began issuing bonded debt in 2014 against future-year HTF revenue.
Developers have paid $176.7 million in inclusionary housing fees; $45.9 million remained unspent by June 2014.
This August, MOHCD admitted it hadn’t created an electronic database of loans issued under its Downpayment Assistance Loans Program (DALP) between 1998 and 2012, and only began building an electronic database at some point during 2012.
As I reported in “Housing Withers on the Vine” last May, 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.
$95 Million in Unencumbered Housing Funds
The City has at least two trust funds set up for affordable housing production, including the Housing Trust Fund (HTF) created by voters in November 2012, and the separate Afford Housing Fund (AHF).
Records provided by the City Controller’s Office showing the actual vs. budgeted performance for the fiscal year that ended June 30, 2015 paints a disturbing picture, since between the two funds, the City is sitting on $95.745 million in unencumbered (unspent) funds.
Things get worse with the Affordable Housing Fund (AHF). The AHF shows a whopping $86.38 million in unencumbered funds at the end of June 2015, $60 million of which were unencumbered funds brought forward to the FY14-15 budget from previous fiscal years. The AHF budget had also included a line item for “Loans Issued by City” in the amount of $43.13 million, but by the end of the FY in June, $21.37 million — fully half of the line item — remained unencumbered.
So we have the sorry situation of $95.74 million between the HTF and AHF remaining unencumbered in the midst of an affordable housing crisis, demonstrating a lack of competence by housing experts on the Mayor’s staff.
The Civil Grand Jury’s concerns about the raiding of the HTF to rescue the Housing Authority was a red-flag warning. It appears the HTF and AHF funds may be being used as slush funds to rebuild public housing and low-income housing, at the expense of building new affordable housing for moderate and medium-income housing.
Given the background documents describing potential planned uses of this bond, and the clear data in the Housing Balance Report from the Planning Department, that’s exactly what may well happen with this $310 million bond.
Handing MOHCD another $310 million for vague uses when it has sole discretion over the planned uses and ultimate spending decisions is simply wrong. That’s why we need a change to the City Charter to create an oversight Board or Commission to provide oversight over all of MOHCD, and not just the current smaller commission that has oversight of only the successor agency to the Redevelopment Authority.
When you vote on Prop. “A,” make it a referendum on the housing policies of the Mayor and his out-of-control MOHCD: Vote “No!”
And while you’re at it, vote “Yes” on Prop. “I,” Suspension of Market-Rate Development in the Mission District. After all, we may need a similar Citywide moratorium on market-rate housing development until San Francisco obtains a real balance of affordable housing.
An expanded version of this article will appear on www.stopLHHdownsize.com
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.
By Patrick Monette-Shaw
This is an abbreviated version of Monette-Shaw's report. For the complete report click here.
All too often, City employees, including department heads and their deputy directors, who engage in retaliation and prohibited personnel practices, get off scot-free, are never disciplined, and keep their highly-paid jobs.
Conversely, employees who report waste, fraud, or corruption in City government typically lose their employment, often suffer great emotional distress, and are insufficiently compensated for financial losses and loss of livelihoods.
Take Kelly O’Haire, a Police Department lawyer who attempted in July 2009 to have then-Deputy Chief Greg Suhr terminated. O’Haire had convinced then-Chief Heather Fong to demote Suhr; his total pay dropped from $256,162 as a Deputy Chief III in 2008 to just $187,959 in total pay as a Captain III in 2010, a $68,203 loss in income, which lost income may have contributed to Suhr’s animus towards O’Haire. O’Haire was terminated by Police Chief Suhr in May 2011, and was just awarded $725,000 to settle her wrongful termination lawsuit. The retaliator kept his job.
The additional 121 cases settled between 2012 and 2015 have cost the City another $12.2 million, including $3.6 million in settlement awards and $8.6 million in City Attorney costs involved during litigation, bringing the total to at least $32.6 million since 2007, and that’s not counting settlement amounts and the City Attorney’s costs for time and expenses for the 66 pending cases that still haven’t been concluded.”
During the past several years, the Westside Observer has reported extensively on whistleblowers facing retaliation — ranging from my article “High Costs of City Attorney’s Advice (Retaliation and Bullying of City Employees) in May 2013, to a whole host of Observer articles across the years by former Laguna Honda Hospital whistleblowing physicians, Derek Kerr and Maria Rivero.
Civil Grand Jury Weighs In
On June 8, San Francisco’s 2014–2015 Civil Grand Jury released its report “San Francisco’s Whistleblower Protection Ordinance Is in Need of Change.” It’s a damning indictment of City Hall’s failure to adequately strengthen whistleblower protections for City employees.
The Grand Jury reports that although “San Francisco has enacted a series of ordinances intended to protect City officers and employees from retaliation for reporting improper government activity” since 1989, over the years “the scope of these so-called ‘whistleblower protection’ laws has narrowed.”
San Francisco’s WPO protects only employees who make disclosures “in house.” In order to have the WPO apply, whistleblowers must disclose their government wrongdoing complaints only to certain City government agencies and in certain approved ways; otherwise, the WPO doesn’t apply and provides no protections. The Jury noted “[The WPO] does not protect disclosures that are made by other means, or to persons or entities that are not listed in the ordinance: for example, to news media, to outside law enforcement agencies, or to elected officials outside City government.”
Nor are complaints filed with the FBI.
If an employee suffers retaliation for reporting wrongdoing to any agency not listed in the WPO ordinance, their complaint will likely be dismissed by the Ethics Commission, which also dismisses complaints not listed in the WPO’s narrow limit of disclosures; waste, fraud, abuse in general, or violations of general law are not included. The Jury notes whistleblowers who disclose such information are not protected from retaliation.
The WPO prohibits only a few types of retaliation: termination, demotion, suspension, and similar job actions. It does not address a wide variety of lesser reprisals and coercion, including non-promotion or reassignment.
The WPO’s Evolution
The Grand Jury reports San Francisco first addressed whistleblower protection when then-Mayor Art Agnos signed the Improper Government Activities Ordinance (IGAO) 26 years ago in 1989, which permitted employees injured by retaliation to sue for a paltry $5,000 in civil damages. Agnos hired Ed Lee to be the whistleblower protection ordinance’s first investigator.
Within 11 years, the Board of Supervisors managed to repeal the IGAO in 2000, replacing it with the WPO, which then Mayor Willie Brown signed into law, transferring investigation of whistleblower complaints from the Mayor’s Office to the Ethics Commission, and narrowing the range of disclosures that qualified for retaliation protection to only those allegations of violations of laws enforced by the Ethics Commission. Allegations of gross misconduct, economic waste, or violations of general law were removed from protection.
In the wake of shrinking protections for City employees, voters passed the 2003 Proposition “C” Charter amendment, creating the City Controller’s City Services Auditor (CSA) unit charged with developing a whistleblower program, and including a mandate requiring the Board of Supervisors to enact an ordinance to protect whistleblowers from retaliation. In the 12 years since passage of Prop C, the Grand Jury reports the WPO essentially remains as it was before the 2003 Charter change because the Board hasn’t made substantive changes in anti-retaliation provisions.
The Grand Jury recommended that the Ethics Commission should recommend to the Board of Supervisors an amendment to the WPO that provides real protection for whistleblowers, and if the Board doesn’t act, the Commission should consider submitting such an amendment directly to the voters, or the Mayor should introduce legislation to the Board of Supervisors that would amend the WPO. The Jury also recommended amendments to the WPO to expand the definition of whistleblowing, expand the scope of covered disclosures, and provide meaningful remedies to allow the Ethics Commission to order cancellation of a retaliatory job actions, along with other recommendations.
Uptick In Retaliation Lawsuits During Mayor Lee’s Tenure
My May 2013 Westside Observer article on the high costs of retaliation and bullying of City employees explored 105 cases involving prohibited personnel cases between 2007 and 2012. That article included a pie chart showing the 105 settlements cost $12.1 million to settle with Plaintiff victims, including at least $1.4 million to settle 14 “wrongful termination” cases.
In addition, costs were substantially higher when City Attorney costs were added in. Deputy City Attorney’s spent a total of 43,195 hours at a total cost of $8.3 million defending the 105 cases, bringing the combined total actual settlement awards plus City Attorney time to $20.4 million in preventable waste of taxpayer funds.
Surge of Cases Since 2012
In response to a records request seeking updated records involving prohibited personnel practice lawsuits filed between mid-2012 and May 15, 2015 the City Attorney’s Office provided additional data.
An analysis shows the 105 previously-reported prohibited personnel practices lawsuits between 2007 and mid-2012 has soared to an additional 187 cases in the three-year period between mid-2012 and 2015, a 78% increase during Mayor Ed Lee’s tenure.
The increase in wrongful termination cases from 14 such cases between 2007 and 2012, to an additional 32 wrongful termination cases in the three years since 2012 is troubling, since it represents a 128.6% increase, pointing to a culture of increasing retaliation during Mayor Lee’s tenure.
The additional 121 cases settled between 2012 and 2015 have cost the City another $12.2 million, including $3.6 million in settlement awards and $8.6 million in City Attorney costs involved during litigation, bringing the total to at least $32.6 million since 2007, and that’s not counting settlement amounts and the City Attorney’s costs for time and expenses for the 66 pending cases that still haven’t been concluded.
While the 14 wrongful termination cases between 2007 and 2012 cost the City $1.4 million in settlement costs alone, the 23 wrongful termination cases between 2012 and 2015 involved $1.2 million in settlement costs. And there’s nine outstanding wrongful termination settlements still not concluded, with an unknown amount of City Attorney expenses unreported.
Wrongful terminations occurred in the Police Department, District Attorney’s Office, SFGH, Laguna Honda Hospital, Department of Human Services, Department of Parking and Traffic, Recreation and Parks Department, the Fire Department, Planning Department, MTA, Department of Juvenile Probation, the Fine Arts Museums, and other City Departments.
While all the victims appear to have lost their City jobs, the department heads named in the lawsuits as responsible — or alternatively were responsible for the actions of their subordinates who engaged in wrongful termination — kept their jobs, including department heads Ed Reiskin, Phil Ginsburg, Joanne-Hayes-White, John Rahaim, Trent Rhorer, Barbara Garcia, George Gascón, and Greg Suhr, among others.
Will the Mayor Stop the Retaliators?
Back in 1989, then-Mayor Art Agnos appointed the then-young Ed Lee to be San Francisco’s first investigator for the City’s whistleblower ordinance. Now that Lee became Mayor, it’s time for him to come full circle and actually fix the many problems with the whistleblower program operated jointly by the Ethics Commission and the City Controller’s Office.
The 2014–2015 Civil Grand Jury’s new report appears to have overlooked three key improvements that need to be amended in the Whistleblower Protection Ordinance.
The first involves amending the WPO to include basic First Amendment protections for City employees. As Judge Claudia Wilken noted during proceedings in Dr. Kerr’s wrongful termination case, Section 4.115 of San Francisco’s Campaign and Government Conduct Codes that can sanction officers or employees who engage in retaliation does not provide any mechanism for review or reversal of unlawful termination decisions.
Wilken further noted Section 4.115 does not provide retaliation protections for employees who engage in using First Amendment free speech and subsequently face retaliation
The second needed improvement involves the Jury’s recommendation that the Ethics Commission be authorized to cancel retaliatory job actions. There should be a mechanism for review of all retaliatory job actions by an Administrative Law Judge who is completely independent of the City’s Department of Human Resources.
And third, the WPO needs to have a provision added specifying that any manager in every City department found to have engaged in retaliation will face suspension or immediate termination.
Retaliation “Tone” Set at the Top
Mayor Lee has both a duty to ensure retaliation against whistleblowers is detected and remedied, and that organizations set the tone from the top on down that retaliation is not acceptable and will not be tolerated.
The Mayor should adopt all of the Grand Jury’s recommendations immediately. The culture of retaliators keeping their jobs, while the victims of retaliation lose their livelihoods, needs to stop now.
The in-depth version of this article is available at www.stopLHHdownsize.com. 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: monette-shaw@westsideobserver.
By Patrick Monette-Shaw
Imagine for a moment being admitted to a local private hospital — say St. Mary’s — suffering from a stroke, brain injury, or heart attack. As you’re recovering from your acute-care medical event, imagine you’re told that you need 12-day, short-term skilled nursing care to re-learn how to feed, groom, and dress yourself, and to re-learn how to walk safely without falling.
…nearly 30 years ago — San Franciscans were so concerned about private-sector hospital mergers that were eliminating needed medical services suddenly, without advance notice and without community input, that 16,900 citizen petition signatures qualified “Proposition Q,” the Health Care Community Service Planning Ordinance, for the ballot, which passed with a resounding 129,257 votes in support — 59.8% of ballots cast.”
Then imagine being informed by the private hospital you were admitted to that it is discharging you post-acute care because it has no hospital-based skilled nursing beds to help transition you back to being independent and functioning.
Finally, imagine being told the hospital is dumping you into a short- or long-term skilled nursing facility out-of-county because there are no skilled nursing beds in San Francisco to provide you with short- or long-term rehabilitation in a post-acute care setting.
You might find yourself wondering how such a scenario developed in the City of St. Francis, disguised by Health Commission claims that “reforms” under the Affordable Care Act, it may be permissible to allow San Francisco hospitals to make cuts in providing healthcare services, even if detrimental, by just changing up the language required by a City Ordinance, based on an Orwellian secret City Attorney opinion.
Voters Spoke in 1988
In November 1988 — nearly 30 years ago — San Franciscans were so concerned about private-sector hospital mergers that were eliminating needed medical services suddenly, without advance notice and without community input, that 16,900 citizen petition signatures qualified “Proposition Q,” the Health Care Community Service Planning Ordinance, for the ballot, which passed with a resounding 129,257 votes in support — 59.8% of ballots cast.
“Proposition Q” provided that before private hospitals or clinics can eliminate or reduce any healthcare services, they are required to notify San Francisco’s Public Health Commission at least 90 days in advance, and the Health Commission, in turn, is then required to hold two public hearings to evaluate and decide whether the proposed service reductions will or will not have a detrimental impact on provision of healthcare services in the community.
The official argument in favor of Proposition Q in the 1988 voter guide was authored by Congresswoman Nancy Pelosi, then State Assemblymen Willie L. Brown and John Burton, and then Board of Supervisors President Nancy Walker and then Supervisor Harry Britt. The five legislators must have known how dearly San Franciscans held Prop Q to their hearts.
The legal text in the 1988 voter guide states in relevant part: “The [Health] Commission shall make findings based on evidence and testimony from public hearings that the proposed action will or will not have a detrimental impact on the health care service of the community” [emphasis added]. The legal text unequivocally mandates the Health Commission shall make an up or down ruling on whether reduction or elimination of health care services will or will not have detrimental effects. There’s no missing the duties Prop Q imposed on Health Commissioners.
Negligent Public Health Commission?
Although an April 29, 2015 Department of Public Health (DPH) memo summarizing projections shows on page 5 that hospital-based skilled nursing facility (SNF) beds (beds affiliated with and operated by private-sector hospitals, as opposed to community-based free-standing SNF units) will have declined from 2,166 beds in 2002 to just 1,240 beds in 2020 — a whopping 42.8% decline and loss of 926 hospital-based SNF beds — the four Prop Q hearings held since 1988 (see below) document that the Health Commission has apparently only held hearings on the closure or reduction on a total of 90 of the 926 hospital-based SNF beds lost since 2002.
This begs the question: Did the Health Commission allow the loss of the other 836 hospital-based SNF beds — including the 420 skilled nursing beds eliminated from the Laguna Honda Hospital rebuild that opened in 2010 — between 2002 and 2020 without Prop Q hearings? How did San Francisco lose 43% of its hospital-based SNF beds without adequate Health Commission Prop Q oversight hearings? Isn’t that negligence?
According to the Health Commission’s Executive Secretary, the Commission appears to have only held four Prop Q hearings during the past 13 years since 2002. It’s not known how many Prop Q hearings the Commission may have held in the 14 years between 1988 and 2002, if any.
The Commission held its first Prop Q hearing on April 4, 1995; Resolution 10-95 that it adopted claimed the outsourcing of various post-acute care services from CPMC to an outfit called the Guardian Foundation would not have a detrimental effect on healthcare services to San Franciscans. The Resolution asserted that the Guardian Foundation would “expand availability of post-acute care services to the San Francisco community and would ensure the continuation of the quality continuum of care to patients.” The Resolution noted the Guardian Foundation would manage CPMC’s skilled nursing unit on its California Street campus, with CMPC continuing to own the unit.
The second Prop Q hearing was held by the Health Commission November 13, 2007 to consider the elimination of St. Francis Memorial Hospital’s 34-bed skilled nursing unit; Resolution 14-07 the Commission adopted determined the closure of St. Francis’ skilled nursing beds would have a detrimental impact.
A third Prop Q hearing was held on July 15, 2014, again regarding CMPC’s plan to consider eliminating 24 staffed skilled nursing beds, from 99 staffed to just 75 staffed beds. This was particularly egregious, considering the fact that at the time CPMC was licensed to operate 212 skilled nursing beds, but had chosen — like many hospital-based skilled nursing units do — to operate and staff only a fraction (46.7%) of the beds they are licensed to have. Resolution 14-08 that the Commission adopted determined the closure of CPMC’s skilled nursing beds would have a detrimental impact.
[Editor: Note that the 2014 Resolution switched from listing the resolution number adopted in any given year first followed by the year in which adopted, to listing the year adopted first.]
Crying Poor, St. Mary’s Proposes Shuttering Its SNF
Less than a year after the Commission ruled last July that CPMC’s closure would have a detrimental effect, a second draft Resolution dated May 14 debated on May 19, 2015 indicated the Health Commission would consider during its fourth Prop Q hearing a proposal by St. Mary’s Hospital to close its 32-bed skilled nursing facility (SNF).
Health Commissioner David Singer cleverly asserted during the hearing St. Mary’s proposed SNF closure is a very legitimate financial issue under the Affordable Care Act, since St. Mary’s cited in its March 16, 2015 notice to the Health Commission that shifts in health care reimbursement to hospital-based programs, and prolonged and substantial financial losses operating its SNF, as the reason to seek its closure.
Singer had to have known that the San Francisco Business Times reported September 25, 2014 that Dignity Health — St. Mary’s parent company — had seen a nine percent increase to its profits in 2014 to $885 million on overall revenue of $10.7 billion. Dignity’s 2014 profits compared to “relatively measly” $135 million profits two years earlier in 2012.
Unfortunately, the April 19 DPH analysis provided to the Health Commission noted above providing background information for consideration of St. Mary’s proposal, failed to clearly point out to Health Commissioners that between 2013 and 2020, DPH projects an additional loss of 346 hospital-based SNF beds, to a total of just 1,240 by 2020.
In addition, the April 19, 2015 DPH projections memo noted that overall, the total number of SNF beds — including both hospital-based and freestanding SNF’s — declined 22%, from 3,540 in 2002, to just 2,758 in 2013. And that by 2020, there will only be a total of 2,371 SNF beds in San Francisco. DPH failed to clearly summarize for Health Commissioners that by 2020 there will have had an overall 33% loss of 1,169 SNF beds since 2002, including the 926 hospital-based, plus another 243 community-based freestanding, SNF beds.
That’s assuming there will be no further loss of hospital-based or freestanding SNF beds in San Francisco during the next four-and-a-half years between now and 2020.
This is after the Health Commission was informed in 2014 during the CMPC Prop Q hearing that San Francisco is facing at least a 700-bed shortage of skilled nursing beds within the next 30 years, an overall shortage that may now be significantly higher, since a May 2011 analysis prepared by Resource Development Associates that DPH had commissioned is now four years old and probably sadly out of date.
Interestingly, the Commission’s May 5 meeting minutes indicate Health Commissioner David Pating, MD (who is a psychiatrist and Chief of Addiction Medicine at Kaiser San Francisco) stated he’s unsure if he agrees with the DPH recommendation that closing St. Mary’s SNF will be detrimental, because it only has seven patients with low average lengths of stay in the SNF units. Commissioner Pating misses the point: This is not just about closing seven beds. Closing its SNF means St. Mary’s will undoubtedly relinquish its 32-bed license. That’s a significant number, and a detrimental loss, of licensed bed capacity.
The May 5 meeting minutes also show on page 3, and the meeting’s audio recording reveals, that Ms. Patil, a Health Program Planner in DPH’s Office of Policy and Planning, stated data shows a quarter of community SNF patients in freestanding SNF’s are discharged by way of re-admission to hospitals. The minutes should have more closely matched the audio to indicate that “a quarter of patients discharged from community-based SNF settings are re-admitted to hospitals.” The minutes also didn’t report that Patil’s April 29 memo noted “the vast majority of discharges from freestanding SNF’s (85%) occur within 3 months or less of the resident’s admission.”
After all, if almost a quarter of SNF discharges are for hospital re-admissions and occur within three months of initial SNF admission, this suggests that either patients are being discharged too quickly from acute care settings to SNF’s in the first place, or that they are not receiving the proper level of care with adequate lengths of stay in hospital-based or community-based SNF settings, or discharge planners may be ignoring patients’ acuity level prior to admission to freestanding community-based SNF’s.
What About Out-of-County “Patient Dumping” Discharges?
Finally, on page 5 of the Health Commission’s May 5 minutes, Commissioner Chung asked whether discharges to out-of-county SNF’s are common due to a lack of SNF beds in San Francisco. The minutes show that St. Mary’s Ms. Yeant sidestepped a direct answer, saying out-of-county discharges are not ideal, failing to answer Commissioner Chung’s question about whether historical out-of-county discharge data show the practice to be common.
Commissioner Chung, Commissioner Pating, and Commission President Edward Chow must all know that SNF out-of-county discharge data could help inform community-based post-acute care planning. The Health Commission has an obligation to report transparently to San Franciscans just how widespread SNF out-of-county discharges are, and what types of out-of-county facilities patients are discharged to; San Franciscans have every right to be told this data.
As I reported in “The Big Squeeze: Dys-Integration of “Old Friends” in the Westside Observer in July 2014, out-of-county discharge data is more than likely being collected by San Francisco’s Department of Public Health and San Francisco’s Department of Aging and Adult Services (DAAS) in a database called SF GetCare, that the two Departments have contracted with for development by RTZ Associates as far back as 2003, and have paid RTZ at least $5.6 million to develop 10 to 12 separate but interrelated component modules.
I know the SF GetCare database components more than likely share fields of data showing discharge location by type of facility and location, because SF GetCare was initially prototyped from a Microsoft Access database I assisted in developing in Laguna Honda Hospital’s Rehabilitation Services Department. As any first-year programmer — or a first-year doctor or nurse — knows, tracking the name of the facility a patient is discharged to and the facility’s location is not rocket science to capture; both are necessary data elements for post-discharge follow-up.
Supervisor David Campos peppered Director of Public Health Barbara Garcia about discharge location data during a hearing on March 20, 2014 to learn whether patients are being “integrated” into San Francisco communities. DPH has adamantly refused to provide historical data on discharges to, or admission “diversions” to, out-of-county facilities since 2003. It’s unknown why DPH struggles so mightily to prevent release of aggregate discharge data documenting how many San Franciscans are being dumped out of county.
It’s suspected that the probable significant number of out-of-county discharges would be politically embarrassing to City officials from the Mayor on down, given implications about patient “dumping” during the same time as San Francisco’s current housing crisis and massive displacement of San Franciscans.
DPH and DAAS surely have this out-of-county discharge data, but simply don’t want to provide it. In fact, the Health Commission’s current vice-president, Commissioner Singer, formally requested out-of-county discharge data from DPH staff, but was rebuffed, given having received no response to his request for records.
Since Commissions exist to provide oversight and direction to City departments, observers believe that the failure of any department’s staff to respond to any Commissioner is tantamount to obstruction, given that various Boards and Commissions are charged with performing due diligence, fiduciary oversight, and developing policies of the Department a Commission governs. Failure to provide Commissioners with data requested clearly interferes with any Commissioner’s sworn duties to perform adequate oversight and ministerial duties.
For his part, Commissioner Singer needs to resubmit his request for the out-of-county discharge data to Director of Public Health Barbara Garcia, this time as an official’s public records request in his capacity as a Health Commissioner.
The State’s Long-Term Care Ombudsman, Benson Nadell, testified to Supervisor Campos on March 20, 2014:
“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 …”
Some observers believe that both short- and long-term care SNF beds are now being converted to sub-acute beds instead, under the guise of public-private partnerships, following an earlier era of converting long-term SNF beds to short-term or rehabilitation beds.
Detrimental Impacts of SNF Bed Reductions
Ms. Patil’s April 29 memo to the Health Commission regarding St. Mary’s SNF closure proposal ends on a thud, although it acknowledges that an industry trend in converting long-term SNF beds to short-term SNF 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.”
Patil’s April 29 memo notes, in fact, that “many seniors and persons with disabilities who require long-term care are forced to move outside the City … becoming socially and culturally isolated.”
During the first of its two hearings on May 5 regarding St. Mary’s proposal to close its SNF units, the Health Commission requested additional information on the short-term and long-term skilled nursing bed inventory in San Francisco.
In a follow-up May 13, 2015 memo to Health Commissioners prior to their second Prop Q hearing on closure of St. Mary’s SNF beds on May 19, Ms. Patil asserted that short-term beds are most often used for rehabilitation and recovery following acute-care hospital stays due to injury or illness, while long-term SNF beds are typically used by patients with chronic medical conditions, permanent disabilities on-going help with activities of daily living. Short-term stays are generally defined as being for three months or less, while long-term stays are defined as three months or longer.
DPH guessed at estimating that the number of short-term vs. long-term SNF beds currently available. Following its May 5 meeting, the Health Commission requested additional data from Patil to stratify the number of short-term and long-term beds in both freestanding and hospital based SNF’s, data that Patil subsequently provided on May 13. But on May 19, Commissioner Chow quibbled over whether the closure of 32 of approximately 180 hospital-based short-term SNF beds was significant. The 32-bed SNF license at St. Mary’s represents fully 17.8% of the 180 beds; as such it’s a significant and detrimental cut of remaining hospital-based short-term beds.
St. Mary’s short-term SNF, by contrast, had average patient length of stay’s of just 12 days, and had an average of just six SNF patients daily during the past year, which apparently posed a great financial burden on the hospital.
Ms. Patil’s May 13 memo asserts that “the standard of care for post-acute services, such as skilled nursing care, has been moving from institutions [hospital-based facilities] to community-based skilled nursing and other support service alternatives.” Patil claims that as the Health Commission noted on May 5, eliminating hospital-based “institutional post-acute care options represents ‘rational care,’ consistent with national trends.” It appears to many observers that the reduction of hospital-based post-acute care services is much more closer to “rationed care” than rational care.
Ms. Patil has acknowledged that there is a long wait list for long-term SNF beds in San Francisco. The Commission’s May 5 meeting minutes indicate she stated “as hospital-based short-term SNF beds close, this may impact the availability of long-term SNF beds for which there is already a long wait list in San Francisco and the Bay Area.”
Both Patil’s May 13 memo to the Health Commissioners, and the Commission’s second draft Resolution 15-08, assert that the reduction of hospital-based SNF beds needs to be offset by increasing the availability of community-based post-acute care alternatives to preserve and maintain “capacity” to care for this patient population.
Patil’s May 13 memo acknowledges that in order to maintain the overall capacity of post-acute care services, “rational reductions” in hospital-based beds needs to be “accompanied by corresponding increases in community-based care alternatives,” since San Francisco’s “community based skilled nursing resources are already stretched [thin] by existing capacity.” That’s because there has not been a concomitant 31.4% to 42.8% increase in community-based post-acute alternatives to replace hospital-based SNF beds that have been lost.
There has been little, to no, increase in community-based alternatives, at all.
Between St. Mary’s proposed SNF closure in 2015 and CMPC’s SNF closure in 2014, a detrimental loss of 56 hospital-based SNF beds is very significant over a one-year period, particularly since there has been zero corresponding increase in community-based capacity during the same time, a grim fact that cannot possibly have escaped notice of our Health Commissioners. To her credit, Ms. Patil reports that DPH believes reductions in hospital-based SNF care without a corresponding increase in community-based care alternatives places a burden on community systems — and for that reason alone, involves detrimental health care to San Franciscans.
Patil’s observations appear to have been lost on our Health Commissioners, who unanimously turned a deaf ear to the Health Department’s analyses indicating St. Mary’s SNF closure will be detrimental.
Sabotaging the Will of Prop Q Voters
St. Mary’s so desperately wants a get-out-of-jail-free card, it appears that Health Commission president Edward Chow may be all too willing to assist in changing what is required of the Health Commission under Prop Q mandates.
Dr. Chow — appointed to the Health Commission in 1989 (shortly after Prop Q was passed in 1988) and reappointed seven times now, serving a total of 26 years on the Commission — has been involved in the dearth of Prop Q hearings conducted by the Health Commission since 2002, resulting in the loss of the 926 hospital-based SNF beds in just four Prop Q hearings during his tenure, including St. Mary’s hearing on May 19. Perhaps it’s time the good Dr. Chow be replaced with new blood on the Health Commission.
It is clear from the Health Commission’s May 5 and May 19 hearings on St. Mary’s SNF closure that DPH and the Health Commission are desperately attempting to overturn the intent and will of Prop Q voters, without having to ask those pesky voters to weigh in again on whether Prop Q should now be changed, 27 years later.
First, Director of Public Health Garcia stated at 1:03:45 on the Commission’s May 5 audio tape “Prop Q is from 1988 and it’s not where we are today.” How’s that for chutzpah?
Not to be outdone, Commissioner Chow stated at 1:06:02 on May 5:
“Under Prop Q — because it is from the 80’s, and was focused on facilities — we also indicate that we’re [now] looking more broadly, because it [Prop Q] does say whether or not it [will have detrimental] impacts on care in the community.”
Chow went on to ramble at 1:06:30 on May 5:
“It might be something we would like to look at in terms of maybe the Prop Q itself and working with the [Board of] Supervisors to perhaps have a different approach towards Prop Q [hearings]. Which would be more towards that we should really be concerned about the system [as a whole] rather than discussing whether or not loss of particular beds is going to be detrimental. It’s something [we need] to start looking at in this new era of [healthcare] being patient-centered rather than facility-centered.”
Although Patil had noted in her oral presentation May 5 that St. Mary’s had indicated in its March 16, 2015 notice to the Health Commission that changes in healthcare reimbursement and on-going [financial] losses of the SNF unit as reason for its closure, Abbie Yant, St. Mary’s Vice President for Mission, Advocacy and Community Health stated at 27:43 on videotape May 5:
“The leadership did what we call at Dignity Health a ‘values-based discernment decision,’ which is where multiple stakeholders are called in to the room to have a very deep and thoughtful discussion based on values, not necessarily [based] on finances, but on the values of the hospital, and what the closure means to the hospital and the community. And it was a unanimous decision that this was a necessary step to take and so plans are underway to close the unit on June 21.”
There you have it: Although the Health Commission was told St. Mary’s SNF unit closure was due to on-going financial losses, St. Mary’s Ms. Yant admitted that the hospital’s leadership unanimously decided to close the unit based on the hospital’s “values,” not necessarily for financial reasons.
Next, Health Commissioner Pating quibbled extensively about whether St. Mary’s closure would have a detrimental impact in the near term, or if the detrimental effect won’t happen until the long term. He was not convinced by DPH’s planning staff that there would be an immediate detrimental effect, but a day of reckoning might eventually arrive. Pating split hairs and ignored that once the beds and license are given up, there will be a detrimental effect sooner (in the short term, or right now) or later (in the long term, say ten years from now).
Commissioner Singer also quibbled about whether DPH’s advice that St. Mary’s closure would be detrimental and whether it might have an immediate impact. Ms. Patil interjected, saying:
“One concern is that a reduction in short-term beds means that patients needing short-term care are going to be shifted [from hospital-based] to other [community-based] facilities …and may impact the overall availability of long-term [SNF] beds … which we have heard from DAAS repeatedly that those [long-term care] beds are [already] full and near capacity, and [have] waiting lists for people who need long-term care.”
The Health Commission didn’t seem to understand DPH’s concern that shifting post-acute care hospital-based SNF care to short-term community SNF beds will have an immediate detrimental impact now, not ten years in the future.
Although the May 5 meeting minutes indicate President Chow encouraged the Commission to focus its discussion on the short-term impact on the post-acute care spectrum by closing St. Mary’s SNF unit, in fact Chow said “care,” not “impact.” The Health Commission’s secretary, Mark Morewitz, cleverly changed in the minutes Chow’s observation about how short-term care fits into the post-acute spectrum to being what kind of an impact it might have.
Similarly, the May 5 minutes assert that Chow stated “the City Attorney’s Office will need to be consulted” regarding addition of language to the Health Commission’s Resolution 15-08, and Chow suggested “the language of Proposition Q be reviewed to ascertain if it can be made more relevant and helpful.”
Morewitz appears to have made this up when he prepared the minutes, since Chow said nothing on the May 5 audiotape about contacting the City Attorney for review of Prop Q, nor had Chow said anything on tape about making Prop Q more “relevant and helpful.”
The May 5 meeting minutes mentioned neither Garcia’s claim Prop Q is from 1988 “and it’s not where we are today,” nor Chow’s claim Prop Q was from the 80’s. It’s clear Morewitz elided comments made during the hearing from the minutes, and also tossed into the minutes things that had not been said at all.
For her part, Health Commissioner Judith Karshmer blurted at 44:08 May 19 that she didn’t know the Prop Q law particularly well, and asked whether it has been the case that in past Prop Q hearings private-sector facilities have indicated that although they would be reducing or eliminating “something” [a given service], that they offer to offset it by replacing [lost SNF services] with “another thing” [an alternative service].
Thankfully, Director Garcia responded to Karshmer that hasn’t been the case in past Prop Q hearings. Garcia replied at 44:50:
“It hasn’t been. It’s really been [in past hearings] around patient dumping in terms of really making sure that entities do not push patients out of services.”
City Attorney Wades In
Moving to the Commission’s May 19 second hearing on St. Mary’s, Commissioner Chow suddenly claimed — but had not mentioned on May 5 during the Commission’s first hearing on St. Mary’s proposal — that the City Attorney has apparently recently reviewed Prop Q. It’s not clear whether the City Attorney issued a formal written “opinion” on Prop Q between May 5 and May 19. Chow suggested the City Attorney review may allow the Health Commission to avoid ruling one way or another on whether reductions in services or closure of facilities will or will not have a detrimental effect. Chow said May 19 at 46:40 on audio:
“Because of a more strict interpretation of Proposition Q then, the Commission has been [in the past] using only the strict words of we need to find a determination [of whether a proposal would be detrimental]. The City Attorney has looked more broadly at this, and this is the reason that this is really taking a new step towards trying to take the opportunity — as Commissioner Singer has said — to really use what might be happening … that there should be alternatives, because it says within [Proposition Q] as we now read that the Commission should also be seeking alternatives.
We want to go further than that. The question being within the continuum of care and under our new healthcare reform [the Affordable Care Act] can we do better and, therefore, turn Proposition Q into a positive hearing, rather than just simply saying ‘do we find something bad, or is neutral at best’?”
Chow’s implication of a fresh reading of language in Prop Q is ridiculous. The legal text of Prop Q in the 1988 voter guide stated at the time that the Commission “shall further explore in these public hearings what alternative means are available in the community to provide the service or services to be eliminated or curtailed.” It didn’t need a new City Attorney “opinion” to uncover the plain meaning of language in Prop Q that has existed for the past 27 years. It appears Chow, Garcia and Karshmer may have simply never bothered reading the legal text of Prop Q, or they would have known they’ve had this new “tool” all these years.
Chow had a problem on his hands, since the agenda descriptions for May 5 and May 19, and the title of and body of the first two draft Resolutions, all stipulated that the Commission would rule on whether St. Mary’s SNF closure “will” or “will not” have a detrimental effect. Chow suggested May 19 that perhaps a creative way around the problem would be to change the wording in the title of the final Resolution adopted 19 to remove the “will” or “will not” phrase, as if by a stroke of the Health Commission’s pen it could unilaterally overturn the will of voters who passed Prop Q.
When Chow started to take a vote May 19 on whether to adopt changes to the final Resolution. Commissioner Singer thoughtfully interjected at 53:14, saying “The Resolution doesn’t have in the first sentence ‘will or will not.’ Just to be clear for the record, you are proposing …”
Chow responded at 53:30, saying:
“We’ll correct the title of the Resolution. It is not ‘will or will not.’ It’s actually … we have to revise the title of the resolution because we are not finding ‘will or will not.’ We are instead Resolving that skilled nursing beds closed will need to have post-acute care, or [will] be found not to be helpful to the health of the City. It’s a different finding.”
Again, Morewitz cleverly omitted multiple items from the minutes of the Commission’s May 19 meeting published and adopted on June 2. Most egregiously, Morewitz elided from the minutes Chow’s observation that the City Attorney had reportedly issued some sort of “advice,” or a formal written “opinion” interpreting Prop Q. The minutes failed to report clearly that the Commission would not be issuing a Finding on whether St. Mary’s closure will or will not be detrimental, or that Chow had indicated the Commission would issue a different Finding altogether.
The minutes omit that Chow wants to turn Prop Q hearings into “positive” hearings, and mentioned nothing about the Health Commission working with the Board of Supervisors to change Prop Q. The minutes omit that Chow suggested changing the title of the third draft of the Resolution would get around whether the Commission was making a Finding of “will or will not” be detrimental.
At 54:21, Chow repeated: “And once again I will reemphasize that the City Attorney has indicated that we have discretion [regarding language in the Resolution].” Morewitz cleverly substituted in the minutes that the Commission has “latitude beyond” determining whether service closures are detrimental or not, but the videotape and audiotape contain no mention of this; Mark substituted “latitude” for Chow’s claim of “discretion,” which mean different things.
And the minutes say nothing about the second and third Resolved clauses the Commission adopted and fail to report you’ve imposed a six-month deadline for DPH to provide you the SNF needs analyses. The minutes also omit that DPH was instructed to provide an analysis of SNF needs within the next six months.
Brazenly, Chow changed things up twice. Rather than ruling on whether a reduction in services will or will not be detrimental, he changed it up to being that the lack of post-acute care services in the community is the real culprit, blaming the lack of community-based alternatives rather than blaming St. Mary’s for eliminating its SNF beds.
Chow changed it up a second time by saying that the Health Commission would be reaching a different finding (not the “Finding” required by the legal text of Prop Q and the Finding advertised on the two agendas, the two draft resolution titles, and in the body of the two resolutions debated on May 5 and May 19).
It bears repeating that the obvious problem with this is that the legal text of Prop Q that appeared in the voter guide to inform citizens on what they were voting on specifically stated “the Commission shall make findings that the proposed action will or will not have a detrimental impact on healthcare services in the community.” The legal text of Prop Q did not provide that the Health Commission could simply make other kinds of “findings”; it provided that the Commission had to reach a single finding of whether proposed actions “will” or “will not” be detrimental.
And the actual question put to voters on the ballot forms specifically said “… shall the Health Commission be required to decide whether the change will impair health care services? … [emphasis added]”
Health Commission Unanimously Passes Final Resolution on St. Mary’s
Predictably, a records request placed May 20 for the final Resolution adopted by the Health Commission revealed that Dr. Chow did, in fact, creatively edit the title of the Resolution striking out the “will or will not” clause, and the body of the Resolution also removed an up or down vote on whether St. Mary’s SNF closure would be detrimental.
Beginning around 32:13 on the May 19 video, Dr. Chow indicated a first “Resolved” statement would be changed to say “The closure of short-term skilled nursing facility beds without ensuring an appropriate level of post-acute care is available may result in unmet short-term skilled nursing needs of the community [emphasis added].”
Leading up to the May 19 Health Commission meeting, the second draft of the Resolution dated as late as May 14 and distributed with the agenda had included just two Resolved statements, the first of which indicated the Commissioners were considering an up or down vote on whether St. Mary’s SNF closure would or would not have a detrimental effect. The “will or will not” Finding was simply completely deleted from the final Resolution adopted, with no separate Health Commission vote taken on whether to do so.
Commissioner Singer proposed a friendly amendment designed to tone down whether there would be unmet skilled nursing needs; he proposed moving the “unmet” clause to the end. The first Resolved passed ended up reading “The closure of short-term skilled nursing facility beds without ensuring an appropriate level of post-acute care is available may result in short-term skilled nursing needs of the community not being met.”
A “Whereas” clause in the Resolution adopted indicates that “while institutional [hospital-based] post-acute care continues to decrease, the availability of community-based post-acute care will need to rise to maintain the capacity to care for San Francisco’s population.” There’s been no such increase in capacity.
Chow indicated at 33:13 a new second Resolved would read:
“SFDPH is encouraged to work with other City agencies, local hospitals, and community-based organizations to research the needs for short-term SNF’s and post-acute care services in San Francisco, and submit a report back to the Health Commission within six months [emphasis added].”
The second Resolved had not existed in the second draft of the Resolution dated May 14; between May 14 and May 19 it appears to have been hastily added. Chow further explained at 35:11:
“Back in 2007 [in Prop Q hearings on closing St. Francis Hospital’s 34-bed SNF unit], we did ask for a study on SNF’s. I think in the 2014 dialogue [in Prop Q hearings on eliminating CPMC’s 24-bed SNF unit] we said the same thing, that we really needed to know more about it [the needs for short-term SNF’s and post-acute care alternatives]. So now within the Resolved [statements] rather than just as conversation, we are putting it into the Resolution.”
This is clearly a long-overdue admission that for fully eight years, the Department of Public Health failed to conduct an analysis of short-term SNF needs in coordination with other City agencies as the Commission had requested in 2007. And sadly, the second Resolved statement merely “encourages” DPH to finally get around to conducting this study. It’s shameful this had to be added to St. Mary’s Resolution in writing to spur DPH to comply with the Commission’s 2007 request, as if the word “encourages” will actually result in action.
The third Resolved statement adopted unchanged from the second draft of the Resolution, also merely “encourages” St. Mary’s to explore community benefit investments in other community-based post-acute care alternatives. There’s that toothless word “encourages” again, which likely carries no weight in law.
Interestingly, in response to a second records request also placed on May 20 for any written City Attorney “opinion” regarding interpretation for the Health Commission regarding Prop Q, the Health Commission’s secretary responded on May 29 (two working days before the Commission’s June 2 meeting) saying that to the extent the Health Commission has any responsive records, advice and opinions from the City Attorney are protected by attorney-client communications, and/or attorney work product privileges, and won’t be provided to members of the public.
In one fell swoop, Chow — apparently with the City Attorney Office’s help — simply changed the Prop Q hearing into some other sort of hearing, without approval by the voters who have not given Chow, the Health Commission, or the City Attorney license to thwart their will by thwarting Prop Q.
City Attorney Makes George Orwell Proud
Not only does our City Attorney illegally advise City Departments on how to evade complying with the Sunshine Ordinance (which City Attorney advice is explicitly prohibited under Sunshine), the St. Mary’s Prop Q hearing offers proof that our City Attorney apparently also advises Departments on how they can overturn the will of voters by simply ignoring the legal text of citizen-initiative ballot measures in voter guides and the official question placed before voters at the ballot booth.
Two weeks after the Health Commission adopted its Resolution May 19 regarding St. Mary’s SNF closure, the City Attorney’s Office finally weighed in on June 1. In response to a separate records request, the City Attorney’s Office appears to admit the City Attorney has not issued any formal written opinions about Prop Q during the past 30 years. In addition, the CAO claims that to the extent my records request had sought communications between the Health Commission and the City Attorney, any communications (apparently including e-mails) are protected by attorney-client “privilege,” and/or by attorney “work product privilege,” and won’t be released.
This is completely Orwellian: How can the Health Commission refuse to release a secret City Attorney “opinion” granting them authority to overturn the intent of citizen-initiatives that voters passed, without going back to the voters to ask permission to rescind previously-passed legislation? How did we get to the point when voter-initiatives can be overturned using secret City Attorney “communications” the City Attorney and Health Commission refuse to disclose?
The Health Commission’s refusal to release “communications” with the City Attorney is particularly galling because it is being shrouded in complete secrecy, having been issued with no citizen oversight, demonstrating more brazen chutzpah! The City Attorney’s secret “advice” smacks of another secret court — the Foreign Intelligence Surveillance Court — that’s let the NSA keep spying on our phone records under the so-called “Patriot Act” passed in 2001.
What would be so wrong with allowing citizens to read the City Attorney’s written opinion parsing Prop Q that purportedly permits the Health Commission broad latitude and “discretion” to simply drop reaching a Finding of “will” or “will not” be detrimental?
After all, this secret City Attorney opinion — albeit Orwellian — effectively neuters Prop Q, rendering any future Prop Q hearings unnecessary. If allowed to stand, it will effectively end any need to hold Prop Q hearings, taking us right back to 1988 when private facilities could do as they pleased closing or eliminating heath care services without any community involvement and oversight.
By changing the Findings for St. Mary’s SNF closure on May 19, five of the seven Health Commissioners voted to overturn the will of 129,257 voters who passed Prop Q 27 years ago.
Only voters can rescind Prop Q, not a secret “opinion” or communication issued by the City Attorney. If the Health Commission wants Prop. Q changed, the City must go back to voters and ask them to rescind or revise it. How did the five Commissioners who passed this Resolution know better than the 129,257 voters who passed Prop Q 27 years ago? Who anointed them to gut processes in our democracy using a secret City Attorney “opinion” that trashes our democratic processes?
The Health Commission has set a very dangerous precedent in doing so.
A Lesson from Prop “E” in 2011
Back in November 2011, Supervisor Scott Wiener managed to get Proposition “E” placed on the ballot, which would have permitted the Board of Supervisors to eventually overturn ballot measures placed on the ballot by the Mayor or Board of Supervisors three to seven years after voter approval. Voters saw through this ruse, and rejected Prop “E” by a resounding 67.1%, handing Wiener a resounding defeat, perhaps in part because voters may have feared that Wiener would have next proposed allowing the Board of Supervisors to repeal, tinker with, or otherwise alter ballot measures passed by voters that were placed on the ballot via citizen petition-signature initiatives.
What we have now with Commissioner Chow, Director Garcia, and the City Attorney wanting to change the intent of Prop Q is the same sort of end run around the will of voters. Chow’s suggestion of working with the Board of Supervisors to somehow change Prop Q is worrisome. Prop Q cannot be changed by anyone other than the voters, but instead of going back to voters, Chow now appears to be trying to undo Prop Q legislatively, or by using secret City Attorney opinions.
Under the Affordable Care Act (Obamacare) private hospitals will have even more incentive than in 1988 to eliminate medical services suddenly and without input from the community. A “strict” reading of Prop Q as originally enacted by the voters is actually needed now, much more than ever, to prevent the Dr. Chow’s and the Barbara Garcia’s of the world from dictating to the rest of us what the healthcare “system” should look like, and to get out of having to rule on whether service reductions will or will not have a detrimental impact on our healthcare. Without the focus being “facility centered,” you can expect private facilities to dictate to us how “patient-centered” will be defined, by whom, and without any oversight.
As you face being dumped out-of-county for skilled nursing care following your stroke, brain injury, or heart attack, you may find yourself asking “Please remind me again. How did we get here?”
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: monette-shaw@westsideobserver.
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.
© 2008 West of Twin Peaks Observer. No portion of this website or artwork portrayed herein may be redistributed of republished without the expressed consent of West of Twin Peaks Observer. View our full legal disclaimer here.