Lennar’s $3.3 Million Chump-Change Financing May Yield Itself Billions
By Patrick Monette-Shaw
Question: What do you get when you stir into the soup $3.3 million in various campaign financing by the powerful Lennar Corporation; mix in two nephews of Congresswoman Nancy Pelosi; and season the mix with Newsom’s “dream team” of political advisors?
Answer: You get Proposition G, boiled and bubbled onto the June 3 municipal ballot. Might you find potential conflicts of interest ladled into the mix?
Staff Admits Why Prop G Is on the Ballot.
Michael Cohen employed in the Mayor’s Office of Economic and Workforce Development, has noted Prop G is on the ballot because “The only legal reason we are going to the voters is Monster Park.”
If Prop G were only about overturning voters’ previously-approved financing of a new stadium at Monster Park, the City could have sponsored such pared down legislation by placing it on the ballot without a signature petition drive, and without selling out Bayview Hunters Point in a lucrative deal for Lennar.
The real reasons behind Prop G is to authorize a swap of state park lands for new “parks” that will be flexed between “green” stadium parking surfaces for stadium events and also serve as “public playing fields” at other times. Will these new “parks” be constructed of green “Astroturf” that can flex to accommodate both parking and public soccer fields?
Why would Lennar report campaign spending of $3.3 million on what is not a legally-binding agreement, but is instead a non-binding redevelopment measure — unless Lennar stood to gain a substantial return on its campaign financing investments? Prop G is obviously not just about Monster Park.
Follow the Yellow-Brick-Road Money
If the phrase “follow the money” ever applied to ballot measures, the $3.3 million Lennar has reported through May 22 to convince voters to defeat this June’s Prop F and to pass Prop G should be of great interest.
Lennar, with the backing of Newsom’s political dream team, spent $52,000 to gather enough signatures to place Prop G on the June ballot (at $4. per signature).The SF Examiner, along with other major media outlets, has obscured the fact that Prop G got on the ballot at the last minute through a signature campaign—likely the largest amount ever spent to gather signatures to place a measure on any SF ballot. Greasing the wheels by spending $52,000 to place a measure before voters worth billions is chump change to Lennar.
Compare Lennar’s efforts to Prop F’s. The glut of deceptive Yes on G mailers hitting our mailboxes falsely assert that Supervisor Daly single-handedly put Prop F on the ballot. But that ignores the fact that it was community activists in the Bayview who initiated Prop. F by collecting the first 6,000 of the 11,000 signatures. Daly merely partnered with Bayview community activists, the same way that Newsom “partnered with” Lennar.
Lennar has paid $106,000 to David Binder Research to conduct poll after poll, and focus groups, to gauge public opinion about Prop G.
Despite all the claims, there is nothing in the text of Prop G that guarantees any precise percentage of housing that will be designated as “affordable.” Lennar, under the non-binding Prop G, may end up building only market-rate housing in the “redevelopment” scheme.
The 750 acres affected by Prop G is likely valued at $1 million per acre minimum, or $750 million. But many of the acres along the waterfront are valued at much more, and the 750 acres — which Lennar will acquire free and clear if Prop G passes — are estimated to be worth several billion dollars.
San Francisco’s Two Costliest Ballot Measures
The highest amount spent on a ballot measure in SF’s history prior to Prop G is the $2.7 million spearheaded by PG&E in the 2002 election cycle to defeat Prop D, a Charter amendment that would have made the PUC the primary provider of electric power to SF residents. Prop D was opposed by Supervisor Gavin Newsom, who is ever deep in PG&E’s back pocket.
Now, Newsom and his political allies are backing the Prop G transfer of City property to a private developer. According to disclosure statements on the Ethics Commission’s web site, Lennar Homes of California, as an independent expenditure committee, has financed $3.3 million to pass Prop G ($2.26 million in independent expenditures) and to defeat Prop F ($997 thousand between independent expenditures and non-monetary contributions), including a $52,500 monetary contribution to the SF Democratic County Central Committee.
On May 20, Lennar filed a late Independent Expenditure Committee report suddenly announcing another $186,150 in spending for Prop G, and a second late contribution of $89,534 on behalf of the “Committee for Real Solutions for Housing – A Committee Opposed to Proposition F,” and on May 22 filed additional disclosure statements bringing Lennar’s total spending to at least $3.3 million. It is unknown how much more Lennar will spend between May 23 and June 3rd.
Campaign Finance Binge & an Incestuous Web
Carmen Policy, former president of the San Francisco 49er’s, has been paid $40,915 in an effort to lure the 49er’s back to San Francisco. Fat chance.
Johnnie L. Carter, received $26,896 to enlist support among black SF voters. He’s not the only African American working against the interests of Bayview residents, since five black ministers have been reported to have cut development deals with Lennar and A. Philip Randolph Institute has received funding from Lennar, too.
“Social justice” lawyer Roberta Achtenberg, a former SF supervisor has been paid $20,569 by Lennar. Not uncoincidentally, her unsuccessful bid for SF mayor in 1995 was run by then newbie Eric Jaye, now Gavin Newsom’s chief political strategist.
But these three (Policy, Carter, and Achtenberg) are small fry among recipients of Lennar’s largesse. Four law firms have raked in $343,138 for legal services.
At least $1.1 million has been spent by Lennar on TV ads, e-mail and voice messaging, and print campaign materials, excluding another $173,094 spent by subcontractors on the TV and print media ad campaign.
Add to that $767,607 spent through May 22 on so-called “consulting services.” Feeding at the trough of Lennar’s spending is Newsom’s “dream team” consultants.
Jim Stearns, of Stearns Consulting, has received $91,374 from Lennar, and another $130,799 to Stearns’ firm for database creation, web site development, and campaign materials. Lennar has paid Eric Jaye’s political consulting firm, Storefront Political Media, $152,767. Storefront Political Media received an additional $492,949 for various subcontractors related to the $1.1 million in television ads, e-mail and voice messaging, and campaign materials.
Doctor of all spin-doctors, Sam Singer, of Singer Associates, has also been paid $108,597 by Lennar’s independent expenditure committee.
Another political consulting firm Terris, Barnes & Walters — has been paid $176,733 by Lennar to provide even more consulting services, receiving an additional $440,629 for various subcontractors related to the $1.1 million in television ads, e-mail and voice messaging, and campaign materials.
Finally, Lennar has paid Mayor Newsom’s former Deputy Chief of Staff, Alex Tourk, $83,366 in consulting fees for Tourk’s new start-up company, Ground Floor Public Affairs. Tourk’s group has also been paid another $210,156 for various subcontractors.
As Sarah Phelan noted in “The corporation that ate San Francisco” (SF Bay Guardian, 5/12/07), the “incestuous web of political connections” involved in the project range from Redevelopment Agency commissioners appointed by Newsom and his predecessor Willie Brown, to the nephews of Congresswoman Nancy Pelosi: Newsom, Pelosi’s nephew by marriage, and, Laurence Pelosi, who used to be VP of acquisitions for Lennar and now works for Morgan Stanley Real Estate, which holds Lennar stock. Laurence Pelosi also used to be Newsom’s campaign treasurer.
Phelan noted both Newsom and Laurence Pelosi are connected to lobbyist Darius Anderson, who hosted a fundraiser to pay off Newsom’s campaign debts. Phelan reported in April 2007 that former mayor Willie Brown’s head of economic development was then Lennar Urban’s president Kofi Bonner, who while working “for the Redevelopment Agency recommended hiring KPMG Peat Marwick to choose between Catellus, Lennar, and Forest City for the Hunters Point project.” Redevelopment Commissioners ignored the consultant’s advice and awarded project to Lennar.
Labor’s Divided Endorsements
The San Francisco Labor Council announced on May 16 that it struck a deal with Lennar Urban to guarantee that 3,500 affordable homes will be constructed in the Hunters Point Shipyard – Candlestick Point areas, and throughout District 10. In addition Lennar agreed to commit $27.3 million for “hundreds” more affordable homes throughout District 10; it is not yet known whether the additional hundreds of units will be placed off-site from the Bayview area, away from the gentrified upscale market-rate condo’s planned for Parcel A.
Remarkably, on May 20th, the Labor Council’s Executive Director, Tim Paulson said the new deal’s exact terms are still “being lawyered up,” just 14 days before the June 3 election.
Even more remarkably, the City Star reported May 21 that “in an emotional address,” Newsom claimed the new agreement with the Labor Council will make Lennar “legally bound to build what’s right,” despite the fact that Prop G is not a legally-binding agreement, it’s a non-binding redevelopment measure. But voters are not voting on a separate last-minute deal between the Labor Council and Lennar, which deal appears to still be being written. Voters are voting on the legal text of Prop G, and there is no language in Prop G specifying a precise percentage that will be dedicated to affordable homes. Lennar may eventually renege on its “deal” with Labor, just as they reneged on plans to build rental units on Parcel A.
Lennar’s Expected Lucrative Sales
Although the development plan for Parcel A had initially promised low-income rental units, Lennar single-handedly changed the composition of the first 1,600 units to be built. The first 1,600 will all be at market-rate—no low-income rental units.
These 1,600 units are expected to each sell for the SF median price of $836,000, in 2008 dollars. Lennar stands to sell $1.38 billion in homes and condos on Parcel A, with a commitment to build zero affordable housing or rental units among the first 1,600 units.
The text of Prop G waffles, vaguely claiming “between about 8,500 and 10,000 residential housing units” will be built, but Prop G doesn’t stipulate what percentage will be “affordable.”
An analysis prepared by the brokerage firm CB Richard Ellis (CBRE) for Newsom claims that 25 % of the planned 9,500 units will be affordable. Presumably the remaining 7,100 units will be sold at market rate of $836,000 per home, $5.94 billion.
But Newsom’s office has not revealed that CBRE has been a partner financing many of Lennar’s deals around the country.
Elsewhere it has been reported that Lennar has entered into a deal with Scala Real Estate to potentially build 17,000 units of housing on the Bayview-Hunters Point sites, not the nebulous 8,500 to 10,000 housing units the legal text of Prop G claims will be built. If 17,000 units will be crammed into the Bayview in a Lennar/Scala financing deal, and assuming 25% will be “affordable,” 12,750 units could conceivably be sold at market rates. At the current median sales price, Lennar and its partner Scala, potentially stand to earn $10.659 billion in market-rate sales. Will Lennar Ever Clean Up the Shipyard?
Prop G’s tag line is “Clean Up the Shipyard.” But language in the legal text regarding clean up and remediation of the toxic Superfund site is limited to a single phrase in the “Policies” section stating the project’s clean up should be “fiscally prudent,” and “to the extent feasible, use state and federal funds to pay for environmental remediation on the Project site.” “Fiscally prudent” and “to the extent feasible” are buzz words; Prop G contains no guarantees that full remediation of the toxic Superfund site will ever occur to clean up the Shipyard to residential standards.
The shipyard remains on the National Priorities List, a list of the most polluted facilities in the nation, and is the only federal Superfund site in the City.
As Dr. Ahimsa Porter Sumchai, a medical doctor, noted in a presentation to UCSF medical students in February 2008 titled “Black Flight” (regarding the flight of African Americans from San Francisco), a 1995 study documented that the heavily polluted Bayview Hunters Point community had hospitalizations for chronic illnesses four times higher than the state average. This is due, in part, to the fact that although the district has less than 4% of the City’s residents, it has one third of the City’s hazardous waste sites, containing four times as many toxins as other City neighborhoods. The 1995 study documented that hospitalization rates for asthma, congestive heart failure, hypertension, diabetes, and emphysema were 138 cases per 10,000 in the Bayview, compared to the statewide average of 38 cases per 10,000, even after earlier SF Public Health studies had identified excessive rates of breast cancer, leukemia’s, childhood cancers, and cardio-respiratory diseases in the Bayview Hunters point areas. The incidence of infant mortality and birth defects in the Bayview also exceed citywide averages.
Handing Tax Increment Funds to the Redevelopment Agency
Dr. Sumchai also notes in “Black Flight” that tax increment financing (which Prop G is premised on), will directly impact San Francisco’s municipal budget by diverting City revenues to the Redevelopment Agency. The part of tax increments that would otherwise go into the City’s General Fund (averaging 12%), will be lost and can only be used by the Redevelopment Agency. Therefore, money to build malls and hotels will be permitted, but no new financing for basic City services, such as police, firefighters, nurses, or librarians, will be generated. Sumchai rightfully notes that cities cannot use redevelopment money to pay for salaries, public safety or maintenance, by far the largest share of municipal budgets.
Jeopardizing a State Park … for a Promise of “Green Science and Technology”
There are serious environmental concerns regarding promises in Prop G that new parks will be built on other parcels in the Bayview in a land-swap for a state park that will be rebuilt to contain luxury condos. A major restoration effort to preserve the Yosemite Slough would be destroyed by trading parcels for replacement parks that don’t provide adequate habitat, particularly if Lennar’s plan to build a bridge over the Yosemite Slough proceeds.
There’s a reason that the Sierra Club and the SF League of Conservation Voters took out paid arguments in the voter guide against Prop G, it is a deceptively bad deal for the City’s Southeast parks and the environment, since it will place a nine-lane, $60 million bridge over the Slough that will endanger a bird nesting restoration area that has taken years to plan, and $11 million to create.
While Lennar’s recent mailers claim Prop F contains false promises, it may be Prop G itself that is riddled with false promises. Don’t be fooled: Six City supervisors, including Mirkarimi, Ammiano, McGoldrick, Sandoval, and Peskin, along with Supervisor Daly, have not endorsed Prop G. As prominent African American activist Espanola Jackson has noted: “I know a scam when I see one. Don’t buy their lies. Vote No on G!”