Printer-friendly PDF file
Westside Observer Newspaper
June 2018 at www.WestsideObserver.com
The $310 Million Housing Bond
Affordable Housing Bond Continuing Oddities
by Patrick Monette-Shaw
Changes to planned spending have plagued the affordable housing bond all along, after voters passed the bond in November 2015. The history of planned bond spending changes has been remarkable.
Affordable Housing Bond Purposes Change Again
Now as of May 2018, there are even more changes to bond spending.
On July 28, 2016 the Mayor’s Office of Housing and Community Development (MOHCD) informed the Citizens’ General Obligation Bond Oversight Committee (CGOBOC) that between January 2016 and July 2016 MOHCD had eliminated both the “Middle-Income Rental Program” and the “Expiring Regulations Preservation” subcategories from the “Middle-Income Housing” main category of bond uses. Three new subcategories appeared on July 28 that had not been previously listed in previous documents describing planned bond uses. The three new categories were “Middle-Income Teacher Housing,” “Middle-Income Buy-in Program,” and “Middle-Income MOHCD Production,” none of which were previously disclosed by MOHCD.
The Westside Observer reported in March 2017 that by CGOBOC’s October 3, 2016 meeting MOHCD had eliminated the “Middle-Income Buy-in Program” first rolled out on July 28, 2016, a sub-component of planned bond spending that appears to have existed for just a two-month period.
Similarly, nobody knew about the proposed 150-unit senior housing project at 250 Laguna Honda until it suddenly appeared in MOHCD’s bond update presentation to CGOBOC on January 26, 2017. It was a massive “change order,” insofar as it came out of nowhere well into the first year of the affordable housing bond oversight hearings when it first appeared. Just like the “Middle-Income Buy-in Program” first introduced in July 2016 and then removed in October 2016, the 250 Laguna Honda senior housing project introduced in January 2017 also disappeared from bond spending 10 months later on November 20.
Planned bond spending is changing again, six months after MOHCD presented bond spending plans to CGOBOC on November 20, 2017.
Here We Go Again …
Three of the semi-annual reports MOHCD has provided to CGOBOC include reports for CGOBOC’s hearing on July 28, 2016, CGOBOC’s hearing on November 20, 2017, and CGOBOC’s hearing on May 21, 2018. The three reports document substantial changes to planned bond spending across the past two years.
Table 1: Changes to Planned Spending of the November 2015 $310 Million Affordable Housing Bond
Table 1 illustrates that between November 2017 and May 2018, the number of affordable housing units in the $100 million “Low-Income Housing” main sub-category dropped by 246 units. That includes a decrease of 264 units at 250 Laguna Honda Boulevard and 4840 Mission Street, and an increase of 18 units in the Small Sites program within the “Low-Income Housing” category, for a net reduction of 246 fewer units, a negative 38.7 percentage change cut.
As well, between November 2017 and May 2018 the “Teacher Next Door” program is cutting support to 190 teachers (potentially miserly “forgivable loans” that may be just $5,000 each loan). The reduction from 250 to just 60 Teacher Next Door loans represents a negative 76 percentage change cut.
As for the cut from 64 to just 21 units in the “Middle-Income MOHCD Production” category represents a negative 67.2 percentage change reduction.
The combined cut of 43 units in the “Middle-Income MOHCD Production” category, the elimination of 246 “Low-Income Housing” units, and the 43-unit reduction in the “Middle-Income MOHCD Production” category — offset by modest increase of 82 units in “Public Housing” and the DALP loan expansions — total an overall 397 reduction of affordable housing units to be funded by this bond. The overall loss of 397 planned units from the bond funding — from 1,785 to 1,388 units — represents a negative 22.2 percentage change cut, all within the six-month period between November 2017 and May 2018.
Table 1 also illustrates that fully $18.92 million is being shifted from the “Middle-Income MOHCD Production” category to the “DALP” (Down Payment Assistance Loans) category, to fund an additional 63 DALP loans, at an average of $300,317 per loan. It’s not known how many of the DALP middle-income applicants may include above moderate-income households, a question that CGOBOC has so far failed to examine in detail during the five hearings CGOBOC has held on the bond starting in January 2016.
Where’s the Metrics?
As the Westside Observer in reported June 2016, the inaugural hearing on the affordable housing bond held on January 28, 2016 was pathetic, as neither MOHCD nor CGOBOC had thought ahead about what sort of reporting requirements — evaluative “metrics” to report and evaluate various and diverse categories within the bond — would be used by CGOBOC to assess progress on the bond. The reporting metrics hadn’t been developed by January 28.
In June 2014, the 2013–2014 Civil Grand Jury issued a blistering report about MOHCD titled “The Mayor’s Office of Housing: Under Pressure and Challenged to Preserve Diversity.” The Civil Grand Jury’s sixth “finding” noted MOHCD lacks discipline in posting and reporting affordable housing metrics and program results reporting on its website. The Grand Jury recommended MOHCD publish those metrics with greater frequency to help the public assess progress of MOHCD’s new development and housing efforts.
Back in January 2016 when CGOBOC held its first hearing on the affordable housing bond, several CGOBOC members expressed the need to develop “metrics” to assess bond spending. CGOBOC member Brenda Kwee McNulty specifically fretted on January 28, 2016 about the lack of metrics to evaluate bond spending. During the discussion about developing metrics, McNulty astutely noted:
“But I think it’s helpful to be able to at this early stage of the game [to] lay out those areas, or categories of returns … so that we can go back [later to] evaluate how successful ... what our return was for the whole bond program. So, the relative returns of these categories will also shed some light into whether or not we made the right allocation decisions.”
McNulty has not followed up since January 2016 about the lack of metrics having been developed. Throughout 2016 and 2017, MOHCD has stalled developing in collaboration with CGOBOC any meaningful metrics. Here we are two-and-a-half years after the inaugural CGOBOC hearing in January 2016, and metrics still don’t appear to have been developed.
What’s taking CGOBOC so long to develop the measures that will be used to assess progress on, and performance of, this bond measure? It’s thought following CGOBOC’s May 21 hearing, it will not hold another hearing on the affordable housing bond measure until later in 2018. Will CGOBOC insist by November 2018 that the metrics must be defined?
Ethics Commission Fines MOHCD's Previous Director
As the Westside Observer previously reported in April 2015, leading up to the November 2015 $310 million Affordable Housing Bond ballot measure, Kate Hartley — the then-Deputy Director of the Mayor’s Office of Housing and Community Development who is now the Director of MOHCD — pushed an e-mail on January 27, 2015 to City Hall staff, including to MOHCD’s then-Director, Olson Lee. Hartley indicated she had reduced planned bond spending for the middle-income housing category, and proposed allocating $20 million of the then-planned $250 million bond to be set aside for a “Catalyst Fund Top Loss” component to fund low- to middle-income affordable housing programs.
As reported in April 2015, a January 15, 2015 a press release from then-Mayor Ed Lee summarizing his January 2015 State of the City address claimed he would create a new investment fund to launch more affordable housing projects:
“The Mayor will create an accelerator fund, with private and philanthropic partners, to accompany bond financing, seeding public-private partnerships that will enable nonprofits to act quickly and complete [sic; “compete”] on the open market to purchase land for construction of affordable housing and buildings to be improved as permanently affordable units.”
A 2014 report from the Mayor’s Housing Work Group noted that a “Housing Affordability Fund” — ostensibly separate and distinct from the Housing Trust Fund approved by voters in 2012 — would be established via a public-private partnership. The Housing Work Group report stated the accelerator fund would leverage limited public dollars for housing by pursuing development of the Housing Affordability Fund as an “off balance-sheet” fund.
As we reported in April 2015:
“For anyone who was invested in Enron, off-balance sheet (OBS) financing is a scary term. Off-balance sheet financing means a company does not include a liability on its balance sheet. It is an accounting term and impacts a company’s level of debt and liability.”
A week after Hartley pushed her January 27, 2015 e-mail, on February 3, 2015 a replacement proposal removed the Catalyst Fund Top Loss component from the planned affordable housing bond spending. But the Catalyst Fund proposal didn’t just go away.
Within a year, the City launched the “accelerator” fund on February 2, 2016, reorganizing the Public Initiatives Development Corporation (a public entity formed by the Redevelopment Agency prior to its dissolution) into the Housing Accelerator Fund. MOHCD staff and the Mayor’s staff, in consultation with other City departments, managed this reorganization. The Housing Accelerator Fund is a registered 501(c)(3) non-profit organization, and it eventually received a $10 million loan from MOHCD, presumably from MOHCD’s larger Housing Trust Fund, not from the $310 million Affordable Housing Bond. The Housing Accelerator Fund was the only non-profit entity that responded to MOHCD’s request for qualifications/proposal (RFQ/RFP).
San Francisco’s Campaign and Governmental Conduct Code prohibits City employees from engaging in activities that their city departments have identified as incompatible in a Statement of Incompatible Activities (SIA). Each city department’s SIA is unique outlining activities that are specific to their departmental missions.
The Mayor’s Office SIA provides in § III(A)(3)(B) that the following activity is incompatible and, therefore, prohibited with the duties of Mayor’s Office employees:
“No employee who works in the following divisions of the Mayor’s Office — the Mayor’s Office of Housing, the Mayor’s Office of Community Development, or the Mayor’s Office of Criminal Justice — may serve on the Board of Directors of a non-profit organization that applies for loan or grants administered by the employee’s division.”
The Housing Accelerator Fund by-laws required that the Director of MOCHD and the Director of the City’s Office of Public Finance serve on the Board as ex officio representatives from the City and County of San Francisco. Of interest, the Housing Accelerator Fund has not responded by press deadline to a request placed on May 15 whether its Board of Directors meetings are open to the public, whether its meeting minutes are published on-line, and for its IRS Form 990 tax returns.
The Ethics Commission eventually got wind that when the Housing Accelerator Fund was created, MOHCD’s then-director, Olson Lee, served on the Board of Directors for the HAF from its inception until his retirement on June 2, 2017.
The Ethics Commission notified Olson Lee on October 4, 2016 that he appeared to have violated MOHCD’s SIA.
A year-and-a-half later, the Ethics Commission entered a “Stipulation” in mid-April 2018 with Mr. Lee. The Ethics Commission’s Stipulation noted:
“[Mr.] Lee should have obtained an Advance Written Determination prior to serving as a board member for the Housing Accelerator Fund [HAF]. Instead, Respondent Lee obtained an Advance Written Determination from Mayor Lee only after Ethics Commission Staff inquired [in October 2016] whether his service on the HAF Board was an incompatible activity under the Mayor’s Office SIA and after having participated in a decision to make a grant to a non-profit organization for which he served as a board member.”
The May 7, 2018 Stipulation also noted:
“As director of MOHCD, Respondent Lee oversaw the staff that drafted the RFQ and subsequent selection of the Housing Accelerator Fund as the recipient of this $10,000,000 loan during the same period he was also serving as an ex officio member of the Board of Directors for the Housing Accelerator Fund.”
The Stipulation fined Olson Lee a mere $800 for having violated the SIA. Ethics could have fined Lee up to $5,000 for the violation, but just slapped him on the wrist with the reduced fine. As a Department Head who reported directly to then Mayor Ed Lee, Olson Lee should have been keenly aware of the prohibited incompatible activity he was engaging in, and he should have sought an advanced written determination prior to serving on the HAF’s board of directors. Ethics should have thrown the book at Olson Lee by imposing the maximum fine, since he was a department head who was also not above the law.
The fine against Olson Lee was levied by the Ethics Commission primarily because he didn’t obtain an advance written determination seeking an exemption to the Mayor’s Office SIA from Mayor Ed Lee prior to serving on the Housing Accelerator Fund’s board, although Olson Lee eventually received a written determination from Mayor Ed Lee, but only after Ethics had caught him with his pants down and notified him of his failure.
Homeowners Didn’t Kill 250 Laguna Honda Project
Forest Hill neighbors were falsely accused of killing the senior housing project proposed for 250 Laguna Honda Boulevard. That’s a complete lie that deserves to be corrected in the public record.
Several factors are what killed the project, not the neighbors. First, the Planning Department strongly objected to demolishing the existing Forest Hill Christian Church on the property, given the probable historical status of the church’s “Expressionist” architecture.
Second, the draft Langan Engineering geotechnical report for the 250 Laguna Honda project commissioned by the developer, Christian Church Homes (CCH), was released on January 2, 2018. The draft report noted significant shoring up of the hillside behind the property would be required to prevent homes along Castaneda Avenue from tumbling down the hill either during construction, or during a major seismic event.
Obviously, the Forest Hill neighbors did not write the Langan report.
Third, on March 19, 2018 in response to a follow-up records request MOHCD’s Director, Kate Hartley, wrote by e-mail:
“The reduced footprint required to accommodate both the church and the unstable hillside meant that 250 Laguna Honda was likely no longer a large development but instead average in size (maybe 70 to 80 units). For this size development … MOHCD determined that its money could be better deployed elsewhere.”
Hartley’s e-mail response mentioned not one word in her March 19 response saying the project was dropped due to opposition from neighbors. Her response only presented the financials that eventually killed the project.
It’s a sad day for journalism when a neighborhood newspaper — the Westside Observer — has to correct inaccurate reporting in San Francisco’s mainstream news media outlets. But the Westside Observer may be happy to do so as a civic duty to correct false mainstream media reports.
On April 12, 2018 the San Francisco Examiner published an article by Joshua Sabatini that was both inflammatory, and factually incorrect. One person who posted an on-line comment to Sabatini’s article noted the Examiner was “demonizing San Francisco homeowners and ignoring the facts.” She wrote, in part:
“Reporters [like Sabatini] want to make people angry at the neighbors and create discord because fake news sells [newspapers]. They don't want to tell the facts, they want to create a YIMBY vs. NIMBY fantasy world.”
Sabatini wrongly reported:
“The Forest Hill [senior housing] project was scrapped due to neighborhood opposition amid escalating cost concerns and a geotechnical report finding a nearby slope unstable and in need of shoring up — after a $2 million investment from bond funds.”
Sabatini referred ecliptically to a mandated “report” released in March 2018. He sloppily didn’t name the title of the report he was referring to.
In response to a records request placed with Kate Hartley at MOHCD the same day Sabatini’s article appeared in print, Hartley responded by e-mail “[MOHCD] did not advance any funds to Christian Church Homes [for the 250 Laguna Honda project], nor did we sign a predevelopment loan agreement. We don’t have records responsive to your request.”
After MOHCD had initially funded the 250 Laguna Honda project using the $310 million Affordable Housing Bond in January 2017, MOHCD changed its mind and notified CGOBOC on November 20, 2017 that the $3 million in “Prop. A” funding for 250 Launa Honda had been re-allocated to another senior housing project at 1296 Shotwell. MOHCD’s Eugene Flannery responded on January 19, 2018 to a records request, indicating that MOHCD had notified CGOBOC at CGOBOC’s November 20 meeting that the 250 Laguna Honda funding was being removed from planned bond spending and transferred to another project. Flannery noted that the main reasons for the funding transfer were “delays encountered at 250 Laguna due to the historical findings on the site, the associated environmental approvals, and the extensive community outreach underway.” MOHCD did not cite on November 20 that neighborhood opposition caused re-allocating of the funding. Sabatini should have known that, before writing his April 12 article.
Although MOHCD’s formal report — bearing a September 2017 date on the cover — for CGOBOC’s November meeting continued to list the 250 Laguna Honda project, the formal report noted: “MOHCD has reallocated the funds designated for [250 Laguna Honda] to another, similar project.” In addition, the separate PowerPoint presentation created on November 15 and presented to CGOBOC on November 20 stated funds previously allocated to the 250 Laguna Honda project would be re-allocated to the 1296 Shotwell project.
Also of interest, on March 7, 2018 MOHCD notified Christian Church Homes that MOHCD had decided to withdraw all funding support for the 250 Laguna Honda project, not just withdraw funding support from the bond. How could Sabatini not have known that by April 12?
Sabatini should also have known before publishing his April 2018 article blaming neighborhood opposition that even prior to release of the Langan Engineering report in January 2018, MOHCD had already withdrawn “Prop. A” funding from the project a month-and-a-half earlier in November, and four-and-a-half months before Sabatini’s article appeared in print, and that MOHCD had already notified CCH of the withdrawal of funding earlier on March 7, a month before Sabatini’s article appeared in the Examiner.
Hartley Confirmed Neighborhood Opposition Wasn’t a Factor in Withdrawing Funding
I spoke with Kate Hartley by phone on April 13, 2018. She confirmed the City had not spent one penny of the Affordable Housing Bond on the 250 Laguna Honda senior housing project, so Sabatini’s reporting was factually incorrect. Hartley gave me permission to quote her. She clearly stated:
“Withdrawing from the 250 Laguna Honda Boulevard senior housing project had nothing to do with the neighborhood’s objections.”
Hartley went on to indicate in an April 19 e-mail to this author:
Hartley concluded, saying:
“There would likely be regular deposits of hillside debris onto the housing site, even under static conditions, which would have to be removed regularly. To mitigate against these deposits, the building footprint would have to be reduced, further decreasing the potential unit count at the site.”
Obviously, bond funding cannot be used for on-going maintenance or operating expenses such as on-going debris removal for affordable housing projects.
Hartley — who has worked for MOHCD for four years and four months, worked for eight years and two months for the San Francisco Redevelopment Agency, and worked for another eight years and four months for other housing development corporations, for a total of 20 years and 10 months — indicated on May 18, 2018 that she “doesn’t recall” any proposed MOHCD affordable housing projects that were stopped due to opposition from neighborhood or homeowner objections.
Hartley said that given the risks of the project, MOHCD actually required Christian Church Homes (CCH) to demonstrate the 250 Laguna Honda senior housing project was a worthwhile investment, placing the risks directly on CCH. CCH never demonstrated it was a worthwhile investment. Hartley also indicated that even MOHCD was worried about the stability of the neighbors’ homes at the top of the hillside along Castaneda Avenue.
The only report issued by either MOHCD or CGOBOC in March 2018 Sabatini may have been referring to was the “Accountability Report March 2018” created and released by MOHCD on March 16, a month before Sabatini’s hit piece. [Note: The “accountability” report should have been issued by CGOBOC, not by MOHCD per the 2015 voter guide, and CGOBOC had no business delegating production of that report to MOHCD.] Numbered page 26 of MOHCD’s report obtained from the City Controller’s Office directly contradicted Sabatini’s claim $2 million of bond funds had been expended on the 250 Laguna Honda project:
“The project at 250 Laguna Honda is no longer moving forward due to cost considerations. No bond funds[from the $310 million Affordable Housing Bond] will be spent on this project.”
Sabatini completely overlooked in his April 12 article that almost five months earlier, MOHCD had already re-allocated the planned $3 million bond allocation for the 250 Laguna Honda project to a completely different project in November 2017. Not one penny of the bond was ever actually spent on the 250 Laguna Honda project, and certainly $2 million had not been spent on it.
I spoke by phone again with Ms. Hartley on Friday, May 18 asking whether MOHCD might consider posting a press release on its web site indicating neighborhood opposition had not been what caused MOHCD to withdraw funding from the 250 Laguna Honda Project. Hartley indicated that at this point in time, there was no current “context” in which to belatedly write and post a press release to correct false reporting in the mainstream media.
Instead, Hartley indicated that she would work in a statement during CGOBOC’s May 21 hearing on the Affordable Housing Bond that the decision to withdraw funding had had nothing to do with MOHCD’s decision-making.
Unfortunately, Hartley didn’t carry through. According to an extract of the audiotape of CGOBOC’s May 21 hearing, Hartley stopped short, indicating only “The reason that we [MOHCD] pulled away from 250 Laguna Honda was solely due to the need to be very cost effective in our application of bond funds.”
Shame on Hartley for not stating explicitly on the record that neighborhood opposition had nothing to do with the decision to withdraw funding from the 250 Laguna Honda project. Here’s the timeline of how the funding was pulled from the project:
Table 2: Timeline of MOHCD’s Withdrawal of Funding for the 250 Laguna Honda Senior Housing Project
Hartley failed to tell CGOBOC on May 21 that her March 7 letter to CCH appears to have pulled all MOHCD funding — not just the bond funding — from the 250 Laguna Honda senior housing project.
A Pretext to Deceive?
Of all the reasons offered to explain the withdrawal of funding for the 250 Laguna Honda project, CCH’s new lawsuit appears to allege that the explanations offered to date about why MOHCD dropped funding of the 250 Laguna Honda project may have been pretextual.
More potential proof neighborhood opposition had nothing to do with MOHCD’s decision to withdraw all funding from the 250 Laguna Honda project surfaced in a new lawsuit filed in Alameda County Superior Court on May 17 (Case # RG18905402, Christian Church Homes vs. Philadelphia Indemnity Insurance Company). All of the public reasons MOHCD has offered to date as to why the senior housing project was eliminated from bond spending appear to have possibly been pretexts to mask the real reasons, according to CCH’s new claims and version of events.
Are CCH’s New Explosive Allegations Designed to Claim a Pretext?
As the Westside Observer reported in March 2018, the El Bethel Arms, Inc. vs. Christian Church Homes lawsuit filed in San Francisco Superior Court appears to have potentially contributed more than we knew about what killed the 250 Laguna Honda senior housing project. But City officials have studiously avoided any public discussion about the El Bethel vs. CCH lawsuit, including discussion by D-7 Supervisor Norman Yee.
All along, there has been keen interest in whether the 250 Laguna Honda Boulevard project was killed due to the ugly lawsuits between Christian Church Homes — the 250 Laguna Honda project developer — and El Bethel Arms, involving potential fraud to deprive El Bethel Arms of its ownership of another senior housing project in San Francisco. Hiding public discussion of whether the El Bethel lawsuit may have contributed to the decision to kill the project hasn’t helped.
San Francisco Superior Court Judge Richard Ulmer’s January 16, 2018 tentative ruling in favor of El Bethel (at the expense of CCH) may have contributed to the new CCH lawsuit filed in Alameda Superior Court on May 17.
A five-page extract of the new Alameda Superior Court lawsuit alleges MOHCD exerted significant pressure on CCH to resolve the El Bethel Arms lawsuit, or risk losing the 250 Laguna Honda project. The lawsuit also alleges that MOHCD had apparently made it clear that if CCH did not resolve the El Bethel Arms lawsuit, CCH would lose the Laguna Honda project outright. MOHCD hasn’t admitted so, publicly.
It should be noted allegations raised by CCH in the Alameda Superior Court lawsuit are just that: Allegations that have not yet been fully litigated. There has been no ruling on whether any of the allegations CCH raised will be upheld, or all tossed out.
A summary of the explosive allegations CCH included in the extract of the Alameda Superior Court filing include:
Of note, the allegations CCH raised in its Alameda Superior Court filing contain no dates supporting the basis of the allegations and contains no footnotes or cross-references to other “exhibits” that may be included in the full 544-page Alameda court filing, which has not yet been obtained in full. And CCH’s Alameda Superior Court filing doesn’t explain how CCH was confronted with a dilemma in December 2017, or provide any dates on which Reverend Brown may had summoned parties in the EBA litigation to participate in settlement discussions prior to Judge Ulmer’s January 16 ruling, or provide any dates of the settlement discussions.
Several questions are in order.
Are CCH’s allegations and claims it has now asserted and noted above supported with documented evidence? Why did CCH raise these claims on May 17 in Alameda Superior Court after Judge Ulmer issued his tentative ruling in San Francisco Superior Court on January 16? Did CCH raise the same claims and allegations in the CCH vs. El Bethel lawsuit in San Francisco Superior Court, and if not, why is CCH raising them now?
It’s totally unclear why CCH has raised these allegations in the Alameda Superior Court filing in a case between CCH and CCH’s insurance company, Philadelphia Indemnity Insurance Company. What significance, if any, do these new explosive allegations — that have not been fully adjudicated or resolved by the Alameda Superior Court judge — have to do with CCH’s dispute with its insurance carriers?
A larger question is: Will CCH’s new allegations — if upheld in the Alameda Court case — uncover whether the rationale MOHCD has offered to date about its decision-making to drop all funding support for the 250 Laguna Honda senior housing project had been pretexts to mask other potential politically-damaging factors?
Prelimany Observations on CCHs New Allegations
First, as Table 2 shows, Judge Ulmer’s ruling noted that evidence presented in San Francisco Superior Court “established that CCH had exerted undue influence at the least, if not outright fraud.” Why CCH is alleging in Alameda Superior Court that its insurance company had not paid CCH’s legal expenses in a case involving potential fraud, is somewhat comical because insurance policies typically exclude paying damages to the insured when a case may involve fraud.
Second, when this author forwarded CHH’s Alameda Court lawsuit to MOHCD on May 28 seeking MOHCD’s comment or response to the explosive allegations, MOHCD responded a day later indicating it had not been aware of CCH’s new lawsuit, and because MOHCD had not yet reviewed the full CCH complaint, MOHCD had comment at this time.
MOHCD’s May 29 response denied that MOHCD had pressured CCH into settling the CCH vs. El Bethel lawsuit in San Francisco Superior Court. Ms. Hartley did indicate that while she had personally discussed with CCH staff that if CCH’s lawsuit against El Bethel “resolved badly for CCH, it could be[come] problematic.” But she stated MOHCD had not actually “pressured” CCH, as CCH now alleges in the Alameda Court case.
In response to a question about whether MOHCD had been concerned a verdict against CCH could scuttle the 250 Laguna Honda senior housing project, Hartley wrote in response that MOHCD was “concerned that if the resolution of the El Bethel case went badly for CCH, that could present problems for them.” She also indicated that “neither [MOHCD] nor CCH were immediately clear on what options were available to CCH following the tentative ruling’s publication and what a final decision might look like.”
Hartley avoided, however, answering why MOHCD had made no mention of whether the El Bethel lawsuit may have been a potential contributing factor in MOHCD’s decision-making.
CCH’s new Alameda Court lawsuit seems to have so many holes you could drive an 18-wheeler through it. There’s a lot of unanswered questions. And the lawsuit seems to fail passing the “smell test.”
But we’ll have to see. As the lawsuit advances — or ends on a whimper and is dismissed as unfounded — watch this space.
An Educated Guess: Did Loss of Tax Credit Equity Funding Kill the Project?
The extract of CGOBOC’s May 21 hearing also revealed that Kate Hartley had failed to mention to CGOBOC either in her written report or in her oral presentation that the City has seen a decline of approximately $50,000 per unit in tax credit equity funding since December 2017, until CGOBOC member Robert Carlson asked a related question about the loss of units in the “Low Income Housing” portion of the Affordable Housing Bond. Hartley finally admitted at 43 minutes and 55 seconds into the audiotape:
“Even a year ago, we projected a certain per-unit subsidy, but because of the costs and also at the federal level — I didn’t mention this — but with the federal Tax Reform Act that was finalized in December 2017, we lost approximately $50,000 in equity per unit from our low-income housing tax credit [equity] program. The only source of replacement for those funds is the City. So, we are facing dual challenges: Less assistance at the state and federal level, and higher costs. So that is resulting in … um … higher gap funding on a per-unit basis from us [MOHCD].”
Since the 250 Laguna Honda senior housing project had been relying on $31.5 million in tax credit equity funding towards the $73.5 million in total project costs reported in the March 2018 Westside Observer, did the probable loss of $50,000 in tax equity credits for each of the 150 planned units for 250 Laguna Honda translate into an actual loss of $7.5 million in funding, a loss of fully 10.2% of the total project budget? If you add in the $1.5 million MOHCD prematurely claimed (with no proof or full analysis) would be needed to stabilize the hillside behind the project site, that pushes increased costs to at least $9 million, 12.2% of the projected $73.5 million in the project budget. Could that loss of funding have contributed significantly to killing the project?
Just like City officials have avoided any public discussion of how the CCH vs. El Bethel lawsuit may have contributed to pulling the plug on all funding for the 250 Laguna Honda senior housing project, the City has also studiously avoided discussing publicly whether the significant loss in federal tax credit equity funding may have contributed to funding for not only the 250 Laguna Honda project, but perhaps for many other projects the City is hoping to build to deal given our affordable housing crisis. An educated guess is that the loss of available tax credit equity funds played a significant role in what really caused MOHCD to pull the funding plug at 250 Laguna Honda.
Hartley contributed significantly in failing to mention either the loss of tax credit equity funding, or the El Bethel lawsuit against CCH. Both factors appear to have played prominent roles in killing the 250 Laguna Honda project.
Hartley’s failure to explicitly address either issue during a CGOBOC public hearing, or state address both issues in an MOHCD Bond Accountability written report, is simply shocking that she left the impression in the minds of San Franciscans — and in San Francisco's lazy mainstream media — that it was solely the fault of NIMBY Forest Hill neighbors whose opposition had killed the project.
Leaving that misimpression hanging like an albatross around the necks of Forest Hill homeowners that they had killed the project is totally unfair to them, and is intellectually dishonest on Hartley’s part! She knew for almost six months about the loss of tax credit equity funding, but didn’t say anything about it until May 21, 2018 and then only when questioned.
Her failures bring great discredit on herself, on MOHCD, and on the city of San Francisco. Shame on her!
When Will Changes to the Afordable Housing Bond Spending Stop?
Here we are approaching three years after voters passed the affordable housing bond in November 2015. When will changes to planned spending of the affordable housing bond stop? What types of affordable housing will voters eventually end up getting?
And when will CGOBOC get around to insisting that the metrics to evaluate the bond spending must be developed and fully implemented?
Or will this be yet another bond spent up in smoke?
Monette-Shaw is a columnist for San Francisco’s Westside Observer newspaper, and a member of the California First Amendment Coalition (FAC) and the ACLU. He operates stopLHHdownsize.com. Contact him at email@example.com.