Nightmare on West Portal

By John Farrell

Alease was executed on November 5, 2014 for space at 360-A West Portal Ave between West Portal Financial Group LLC (WPFG), the lessee, and Francis Eng, on behalf of the Eng 1990 Trust, the lessor. WPFG consists of Peter Chen and Ellen Ching, a couple who reside in Balboa Terrace with their daughter Ashley. This couple's business, Raymond James Financial Services, was a home based business they outgrew. They moved into what they believed was a second floor space. They wanted to be in West Portal, and are committed to serving their existing client base and growing their business in the neighborhood.

That was where the nightmare began.

On June 12th 2015, Peter received a letter from the West Portal Merchants Association that a complaint had been filed with the Planning Department alleging violation of the existing moratorium on West Portal corridor for additional financial institutions. As the result of the complaint, the Planning Department issued a Notice of Enforcement on July 24, 2015, alleging violation of the Planning Code prohibiting "new financial services" in the West Portal Ave Neighborhood Commercial District.

Peter and Ellen hired a land use attorney, and after several months a hearing was held on November 10, 2015 before the Planning Department's Zoning Administrator. The Zoning Administrator determined that, per Planning Code Section 729.53, a Conditional Use Application (CUA) was required to operate on the first floor. He cited Planning Code Section 102 for the definition of the First Floor. In order to be considered a second floor it must be 6 ft higher than the sidewalk. The building unfortunately missed this requirement by approximately 2 inches. By the way, there is an elevator lift to get to the business. Previously this space was used for another Business and Professional Use, chiropractic care, and a CUA was never filed. No one ever complained.

Another "Notice of Violation and Penalty Decision" was issued on January 27, 2016 requiring a CUA to legalize the Business and Professional Service Use on the first floor. Peter and Ellen appealed the Zoning Administrator's decision and were given a directive to file diligently for the CUA.

On June 12, 2015, the CUA was filed, as well as a request for a Letter of Determination (LOD) from the Zoning Administrator. After a lengthy and thorough review by the Planning Department, an LOD dated July 11, 2016, confirmed that the business was eligible for a CUA as a Business or Professional Service. No hearing date for the CUA has been set.

On August 2, Supervisor Yee introduced an urgency ordinance to prohibit first floor story Business or Professional Services uses in the West Portal Avenue Neighborhood Commercial District for 45 days.

At the September 10 District 7 Supervisors Candidate Forum a question was submitted asking candidates to address the proposed urgency ordinance. Four District 7 Supervisor candidates, except Supervisor Yee, opposed the proposed ordinance.

At the Land Use and Transportation Committee meeting on September 19, 2016 the urgency ordinance was continued. Over a dozen concerned neighbors and clients of Peter and Ellen spoke out in support of their business, including an articulate 100 year old client. A few asked for a continuance, for the business to be grandfathered in, or that the business receive a friendly amendment exemption if this ordinance was adopted. It was continued. What was the urgency?

This urgency ordinance is to allow time to revise the Planning Code to categorize and define businesses to prevent any confusion in the future, and no new CUA's will be issued until this is resolved. This will adversely impact new businesses including Peter and Ellen's, since it is considered a new business until the CUA is received. If this ordinance "as is" passes, Peter and Ellen's business may have to close down. Further, currently 15% of businesses on West Portal are "Business and Professional Services." Do all these meet City requirements?

Even though the Planning Department's Zoning Administrator reported in the LOD that Raymond James does not offer banking services or products to the public and is not considered a Financial Service under the Planning Code, the President of the West Portal Merchants Association told the merchants at a September 15th meeting that this business was bank-like and had bank-like activities. Peter and Ellen attended the meeting but were not given the opportunity to speak. To date Peter and Ellen have never been given the opportunity to present before the West Portal Merchants Association.

Planning Code Section 790.110 defines a Financial Service use as "retail use which provides banking services and products to the public, such as banks, savings and loans, and credit unions when occupying more than 15 feet of linear frontage or 200 square feet of gross floor area."

At least 18 merchants from the West Portal Merchants Association are in support of the business, as well as dozens from the neighborhoods to date. Further, Supervisor Yee has received 30 correspondences in support of Peter and Ellen's business. On September 7th, Jen Low, Legislative Aide to Norman Yee, told Peter and Ellen and two others "You are clearly not a threat to the neighborhood."

Then why is Peter and Ellen's business being obstructed from receiving a CUA, instead of letting it go through the due process as recommended by the Planning Department and the Board of Appeals? Can someone please explain this to me?

The Greater West Portal Neighborhood Association (GWPNA) has this matter on its agenda at its next meeting on October 5th.

John Farrell Broker/Realtor – Farrell Real Estate, MBA, Former Assistant Assessor-Budget and Special Projects, 5th Generation San Franciscan, Westside resident.

The Leaning Tower of SOMA

Guess Who's Getting Stuck with the Bill?

By John Farrell

In 2008, the Transbay Joint Powers Authority, a public agency, executed an agreement to pay the Millennium Tower for any soil settlement and cracking caused by the construction of the new Transbay Terminal. But after signing the agreement and then doing testing, the City discovered that the 58-story concrete structure had already sunk 10 inches before any work on the Transbay Terminal began. I can't stress enough the importance of accountability and due diligence.

First off, why did the City approved the $600 million Millennium project without requiring that its anchor piles be drilled into the bedrock? Drilling into the bedrock prevents sinking and has often been required on other projects in parts of the City, especially those built on top of bay mud. 

Second, why didn't the Transbay Joint Powers Authority do its due diligence before signing the agreement?

Third, why did the City commence construction after finding out that the Millennium was faulty without re-negotiating its agreement, or having the Millennium take action to correct its problem?

Taxpayers are now at risk of paying hundreds of millions of dollars for this beautiful tilting/sinking luxury building debacle, and to top it off, the Transbay Terminal project is already over its budget by $1 billion dollars. 

John Farrell, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

September 2016

He's Back

By John Farrell

Per the article "Lucas S.F. museum sequel," in the May 15th Chronicle, "After a lobbying campaign by Mayor Ed Lee, Stars Wars creator George Lucas is again looking to San Francisco as a possible home for a museum housing his collection of illustrative art and Hollywood memorabilia — this time on a site already approved for development on Treasure Island."

When I read this article it reminded me of the movie Poltergeist where the little blonde girl is sitting in front of the TV and looks at the camera and says, "They're back." Well, in the case of Mr. Lucas, "He's back."

First off, let me say this. I am a big George Lucas fan and remember being one of the first in line to see Star Wars at the Coronet in 1977. I've watched all six episodes, as well as all Indiana Jones and American Graffiti movies. I know there are 7 episodes in the Star Wars saga but episode 7 The Force Awakens (which is fabulous), is from Disney, who bought Lucasfilm in 2012.

This time let's not blow it like the Presidio Trust. I appreciate creativity and would enjoy this type of collection provided by Mr. Lucas as much as a Rembrandt. If we are given a second chance to be the home of this creative and revolutionary genius who is from the Bay Area, then let's do it right this time.

Per the Chronicle article, "Lucas has renewed his interest in the city because his latest museum proposal – for a futuristic structure on the shores of Lake Michigan in Chicago-is on life support. Open space advocates like those who helped spike his earlier plans for a Beaux Arts-style monument near Presidio's Crissy Field have Lucas' plan hopelessly entangled, legally and politically." Since no decision has been made by Mr. Lucas on where his museum will be, Mayor Lee plans to send a letter formally inviting him to build his museum on Treasure Island.

Wilson Meany and Lennar Corp have already completed the environmental review by the City, and have entitlements to build 8000 homes, 400,000 sq ft of commercial space and 2 hotels on Treasure Island. The City approvals also provide for the construction of a museum or community center on the island.

The current access plans to the island are by ferry, motor vehicle or bike. In my opinion, as I have told representatives of the last two Mayoral administrations, if this development is to be viable then I recommended working with BART in putting a station on Yerba Buena Island. When BART was constructing the tunnel under the Bay, which goes right by the island, the Navy at the time did not want a station for security reasons. If this development is to be a success than access is crucial. This station would provide residents and visitors of Treasure Island access to all the BART arteries around the Bay Area including SFO and Oakland.

Of course it will cost, but what project has the City been part of that hasn't. This development will benefit the whole Bay Area in the future so why limit access. If Mr. Lucas decides to build his museum on Treasure Island, he might even help defray the cost for this station, since he would want the best accessibility possible for his legacy.

Good Luck Mr. Lucas! May the force be with you.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

June 2016

Look Out Behind You Mr. Jordan. That’s No Bull

by John Farrell

The 1995-96 Chicago Bulls are considered to be the greatest basketball team ever. With their 72-10 record, this dominating team had an NBA record 33 road wins, and one of the best head coach’s in Phil Jackson. You had the greatest player in Michael Jordan, and a cast of complimenting players such as Scottie Pippen, Dennis Rodman, Ron Harper and Steve Kerr that made up a juggernaut that year.

Well, if you haven’t been following basketball this year then you have missed history in the making by our Golden State Warriors coached by Steve Kerr, a member of that Bulls team. From a 24-0 start to finish 73-9 with 34 road wins. All the best in history. The Warriors have never lost back-to- back games and have never lost more than one game to the same opponent the whole year, which has never been done before as well.

The ongoing debate is how would these 1995-96 Bulls compare with our 2015-16 Golden State Warriors. Scottie Pippen and several of the Bulls say that they would have swept the Warriors. Hall of Famer and Warrior Legend Rick Barry says it would be an amazing and close series. So what do you think?

Let’s look at the facts. The Warriors have the best record, best start, and best road record in history. But some people say the Warriors played weaker teams. The Warriors played better against the top ten teams losing twice compared to the Bulls losing five times. The Warriors never lost to the same team twice. The Bulls lost twice to the Indiana Pacers. The Warriors never lost two in a row. The Bulls lost two in a row to the Denver Nuggets and the Phoenix Suns. Also the Bulls never played a team that year as good as the San Antonio Spurs who were riding the tails of the Warriors all year and writing their own history with their best record of 67-15, which is tied for the sixth best record of all-time. These Spurs were 39-0 at home until our Warriors showed up and ended their streak.

Ok, I am biased. I admit it. I have been a Warriors fan since I can remember. At St. Ignatius I went to several games during that miraculous 1975 year when they won the NBA Championship. Forty years later, after many tough years, I was thrilled as the Warriors last year defeated Lebron and the Cavaliers for the NBA Championship.

I compare these Warriors to our 49ers of the 80’s and early 90’s with Joe Montana and Jerry Rice and coached by Bill Walsh. We watched one of the greatest football teams in history and got spoiled. Well our Warriors are the best in history and we may never see another team like this again. So if you haven’t watched our Warriors then I highly recommend it. It’s a thrill.

The Warriors are the Best Sports Show on the planet. The fast pace offense, the in-your-face defense, the best backcourt in the game of MVP Stephen Curry (soon to be MVP again) and Klay Thompson – “the Splash Brothers”, the heartbeat of the team Draymond, Bogut, the Black Falcon, Iggy, the Brazilian Blur, Mo Buckets and Sean Livingston to name a few. And let’s not forget Coach Kerr, his highly regarded coaching staff and the unbelievable fans at Oracle and all over the Bay Area.

It will be a tough road along the way this year to the championship if they face the Spurs and then LeBron and the Cavaliers in the Finals again. But the only team that can beat the Warriors is themselves. They are that good. Historically good.

The Bulls-Warriors debate will go on just like Ginger and Mary Ann. But I know who is the best team ever.

So look out behind you Mr. Jordan. You may still be the greatest player of all time. But if the Warriors win the championship this year than your Bulls are number two. And that’s no bull.

Go Dubs!

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

May 2016

Enough is Enough

By John Farrell

It seems every time I read the paper someone at City Hall is pointing the finger at someone else for not taking care of business. Several of the Supervisors blame the Mayor for the homeless situation getting out of hand. Per the Chronicle's City Insider dated March 13, Supervisor Campos said "Lee has failed to respond adequately to the growing homeless crisis and City Hall has failed to make him accountable." All I can say is that you are elected officials as well and where were you?

The Mayor has his hands full and it is easy to point fingers at issues such as the homeless situation and an affordable housing crisis which has gotten totally out of control since 2012. Not to mention a $100 million deficit in the next fiscal year after years of prosperity, which is disturbing.

But you have to give credit where credit is due. Under the Mayor, the first Navigation Center opened around a year ago near 16th St and Mission. This center brought street encampments of homeless people to shelter. The Mayor has plans to open a second within the next six months. On the other hand, the street encampments should have never been allowed in the first place.

Early March, Supervisor Campos introduced a resolution declaring a State of Emergency on Homelessness in San Francisco. This resolution calls for the City to evaluate existing locations around the city where more shelters and Navigation Centers could be built in the imminent future. This is a hot potato, because how many neighborhoods want a homeless shelter in their backyards?

Per a letter dated March 15th from our District 7 Supervisor, the City currently has hundreds of public sites that are underutilized. There were two parking lots in West Portal that were initially assessed as feasible by the Department of Real Estate. Subsequently, this was clarified and it was determined that the sites did not meet the size requirement. The City's Director of Real Estate noted that even when the site meets the size requirement, there are many other factors that would be taken into consideration.

When I read this I felt like Laughing Sal at the long gone Playland at the Beach. No way would this ever happen. Do you have any idea the effect this would have on this family neighborhood, children, and the businesses? Are you out of your freakin minds?? Our Supervisor, to his credit, made it clear that West Portal does not meet any criteria to be considered a potential location.

The Chronicle Insider further noted "In the coming weeks, Campos will also propose the creation of six new Navigation Centers within a year, including one where alcoholics can imbibe (drink) inside and one where intravenous drug users can legally shoot up." I guess there is no liability in doing that, Supervisor.

It is positive to see out City officials address this crucial homeless problem. But as everyone knows who as ever worked at City Hall, it seems that before any elected official takes action something has got to get out of hand, or a massive protest has to take place, before the issue gets addressed. How many tents, mentally ill, and defecation incidents on our streets did it take to finally say "enough is enough."

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

April 2016

Are You Kidding Me?

By John Farrell

Over the past several years our City has flourished and money has been coming in hand over fist. Our tax revenues have increased substantially as tourism booms and buildings continue to go up like crazy changing the character of our neighborhoods. The Mayor's FY2015-16 budget of $8.96 billion was $1 billion more than it was 2 years ago.

As I have mentioned in previous articles, in good times like now, programs and services are not as scrutinized in the budget process as they would be in a recession or depression. It's easy for our public officials to look the other way since we are flush with cash.

As you might have read our City has an estimated $100 million deficit for the coming 2016-17 fiscal year. Are you kidding me! Who is minding the store?

It is reported that nearly half of this deficit is due to the increase in pension costs. In 2011, voters approved Prop C which was a pension reform measure spearheaded by Mayor Lee which was to resolve this issue. Of course it didn't since the assumptions didn't take into account retirees living longer and a return on investments that wasn't realized. Keep in mind, pension reform wouldn't have been addressed if it wasn't for Jeff Adachi.

So where do we go from here?

First off let's identify the problem. The City has no game plan other than asking City departments to cut up to 3% percentage of their budgets in order to balance the City's budget. Or to put it another way – live in the present. No plan for the future.

I have a better idea. It is called accountability. We need to run the City like a real business and stop the waste. This is the perfect time for the City to do a zero-base budget and start being made accountable before the next bubble bursts. The Board of Supervisors should immediately direct the Budget Analyst Harvey Rose to conduct a zero-base budget as of a specific start time.

The City must cut unnecessary fat to ensure vital City needs are met. We need to prioritize essential services and programs and ensure they have sufficient funding before lower priority programs are funded. It is just dumb to cut every department across the board. Especially revenue generating departments.

We need to analyze and audit the entire City operation. I cannot stress the fact that the City must audit the revenue practices of our revenue generating City Departments to insure all revenue sources are identified. I guarantee they are not. Have Grand Jury and Harvey Rose audit recommendations been implemented? Have all backlogs, such as building permits, been addressed? Audit non-profit agencies and City contracts to insure that services are being provided and determine if they are even necessary.

For example: The Healthy San Francisco Program (HSF) was designed by the Department of Public Health (DPH) in 2007 to make health care services available and affordable to uninsured San Francisco residents. In FY2013-14, DPH's estimated HSF expenditures totaled nearly $112 million. Of this amount, $28.76 million was covered by revenue and $83.12 million was provided by the General Fund. This amount has been dramatically reduced due to health care reform - Obama Care. HSF should be reviewed for possible elimination.

Another example: Domestic partner benefits. Domestic partnerships date back to the early 1980s, when lesbian and gay activists sought recognition of their relationships and new definitions of family. Domestic partners are unmarried couples, of the same or opposite sex, who live together and seek benefits comparable to those granted their married counterparts. These benefits were reasonable since lesbian and gay marriage were not previously recognized. Now that lesbian and gay marriage is accepted domestic partnerships benefits should be eliminated.

Another example: Over the past year I have written articles identifying over $200 million in tax revenue to the City that is not currently being appraised by the Assessor's Office, such as the unconstitutional loophole in the Presidio Trust that tax exempts tenants, the non assessment of naming rights at AT&T Ballpark and of the PG&E franchise fee by the SBE, to name a few. If these high profile properties are not being assessed appropriately, then what about other properties in the city. Just think, this $200 million in tax revenue not being addressed appropriately is just from a handful of properties and represents 10% of the City's total annual property tax revenue.

I could go on all day and know I sound like a broken record. But the bottom line is this – "Business as usual at City Hall has got to change."

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

March 2016

Where Do We Go From Here?

By John Farrell

On Jan 12th I attended a meeting sponsored by the Planning Department on the Affordable Housing Bonus Program (AHBP). AHBP provides incentives for developers to include more affordable housing for very low, low, moderate and middle-income households. Development bonuses include increased density and height based on the number of affordable units.

We all agree that our City is in drastic need of affordable housing. But one of the main concerns is that the City is in a reactive mode, pushing this through without due diligence, like proper neighborhood input. For example, this legislation would allow one or two story properties along commercial strips to add two or three stories more for affordable housing. The City’s one size fits all mentality, allowing for increases in stories in commercial strips throughout the City, is not the way to go. What may work well in one neighborhood commercial strip doesn’t always work in another. Further, this legislation opens the door to unlimited demolitions, changing our neighborhoods.

Today we have over 850,000 residents. Despite the rapid growth in our City’s cost of living, the population is projected to increase to 1 million over the next 15 years or much sooner. What is the City’s strategy to achieve this 1 million population growth? We have an aging infrastructure and our transit system needs to be addressed. Traffic downtown is horrendous. Our Homeless program is mediocre. Buildings are going up like crazy but our infrastructure and water are at risk. Should I go on?

We all get wrapped up in our worlds, whether it’s making our mortgage or rent payments, putting food on the table, raising our children, or taking care of an elderly family member. We take care of the sick, needy and those less fortunate and help in our neighborhoods. We count on our elected officials but it is time people start realizing they are not getting the job done. We need solutions, not rhetoric.

It is all good that our City officials want more affordable housing, to improve services, and to maintain our infrastructure. As concerned citizens we all want that. It is easy to finger point but that is not productive since we are all in this together. So where do we go from here?

First off, let’s identify the problem. The City has no game plan or strategy to achieve a 1 million population.

Second. Let’s stop being in a reactive mode and formulate a game plan for the future that keeps the integrity of San Francisco and our neighborhoods. The City needs an all-inclusive strategy to handle the increase in population to 1 million, 30,000 new units within the next 5 years, and ramifications on our City and our City Services. These ramifications include increases in crime, traffic, transportation, homelessness, panhandling, the City’s universal health plan, police and fire services, jobs, new businesses, etc. All City departments should report on the effect that the proposed increases will have on their service levels.

What will be the effect on our City revenues? For example, what is the projected property tax revenue increase from these 30,000 units once completed? If we took a conservative $1 million average sales price per home, then the assessed value would be $30 billion or $354.78 million annually in property tax revenue (based on the 2015-16 tax rate of 1.1826%). This doesn’t even take into account transfer tax revenue of $225 million from the sales of these 30,000 units (based on the transfer tax rate of $3.75 for each $500 portion of $30 Billion). We are not even looking at increases from other property transfers and new construction, business tax, hotel tax, etc… With this anticipated increase in revenue we should be seeing fewer bond initiatives.

Third. The City must stop spending like a drunken sailor. The Mayor’s FY2015-16 budget of $8.96 billion is $1 billion more than it was 2 years ago. In good times like now, programs and services are not as scrutinized in the budget process as they would be in a recession or depression. This is the perfect time for the City to do a zero-base budget and start being made accountable before the next bubble bursts. Keep in mind everything is cyclical. The Board of Supervisors should immediately direct the Budget Analyst Harvey Rose to conduct a zero-base budget as of a specific start time. The last zero-based budget was during the Willie Brown administration.

Fourth. In real estate it is “location, location, location.” In regard to the City it is “audit, audit, audit.” Audit the revenue practices of our revenue generating City Departments to insure all revenue sources are identified. I guarantee they are not. Have Grand Jury and Harvey Rose audit recommendations been implemented? Are all City department lands that are rentable leased out, and if not, why not? Have all backlogs, such as building permits, been addressed? Audit non-profit agencies and City contracts to insure that services are being provided and determine if they are even necessary. Cut unnecessary fat to ensure vital City needs are met. We need to prioritize essential services and programs and ensure they have sufficient funding before lower priority programs are funded.

Fifth. Stop the waste. For example, the January 15 Chronicle article,”S.F. budget analyst says city did a poor financial deal on Super Bowl,” reported that,” San Francisco’s budget and legislative analyst has slammed the city for not signing an agreement with the National Football League and the Super Bowl 50 Host Committee for full reimbursement of the city’s $4.8 million in costs.” The article further read,” that the city of Santa Clara is getting full reimbursement for its $3.6 million in costs. San Francisco all but gave the Super Bowl 50 Host Committee a pass, the report concludes, and urges the city to renegotiate immediately with the committee for reimbursement of all its costs.” There is no excuse for this.

Sixth. Review all our existing City systems to see how tech savvy we can be. We have the top tech minds in our neighborhood, let’s take advantage of it.

Seventh and last but not least, let’s stop talking and get it done.

If you don’t know me than you might say “who is this guy writing this article and what does he know?” First off I am not someone who is here to take from the City. I am a fifth generation San Franciscan. My two daughters are sixth generation. My wife and I are here for the long haul. My family has been in public service for decades. My father is the retired Controller appointed by Joe Alioto, my grandfather was a Muni driver, my uncle was a Sergeant in the Police Department, etc. I have an extensive background of over 35 years in private industry and government. I have worked over the years for the City as a Park Director for the Recreation and Parks Department, a Senior Analyst for Harvey Rose, the Budget Analyst for the Board of Supervisors, a Mayor’s Budget Analyst, a Senior Management Assistant to the Port, an Assistant Assessor-Budget and Special Projects and as Financial Director for the Treasure Island Development Authority.

As a public servant, I knew that I worked for you - the taxpayers of the City and County of San Francisco. Every decision I made was in the best interest of the City. I am writing to you as a professional and true public servant who knows the workings of City Hall and knows that business as usual has got to change.

We are the City that knows how. We all need to work together. But let’s be proactive and develop a viable plan and stop being reactive.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

February 2016

Timing is Everything!

By John Farrell

Timing is everything. From a dramatic last minute drive down the field for a score for which our 49ers used to be known. Thanks a lot, Jed and Trent. To running for office when everyone thinks you are unbeatable and you only receive 51.9% of the vote against no competition. Congratulations Mayor Lee.

This past November the Mayor had no competition and only received 51.9% of the vote. What does that tell you? It shows people wanted a change but there was no alternative. All the alternatives were scared off or bargained off and will now wait four years to run for Mayor.

If winning by only 51.9% isn’t enough to worry the Mayor, he also couldn’t get his handpicked Supervisor to win in District 3, which includes Chinatown. What does that tell you? We have a mayor that residents have lost confidence in, or they just don’t trust him. Sure we wish him the best since he is our mayor. But there was no alternative this last election.

Mayor Lee’s record includes positives which include bringing tech firms to the City, cutting the unemployment rate, and reforming the City’s pension program and payroll tax. But let’s face the fact. Pension reform wouldn’t have been addressed if it wasn’t for Jeff Adachi.

How can such a wealthy City be in such poor condition? Muni needs $10 billion. The Planning Department is understaffed and backlogged almost 2 years. The Assessor is losing hundreds of millions annually. Buildings are going up like crazy but infrastructure is at risk.

We are in drastic need of affordable housing, but this only became an issue when the mayor was up for a second term. Homelessness and panhandling are epidemic. The Chronicle questioned the mayor’s capability to resolve the issue in its article dated October 25, 2015, “Is homeless crisis too much for Lee?”

What the hell is going on! The answer is quite simple. No leadership or vision.

I believe if the mayor put as much energy into affordable housing, homelessness and other crucial City issues as he did in trying to remove then-Sheriff Ross Mirkarimi, then our City would be substantially better off today.

Prior mayors like Joe Alioto, Diane Feinstein, Art Agnos and Frank Jordan made decisions on what they believed was in the best interest of the City, whether you agreed with them or not. You never felt that the City was losing its direction.

Our City is flourishing, and money is coming in hand over fist and is expected to continue over the coming years. Our tax revenue has increased substantially due to transfer taxes, property sales and new construction. And we are not even bringing in hundreds of millions that we can, as I have written in previous articles. I can’t get over that the Mayor’s FY2015-16 budget of $8.96 billion is $1 billion more than it was 2 years ago and City Hall is still asking homeowners for more. Something is really wrong here.

In good times like now, programs and services are not as scrutinized in the budget process as they would be in a recession or depression. The City needs to do a zero-based budget and start being made accountable before the next bubble bursts. Keep in mind everything is cyclical.

Mayor Lee will begin his second term in January. Whether you voted for him or not, we want our mayor to do what is in the best interest of the City, and to lead by example. We are the City that knows how. We need our mayor take the lead.

By the way, now that Aaron Peskin won the District 3 Supervisory race against the Mayor’s hand-picked candidate, the progressives will control the Board with 6 votes, which includes the vote of our District 7 Supervisor. But as the Chronicle noted in its’ article, ”District 3: Regaining seat as supervisor may bring new dynamic at City Hall,” dated November 5th ,”Three progressive supervisors – Mar, David Campos and John Avalos – will be termed out. Another, Jane Kim, will be busy running for the state Senate against Supervisor Scott Wiener. The fifth, Norman Yee, is not termed out or eyeing another office, but tends to remain quiet and off-the-radar. That means Peskin is guaranteed only a year with a progressive majority...”

Isn’t it nice to know that our District 7 has a quiet and off-the-radar supervisor.

Have a wonderful and safe Holiday Season. All the best to you, your family and all those close to your heart.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

December 2015

City Hall Overrides Lease Agreements!

By John Farrell

Riddle me this! When is a written contract not a contract? Answer: When it involves the San Francisco Board of Supervisors.

You may have read recently that legislation was passed by the Board of Supervisors which changes the Rent Ordinance by making it harder for landlords to evict tenants for minor violations such as unruly behavior or improperly painting the walls. This legislation is the result of the spike in landlord notices – up 67% in five years per the Rent Board. This rise in eviction is the result of certain property owners looking for ways to get rid of low rent paying tenants for market rents.

This part of the legislation is reasonable. However, this legislation also provides for the overriding of any lease with a no subletting clause. Therefore, tenants can bring in more roommates as permitted under the Fire Code without the consent of the landlord. Further the landlord may not impose an increase in the rent if a tenant adds an additional occupant to the existing tenancy. This is unreasonable and unfair. I thought a written lease agreement is a legal contract. But I guess that means nothing to City Hall.

This is an important issue to many, including owners, property managers and all other real estate professionals. It is so important that the Chronicle’s article “New tenants’ rights allowed to become law“appeared on the bottom of the fourth page in small print in the October 10, 2015 Bay Area Section. Shame on you.

The article reported, “Earlier in the week, it looked like the mayor, a former tenants’ rights lawyer, might veto the legislation. While allowing it to become a law, Lee wrote to the Board of Supervisors that he was troubled by a provision allowing tenants to take on more roommates than their lease allows. Tenants still could not take on more than allowed by the city’s fire code.” It further noted, “Lee also criticized how the legislation was drafted, saying the process didn’t take into account the concerns of the property owners.” He was so concerned that he looked the other way and let it pass.

Keep in mind this is the same Ed Lee who stated in an interview on November 17, 2013 with the New York Times, “I used to brag that I can hold up an eviction - even if the landlord had legal rights, I could hold it up for a year.”

As you read in many newspapers such as the Chronicle, the District 3 Supervisory race will determine the balance of power on the Board of Supervisors. If the current District 3 Supervisor Julie Christensen, appointed by Mayor Lee, wins, then moderates maintain control. But if former Supervisor Aaron Peskin wins, then the progressives, including our District 7 Supervisor, will control the Board.

The good news is, our District 7 Supervisor voted against this legislation. The bad news is he is still part of the progressive vote which primarily votes against the voice of our neighborhood. For example, he voted against an increase in police as the neighborhood wanted. You are the voice of the neighborhood Mr. Yee, so speak on behalf of District 7, not on behalf of Supervisors Mar, Kim, Campos and Avalos.

The provision to allow tenants to add roommates at will is bad legislation which doesn’t take into account the property owners, property managers, or the effect on other tenants in the buildings. Not to mention it is illegal if there is a written lease agreement.

For a group of educated legislators, as a whole, you look really dumb on this one.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Assistant Assessor-Budget and Special Projects, 5th Generation San Franciscan, Westside resident

November 2015

No, No, No

By John Farrell

No on Prop A - Affordable Housing Bond

Of course anyone with a heart will agree we need housing for our City’s low and moderate income families. This $310M Bond to be paid by property owners is to help our City affordable housing needs with the Mayor’s promise of 30,000 affordable new units by 2020. However, per the September 9th Chronicle article “Lee outlines plan to create or repair affordable housing” Mayor Lee’s goal now is to build or rehabilitate 10,000 units for low-income and working class families by 2020. I figure the Mayor dropped the units from 30,000 to 10,000 since he has his re-election in the bag and didn’t have to blow smoke anymore. The Mayor is fully aware that less than 10,000 affordable housing units have been built over the last ten years and the planning department is backlogged 18 months, as frustrated contractors and their clients are fully aware.

In regard to affordable housing, when Mayor Lee was asked in Jan 2014 by Time “Why has San Francisco been so slow to build,” he replied, “Our city did pretty good in investing in low-income housing and trying to do as much as we could for the homeless. That was where our sentiments were … I don’t think we paid any attention to the middle class. I think everybody assumed the middle class was moving out.” This says it all.

Our City is flourishing and money is coming in hand over fist and is expected to continue over the coming years. Our tax revenue has increased substantially due to transfer taxes, property sales and new construction. And we are not even bringing in the hundreds of millions that we can, as I have written in previous articles.

Let me just stress the fact that I am a strong advocate for affordable housing and not just during an election year. But I am also for accountability. This $310M bond for affordable housing could be handled with existing and future City funds if prioritized, without asking taxpayers to pay the bill, and save millions in bond interest payments. Further, there are also balances as of June 30, 2015 in two existing City trust funds for affordable housing totaling approximately $95.7 million that are unencumbered.

I can’t get over that the Mayor’s FY2015-16 budget of $8.96 billion is $1 billion more than it was 2 years ago and City Hall is still asking homeowners for more. Something is really wrong here. City Hall must be made accountable. No on Prop A.

No on Prop D - Mission Rock DevelopmentThe SF Giants organization wants to transform a 28-acre industrial site on Port property, currently used as a surface parking lot for Giants games, into a mixed-use, 11 building $1.6 billion development featuring waterfront parks, 1500 rental units with 33% of affordable housing, retail and 1.5 million sq ft of office space, a new parking garage and the restoration of historic Pier 48 for a new Anchor Steam Brewery.

The Mission Rock Initiative on the November ballot would allow the Giants to increase the existing height limit of 40 feet on waterfront land to 90 to 190 feet for office and retail uses and 120 to 240 feet for rental housing, with 33% of the units dedicated for affordable housing.

If this was another developer besides the Giants I believe they wouldn’t even consider going to the voters asking for such a large increase in the height. The only reason that this initiative is being put to the voters is because of the increase in the waterfront height limits as required by Prop B. Prop B was approved by the voters in June of 2014, which prevented the City from allowing any development on Port property to exceed the height limits in effect as of January 1, 2014 unless the City’s voters approved the height limit increase.

Over the next month, the Giants organization and its political allies will stress the affordable housing, job creation, waterfront parks, and transforming a parking lot into a neighborhood asset. Which is fabulous and needed. But if they really care, then drop the height more. Isn’t it deceiving that Prop D is about height limits but is not mentioned in any of the Yes on Prop D ads. But that’s politics.

The 40 ft height limit was set to protect the waterfront. The voters approved the Pier 70 development project which increased the height to 90 ft. The voters rejected the 8 Washington project which wanted to increase the height limit to 130 ft but provided no affordable housing on site. The Mission Rock Initiative by the Giants organization is asking for a height increase of buildings up to 240 ft (24 stories), and is way out of line (Just think of the 18 story Fontana West at the end of Van Ness Ave and picture it 1/3 or 6 stories higher). But that is my opinion. I’m just a fool who loves this City and doesn’t want another eyesore on our City landscape, especially not on our waterfront. No on Prop D.

By the way, if you added all the heights of the eleven buildings and divided by eleven and made adjustments for the bases of the buildings than you would accommodate all the space needed for the project with building heights of no more than 150 feet (15 stories). But that is my opinion. That’s a win win.

No on Prop I - Suspension of Market Rate Mission District Housing - If passed the City would suspend the issuance of permits in the Mission District for market rate housing for 18 months and develop a stabilization plan. The Mission District has gone through a dramatic change due to gentrification displacing lower income residents and small businesses. Without gentrification we wouldn’t have the Castro, Noe Valley, Alamo Square and other neighborhoods that were rundown and people came in and fixed up the properties increasing the value of the neighborhoods. The Mission has been up and coming for the last 50 years and was considered a tough neighborhood and rundown. It is now becoming a chic neighborhood due to gentrification. The problem is not gentrification; the problem is no vision from the government to provide affordable housing for low-income and middle class. There is also a problem with quality of life issues which is not even being addressed. No on Prop I.

John Farrell Broker/Realtor – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

October 2015

Too High. Or not too High.
That is the Question!

By John Farrell

The San Francisco Giants organization wants to transform a 28-acre industrial site on Port property, currently used as a surface parking lot for Giants games, into a mixed-use $1.6 billion development featuring waterfront parks, 1500 rental units with 40% of affordable housing, retail and 1.5 million sq ft of office space, a new parking garage and the restoration of historic Pier 48 for a new Anchor Steam Brewery.

The Mission Rock Initiative on the November ballot would allow the Giants to increase the existing height limit of 40 feet on waterfront land to 90 to 190 feet for office and retail uses and 120 to 240 feet for rental housing, with 40% of the units dedicated for affordable housing. None of the 11 buildings will be built within 100 feet of the Bay and building heights will step down as they get closer to the water. In 2013, the voters rejected the 8 Washington Project — “The Wall on the Waterfront” which was 136 feet tall, over 100 feet less in height. But then again the developers were not the Giants.

Last November, voters approved Prop F which increased the height limit from the existing 40 feet to 90 feet and, to move forward with the mixed use project on 28 acres at Pier 70. Forest City, the Pier 70 developer, had won the bid over three other competitors. There was no competitive bid for the Mission Rock project.

Since 1997, the China Basin Ballpark Company LLC (aka Giants organization) has leased land from the Port for parking. Their current lease expires in Nov 2017 and pays the Port a rent of $2.4 million annually.

As a parking lot the value of this land, in my opinion, is worth approximately $24 million (reflects the $2.4 million annual rent with a 10% cap rate) since it had a restricted use as a parking lot. However the Port, along with City Hall, has approved the change of use in order for this new development to be built. Due to this use change, the property is now worth well over $500 million (based on the proposed project of 28 acres less 8 acres of land designated for parks and open space x $25 million an acre.) Keep in mind I am conservative in my valuation. Even with the limited height requirement this choice piece of property is located in one of the most premium locations in the world.

The Port has aging facilities and is always looking for revenue and approved the Mission Rock development. Under the new agreement, the Port will receive $3.4 million annually in rent, or $1 million more than from the previous parking lot. Let’s see, going from a $2.4 million annual rent payment on a lease that expires in 2017 on restricted land for parking that is worth $24 million to a $3.4 million annual rent payment on highest and best use land worth over $500 million in one of the most premium locations in the world with no competitive bid. I would take that and run just like the Giants did.

“The Mission Rock Initiative is the culmination of eight years of extensive neighborhood outreach and community planning to transform this surface parking lot into an asset for the community,” said Giants President and CEO Larry Baer. “We are eager to engage with San Francisco voters to share our community’s vision of open access along the waterfront, new jobs, neighborhood serving retail, new parks and an unprecedented level of affordable housing.” Not to mention that the Giants will make a fortune which I have no problem with or do they.

In an Examiner article,” Giants’ Mission Rock initiative submits signatures for November election,” dated June 30th, 2015, Jon Golinger, co-chair of No Wall on the Waterfront, said the buildings proposed for the Giants’ development are too tall. “The vast majority of the buildings are still either offices or luxury housing, and five of the buildings would be taller than 8 Washington,” Golinger said in reference to a contentious luxury condominium complex development along The Embarcadero waterfront that voters rejected in 2013. “If 8 Washington was too big for the waterfront, then five 8 Washingtons are far too big for the waterfront,” Golinger added.

If this were another developer I believe they wouldn’t even consider going to the voters asking for such a large increase in the height. But it is not your typical developer. It is the Giants organization. A San Francisco Institution. The Mission Rock Initiative to increase the height is backed by the Mayor and by all members of the Board of Supervisors, several of whom voted against the 8 Washington project­—increasing the height limit to 136 to preserve our waterfront for generations. Keep in mind the 8 Washington project had no affordable housing on site.

As I wrote in previous articles, the Giants ballpark is under assessed as well as AT&T’s ballpark naming rights, which have never been assessed, costing the City millions in tax revenue annually. But as a top elected official at City Hall said, “But they won the World Series.”

As a Giants fan since birth, I hope the team wins the Series again. If the organization can continue knocking it out of the ballpark as they did with their new agreement with the Port, then the team has a great shot again.

Over the next two months, the Giants organization and their political allies will stress the affordable housing, job creation, waterfront parks, and transforming a parking lot into a neighborhood asset. Which is fabulous and needed. But if they really care, than drop the height more. The Giants initially wanted the tallest buildings to be 380 ft and dropped them to 240 ft. This is an old City Hall department head ploy where you ask for more knowing that you are going to be reduced and end up where you wanted be in the first place.

The bottom line is this. The only reason that this initiative is being put to the voters is because of the increase in the waterfront height limits as required by Prop B. Prop B was approved by the voters in June of 2014, which prevented the City from allowing any development on Port property to exceed the height limits in effect as of January 1, 2014 unless the City’s voters approved the height limit increase.

As of the writing of this article, when you go the Mission Rock Initiative website at Missionrock.com you only see drawing renditions of the waterfront park, retail area and the brewery. Let’s be honest and show what the 24 stories are going to look like from the Bay. Then let the voters decide.

I recommend everyone go to the actual site or Google maps. Now pan around the neighborhood. Now picture several buildings 24 stories high (Just think of the 18 story Fontana West at the end of Van Ness Ave and picture it 1/3 or 6 stories higher). There are currently no buildings even half that size in the neighborhood, including the proposed Warrior stadium and buildings on the UCSF Mission Bay campus. You decide.

If this initiative is passed than the Washington 8 project should have been built, and voting yes on Prop B and the height increase for the Pier 70 project was a waste of time since the proposed 240 height limit will set the precedent for height limits for waterfront property.

The 40 ft height limit was set to protect the waterfront. The voters approved the Pier 70 development project which increased the height to 90 ft. The voters rejected the 8 Washington project which wanted to increase the height limit to 130 ft but provided no affordable housing on site. The Mission Rock Initiative by the Giants organization is asking for a height increase of buildings up to 240 ft (24 stories) is way out of line. But that is my opinion. I’m just a fool who loves this City and doesn’t want another eyesore on our City landscape, especially not on our waterfront.

I have an idea. If you added all the heights of the eleven buildings and divided by eleven and made adjustments for the bases of the buildings than you would accommodate all the space needed for the project with building heights of no more than 150 feet (15 stories). But that is my opinion. That’s a win win.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

September 2015

Let’s Get Mikey!

By John Farrell

Many of you remember the old Life cereal commercial “Let’s Get Mikey.” Two boys are pushing a bowl of Life cereal back and forth since neither one wants to try it. They look at each other and one says, “Let’s get Mikey. He won’t eat it. He hates everything.” They push the bowl over to Mikey and he digs in with his big spoon. “Mikey likes it!” one kid yells out euphorically, giving the cereal the stamp of approval.

In the case of City Hall officials, they will only give Mikey what they know he likes. Over the next few months they will spoon feed and inundate taxpayers with bond measures like the Mayor’s proposed $250 million affordable housing bond this November, which supposedly won’t increase your property taxes, and that we need because families and neighbors are leaving our City for more affordable housing elsewhere. I guarantee that when the voter pamphlet comes out, the Controller’s Statement will provide a cost to the homeowner.

Of course anyone with a heart will agree we need housing for our city’s low and moderate income families, just like we needed other bond measures previously passed by the voters, like Prop A for Muni infrastructure and projects last November. How can anyone vote against a bond measures to provide affordable housing or better Muni services? That’s why City Hall officials play with issues close to the taxpayers’ hearts. But I know and you know that many of them are just looking for a slam dunk for their resume, or for a platform for their next stepping stone for higher office.

Doesn’t this bother you that you are being asked during an election year? Why not last year or the year before? Year after year we’ve watched as families and neighbors leave the City for more affordable homes elsewhere. And as you know, once you leave the City, most people can never afford to return. Even back in the September 2008 Westside Observer edition, former Supervisor Tony Hall wrote an article on the family exodus from our City.

When I read the article in the Sunday June 7th Examiner, “Teachers Struggle to Secure Housing”, I became angry. The article noted that “city leaders first began discussing how to provide housing for teachers more than 15 years ago during the thriving dot-com economy of the late 1990’s. But the initial commitment for such an effort from the City came in 2007, when former Mayor Gavin Newsom secured $1 million for the Teacher Next Door Program that helps teachers purchase their first home. As of this year the program, which has since helped 52 teachers find homes in San Francisco, is out of money and without it there is no dedicated source of funding exclusively to help teachers in the City.”

The Examiner article goes on to note “On May 12, Mayor Ed Lee proposed a $250 million housing bond that would include $5 million for the Teacher Next Door Program. Renewing the program per Lee’s bond would help 250 teachers.” I guess helping 250 teachers find housing is such a priority that no monies were set aside in the Mayor’s FY2015-16 budget of $8.96 billion, which is $1 billion more than it was 2 years ago. But City Hall knows it can count on its Mikey to fund heart-wrenching issues like this. As the song goes, and as Private Gomer Pyle use to say, “Shame, Shame, Shame!”

Most taxpayers will vote yes on this Housing bond because it is drastically needed. This bond requires a two-thirds vote to pass and would include funding for affordable housing that targets low-income and middle-class San Franciscans, and for rehabbing existing public housing.

It is all good that our City officials want more affordable housing. As concerned citizens we all want that. In my opinion, if the Board, especially former Supervisor and now Assemblyman David Chu, put as much effort in as they did with Airbnb, then this housing crisis would have been addressed sooner and as a priority, not as an election platform.

This $250M Bond to be paid by property owners will help the Mayor keep his promise to build 30,000 new units by 2020. We all know Mayor Lee is looking for a legacy. We all know he was hoping it would be the Warriors, if they built their stadium on Port property, but it is no longer the case. If the proposed 30,000 units are created by 2020 he will receive high accolades for his effort. But if not, it should be considered his failure because this whole idea of addressing the housing crisis is part of his election platform for a second term.

I am rooting for the Mayor to keep his promise. However, the Mayor is fully aware that less than 10,000 affordable housing units have been built over the last ten years, and the planning department is backlogged 18 months, as frustrated contractors and their clients are fully aware.

Our City is flourishing and money is coming in hand over fist, and it is expected to continue over the coming years. Our tax revenue has increased substantially due to transfer taxes, property sales, and new construction. And we are not even bringing in hundreds of millions that we can, as I have written in previous articles. In good times like now, programs and services are not as scrutinized in the budget process as they would be in a recession or depression. Let me just stress the fact that I am a strong advocate for affordable housing, and not just during an election year. But I am also for accountability.

This $250M bond for affordable housing could have been handled with existing and future city funds if prioritized, without asking taxpayers to pay the bill and cost millions in bond interest payments. But City Hall gets its cake and eats it too, because it knows what Mikey likes.

I can’t get over the fact that the Mayor’s FY2015-16 budget of $8.96 billion is $1 billion more than it was 2 years ago and City Hall is still asking homeowners for more. Something is really wrong here.

I wish everyone a wonderful and safe summer!

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

Hey City Hall! What’s the Game Plan

By John Farrell

On April 27th I attended a meeting of the West of Twin Peaks Council. District 8 Supervisor Scott Weiner was on hand to speak on several issues. One in particular was the increase in our police force. Currently there are three academy classes going on and they expect the police to be in full force reflecting 1971 mandated full duty officers by 2018. Supervisor Weiner was saying that this staffing level was dated back to the Mayor Diane Feinstein years and believes that more staffing is needed.

Let’s look at the full picture. When Police staffing levels were set in the early 1980’s the population of our City was approximately 700,000. Today we have over 850,000 residents. Despite the rapid growth in our City’s cost of living, the population is projected to increase to 1 million over the next 15 years or much sooner. There is a direct correlation between increased population and police needed, as well as fire and other City services.

First off, what is the City’s strategy to achieve this 1 million population growth? We have an aging infrastructure and our transit system needs to be addressed. Muni needs $10 billion but the City has only committed $4 billion, which includes $500 million from the recent passage of Prop A in November. Traffic downtown is horrendous. Our Homeless program is mediocre. The Planning Department is understaffed and backlogged 18 months. We are in drastic need of affordable housing. Panhandling is an epidemic. Buildings are going up like crazy but our infrastructure and water are at risk. Should I go on?

Do you realize how serious this drought is? California is in its fourth year of an extreme drought. The major sources of water are rain and snow melt in the Sierras, ground water, and imported water. The future looks bleak because of climate change and the decrease of snow and rainfall and continued ground water use. Even though our City is working to conserve our precious drinking water and to use our resources as effectively as we can, other CA cities are running out.

On the November ballot the Mayor is putting a $250M general obligation bond for affordable housing. This bond requires a two-thirds vote to pass and would include funding for affordable housing that targets low-income and middle-class San Franciscans, and rehabbing existing public housing. It must be an election year.

In a Chronicle interview, Lee stated that “We can do $250 (million) without raising anybody’s taxes.” As Former President Ronald Reagan used to say, “There you go again.” Just like Prop A’s general obligation bond approved last November, the Mayor states this housing bond will have no cost to the property taxpayer. Let’s be honest, it will cost the taxpayer. What the Mayor implies is that since certain bonds are retiring there would be no increase in the property tax rate if this measure is passed. However if it doesn’t pass then the tax rate would drop, reflecting a savings to the taxpayer. I guarantee that when the voter pamphlet comes out the Controller’s Statement will provide a cost to the homeowner.

This $250M Bond paid by property owners is to help our City housing needs, since the Mayor has promised to have 30,000 new units by 2020. Do we really need to increase property taxes to property owners? What is the projected property tax revenue increase from 30,000 units once completed? If we took a conservative $1 million average sales price per home, then the assessed value would be $30 billion or $317.43 million annually in property tax revenue (based on the 2014 tax rate of 1.1743%). This doesn’t even take into account transfer tax revenue of $225 million from the sales of these 30,000 units (based on the transfer tax rate of $3.75 for each $500 portion of $30 Billion). We are not even looking at increases from other property transfers and new construction, business tax, hotel ax, etc… Also how do you expect to get projects through when the Planning Department is backlogged 18 months?

No general obligation bond measure should put to the voters until an all-inclusive strategy is in place to handle the increase in population to 1 million and 30,000 new units within the next 5 years. and its ramifications on our City and our City Services. These ramifications include increases in crime, traffic, transportation, homelessness, panhandling, the City’s universal health plan, police and fire services, jobs, new businesses, etc… All City departments should report on the effects that the proposed increases will have on their service levels.

Supervisor Farrell is considering a ballot initiative for November for more funding for homeless housing and services. Mayor Lee graded the homeless program a “C”, which is mediocre, and a Chamber of Commerce poll found 58% of San Franciscans think homelessness and street behavior is getting worse (9% think it’s getting better). If there is a plan to overhaul the homeless program than I would like to see it. I do not believe in throwing good money after bad, or for someone’s political agenda to run for higher office. Hey, didn’t we elect the previous Mayor whose platform was to eliminate homelessness? It didn’t work, but it did have a catchy name, “Care Not Cash.”

It’s all good that our City officials want more affordable housing, to improve services, and to maintain our infrastructure. As concerned citizens we all want that. But before you start inundating the voters with initiatives, I would highly recommend you look into your own backyard. Because if you did, then you would not be putting measures like these to the voters.

Our City is flourishing and money is coming in hand over fist. Our tax revenue has increased substantially. For example, property assessments alone increased 6% or $10 billion for fiscal year 2014-15, reflecting approximately $117 million in property tax revenue, and our City is collecting hotel taxes and penalties from Airbnb estimated at 25 million.

In good times like now, programs and services are not as scrutinized in the budget process as they would be in a recession or depression. It’s easy for our public officials to look the other way since we are flush with cash. Let me just stress the fact that I am a strong advocate for affordable housing and not just during an election year. But I am also for accountability.

Mayor Lee, before any monies are requested from taxpayers in the future, audit the revenue practices of our revenue generating City Departments. Have Grand Jury and Harvey Rose audit recommendations been implemented? Are all City department lands that are rentable leased out, and if not, why not? Have all backlogs, such as building permits, been addressed? Audit non-profit agencies and City contracts to insure that services are being provided and determine if they are even necessary. Cut unnecessary fat to ensure vital City needs are met. We need to prioritize essential services and programs and ensure they have sufficient funding before lower priority programs are funded.

Over the past year I have written articles identifying over $200 million in tax revenue to the City that is not currently being appraised by the Assessor’s Office, such as the unconstitutional loophole in the Presidio Trust that tax exempts tenants, the non assessment of naming rights at AT&T Ballpark and of the PG&E franchise fee by the SBE, and the appalling appeal by the Giants to reduce their Ballpark value to $140 million after they built it in 2000 for over $350 million, to name a few. If these high profile properties are not being assessed appropriately, then what about other properties in the city. Just think, this $200 million in tax revenue not being addressed appropriately is just from a handful of properties and represents 10% of the City’s total annual property tax revenue. This $200 million would go along way for our affordable housing without asking taxpayers to pay the bill and save hundreds of millions in bond interest payments.

Mayor Lee will be re-elected in November 2015. Whether you vote for him or not,we want our Mayor to do what is in the best interest of the City and to lead us in this time of prosperity.

We are the City that knows how. We all need to work together. But let’s have a plan.

John Farrell Broker/Realtor – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

June 2015

Go Dubs!

By John Farrell

As of the writing of this article the Golden State Warriors just finished up an amazing season and will start playing in the first round of the NBA playoffs. It will be a tough road along the way if they face the Spurs and then LeBron and the Cavaliers in the Finals. But the only team that can beat the Warriors is themselves. They are that good.

I have been a Warriors fan since I can remember. I was attending St. Ignatius when I went to several games during that miraculous 1975 year when they last won the NBA Championship. They were supposed to lose in the Finals to the Washington Bullets in four. Instead they beat them in four.

There were a lot of tough years along the way but some amazing ones as well. From Al Attles and Rick Barry, to Run TMC, to “We Believe” till now. To me the current Warriors are the Best Sports Show in the World. The fast pace offense, the in-your-face defense, the best backcourt in the game of MVP Stephen Curry and Klay Thompson – “the Splash Brothers” - and the unbelievable fans who have never given up on them. And I am one of them.

The last two years have been fun to watch, but this is a special year when everything gelled. They finished with an NBA best record 67-15, which is tied for the sixth best record of all time, and with a home record of 39-2, which is tied for the second best of all-time. Both Warrior franchise records. They finished first in offense, first in defense and have a first year coach Steve Kerr who deserves “Coach of the Year”. He and his highly-regarded coaching staff took a wild horse of talented players and pulled everything together as a team. The Warriors are a class operation from top to bottom, and when everyone is on the same page then you get something special like this year. But let’s don’t forget former coach Mark Jackson. As he eloquently put it, “You cannot disrespect the caterpillar and rave about the butterfly.”

I love our Giants and 49ers, but when it comes to an exciting, high energy, high paced game, they are no match to the Warriors. The Warriors are a non-stop adrenalin rush. If you turn your head for one second you can miss a spectacular drive, pass, or shot from Steph – “the Human Torch”, a stop-and-shoot three by Klay, a defensive stop from Draymond, a dramatic block or rebound from Bogut, or a slam dunk from the Black Falcon. Even the second team, which includes All-Star David Lee, would be the first on another team. Watching Iggy defend and anticipating another players move is amazing. Watching Barbosa “the Brazilian Blur” drive up court is like watching an explosion from a cannon. We want more buckets from “Mo Buckets”.

If you haven’t watched our Warriors then I highly recommend it. It’s a thrill.

Thank you for this special year. All the Best! Go Dubs!

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

May 2015

Alcatraz Ferry Move to Fort Mason: Bad for the City

By John Farrell

We all read recently that the National Park Service (NPS) wants to move the Alcatraz ferry from its current long-term home at the Port of San Francisco to Fort Mason. This move may be necessary if the NPS cannot reach an agreement with the Port on a 50-year lease.

Per federal law, the NPS puts the Alcatraz ferry concession up for competitive bid every 10 years. Currently, the company that wins the Alcatraz ferry concession bid decides from where the ferries will depart. The current concession with Hornblower Yachts expires in 2016. The NPS now wants a minimum 50-year lease on the ferry piers for itself, and to sublease to whoever wins the future bids. The NPS has identified three possible locations - two at the Port (includes its existing location at Pier 31 ½ and 33) and at Fort Mason.

If the NPS moves the Alcatraz ferry to Fort Mason, the City will lose millions in revenue. Let’s don’t blow it like the Presidio did with George Lucas.

Why is this move bad for the City? First off, the Port will lose millions over the years from no longer receiving lease payments. Local businesses along Fisherman’s Wharf will also lose millions in revenue as the result of the projected 1.7 million annual passengers of the ferry going to Fort Mason. This doesn’t even take into account the effect on the traffic and congestion to Marina District residents.

The City will also lose millions over the years in property tax revenue for our General Fund. Let me explain this one. Most properties are reappraised upon ownership transfer or completion of new construction per Prop 13 by County Assessor’s Offices. These valuations by the Assessor are pretty basic, since transfers are based on recorded deeds and new constructions are based on permits filed with the Department of Building Inspection (DBI).

However it is quite different when it comes to “possessory interests” when a private party leases, rents, or makes payments for use of government-owned property, and is subject to a “possessory interest tax” (property tax). Keep in mind the Assessor relies on all government agencies (federal, state and local) to report their users. In many cases users are not reported and the Assessor staff needs to visit the properties to see what is there. Many times these assessments are not assessed or under-assessed, many times due to politics.

I recently talked with an appraiser from another county who handles possessory interest, and asked him about several assessments. He said they were aware of the potential assessments, but their county was not appraising since it was too political. This reminded me of when I worked in the Assessor’s Office years ago and specialized in possessory interest. I remember going through numerous files and found one with a note from a prior Assessor stating, “Do not assess. Too Political.” However, we picked up this assessment along with dozens of others that were never appraised before, such as shipping and cruise lines, advertising on MUNI and BART, naming rights at Candlestick, a towing service, stadium concessions, and numerous missed assessments resulting in millions in tax revenue to the City that would have otherwise not been received. Back then, Fort Mason users for private benefit were assessed. However, over the past ten years, they are no longer assessed. That means that the Alcatraz ferry concessionaire currently paying property tax at the Port will no longer pay if it moves to Fort Mason.

During World War II, Fort Mason was the headquarters for the “San Francisco Port of Embarkation” which controlled shipping facilities across the Bay Area. Over the years of WW II, two-thirds of our troops sent into the Pacific, and more than half of all army cargo moved through West Coast ports. This high volume continued in the 1950’s with the Korean War, and through the early 1960’s. In 1955 the “San Francisco Port of Embarkation” was renamed the “U.S. Army Transportation Terminal Command Pacific.” In 1965 the headquarters transferred to theOakland Army Terminal, and most of Fort Mason’s embarkation facilities fell into disuse. Since Fort Mason was no longer being used for military purposes, the federal government transferred jurisdiction to the Golden Gate National Recreation Area (GGNRA) in the 1970’s to be used for natural, historic, and cultural purposes.

Military installations are federal enclaves and are exempt from state authority. Per legal counsel of the State Board of Equalization, a “federal enclave” is a property over which the federal government holds exclusive jurisdiction. The transfer of jurisdiction to the GGNRA negates the concept of “federal enclave” and “exclusive jurisdiction” since Fort Mason is no longer used for military purposes. Current users of Fort Mason include restaurants, art galleries, etc. Many users, such as those for educational purposes, would be tax-exempt by filing the applicable exemption.

The Alcatraz ferry move to Fort Mason is a bad move for the City, not only financially, but because it hurts local businesses along Fisherman’s Wharf, and Marina District residents. The Assessor should revisit the assessment of private users of Fort Mason, and get a legal opinion from the State Board of Equalization, its governing body, on this matter. Or the Assessor can just leave it the way it is: unfair and inequitable taxation.

Everyone should pay their fair share.

John Farrell Broker/Realtor – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

SFPeeUC

By John Farrell

Everyone deserves a second chance. But not all the time. Especially not in the case of a professional Water Department manager who was seen urinating in a City reservoir numerous times. I don’t know the person. I don’t care how long they have been on the job, their political clout, etc… All I know is that this person, with full knowledge that it is wrong, took a whiz numerous times in a City reservoir that supplies drinking water to nearly 2.5 million Bay Area residents. And just think, if he was seen numerous times, how many times did he actually do it. And if he wasn’t caught, he would be still using the reservoir as his personal toilet. This isn’t funny.

San Francisco Public Utilities Commission (PUC) spokesman Tyrone Jue said that the agency confirmed anonymous complaints that a maintenance planner had urinated in the 674-million-gallon reservoir in the Sierra Nevada foothills early January. The reservoir had been drained for maintenance at the time and posed no health danger. Does that mean it was alright to pee in it?

Mr. Jue told the SF Chronicle “The bottom line is — you pee in the wrong place again, and you are toast.” It was reported that this manager was in line for a promotion before the incident and now faces a maximum penalty of a weeklong suspension without pay.

Here is a person lucky to be employed by the City with a $111,000 a year salary not including benefits, a retirement pension, free health benefits for life, and he has total disregard and pees in our reservoir.

This isn’t the first time we have read about unethical practices at City Hall, or the last. Just keep in mind, we as citizens put our faith in the hands of our City workforce to respect, to do what is right, and to do what is in the best interest of our City - our Home.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, Westside resident - farrellreinvestments@yahoo.com

March 2015

SF Giants Champs!

SF Taxpayers Chumps!

By John Farrell

First off, let me wish everyone all the best in this New Year. Now, where do I start. Most people do not think of our City government as a business. But I do. And if you do then you should be very upset, since taxpayers are not treated fairly and equitably and the City is losing hundreds of millions annually. As you know, many decisions are made, not based on what is best for the City, but what is best politically for those in office at the time.

In October, the Board of Supervisors passed legislation to legalize short term rentals of homes, and in the process rezoned the City. Further, the Board rejected approximately $25 million due in back taxes from Airbnb. Let see if the Treasurer - Tax Collector will do his job and collect the taxes or just look the other way. Only time will tell. And by the way, this legislation came about only as a platform for then-Supervisor David Chiu to run for the Assembly.

In November, the San Francisco Public Utilities Commission (PUC) transferred to the Recreation and Park Department the Francisco Reservoir at 2445 Hyde Street for $9.9 million. This 3.29 acre property expands the existing 0.96-acre park to over 4 acres of public open space. The PUC sold the property with restrictions, which they did not need to do, which provided the rationale for the appraisal at this low $9.9 million sale price; if this 3.29 acre property had been rezoned in accordance with the highest and best use in the Russian Hill neighborhood, it would be worth well over $100 million. A 2500 sq ft vacant residential lot in Russian Hill alone sells for over $1.5 million. Our water rates continue to go up and the PUC transfers its property for pennies on the dollar. This to me is a gift of public funds, even if it is to another public agency.

Our World Champion Giants organization’s appeal to reduce its ballpark’s 2012 value from approximately $196.8 million assessment to $140 million has been postponed until May, per the Assessment Appeals Board. The Giants organization built its ballpark for over $350 million in 2000, and pays the Port $1.2 million annually under a 66 year lease for the 12.5 acre land site. Even though the existing 2012 value of $196.8 million, least $200 million under value in my professional opinion, resulting in a property tax loss to the city of over $2.3 million annually, the Giants want to further reduce the value to $140 million, an additional revenue loss to the city of over $650,000 annually. The Giants have also filed appeals for 2013 and 2014 which have not been scheduled. And by the way, if the Giants are getting a tax break, what are the Warriors expecting?

As a taxpayer and Giants fan since birth, I appeal to the Giants owners and management to withdraw all their assessment appeals, which are insulting to the taxpayers of San Francisco, and to continue to be the class act that they are. Without the ballpark, the Giants would not receive its revenues from the tickets, vendors, restaurants, advertising, cable TV, etc… In 2013, the year in between World Series wins, the Giants had 3.37 million paid attendance, $316 million in revenue, and $53 million in operating income. Per Forbes magazine, the Giants club valuation is worth $1 billion. Its revenues continue to grow, which is wonderful. But in my opinion and experience, the Giants should have never received such a reduction in assessment from the City.

The City is losing at least $10 million a year in property tax revenue, and well over $100 million from the Presidio Trust since inception. due to an unconstitutional loophole in the Presidio Trust Act, which allows that tenants are exempt from all taxes, except sales tax, and is subject to interpretation. In 1989, the federal government closed the Presidio as a military base. Since the Presidio is no longer for military use, the federal government transferred jurisdiction to the Golden Gate National Recreation Area (GGNRA) in 1994. Did this transfer to GGNRA end its tax-exempt status and provide for the City to now tax private tenants? The City was told to look the other way by our Congressional representative who spearheaded in 1999 an unconstitutional provision in the Presidio Trust Act to exempt tenants. This has resulted in a tax savings to Lucasfilm alone of over $50 million. I understand that the Presidio Trust needed to be financially independent, but this should have been handled in more of a business fashion and not a political one. Especially not one that is unconstitutional, since Congress does not have the authority to tax exempt tenants (per Article 1 Section 8 of Constitution, which provides the Powers of the US Congress).

Due to this unconstitutional loophole, the City is losing an additional $12.5 million from the sale of Lucasfilm to Disney in 2012 (based on a 2.5% transfer tax on a conservative $500 million assessment). An ownership transfer in CA includes a lease of 35 years or more. Lucasfilm had a 66 year lease at the Presidio transferred to Disney. Per the CA Rev & Taxation Code, this is a legal transfer which the SBE will concur. There is no rationale why there is no transfer tax imposed, since all other ownership transfers in CA pay a transfer tax. The Assessor should appraise the transfer as is done in all other change in ownerships, and a transfer tax bill should be issued.

PG&E is getting a minimum $5.2 million annual tax break. PG&E’s franchise fee is subject to property tax but is not reflected in the annual appraisal by the State Board of Equalization (SBE). If this franchise fee was accounted for, it would result in property tax revenue to the City of approximately $5.2 million annually (based on a market franchise fee of 3%). There are numerous companies with franchise fees that should also be appraised, resulting in addition millions to the City annually. There is also a potential increase in the existing PG&E franchise fee set in 1939 to fair market, resulting in from $27 to at least $45 million annually to the City (reflects a 3% to 5% fair market franchise fee) compared to the existing payment to the City of $5.5 million (based on the existing franchise fee of ½% electrical and 1% of gas from P.G&E’s gross receipts). PG&E rates continue to go up and the City continues to give them a tax break.

AT&T’s naming rights at the Ball Park were never appraised by the Assessor’s Office. Pacific Bell paid $45 million for naming rights in 2000 over 25 years, which was subsequently transferred to AT&T. If valued accordingly, AT&T should be paying the City at least $525,000 annually (based on a 1.1691% tax rate on a $45 million assessed value). The Assessor’s Office can go back 4 years and even longer, since AT&T’s naming rights agreement is unrecorded. Therefore, AT&T should receive tax bills for approximately $4.2 million, reflecting 8 years of benefits for the naming rights. What are these naming rights worth today? Keep in mind that the 49ers/York and Levi Strauss & Co recently entered into a naming rights agreement for a 20-year, $220 million deal at $11 million annually.

But keep in mind, there are many positives to note. It is good to see that one of the main priorities of our Mayor is now affordable housing for the middle class. It must be an election year.

It is also positive to see the current Assessor is finally addressing the extensive permit backlog costing the City millions annually by hiring 5 appraisers/specialist positions. Funding of $1.285 million is provided from a State-County Assessor’s Partnership Agreement Program Grant.

Keep in mind Madame Assessor, who I hope is reading this, that your existing system has the capabilities to direct enroll permits and all transfers, as it currently does for single family homes. This was the intent of the system. Check the test environment. Before the system went live in 2000, we set up a streamlining process which automatically changes ownership and enrolls values once indexed by the recorder staff, which revolutionizes the appraisal process. We were also ready to implement an automatic partial ownership transfer process. Both of these processes are still sitting in a test environment for over the past 10 years gathering dust. You have the opportunity to be a pioneer or just another Assessor warming the chair and collecting a paycheck, as your last few predecessors did. You can do it.

On behalf of all taxpayers in the City and County of San Francisco, Everyone should pay their fair share.

John Farrell Broker/Realtor – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

Let’s Stop This Before it Happens Again!

By John Farrell

The Holidays are here! It is a time to celebrate and share with our friends and loved ones. We tell anecdotes from our past and share moments of joy with each other. We remember all those who have touched our lives and thank the good Lord for all He has given us.

On Monday, October 20, just before 7:00 AM, Lou Van Velzen was crossing the street on Sloat Boulevard and 43rd Ave on his way to the gym for his workout. He never made it. A woman driving on her way to an appointment ran him over. Lou was a close friend and someone I admired.

My wife went to grammar school and high school with Lou’s daughter, and our families have been close ever since. Lou was at our wedding, our two daughters’ baptisms and graduations, and it is our annual ritual to visit the Van Velzen’s every Christmas. At Christmas, I would talk and laugh with Lou, and he would tell me amazing stories with his heavy Dutch accent. My daughters even called him “Opa” (grandpa in Dutch).

Lou worked for years at the Chronicle, and had you met him you would never forget his smile and warmth. Even though Lou was 87, I never thought of him as old. He was vibrant and sharp and always exercised. I could always count on Lou. Lou was a buddy and touched my life. I will miss him deeply.

On October 23, Priscila Moreto (I knew her by Precy) was run over by a motorized cable car as she walked in the crosswalk on Polk Street outside City Hall. She worked for the Controller’s Office and we helped each other on numerous occasions. She was professional, and was always there if I needed assistance. She too didn’t make it. Both Lou and Precy were St. Gabriel parishioners.

On that fateful October Monday Lou became a statistic. As did Precy. My heart goes out to their families and loved ones. Both were irreplaceable. My heart also goes out to those who took their lives accidently, since they have to carry that weight with them for the rest of their lives.

As of Nov 1, 14 pedestrians, including Lou and Precy, have been killed in collisions on our City streets this year. 11 of the 14 pedestrians killed this year were struck in “high injury corridors” that are known to City officials to be dangerous.

Per the Chronicle’s City Insider’s article “S.F. slow to tame its mean streets” dated Nov 2, in regard to pedestrian deaths on our city streets, “Alarmed by last year’s uptick, city officials vowed to do better, created a public awareness campaign and adopted a ‘Vision Zero’ plan with the aim to eliminating traffic deaths in 10 years. But Moreto’s death left some wondering why no improvements have been made to the dangerous Polk Street crosswalk outside City Hall in the seven years since Leal (former head of the Public Utilities Commission Susan Leal) was hit — and whether city officials are paying pedestrian safety more than just lip service.”

Lou and his family were very concerned about the speeding traffic on Sloat Boulevard, and that it was just a matter of time before another accident occurred. I was told Lou called the city numerous times on this matter.

City Hall has plenty of money to put traffic signals in these high injury corridors. They have so much money that when the Board of Supervisors passed, in October, a measure to legalize short term rentals of homes, they rejected $25 million due in back taxes from Airbnb.

I recommend that the City get out of their “Let’s Set Up a Task Force” or “Let’s Do Another Study” mode, and be more like Nike and “Just Do It.” It will save lives. It might even save the life of someone close to your heart.

Contact your District Supervisor and let them know that enough is enough. One life taken is too many.

Let’s stop this before it happens again.

Happy Holidays! – And please drive safely.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

December 2014

Let the Farce Be With You!

By John Farrell

I have been to Paris, London, Rome, Stockholm and many other amazing places around the world. I have to admit that New York City is exciting and gives you one helluva adrenalin rush. But to me the most beautiful City in the world is my forever home, San Francisco. Even though I am a fifth generation San Franciscan, every time I cross the Golden Gate Bridge and see that beautiful city landscape I am in awe. It touches me deeply, like I’m watching William Wallace in ‘Braveheart’ fight to the end for the freedom he believes in and never sways from his dream. I am a sentimental fool.

How can such a wealthy City be in such poor condition. Muni needs $10 billion. The homeless program is mediocre. The Planning Department is understaffed and backlogged. The ambulance crisis. The Assessor is losing hundreds of millions annually. We are in drastic need of affordable housing. Panhandling is an epidemic. Buildings are going up like crazy but our infrastructure and water are at risk. What the hell is going on! The answer is quite simple. No leadership or vision.

We are known as the City that knows how, but are becoming the City that knew how. Over the last few years we lost the 49ers. We lost the Lucas Museum that should have never been allowed to leave this City. We lost America’s Cup. In my opinion, we have lost out direction on where we are heading. But I will never lose hope since I am an extreme optimist. As Steve Perry says, “Don’t Stop Believing.”

We all get wrapped up in our worlds, whether it is making our mortgage or rent payments. Putting food on the table and roof over our heads. Raising our children or taking care of an elderly family member. Taking care of the sick, needy and those less fortunate. Helping in our neighborhoods. Donating to the charities and programs that are close to our hearts. I believe in President Kennedy’s words,” Ask not what your country can do for you. Ask what you can do for your country.”

We count on our elected officials, but it is time people start realizing they are not getting the job done. In private industry if you do not do the job you are fired or demoted. In government you become Lt Governor, or become a member of the Assembly. San Francisco deserves a Mayor to lead the City with a vision which we haven’t had in twenty years. We need solutions, not rhetoric. We need to stop looking at race, color, gender, sexual orientation, and, as Martin Luther King said, “But by the content of their character.” Character with qualifications, that is. Once we do this then this great City will have direction and focus on the main issues. And the main issues are those that are in the best interest of the City and County of San Francisco.

Mayor Lee was appointed to be an interim mayor until a real mayor was elected. This wasn’t the case since he went against his word and won reelection with the help of a flawed rank choice voting system, a system in which you are elected without a majority vote. I have been raised that you are only as good as your word and hand shake. It doesn’t mean much to most people anymore but I stand by mine.

When the 2011 election was over, Mayor Lee had 59,775 votes out of 197,242, or 30.3% of the vote, before the rounds of the rank choice voting. After the rank choice voting rounds Mayor Lee won with 84,457 votes, or 42.8% of the total ballots cast. There were 52,524 votes that were exhausted, meaning these voters didn’t vote for either of the two remaining candidates. In other words, these votes didn’t count. This to me is unconstitutional. By the way, I get a kick because rank choice voting was to save tax payer monies and then the City decides to provide public financing for elected positions.

Mayor Lee’s record includes positives which include bringing tech firms to the City, cutting the unemployment rate, and reforming the City’s pension program and payroll tax. But let’s face the fact, pension reform wouldn’t have been addressed if it wasn’t for Jeff Adachi.

There are also negatives like supporting the 8 Washington Street development to build luxury condos above the height requirements, which was defeated by the voters in 2013. Also why would a standing Mayor have Willie Brown negotiate a Muni contract when anyone in their right mind would have given the drivers what they deserved.

Currently the issue at hand is to remove the Fire Chief. Whether you like the Fire Chief or not, which I do, I can tell you one thing, Joanne Hayes-White will never sell out the City. And as Al Pacino said in the movie Scent of a Woman, “That is called integrity.”

Prior mayors like Joe Alioto, Diane Feinstein, Art Agnos and Frank Jordan made decisions on what they believed was in the best interest of the City, whether you agreed with them or not. You never felt that the City was losing its direction.

Mayor Lee will probably be re-elected in November 2015 with substantially less than the majority of the voters due to the faulty ranked choice voting system. Whether you vote for him or not, we want our Mayor to do what is in the best interest of the City and to lead by example.

We are the City that knows how. We need our Mayor to step up and take the lead.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

Let’s Be Honest - No on Prop A!

By John Farrell

On June 2nd I attended a meeting of the West of Twin Peaks Council. San Francisco Municipal Transportation Agency (SFMTA) Chief Ed Reiskin was on hand to speak on the Transportation 2030 Initiative (which subsequently became Prop A on the ballot) and explained that the City has neglected investing in transportation infrastructure for decades.

In short, Muni needs $10 billion but the City has only committed $3.5 billion. Per Mr. Reiskin, the initiative asks voters to approve a General Obligation Bond of $500 million to fund urgent projects and improve the infrastructure without raising the property tax rate. I thought to myself, that’s a deceptive spin by Mr. Reiskin. Right out of the gate and you are already trying to manipulate voters. If you didn’t know anything about the property tax rate and you heard this statement you would think that there would be no costs to a taxpayer. Let’s be honest, it will cost taxpayers. When I asked Mr. Reiskin directly how much this Bond would cost each taxpayer he did not know the answer.

Let’s go back in time. On June 6th 1978, California voters passed Proposition 13, which established a maximum property tax rate of one percent (1%) of the assessable value of a property, but the total tax rate may also include additional tax rates from bond indebtedness approved by two thirds of the voters. For example, the property tax rate for 2013 was 1.188%, which reflects the 1% tax rate, plus .188% bond indebtedness approved by voters for school bonds, infrastructure, and other public projects. As a result, if the voters approve a new General Obligation Bond, the property tax rate goes up; when that bond retires, the property tax rate is reduced.

What Mr. Reiskin implied was that since certain bonds are retiring, they would offset the increase to the taxpayer if Prop A passed. However, Mr. Reiskin avoided the point that if Prop A doesn’t pass, then the tax rate would drop, reflecting a savings to the taxpayer, an amount Mr. Reiskin had no clue of at the time.

The voter pamphlet recently came out with the Controller’s Statement on Prop A, which provides that “the highest estimated annual property tax cost for these bonds for the owner of a home with an assessed value of $500,000 is $91.02.” It does cost the taxpayer.

Prop A includes vague language such as “Projects to be funded under the proposed Bond may include but are not limited to...” and “A portion of the bond may be allocated to…” Taxpayers should be concerned that Prop A is not specific on how the bond monies are to be spent. In other words, if Prop A is passed, the SFMTA has the authority to spend $500 million any which way it pleases. This is bad government.

It is all good that our City officials want to improve services and maintain our infrastructure, but before you start inundating the voters with initiatives, I would highly recommend you look into your own backyard. Because if you did then you would not be putting measures like Prop A to the voters.

Over the past year I have written articles identifying close to $200 million in tax revenue that is not currently being appraised by the Assessor’s Office, such as the unconstitutional loophole in the Presidio Trust that tax exempts tenants, the non-assessment of naming rights at AT&T Ballpark, the PG&E franchise fee by the SBE, and the appalling appeal by the Giants to reduce its Ballpark value to $140 million after they built it 2000 for over $350 million, to name a few. If these high profile properties are not being assessed appropriately, then what about other properties in the city. Just think, this $200 million in tax revenue not being addressed appropriately is just from a handful of properties and represents 10% of the City’s total annual property tax revenue. This $200 million would go along way for our Muni infrastructure without asking taxpayers to pay the bill, and save hundreds of millions in interest payments.

Mayor Lee, before any monies are requested from taxpayers in the future, “Audit the revenue practices of our revenue generating City Departments.” Have Grand Jury and Harvey Rose audit recommendations been implemented? Are all City department lands that are rentable leased out and if not, why not? Have all backlogs, such as building permits, been addressed? Have all studies been done to insure rental rates, permits, licenses, boat berths, etc...are at fair market and taxed accordingly? I can tell you as a fact they are not.

These are the facts. Not the Spin.

Let’s be Honest - No on Prop A.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

First Step: Admit You Have a Problem?

By John Farrell

After nearly a year and a half after being appointed Assessor-Recorder by Mayor Lee, Former Supervisor Carmen Chu now admits in the Examiner on July 20th that the office has major problems. The article “Can Carmen Chu Beat City Hall’s Paper Chase?” written by her friend Joel Engardio came out two weeks after the July/Aug edition of the Westside Observer with my article “When Will San Francisco Take the Assessor Seriously?”

In my article, I noted that since the two-term limit passed in 1990 there have been five Assessors all politicians. Before the two-term limit, the Assessor came up thru the ranks and had the experience and qualifications needed to run the office, just like it is in the real world in private industry. However, this is government and, as you know, qualifications are secondary to political payback. Three of the five former Assessors resigned and were replaced with Mayor appointments, the current one being Carmen Chu, who was being termed out as District 4 Supervisor, needed a place to go, and was appointed by Mayor Ed Lee.

Mr. Engardio’s Examiner article notes “The assessors’ office was in disrepair because it has a troubled history. It had a dysfunctional bureaucracy in which millions of dollars went uncollected any given year… Chu’s most immediate predecessor twice sought higher office.”

In other words she is blaming, through Mr. Engardio, former Assessors, including current Assemblyman Phil Ting, for not resolving these problems and leaving her a mess to clean up. As Former President Ronald Reagan used to say, “There you go again.” This is exactly what the prior two Assessors, Teng and Ting, did with their predecessors.

She does admit that the office is losing millions that went uncollected. By the way, millions do not go uncollected, since that is the job of the Treasurer/Tax Collector and Mr. Cisneros would be very upset to hear this. The Tax Collector’s Office has an outstanding collection rate. Millions in property tax revenue are lost since many properties are not being appraised appropriately, as noted in the State Board of Equalization’s (SBE) Report on the San Francisco City and County Practices Survey dated June 2013. The SBE noted “We found a number of parcels that were not assessed even though the Assessor was aware of the transfer” and that “the Assessor’s failure to assess new construction as of Jan 1st is contrary to statutory provisions and results in a loss in revenue and inaccurate assessments.”

Based on my own 35 years of experience in private industry and government (of which 12 years were in the Assessor’s Office), and on discussions with former and current staff members, a professional, qualified and independent Assessor means at least $100 million more annually in tax revenue to the City.

Over the past year I have written articles identifying close to $200 million in tax revenue to the City that is not currently being appraised by the Assessor’s Office, such as the unconstitutional loophole in the Presidio Trust that tax exempts tenants, the non-assessment of naming rights at AT&T Ballpark, the PG&E franchise fee by the SBE, and the appalling appeal by the Giants to reduce their Ballpark value to $140 million after they built it 2000 for over $350 million, to name a few. If these high profile properties are not being assessed appropriately, than what about other properties in the city. Just think, this $200 million in tax revenue not being addressed appropriately is just from a handful of properties and represents 10% of the City’s total annual property tax revenue. This $200 million would go along way for affordable housing. Is this the tip of the iceberg?

Over the past year and a half, I have personally talked with Mayor Lee, Assessor Chu and several of the Supervisors, and all are fully aware that potentially hundreds of millions of dollars are not being addressed in the Assessor’s Office.

Mr. Engardio’s article reports “San Francisco’s City Hall still relies on antiquated computer systems and a lot of paper…. That’s why Chu is desperate to modernize her office.” The prior two Assessors Ting and Teng also complained about the systems being used in order to cover their butts. “There you go again.” It is easy to point fingers; it’s a bigger thing to address the issues.

I was lucky to work in the Assessor’s Office with Les Cazzaza, who is one of the best in the state in ownership transfers. Les and I took the bull by the horns and spent over five years developing and implementing the Assessor’s existing assessment system, which revolutionized how valuations and ownerships transfers are processed. When this system went live in 2000 we picked up over one billion in appraised value from values that had fallen off the assessment roll or were not calculated correctly. This resulted in over $10 million annually in tax revenue to the City that otherwise wouldn’t had been received. The recent SBE Survey noted that this system met their requirements in processing assessment roll changes. By the way, San Mateo County is currently using this system as well.

Is this system perfect? Of course not. But it was light years ahead of what was being done and was state of the art at that time. Keep in mind everything prior to 2000 was done manually. For example, prior to the implementation of this new system, on a typical home sale an appraiser would calculate the value of the property and manually fill out forms for the supplemental (and could fill out two supplemental forms depending on the transfer date) and the current roll value, and then submit to a clerical unit for data entry which would take up to several months to input. Now, under the new system which streamlined the process, once the value is approved by the appraiser, they push a button and the system calculates the values correctly and creates the applicable adjustments (roll correction, escape or supplemental) automatically and is paperless.

Prior to this new system, it took a minimum of 6 to 9 months for a homeowner to get a supplemental notice after the sale of a single family home. With this system’s direct enrollment of single family homes, it takes no more than 60 days after the sale for a homeowner to receive their notice and a subsequent tax bill which meets state requirements.

When Les and I left the office several years later, there was no one in the office who continued to foster the system. Before we left, we setup a process which automatically changes ownership and enrolls values once indexed by the recorder staff. We were also ready to implement an automatic partial ownership transfer process. Both of these processes are still sitting in a test environment over ten years later, gathering dust.

In life, a person should never forget where they come from in order to understand how they got to where they are. In order to understand any operation, you should learn its history so you have an understanding on how to move forward. The last three Assessors - Teng, Ting and now Chu - all have directly or indirectly blamed their predecessors for leaving them with a dysfunctional office, excessive backlogs, and antiquated systems, resulting in millions of lost tax revenue annually. “There you go again.” Assessor Chu now has the opportunity to rectify the situation, which Ting and Teng failed to do.

But the first step is to admit there is a problem.

By the way, thank you to the dozens of people who wanted me to run for Assessor. If it was about being a fifth generation San Franciscan and love for the City; being a dedicated professional and having the qualifications, knowledge and experience needed to lead the office; being independent and working for you and not for a Mayor; setting an example and earning respect of the staff and not being handed the position for political payback; treating all taxpayers fairly and equitably; and bringing in hundreds of millions to the City which would otherwise not be received, which I have done in the past, then I would have highly considered it. But this is not the case. It is about politics and not real substance. Every decision that I would make would be in the best interest of the City, which is not the political thing to do in many cases. This is why taxpayers are not all being treated fairly and equitably. I am a moral leader, not a political follower.

“Everyone should pay their fare share.”

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

September 2014

When Will San Francisco Take the Assessor Seriously!

By John Farrell

We all agree that one of the most, if not the most, important revenue producing department in the City and County of San Francisco is the Assessor’s Office. The Assessor ‘s Office is responsible for identifying and appraising all real and business property within the City and County of San Francisco, resulting in approximately $2 billion in tax revenue annually. These monies provide funding for our Police and Fire, for Social, Recreational and Educational Programs, and for administrative offices such as the Mayor’s Office, Board of Supervisors, and Controller, to name a few. Then why do we not take the Assessor seriously?

Since the two-term limit passed in 1990 there have been five Assessors - All Politicians. Former Supervisor Dick Hongisto, who resigned being Assessor to become Police Chief, later fired for taking neighborhood newspapers; former Supervisor Doris Ward, who hired her campaign manager on a City contract to run her campaign; former Supervisor Mabel Teng, who resigned midway thru her first term in office; Phil Ting, who used public financing to run for Mayor to help boost his bid for the Assembly; and now former Supervisor Carmen Chu, who was being termed out as District 4 Supervisor, needed a place to go, and was appointed by Mayor Ed Lee. I wished her good luck on her new position.

If this were private industry, none of these people would be considered for the Assessor position based on their qualifications and experience. Before the two-term limit, the Assessor came up through the ranks and had the experience and qualifications needed to run the office, just like in the real world in private industry. However, this is government and as you know, qualifications are secondary to political payback. Three of the five former Assessors resigned and were replaced with mayoral appointments. The last real Assessor was Sam Duca, who retired in 1988. I knew Sam and had the opportunity to work with him on several Assessor’s budgets when I worked for the Budget Analyst Office.

The City will receive a substantial increase in property tax revenue due to new construction going on all over the City, and due to transfer tax revenue from increased sales. But those who know the business know these positive increases in tax revenue over the years were made by Assessor staff in spite of these political Assessors. Based on my own experience and on discussions with former and current staff members, the office would do a much better job and increase revenues more if there was a qualified Assessor. In fact, the City would bring in tens and potentially hundreds of millions more in additional tax revenue annually if there was a professional, experienced and independent Assessor, not a politician.

The Assessor’s Office has been backlogged in New Construction for over ten years, as well as in Assessment Appeals, among many. Due to the substantial backlog in new construction, the State Board of Equalization (SBE) noted in their Report on the San Francisco City and County Practices Survey, dated June 2013, that there are lengthy delays in processing building permits and adding value due to the new construction, in numerous cases up to four years after the date of completion, resulting in delayed property tax bills for taxpayers, and delay in collection of tax revenue.

The Assessor’s job is to appraise in-progress new construction as of Jan 1. The SBE found ongoing projects over several years where the Assessor did not enroll any value, even though there was evidence of partially completed projects. The SBE noted that “the Assessor’s failure to assess new construction as of Jan 1st is contrary to statutory provisions and results in a loss in revenue and inaccurate assessments.”

Based on a small sample, the SBE also found many procedural deficiencies, and noted “We found a number of parcels that were not assessed even though the Assessor was aware of the transfer.” Just think if they took a larger sample.

Over the past year I have written articles identifying close to $200 million in tax revenue to the City that is not currently being appraised by the Assessor’s Office, such as the unconstitutional loophole in the Presidio Trust that tax exempts tenants; the non assessment of naming rights at AT&T Ballpark; the PG&E franchise fee by the SBE; and the appalling appeal by the Giants to the reduce its Ballpark value to $140 million after building it in 2000 for over $350 million, to name a few. If these high profile properties are not being assessed appropriately, than what about other properties in the city?

Where is the Chronicle? Where is the Examiner? Where is Harvey Rose? How can a Mayor approve a budget knowing there is this excessive backlog, and that property tax revenues are not being accounted for fairly and equitably? And by the way, we are only talking about the Assessor’s Office, and not taking into consideration other revenue generating departments.

Since the two term limit, the Assessor position has never been taken seriously, and has been considered a place where someone would be politically rewarded and retire at a high pension. However, since Phil Ting became an Assemblyman, it is now looked at as a stepping stone for higher office. I hope the current Assessor will take this opportunity to provide a professional environment, and not just use the position like her predecessors as a place to go for the termed out.

Keep in mind, a professional, qualified and independent Assessor means at least $100 million more annually in tax revenue to the City.

Everyone should pay their fare share.

John Farrell Broker/Realtor– Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

July/August 2014

Thank You 49ers!

By John Farrell

Irecently read the "Season of the Witch" by David Talbot, which I recommend. It is a book that chronicles the stories and events over the past century that have shaped the way San Francisco is today. You cannot really appreciate how amazing this City is unless you know what this City has been through. Being a fifth generation San Franciscan, it brought back a lot of memories. Some good and some
not so good.

Our City was in a terrible state of depression after the assassinations of Mayor George Moscone and Supervisor Harvey Milk, the incomprehensible murders in Guyana by the People's Temple leader, the tragedy of AIDS, and the 1989 Loma Prieta earthquake, to name a few. But San Franciscans always rise up. And one of the main forces that brought our City together was our San Francisco 49ers.

I have been a 49er fan since I can remember, going to Kezar and then Candlestick. But 1981 was a year that I will never forget. If you experienced it, it was Magic. No one will ever forget "The Catch" against the Cowboys in the NFC Championship. After losing in the playoffs to the Cowboys in 70, 71 and 72 it seemed like it would never happen. It was third down and three at the six yard line with 58 seconds left in the game. Just six yards away from getting the "Cowboy monkey off our back." I watched intensely as Joe rolled to the right and was about to be engulfed by the Cowboy rush. It seemed like he was just throwing the ball away but it was snatched high in the air by Dwight for the touchdown. Later to find out that it was a designed play by mastermind Bill Walsh that the 49ers ran over and over at practice. To me, this was the Super Bowl. The 49ers subsequently won the actual Super Bowl against the Bengals, and this set the standard for 49er teams in the years to follow.

When Gavin Newsom became Mayor in 2004 I went up to him in the rotunda at City Hall and congratulated him on becoming Mayor. I also told him to take care of the 49ers, since I had been doing their assessments at Candlestick for years for the Assessor's Office, and that 49er management would always stress to me how poor the condition of the stadium was and how they needed a new one.

Just two years later, the 49ers announced in November 2006 their interest in building a new stadium in Santa Clara. The 49ers had been trying for nine years to build a stadium at Candlestick Point to no avail. Per CSN Bay Area 49ers Insider Matt Maiocco, in explaining why Santa Clara became the focus of the new stadium plans, the 49ers said San Francisco officials were repeatedly warned about problems with the Candlestick plan, and those in power, including then-Mayor Newsom, did not act. And by the way, former Mayor Newsom is an alumnus of Santa Clara University.

Subsequently, Santa Clara voters approved a ballot measure in June 2010 to build the Stadium. Our hearts sank. In January 2011, the City won the bid to host the 2013 America's Cup. I believe the Mayor's Office thought this would detract us from losing the 49ers or somehow make us feel better. Think again.

In October of last year Joe Montana stated "I don't think there was enough of an effort by people in power at the time to try to keep them there. To me, they made a terrible effort to try to keep them in San Francisco."

The 49ers were taken for granted and we lost them. Luckily we kept our Giants. The 49ers will move into Levi's Stadium for the 2014 season and it looks spectacular. We wish the 49ers all the best and we will continue to be their loyal supporters to the end. You will always be our 49ers. Thanks for the memories and let's get that sixth Lombardi!

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Asst. Assessor-Budget/Special Projects, 5th Generation San Franciscan, Westside resident - farrellreinvestments@yahoo.com

June 2014

A Giants Appeal

By John Farrell

We all love our 2010 and 2012 World Champion Giants and wish them all the best in 2014. But I also want to see the team do right by San Franciscans.

The Giants organization built its’ ballpark for over $350 million in 2000 and pay the Port $1.2 million annually under a 66 year lease for the 12.5 acre land site. An ownership transfer in CA includes a lease of 35 years or more. Therefore the Giants have ownership of the land as well as the improvements. And by the way, it is a spectacular ballpark and the “Best in Baseball.”

The 2012 property assessment of the ballpark was approximately $196.8 million, at least $200 million under value in my opinion, resulting in a property tax loss to the city of over $2.3 million annually. Yet the Giants are appealing even this $196.8 million assessment, seeking to reduce the value to $140 million, an additional revenue loss to the city of over $650,000 annually. Per the Assessment Appeals Board, this appeal has been postponed and will not be heard until late September at the earliest, as well as the 2013 assessment appeal.

When I worked in the San Francisco Assessor’s Office years ago, one of my assignments was to value the Giants ballpark. After construction was completed in 2000, a principle appraiser, a senior manager, and I met with Giants management in 2003 to finalize the ballpark value. I have worked with the Giants management numerous times in the past on their assessments at Candlestick and they have always been professional, courteous, and fair.

Both parties agreed that a cost approach would be the preferred method of valuation and agreed on costs of approximately $350 million up to that point. The only difference in the final valuation being challenged was a marketing cost of $7 million in assessed value, reflecting $80,000 in tax revenue. The Giants agreed to a middle ground to increase the assessment by $4 million. I advised the senior manager to accept this middle ground since it was reasonable and since the Giants already agreed to the approximate $350 million construction cost. It was a win-win for both the Giants and the city.

The senior manager refused and would not budge on the $7 million assessed figure, reflecting a difference of only $35,000 in tax revenue. Giant’s management left the office very upset. I looked at the principle appraiser and he also couldn’t get over that we wouldn’t work with the Giants. I had worked closely with this principal appraiser over the years and we always got the best and fairest value for the city. I left the office a year later and the Giants subsequently appealed and received a reduction of $200 million in assessed value and have been receiving a reduced assessment ever since.

When a taxpayer files an appeal for a reduction in property value under Proposition 8, it is generally due to a decrease in value as the result of a stagnant economy. I can understand the Giants asking for a reduction if their revenues were going down and justify it. Without the ballpark, the Giants would not receive its revenues from the tickets, vendors, restaurants, advertising, cable TV, etc. Its revenues continue to grow, which is wonderful. But in my opinion and experience, the Giants should have never received such a reduction in assessment.

The proposed reduction to $140 million makes no sense. The land assessment alone is at least $40 million from the capitalization of lease payments to the Port leaving the balance of $100 million for the improvements. This doesn’t even take into consideration fair market value of the land. What are 12.5 acres worth in San Francisco in one of the most coveted neighborhoods like South Beach?

Naming rights were never assessed. Pacific Bell paid $45 million for naming rights in 2000 over 25 years, which was subsequently transferred to AT&T. What are these naming rights worth today? Keep in mind that the 49ers/York and Levi Strauss & Co recently entered into a naming rights agreement for a 20-year, $220 million deal at $11 million annually. Are you telling me the Giants naming rights are not worth at least half this amount when its contract with AT&T expires?

If a high profile assessment like the ballpark is not being valued appropriately, than what about other properties in the city. If the Giants are getting a tax break what are the Warriors expecting.

I appeal to the Giants owners and management to withdraw all their assessment appeals, which are insulting to the taxpayers of San Francisco, and continue to be the class act that they are. This appeal is from a fifth generation San Franciscan who has been a Giants fan since I can remember and had the privilege to see the two Willies, Juan, the Clarks, the Bonds and other Giants greats along the way.

Everyone should pay their fair share.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Assistant Assessor-Budget and Special Projects, 5th Generation San Franciscan, Westside resident

May 2014

If You Build It, Then Use It.

By John Farrell

In writing this article on the recycled water project at the City-owned Sharp Park Golf Course in Pacifica, the movie Field of Dreams with Kevin Costner comes to mind, a touching baseball story about a farmer who hears a voice. “If you build it, he will come.” So the farmer builds a baseball field in his cornfield and players from the past show up to play ball. One of the players in particular is his father as a young man. But enough of this sentimental gem. In regard to the Pacifica Recycled Water Project, a voice in my head says “If you build it, then use it.” And here is why.

In 2008, the San Francisco Public Utilities Commission (PUC) and the North Coast County Water District (NCCWD) entered into a contract to build a recycled water system from the Pacifica’s Calera Creek sewer treatment facility to the Sharp Park Golf Course, which is under the jurisdiction of the Recreation and Park Department (Rec & Park), and to five other nearby recycled water customers including Oceana High School, Lacy Middle School and the Sharp Park Beach Promenade. Funding for the $8.8 million project comes from our City ($4.8 million), NCCWD ($1.6 million) and from Federal monies ($2.4 million). The project consists of a new pump station, approximately 3 miles of distribution pipeline, and a 400,000 gallon storage tank, saving 50 million gallons of potable water annually.

The Pacifica Recycled Water Project replaces freshwater from Hetch Hetchy with recycled water to irrigate the Sharp Park Golf Course, the biggest customer in the project. This project is expected to deliver up to 80,000 gallons of recycled water daily to irrigate the golf course, saving over 29 million gallons of drinking water annually!

The project was put on hold in 2009 for review of the preservation of a habitat for several endangered species at the Sharp Park Golf Course. After a 7 month study, the Rec & Park Commission adopted a resolution to renovate the 80 year old golf course in conjunction with the endangered species habitat restoration in the lakes at the western edge of the course. In January 2011, the Rec & Park Commission unanimously approved a Memorandum of Understanding with the PUC to move forward with the project.

The construction of the recycled water project was completed in March 2012 and over the past year recycled users in Pacifica, such as the Lacy Middle School, have benefitted from the recycled water. However, two years after the construction, Rec & Park has not turned on its part of the project, since they are still in the process of retrofitting the golf course in order to adapt to the new system.

Our City is committed to conserve our precious drinking water, and to using our resources as effectively as we can, in addition to providing a drought-resistant water source and decreasing waste water discharge into the Pacific Ocean.

Hey Rec & Park! Let’s get this up and running. “If you build it, then use it.”

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former City Assistant Assessor-Budget and Special Projects, 5th Generation San Franciscan, Westside resident

An Appeal to Mayor Ed Lee?

By John Farrell

Muni needs $10 billion, the Homeless program is mediocre, the City is in dire need of affordable housing and we lost the 49ers to Santa Clara to name a few. On the other hand, unemployment is low and the City will receive a healthy increase in property tax revenue due to new construction going on all over the City.

I appeal to the Mayor to put a moratorium on any new proposals to increase taxes or fees until all revenue-generating City departments audit and report on potential revenues. Over the past year I have written articles identifying close to $200 million in revenue to the City that is not currently being addressed. Is this the tip of the iceberg? You decide.

In February, I reported that PG&E is getting a $5.2 million annual tax break. PG&E's franchise fee is subject to property tax but is not reflected in the annual appraisal, by the State Board of Equalization (SBE). The Assessor's Office should work closely with SBE staff to insure a fair market franchise fee assessment is accounted for in the SBE's annual appraisal resulting in property tax revenue to the City of approximately $5.2 million annually (based on a market franchise fee of 3%).

Keep in mind we were just reviewing the property tax revenue from the franchise fee of PG&E. There are numerous companies with franchise fees that should also be assessed, resulting in additional millions to the City annually. There is also a potential increase in the existing PG&E franchise fee, set in 1939 to fair market, resulting in from $27 to $45 million annually to the City (reflects a 3% to 5% fair market franchise fee) compared to the existing payment to the City of $5.5 million (based on the existing franchise fee of ½% electrical and 1% of gas from PG&E's gross receipts).

In December, I reported that the City is losing at least $10 million a year in property tax revenue and well over $100 million from the Presidio Trust since inception due to an unconstitutional loophole in the Presidio Trust Act that allows that tenants are exempt from all taxes. This includes transfer tax. Further, if the Lucas Plan for a Presidio Museum is approved, the City will lose at least $8.1 million annually in property tax.

In 1989, the federal government closed the Presidio as a military base. Since the Presidio is no longer for military use, the federal government transferred jurisdiction to the Golden Gate National Recreation Area (GGNRA) in 1994. Did this transfer to GGNRA end its tax-exempt status? Could the city now tax private tenants? This has never been addressed.

Due to this unconstitutional loophole, the City is losing an additional $12.5 million from the recent sale of Lucasfilm to Disney in 2012 (based on a 2.5% transfer tax on a conservative $500 million assessment). An ownership transfer in CA includes a lease of 35 years or more. Lucasfilm had a 66 year lease at the Presidio transferred to Disney. Per the CA Rev & Taxation Code this is a legal transfer, with which the SBE will concur. There is no rationale why there is no transfer tax.

The City has decided to adhere to the legislation by Congress to tax exempt tenants at the Presidio, even though Congress does not have the authority per Article 1 Section 8 of the Constitution which provides the Powers of US Congress. In other words, this provision is unconstitutional.

In Nov, I reported that AT&T's naming rights at the Ball Park are subject to property tax but were never valued by the Assessor's Office. In 2000, Pacific Bell paid $45 million for naming rights over 25 years, which were subsequently transferred to AT&T in 2006. If valued accordingly, AT&T should be paying the City at least $525,000 annually (based on a 1.1691% tax rate on a $45 million assessed value). The Assessor's Office can go back 4 years and even longer since AT&T's naming rights agreement is unrecorded. Therefore, AT&T should receive tax bills for approximately $4.2 million, reflecting 8 years of benefits for the naming rights.

In Oct, I reported that the City is subsidizing San Mateo County for Police and Fire at San Francisco International Airport (SFIA). Since SFIA is located in San Mateo County, all property taxes at SFIA are paid to San Mateo County. Property taxes pay for public services such as Police and Fire. The $11.6 million in property taxes received annually by San Mateo County from SFIA should be reimbursed to San Francisco to help defray the costs of Police and Fire services at SFIA.

In July, I appealed to the Giants owners and management to withdraw all their current assessment appeals, to reduce their 2012 Ball Park assessment from $196.8 assessment to $140 million, a potential tax revenue loss of over $650,000 annually. The Giants built their ballpark for $355 million in 2000 and lease land from the Port. The 2012 assessment of $196.8 million is already at least $200 million under-assessed, in my opinion, resulting in an annual loss of tax revenue of over $2.3 million annually. If the Giants are getting a tax break, what are the Warriors expecting.

These are a few examples of properties that are not assessed or under-assessed. If these high profile assessments are not being assessed appropriately, then what about other properties in the city?

Mayor Lee, before any monies are requested from taxpayers, audit the revenue practices of our City departments." Have Grand Jury and Harvey Rose audit recommendations been implemented? Are all City department lands that are rentable leased out, and if not, why not? Have studies been done to insure rental rates, permits, licenses, boat berths, etc...are at fair market and taxed accordingly? I can tell you as a fact they are not.

These are the facts. Not the Spin.

Everyone should pay their fair share.

March 2014

Why is PG&E getting a $5.2 million
annual tax break?

By John Farrell

While most properties are reappraised upon ownership transfer or completion of new construction per Prop 13 by County Assessors' offices, privately held public utilities, such as the Pacific Gas and Electric Company (PG&E), are assessed statewide by the State Board of Equalization (SBE. These utility properties are not subject to Proposition 13 and are annually reassessed at fair market value.

In 1939, the City granted PG&E and its successors two franchises to use city streets to transmit, distribute, and supply electricity and gas. The City further gave PG&E the right to use power and gas lines on public property "in perpetuity." In consideration for the two franchises, PG&E annually pays a franchise fee to the City based on a percentage of gross receipts from the sales of electricity and gas in the City. The franchise fee rates are 0.5% for electricity and 1% for gas.

The SBE values utility companies like PG&E based on a historic cost less depreciation and/or an income approach. Per the SBE, their annual appraisal does not reflect an amount for the franchise fee even though it is suppose to.

Per the Controller's Office Franchise Fee Audit of PG&E dated June 18, 2012, following are the franchise fees paid to the City in 2009 and 2010:

Based on an annual franchise fee of approximately $5.5 million per the Controller's Office audit, PG&E should be paying the City at least $1.052 million annually in property tax for the franchise fee (based on a 1.1691% tax rate on a $90 million assessed value). This $90 million assessed value reflects the present value of the $5.5 million annual payment to the City over 35 years @ 5% interest rate. Since the PG&E franchise agreement is in perpetuity, I used 35 years, which reflects a transfer of a fee simple ownership per the CA Revenue & Taxation Code.

However if we assess the franchise fee based on fair market, then the assessed value would be substantially increased. For example, San Diego Gas and Electric currently has a 50 year franchise executed in 1970 for 3%. Los Angeles has a franchise agreement on a year-to-year basis at 2%. San Jose is 2.3%. Berkeley is 5%.

If we used a fair market franchise fee of 3% then the assessed value would be approximately $442 million. This $442 million assessed value reflects the present value of a $27 million annual payment (3% fair market franchise fee of approximately $900 million – PG&E's gross receipts from the sale of electricity and gas) over 35 years @ 5% interest rate. This would result in approximately $5.2 million annually in property tax for the franchise fee (based on a 1.1691% tax rate on a $442 million assessed value).

Why is PG&E getting a $5.2 million annual tax break? PG&E's franchise fee is subject to property tax but is not reflected in the annual appraisal by the SBE. The Assessor's Office should work closely with SBE staff to insure a fair market franchise fee assessment is accounted for in the SBE's annual appraisal, which would result in property tax revenue to the City of approximately $5.2 million annually (based on a franchise fee of 3%).

Keep in mind we are just reviewing the property tax revenue from the franchise fee of PG&E. There are numerous companies with franchise fees that should also be assessed, which could result in addition millions to the City annually. This analysis also doesn't include a potential increase in the existing PG&E franchise fee set in 1939 to fair market, i.e. at least $21.5 million annually to the City ($27 million to reflect a 3% franchise fee less the existing payment of $5.5 million).

Everyone should pay their fair share.

Notes: Gross receipts reported by PG&E are net of uncollectible accounts and interdepartmental sales. Franchise fee rates are 0.5 percent of electricity receipts and 1 percent of gas receipts

Source: PG&E certified statements of gross receipts

John Farrell Broker/Realtor® – Farrell Real Estate , MBA, Former City Assistant Assessor-Budget and Special Projects, 5th Generation San Franciscan, Westside resident

February 2014

The Unconstitutional Truth about the Presidio

By John Farrell

When Congress established the Presidio Trust in 1996, they wanted to insure its financial stability. Congress believed taxing private tenants at the Presidio impeded the Trust’s financial stability. Congress even enacted specific legislation in the Presidio Trust Act to insure that tenants were tax exempt. The only problem is that Congress doesn’t have the power to tax exempt tenants under the Constitution of the United States of America.

In 1897, the State of California ceded to the United States exclusive jurisdiction on all lands held for military purposes which included the Presidio. Military installations are federal enclaves and are exempt from state authority. Per legal counsel of the State Board of Equalization, a “federal enclave” is a property over which the federal government holds exclusive jurisdiction.

In 1989 the federal government closed the Presidio as a U.S Army Post. Since the Presidio was no longer being used for military use, the federal government transferred jurisdiction to the Golden Gate National Recreation Area (GGNRA) in 1994 to be used for natural, historic, cultural and recreational purposes.

Did this transfer to the GGNRA cause a retrocession of jurisdiction to the State of CA in order to permit the City to tax the third party beneficiaries at the Presidio? Did this transfer negate the concept of “federal enclave” and “exclusive jurisdiction” since the Presidio is no longer used for military purposes and the City could now tax those properties being used for private benefit which include Disney, a golf course, a sporting goods store, restaurants and housing for more than 3500 people. This issue has never been addressed.

The Presidio Trust was created by Congress in 1996 for a dual purpose: to rehabilitate and repurpose the Presidio’s historic buildings and environmental resources, and to operate the site as a vibrant public park independent of annual taxpayer funds.

In the establishing of the Trust, Congress’s concern was with the City’s potential assessment of possessory interests (property tax). In California, any private party that leases, rents or makes payments for use of government owned property is subject to property tax.

In order to curtail the possible assessment of property tax, Congress enacted legislation that was signed into law by President Clinton on November 29, 1999. Public Law 106-113 (HR 3194) includes specific language providing that, “The Trust and all properties administered by the Trust and all interest created under leases, concessions, permits and other agreements associated with the properties shall be exempt from all taxes and special assessments of every kind in the State of California, and its political subdivisions, including the City and County San Francisco.”

Our City Attorney, as well as our Congressional Representative, has the opinion that all third party interests for private benefit under the Presidio Trust’s jurisdiction are tax exempt since Congress enacted this legislation specifically in the Presidio Trust Act.

This language confirms Congressional intent that private tenants at the Presidio are exempt from all forms of state and local property taxes. The only problem is that if Congress enacted the Presidio Trust Act to exempt third party use for private benefit in the Presidio, they do not have the authority to do so per Article 1 Section 8 of Constitution, which provides the Powers of US Congress. This is Unconstitutional.

Because of this unconstitutional loophole the City is losing at least $10 million annually in property tax revenue and well over $100 million from the Presidio Trust since inception. This amount doesn’t include the loss of revenue from other taxes such as transfer tax. Further, if the Lucas Plan for a Presidio Museum is approved, the City will lose at least $8.1 million annually in property tax revenue.

The City is losing an additional $12.5 million from the recent sale of Lucasfilm’s to Disney in 2012. (This $12.5 is based on a 2.5% transfer tax rate on a conservative $500 million assessment value.) An ownership transfer in CA includes a lease of 35 years or more. Lucasfilm had a 66 year lease at the Presidio that was transferred to Disney. I would love to see the opinion on this transfer by the State Board of Equalization, which governs Assessors Offices in the State, since it is a legal change in ownership with no transfer tax charged.

Why should private users on other government owned properties be subject to property tax while those using the Presidio properties to their private benefit are not? For example, housing on Treasure Island, managed by John Stewart Property Management, is subject to property tax. However, housing in the Presidio, also managed by John Stewart, is exempt from property tax per the Presidio Trust Act.

The City has made the decision to adhere to the legislation by Congress to tax exempt tenants, even though it is unconstitutional.

Contact the Mayor’s Office to have the City reconsider their decision to not tax private users at the Presidio, since it is unconstitutional and could result in at least $100 million in revenue to the City from current and back taxes, and increase tax revenue annually to the City by a minimum of $10 million. The City should work closely with the Presidio management and our Congressional representative to correct this unconstitutional situation and to insure that current and future tenants at the Presidio pay their fair share of taxes like everyone else.

Further, the Assessor’s Office should immediately impose a transfer tax on the sale of Lucasfilm’s property in the Presidio to Disney, resulting in at least $12.5 million to the City and, if challenged by the terms of the Presidio Trust Act, have a court decide if a transfer tax is due. Per the CA Rev & Taxation Code, this is a legal transfer with which the State Board of Equalization will concur. There is no rationale why there is not a transfer tax imposed.

Everyone should pay their fair share.

John Farrell Broker/Realtor MBA, Former Assistant Assessor-Budget and Special Projects, Westside resident

December 2013

Why is the City Giving AT&T a $4.2 Million Tax Break?

By John Farrell

Naming Rights are a major source of income for Ballparks and Stadiums. What are these naming rights worth? In the case of the 49er's new stadium in Santa Clara, Levi Strauss & Co recently entered into a naming-rights agreement for a 20-year, $220 million deal with a $11 million annual payment.

Did you know naming rights are subject to property tax when they are located on government owned property? When I worked in the Assessor's Office years ago, we were the first in the State of California to value naming rights for 3Com when they were at Candlestick Park from 1995 to 2002.

The Giants Ballpark was completed in 2000, and subsequently appraised at the cost approach in 2003. Naming rights were never valued. In 2000, Pacific Bell paid $45 million for naming rights over 25 years, which was subsequently transferred to AT&T in 2006. If valued accordingly, AT&T should be paying the City at least $525,000 annually (based on a 1.1691% tax rate on a $45 million assessed value). The Assessor's Office can go back 4 years and even longer since AT&T's naming rights agreement is unrecorded. Therefore, AT&T should receive tax bills for approximately $4.2 million, reflecting 8 years of benefits for the naming rights.

Why is San Francisco giving AT&T a $4.2 million tax break? AT&T's naming rights are subject to property tax but were never valued by the Assessor's Office. The Assessor's Office should appraise AT&T's naming rights at the Ball Park as of transfer date in 2006 and issue escape assessments back to 2006 resulting in $4.2 million to the City and at least $525,000 annually. Everyone should pay their fair share.

John Farrell Broker/Realtor® – Farrell Real Estate, MBA, Former Assistant Assessor-Budget and Special Projects, City and County of San Francisco, 5th Generation San Franciscan, Westside resident

November 2013

Why is San Francisco
Subsidizing San Mateo Police and Fire?

By John Farrell

We all read about the Asiana Airline crash back in July at San Francisco International Airport (SFIA). Our Police and Fire did an admirable job handling the situation. But why are we subsidizing San Mateo County for these critical services?

SFIA is owned by the City and County of San Francisco and is located in San Mateo County. All airlines, venders and private parties who use space for private benefit at SFIA are subject to possessory interest tax/property tax. Since SFIA is located in San Mateo County, all property taxes at SFIA are paid to San Mateo County. Property taxes pay for public services such as Police and Fire.

San Francisco currently pays for all the costs of Police and Fire services at SFIA. Per the Annual Appropriation Ordinance for FY2013-14, SFIA provides funding of $49,827,889 for Police and $21,536,412 for the Fire Department.

For FY2013-14, the assessed value of all private users at SFIA is approximately $1.057 billion, per the San Mateo Assessor’s Office. Therefore, San Mateo County will receive approximately $11.6 million in property tax revenue and will pay nothing towards Police and Fire services at SFIA.

It is a county’s responsibility to provide public services such as Police and Fire within the county. Why then are we subsidizing San Mateo County for Police and Fire at SFIA? Shouldn’t the $11.6 million in property taxes received by San Mateo County from SFIA be reimbursed to San Francisco to help defray the costs of Police and Fire services at SFIA? This is only fair.

John Farrell is an MBA, Broker/Realtor® – Farrell Real Estate Investments. Former Assistant Assessor, Budget and Special Projects, Fifth Generation San Franciscan, Westside resident.

October 2013

Presidio Museum?

More Revenues Lost

By John Farrell

You might have read recently that Mayor Lee likes the Lucas Plan for a Presidio Museum. Well, here we go again. First off let me say this. I am a big George Lucas fan and remember being one of the first in line to see Star Wars at the Coronet in 1977. I've watched all six episodes, as well as all Indiana Jones and American Graffiti movies. This matter has nothing to do with George Lucas personally, but with fairness.

The $700 million proposed Lucas Museum is one of three finalists for the former commissary site at Crissy Field now occupied by Sports Basement. If approved, the City will "lose at least $8.1 million annually in property tax revenue, which would otherwise provide funding for our City services. The other two finalists are from the Golden Gate National Parks Conservatory, and a joint proposal of a local architect and museum consultant in Washington, DC.

This $8.1 million annual loss is in addition to at least $10 million annually in property tax revenue currently lost from existing tenants in the Presidio. To date, the City has lost well over $100 million in just property taxes since the creation of the Trust. This $100 million does not include other taxes, such as transfer tax; the City is losing an additional $12.5 million from the recent sale of Lucasfilms to Disney in 2012 (based on a 2.5% transfer tax rate on a conservative $500 million assessment value).

How is this possible? This is possible due to an unconstitutional loophole in the Presidio Trust Act that allows that all properties administered by the Trust, and all interest created under leases, concessions, permits and other agreements associated with the properties, to be exempt from all taxes.

In California, any private party that leases, rents or makes payments for use of government owned property is subject to a possessory interest tax (property tax). Why should private users on other government owned properties be subject to possessory interest tax while those using the Presidio properties to their private benefit are not? Let me put this in perspective: a vendor selling hot dogs in Golden Gate Park pays property taxes, while a restaurant in the Presidio pays nothing. This is unfair and inequitable taxation.

The City Attorney, as well as our Congressional Representative, has the opinion that all third party interests for private benefit created under leases, concessions, permits and other agreements under the Presidio Trust's jurisdiction are tax exempt, since Congress enacted legislation specifically in the Presidio Trust Act. This is unconstitutional.

We all agree that the Presidio Trust itself is exempt. However, if Congress enacted the Presidio Trust Act to exempt third party use for private benefit in the Presidio, they do not have the authority to do so per Article 1 Section 8 of Constitution, which provides the Powers of the US Congress.

In 1897, the State of California ceded to the United States exclusive jurisdiction on all lands held for military purposes, which included the Presidio. Military installations are federal enclaves and are exempt from state authority. This exemption is no longer the case since the Presidio is no longer being used for military use, due to the federal government transfer of jurisdiction to the Golden Gate National Recreation Area (GGNRA) in 1994 to be used for natural, historic, cultural and recreational purposes. The Presidio Trust was subsequently created by Congress in 1996 for a dual purpose: to rehabilitate and repurpose the Presidio's historic buildings and environmental resources; and to operate the site as a vibrant public park, independent of annual taxpayer funds.

The issue that needs to be challenged is whether the transfer from the Department of Defense to the GGNRA caused a retrocession of jurisdiction to the State of CA, in order to permit the City to tax the third party beneficiaries at the Presidio.

Should the City look further into this matter, which could result in at least $100 million in revenue to the City from current and back taxes, and increase tax revenue annually to the City by a minimum of $10 million? And $8.1 million annually more if the Lucas plan for a Presidio Museum is approved?

I recommend the Assessor impose a transfer tax on the sale of Lucasfilms' property in the Presidio to Disney. Per the CA Rev & Taxation Code this is a transfer, with which the State Board of Equalization (SBE) will concur. There is no rationale for not doing so.

How does the sale of Lucas to Disney have any effect on the operation of United States government, and what right does Congress have to deny a transfer tax of at least $12.5 million that every entity outside the Presidio pays? Per Article 1 Section 8 of the constitution of the United States, Congress has no right. This matter needs to be challenged in a higher court. It is unconstitutional.

John Farrell, MBA, Broker/Realtor® – Farrell Real Estate Investments. Former Assistant Assessor, Budget and Special Projects, City and County of San Francisco

August 2013

An Appeal to the Giants

By John Farrell

The San Francisco Giants Ballpark is a high profile assessment. We all love our World Champion Giants. The Giants built their ballpark for $350 million in 2000, and lease land from the Port for a total assessment (in 2000) of close to $400 million. The current assessment for 2012 was approximately $196.8 million, at least $200 million under assessed, in my opinion, resulting in a loss of over $2.3 million annually.

I just got word that the Giants are appealing this $196.8 assessment to reduce their value to $140 million, a potential additional revenue loss of an over $650,000 annually. I guess since they received a big reduction in the past, why not ask for more?

When I worked in the Assessor's Office years ago, one of my areas of expertise was in possessory interest, which is when property tax is charged to private parties that use government lands for private benefit. One of my assignments was to value the Giants Ballpark.

After the construction of the Giants Ballpark was completed in 2000, I, along with a principal appraiser and one of the new Assessor's Senior Managers, met with the Giants management in 2003 to finalize the assessment for the ballpark. I had worked with the Giants management numerous times in the past and they had always been professional, courteous and fair.

Both parties agreed that a cost approach would be the preferred method of valuation, and the agreed costs up to that point were around $350 million. The only difference in the final valuation that was being challenged was a marketing cost of $7 million in assessed value, which reflects around $80,000 in tax revenue. The Giants agreed to a middle ground to increase the assessment by $4 million. I advised the Assessor Senior Manager to accept this middle ground since it was reasonable, and since the Giants already agreed to the approximate $350 million construction cost. It was a win win for both the Giants and the City.

The Assessor's Senior Manager refused and would not budge on the $7 million assessed figure reflecting a difference of approximately $35,000 in revenue. Giant's management left the office very upset. I looked at the principal appraiser who was there, and he also couldn't get over that we wouldn't work with the Giants. I had worked closely with this principal appraiser over the years on management contracts, advertising rights, concessions, etc., and we always got the best and fairest value for the City. I left the office a year later. The Giants subsequently appealed and received a reduction of around $200 million in assessed value, and have been receiving a reduced assessment ever since.

When a taxpayer files an appeal for a reduction in property value (Prop 8), it is due to the value of the property going down as the result of the economy, for example. I can understand the Giants asking for a reduction if their revenues were going down, and could justify it. Without the Ballpark the Giants would not receive their revenues from the tickets, vendors, restaurants, advertising, cable TV, etc. Their revenues continue to grow, which is wonderful. But in my opinion and experience, the Giants should have never received such a reduction in assessment.

The proposed reduction to $140 million makes no sense. The land assessment alone is at least $40 million from the capitalization of lease payments to the Port, leaving the balance of $100 million for the improvements.

Naming rights were never assessed. Pacific Bell paid $45 million for naming rights in 2000, which was subsequently transferred to AT&T. What are these naming rights worth today? Keep in mind that the 49ers/York and Levi Strauss & Co recently entered into a naming-rights agreement for a 20-year, $220 million deal at $11 million annually. Are you telling me the Giants naming rights are not worth at least half this amount when their contract with AT&T expires?

I appeal to the Giants owners and management to withdraw all their assessment appeals, which are insulting to the taxpayers of San Francisco, and to continue to be the class act they are, and to meet with the Assessor's Office to determine a fair value of the Ball Park as we started to do back in 2003 before being derailed. This appeal is from a fifth generation San Franciscan who has been a Giants fan since I can remember, and had the privilege to see the two Willies, Juan, the Clarks, the Bonds and other Giants greats along the way.

John Farrell, MBA, Broker/Realtor® – Farrell Real Estate Investments. Former Assistant Assessor, Budget and Special Projects, City and County of San Francisco

July-August 2013

What is the Integrity of the City’s Revenues?

By John Farrell

Residents of our City are concerned about the costs of government, such as health care and pensions. But let’s ask the other question. What is the integrity of the City’s revenues? Can the City do a better job? Keep reading and you decide.

All revenue generating departments should be audited for potential revenues. For example, the City is losing a minimum of $10 million to $100 million annually in revenue from just the Assessor’s Office.

I previously reported in the March edition of the Westside Observer that the City is losing at least $10 million a year in lost property tax revenue and well over $100 million from the Presidio Trust since inception due to an unconstitutional loophole in the Presidio Trust Act that allows that all properties administered by the Trust and all interest created under leases, concessions, permits and other agreements associated with the properties to be exempt from all taxes. This includes transfer tax. Consequently, the City is losing $12.5 million from the recent sale of Lucasfilm to Disney in 2012, based on a 2.5% transfer tax rate on a conservative $500 million assessment value) I would love to hear the response of the State Board of Equalization, since this is a legal transfer with no transfer tax charged.

The Giants are a high profile assessment. We all love the Giants. The Giants built their ballpark for $355 million in 2000, and lease land from the Port, for a total assessment of around $400 million (in 2000). The current assessment for 2012 was $180 million, at least $200 million under assessed, resulting in a loss of over $2.3 million to the city annually. Did you know the Giants are the only assessment under ownership in the City that is depreciated, while all other properties are increased 2% by Prop 13? If the Giants are getting a $2.3 million annual tax break, what are the Warriors expecting?

This doesn’t even consider naming rights to the ballpark, for which Pacific Bell paid $45 million in 2000, which was subsequently transferred to AT&T. We are getting nothing for these naming rights, which are subject to possessory interest/property tax, reflecting a loss of $500,000 annually. By the way, 3Com paid property tax for naming rights when they were at Candlestick Park.

These are examples of properties that are not assessed or under assessed. If these high profile assessments are not being assessed appropriately, then what about other properties in the city?

I get very upset when I see employees in the trenches worried about their jobs or getting laid off because many revenues that the city can bring in are not being considered. Audit the revenues. Have Grand Jury and Budget Analyst Harvey Rose’s audit recommendations been implemented? I could go on all day.

John Farrell, MBA, Realtor/Broker of Farrell Real Estate Investments, former Assistant Assessor for Budget and Special Projects, City and County of San Francisco and Westside resident.

The Presidio Pays Its Way, at a Cost to the City

By John Farrell

We all read recently that the Presidio Trust is now financially independent. However does anyone realize that it costs the City at least $10 million a year in lost property tax revenue and well over $100 million since the creation of the Trust. This $100 million doesn’t even include other tax revenue lost such as a transfer tax of at least $12.5 million from the recent sale of Lucasfilm’s to Disney in 2012 (2.5% transfer tax rate on a conservative $500 million assessment value). An ownership transfer in CA includes a lease of 35 years or more. Lucasfilm had a 66 year lease at the Presidio that was transferred to Disney.

In 1897, the State of California ceded to the United States exclusive jurisdiction on all lands held for military purposes which included the Presidio. Military installations are federal enclaves and are exempt from state authority. Per legal counsel of the State Board of Equalization, a “federal enclave” is a property over which the federal government holds exclusive jurisdiction.

In 1989 the federal government closed the Presidio as a U.S Army Post. Since the Presidio is no longer being used for military use, the federal government transferred jurisdiction to the Golden Gate National Recreation Area (GGNRA) in 1994 to be used for natural, historic, cultural and recreational purposes.

The Presidio Trust was created by Congress in 1996 for a dual purpose: to rehabilitate and repurpose the Presidio’s historic buildings and environmental resources, and operate the site as a vibrant public park independent of annual taxpayer funds.

Per Section 103, Provision 9 of The Presidio Trust Act “The Trust and all properties administered by the Trust and all interest created under leases, concessions, permits and other agreements associated with the properties shall be exempt from all taxes and special assessments of every kind in the State of California, and its political subdivisions, including the City and County San Francisco.”

In California, any private party that leases, rents or makes payments for use of government owned property is subject to a possessory interest tax (property tax). For example, housing on Treasure Island, managed by John Stewart Property Management, is subject to possessory interest tax. However, housing in the Presidio, also managed by John Stewart, is exempt from possessory interest per the Presidio Trust Act. Why should private users on other government owned properties be subject to possessory interest tax while those using the Presidio properties to their private benefit are not? This is unfair and inequitable taxation.

When asked why possessory interest taxes and transfer taxes are not applicable on Presidio Trust properties used by third party interests for private benefit, which would result in millions to the City annually, the answer is that the land is a “Federal Enclave” with “exclusive jurisdiction” or that the language in the Trust specifically disallows it.

Some have the opinion that the transfer of jurisdiction to the GGNRA negates the concept of “federal enclave” and “exclusive jurisdiction” since the Presidio is no longer used for military purposes and the power of “exclusive jurisdiction” is specifically for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings. Currently, under the Presidio Trust Act, some properties are being used for private benefit such as the Disney Museum, Lucasfilm, a golf course, a sporting goods store, restaurants and housing for more than 3500 people and not for needful federal purposes.

The City Attorney, as well as our Congressional Representative, has the opinion that all third party interests for private benefit created under leases, concessions, permits and other agreements under the Presidio Trust’s jurisdiction are tax exempt since Congress enacted legislation specifically in the Presidio Trust Act. This is unconstitutional.

We all agree that the Presidio Trust itself is exempt. However, if Congress enacted the Presidio Trust Act to exempt third party use for private benefit in the Presidio, they do not have the authority to do so per Article 1 Section 8 of Constitution, which provides the Powers of US Congress. Therefore since Congress does not have the power to tax exempt third parties, then this provision is void. The only power Congress has is through “exclusive jurisdiction” which is for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful buildings.

The state of CA ceded to the Federal government exclusive jurisdiction of Presidio lands for military use which is no longer the case. The issue before us is whether the transfer from the Department of Defense to the GGNRA caused a retrocession of jurisdiction to the State of CA in order to permit the City to tax the third party beneficiaries at the Presidio.

What do you think?

Should the City look further into this matter which could result in at least $100 million in revenue to the City from current and back taxes and increase tax revenue annually to the City by a minimum of $10 million. The Assessor could assess the tenants and the transfer of Lucasfilm to Disney and have a court decide. The City could obtain a judicial determination of the City’s right to tax possessory interest in Presidio properties held for private benefit. Or the City could file a declaratory relief action against one of the tenants in order to conserve resources with a more expeditious result to name a few.

Or just leave it the way it is. Unfair and inequitable taxation.

John Farrell, MBA, Broker/Realtor, Farrell Real Estate Investments DRE#00940255

Former Assistant Assessor, Budget and Special Projects, San Francisco

Laguna Honda update

Save the Skilled Nursing Beds at Laguna Honda

By John Farrell

In 1999, voters approved Prop A for the rebuild of Laguna Honda Hospital (LHH) which was to provide 1200 skilled nursing beds for San Francisco’s frail elderly and physically disabled. To date, only 780 of these beds are scheduled to be built and if certain groups such as, San Francisco Independent Living Resource Center (ILRC) and Planning for Elders in the Central City (PECC), get their way there will be even fewer.

These groups are asking Mayor Newsom to divert the monies from the rebuild project to housing and services in the community, leaving the Laguna Honda Hospital with a much smaller skilled bed capacity than currently planned.

Cutting the already reduced 780 skilled nursing beds at LHH spells disaster. As our society grows older there will be an increase demand for facilities, such as LHH, that can provide skilled nursing beds. For example, the Northern California/Northern Nevada Alzheimer’s Associations’ projects that by the year 2020, San Francisco will have 10,000 people over the age of 85 with Alzheimer’s alone.

Many San Francisco facilities are currently cutting their bed count. 120 skilled nursing beds were recently closed at the Community Convalescent Hospital. St. Francis Hospital is planning to eliminate 34 skilled nursing beds. Sutter Health is also planning to close St. Luke’s Hospital, that means another 79 skilled nursing beds will be lost. Combined with the already planned elimination of 420 beds out of its original 1200 bed capacity at LHH, these closures total a loss of 653 or 22% of SF’s approximately 3,000 skilled nursing beds.

This radically reduced amount of skilled nursing beds leaves many San Francisco elderly and physically disabled people in danger of not having proper care.

We need to make sure that the City of San Francisco abides with its obligations of Prop A and provides these necessary skilled nursing beds at LHH. Let your voice be heard! Please contact your district Supervisors (www.sfgov.org) and let them know that you are against any reduction of skilled beds at LHH.

John Farrell is the Chair of San Franciscans for Laguna Honda

February 2013