SF needs a mayor who will tax, spend, and regulate

With all the challenges facing the city, the next mayor has to be willing to challenge the corporate, growth, and tech agendas

Consider a short list of the realities facing our next mayor:

  • The social/economic/cultural transformation of the city through unchecked hyper-gentrification caused by a development policy that has, at its heart, maximizing speculative real-estate profit at the expense of existing residents and the businesses and activities that serve them.
  • A local-government public sector dominated by bureaucrats, policies and programs that see “facilitating the market” as the primary goal of government, by advancing expensive “private public partnerships” in which all of the costs are public and all of the profits are private, which leaves fewer and fewer services that benefit residents producing a sullen disregard (and electoral disengagement) for all government amongst our people;
  • An alarming under-investment in our urban public infrastructure — affordable housing, health and human services including effective programs for homeless San Franciscans, public transit, the timely maintenance and expansion of public facilities and the special investment needs of sea level rise/land subsidence — additionally burdened by the recent period of hyper development of dense market rate housing, commercial office expansion and conversion and the unregulated explosion of ride sharing making many of our streets unusable during ever lengthening “peak hours;”
  • A growing assault on local democratic government specifically aimed at San Francisco led by, at the state level, real estate speculators and their legislator allies seeking an end to “local control” to avoid increases in affordable housing requirements and rent control policies and at the national level, by Trumps’ increasingly frantic efforts to change the subject from his own failures by attacking “sanctuary cities” adopted at the local level;
  • The rapidly growing re-segregation of our civic life involving the toxic brew of race and income inequality, fueled by the Lee Administration’s favoring the tech sector and its systematic under employment of people of color and women, and the emergence of a tech and developer funded astro-turf movement of 30-something white people demanding housing polices aimed at displacing lower income residents and communities of color to house them.
The next mayor needs policies that are different from the past

Given these realities, the June 5th election for mayor has the unmistakable feeling of being a directional election defining San Francisco’s future. As an open race with no incumbent running for the first time since the Matt Gonzalez/ Gavin Newsom race of 2003, candidates (and voters) are free to address the impending challenges facing us, free of any necessity of addressing the record of an incumbent.

How that tactical freedom will be used, and what sets of policies and programs candidates will place before us, is yet to be fully seen. But what should be clear to us is that we need a major change of direction from that set by Ed Lee and his allies on the Board of Supervisors. We need a Tax and Spend Regulator in Room 200 — not only to repair the damage of the Lee administration, overcome the costs of its disastrous deferral of the public interest to private gain but also to create a local buffer to the massive deregulation of our public life now underway at both the state and federal levels.

Stop the Bleeding: Tax and Spend

It is established wisdom at City Hall that unlimited development, both commercial and market-rate residential, is essential to the economic well being of the city and that policies that either retard or limit it are both un-needed and wrong-headed.

There are two things very wrong with this view: First, San Francisco is uniquely ill suited for massive growth without massive social cost, namely the displacement of the existing population, and, second, real estate development simply cannot, under current tax policies, off-set the cost to local government it creates.

San Francisco is a physically mature city with all of its land area already developed. Of its 46.7 square miles, only about 23 square miles is available for all forms of development (and about 13 square miles is available for residential development). Mark Twain’s old advice — “buy land, they’re not making it anymore” — does not fully apply, as a recent study has shown that land in San Francisco is actually sinkingat the same time Bay water is rising as a result of weather change and we will actually have less land than we do now.

New development, especially large or dense projects, requires the demolition of existing structures to clear the land for the new uses.

At residentially zoned land with human densities over 60,000 folks per square mile, tens of thousands of San Franciscans have already faced, or face near-future displacement as a result of unchecked development. This is what gives land-use politics it edge in the city — rarely is there a “win/win” for residents in new development proposals, and more often it’s a zero-sum game with real winners and losers. And the losers leave town.

Far too often, unchecked development is also a bad deal economically for the residents who remain, as the demand for public services increases but funds needed to meet the needs of the new office workers or luxury condo owners are simply not generated by the development themselves.

A decline in the quality of public life — parks, schools, Muni service — is more and more noticeable for the simple fact that costs outpace income when property tax increases are restricted by Proposition 13 but growth (and its attendant demand on public infrastructure) is unlimited.

San Francisco is currently undergoing it biggest real-estate driven boom in modern history. New office space is being built at rates equal to the boom of the late 1970s and market-rate housing — unaffordable to all but a handful of current residents — has reached historic levels. For the market lovers, paradise is within view. Yet, in the midst of this development boom, the City Controller’s office, by law required to keep a running tab on our civic balance sheet, reports that we are currently running a deficit of some $200 millionby the fiscal year 2019-20.

In a report issued just after Ed Lee’s death and ignored by the media, a task force on the future funding needs of Muni found that there was a “$22 billion funding gap for San Francisco’s transportation system through 2045” if the current amount of market rate housing and commercial office growth was to continue. That works out to a need of an additional $785 million a year each year (in constant dollars) for the next 28 years to be added to the city’s general fund.

That does not count the recent news that the new Warriors stadium will cost an additional $62million to provide both an expanded platform and the needed new Metro cars to serve it. The Warriors, in a deal negotiated by Mayor Lee, will pay $19 million with public funds picking up the balance.

A study done by an upper division political science/urban studies class I teach at San Francisco State last fall looked at some of the public cost of accommodating some 220,000 new San Franciscans in 100,000 new housing units — the number asserted by SPUR and others that would be needed before any measurable costs reductions would occur – and the results are sobering.

(Students participating in the studies cited above were Kiley Wyart, Claye Fowler, Adian Finn, Julian Patino, Christian Michel, Brandy Gonzalez, Gerardo Gomez, Andres Cortez, Julio Flores, Connor Hochleutner, Luis Lopez, Ivonne Ruiz-Garcia, Sia Tehrani, and Francisco Vega.)

The cost to the San Francisco Unified school district would be an additional $130 million a year, assuming that only 60% of the new school age population — 12,750 of the 21,250 projected new kids in the new housing — would go to public schools.

Using the current department budgets and the current population to determine a resident-per-department cost, the students found the following additional costs per year to the City and County of San Francisco:

Parks: at the current 254 persons per acre of public parks and additional 1,300 acres of parks would have to be added at an additional cost of $50 million a year in operational budgets for Rec and Park;

Health Department: at the current budget of $2,600 per resident an additional $572 million a year would be required;

Police Department: at $668 per resident, the police budget would have to increase by $147 million a year to accommodate the population growth;

Fire Department: at its current budget of $282 per resident, an additional $62 million a year would be needed.

The bottom line of these annual additional costs to the City and County of San Francisco, including Muni, parks, public health, police and fire (but excluding the SFUSD public education costs) is $1.62 billion a year.

To give some context to an otherwise mind-numbing number, it exceeds by more than 40% the $926 million total operating revenue of SF International Airport in 2017, the biggest money maker in city government.

But, wait there is more.

As we all know, Mother Nature bats last. Sea-level rise in the Bay is increasing at an accelerating rate, now that the additional phenomenon of filled land settling has been discovered. There is a ballot measure already being prepared to make a $500 million “down payment” on as much as a final $5 billion bill due to rebuild the three-mile-long “Great Seawall” along the eastern edge of San Francisco.

But the sea wall is merely part of the problem. Far more of the city’s key infrastructure than the sea wall would have to be relocated, not simply rebuilt. For example, Muni’s brand new 8.4-acre Islas Creek Motor Coach Facility, the primary fueling and dispatch center for the Eastern Neighborhoods area, would have to entirely relocated.  While it’s possible to build a floating fire boat station along the Bay (which the city is doing), it’s not possible to have a floating Muni bus yard. Finding a spare eight acres of dry land, and coming up with the funding for a new facility just after the old one was built, will surely add to the $785 million-a-year funding deficit for Muni.

At this writing, there is no official local estimate of how much San Francisco firms will get in the Trump tax cuts, but it will be tens if not hundreds of millions in federal tax savings. The next mayor must present plans and programs to recapture as much of that as possible and apply it to the unmet public needs of the city.

In a late move to get key Senate support, an additional sweetener was added that benefits the developer boom here in San Francisco. Aimed at developers of offices, housing complexes, and apartment buildings, the tax law granted an additional 20% deduction to development firms with few employees. Taxing that windfall tax cut should be a primary objective of the new mayor.

Also high on any list of tax increases is figuring out a way to add additional payments to car-sharing rides in San Francisco. New York just passed a $2.50 a ride tax on ride share trips and we should seek to do so as well.

We are facing enormous public infrastructural costs from unchecked development, which does not pay its own way and which forces out existing residents and businesses that serve them.

Regulate or Die

The only reason San Francisco has a chance to elect a true left/liberal mayor is because of the regulation of its housing market.

Between 1978 and now, some 242,000 units have had some sort of price controls, limiting, at least partially, residents from the harsh blast of the market. At San Francisco’s average of 2.2 persons per household, that’s 532,000 San Franciscans who are protected by local price regulations. The largest number, some 175,000 units, are covered by rent control. But each year, hundreds of rent-controlled units are converted to condos or TICs — and all rent controlled units are “vacancy decontrolled” and revert to market rents when they are vacated.

The next largest number of units, about 31,000, are non-profit developed and publically owned “permanently affordable” housing. These units do not revert to market rate when vacant. Another 20,000 or so units that are regulated can be found in residential hotels and about 25% of them are run by non-profits and have means-tested affordable rents.

The other 15,000 residential hotel units are privately owned — but conversions to tourist hotel rooms are regulated, keeping their rents lower than would be the case if they were not. Finally, there are some 15,000 public housing units and Section 8 rental subsidies

The protection and, with the repeal of Costa Hawkins (to be on the state November ballot), the expansion of rent control is the center piece of housing price regulation in San Francisco. State legislation (Costa Hawkins) prohibits local governments’ ability to expand the pool of rent controlled units. Every unit built since 1978 is exempt from rent control. We lose, through Tenants in Common (TIC) conversions, owner move-ins, and demolitions about 450 rent controlled units a year.

Supervisor Sandra Lee Fewer has proposed a critically important amendment to the local law that would limit the costs of re-financing and local property taxes from being passed on to tenants. With the Republican tax cut barring rental property owners from deducting their local property tax from their federal taxes, pass-throughs of those costs to tenants would be expected to spike, driving rents up.

Proposition F on the June ballot is another example of regulation aimed at keeping folks in their homes by having the city pay for lawyers to represent any tenant facing an eviction.

Local efforts by a labor/ community coalition and progressive elected officials to limit and regulate short term rentals done by Airbnb and other web based corporations have had an immediate and real impact on both reducing evictions and actually increasing the supply of rental housing. These local regulations resulted in an increase, on one apartment listing web site, 680 percent in long-term rental listings in San Francisco in the month the new equations took effect. As many as 4,500 apartments may have gone back on the market as a result of these regulatory efforts. This is one “supply side” increase unmentioned by the usual cast of “pro-market” cheerleaders.

Trump (and lame-duck Paul Ryan) are pushing the deregulation agenda at breakneck speed at the national level (with far too little push back from national Democrats, even if only rhetorical), requiring a local capacity to backfill gaps created in national regulations from the environment to voting and civil rights. Any mayor seeking left/liberal support should be required to lay out a creative and doable local “re-regulation” agenda given the national situation.

But it isn’t only the national Republican deregulation agenda that is alarming. It is also the state-level, Democratic-party driven mania to de-regulate real-estate speculation and land use that requires strong and creative local response.

For the last two years, Democrats in Sacramento have used their super-majority to limit, and now they want to actually eliminate, local control over basic land use regulation.  While failing to repeal Costa-Hawkins, itself an attack on local government’s ability to regulate its housing market by imposing rent control on recently built housing developments, state Democrats have rushed to pass a series of bills aimed at taking land use decision making power away from local governments seeking protections for low and fixed income residents.

In April 2015, The Economist, the Old Testament of market based neo-liberal propaganda, published a cover story that may put what we are going through into some sort of context and point the way to even more destructive follow on policy.  In the piece , the “Paradox of Soil,”the editors argue that “land, the center of the pre-industrial economy, has returned as a constraint on growth.”

They lay out a two steps to address this “constraint”:

               “First, city -planning decisions [should be] made from the top down. When decisions are    taken at the local level, land-use rules tend to be stricter.

                  Second, government should impose higher taxes on the value of land…Whereas a high tax on property can discourage investment, a high tax on land creates an     incentive to develop unused sites” (emphasis added).

There can be no question that “by right” proposals of Gov. Brown and the “stream lined ” approval process in Wieners SB35 have the effect of making planning decisions “from the top down. (See this and this for details of each).

But both measures pale before Wiener’s proposed SB 827 in creating top-down control; that law would simply gut all local planning powers and establish the right at any time of a state department to declare “invalid” a local law that, for example, makes meaningful changes to affordable housing requirements for new development if those changes are deemed “inconsistent” with SB 827.

It must be remembered that urban renewal – redevelopment — was a legal edifice built on state laws that allowed the creation of a state mandated entity that had limited local control. But SB 827 has even less local control than did redevelopment. Moreover, redevelopment was a state function had had required public hearing and mandated citizen review. SB 827 has neither and its operations are controlled by the “invisible hand” of the private market.

Wall Street investors, developers and banks never have public hearings or mandated citizen review. Hell, they have damn little government review and oversight. But they read The Economist religiously. So can we expect next year a measure that establishes a state land tax on local parcels that only have a ten-unit apartment building on it when state density bonus laws allow 50 units on it until that 50-unit apartment building is built? Given the power of real estate and developer interest on Democrats in Sacramento this is not an impossibility. And while SB 827 is now stalled in committee, Wiener has made it clear he will push it again next year.

It may well be that the only recourse folks will have to massive, community busting development is local government. And we should pin down what candidates for mayor will do to counter act the pressure from the state top pre-empt local land use policies aimed at protecting residents and their communities.

But balanced development is only part of the problem that needs to be addressed at the local level in the face of both national and state regulatory indifference.

We see, before our very eyes, the rise of gentrification of urban transit — yet our city seems powerless to address it.  Uber, Lyft and Chariot are simply the leading edge of this new pheromone. Studies show ( 2017 UC Davis Study) that these private modes of transit are popular with upper income folks — the new “urbanites” that really aren’t all that urban in the sense that they really don’t want to get too close to folks unlike themselves, draining ridership and funding from public transit. “Disruptive transportation” must be integrated into our urban transit system, and its for-profit manifestations taxed, and that revenue used to grow public transit and safer streets. New York has just imposed a tax specifically on ride hailing services. We must figure out how to do that given the increasable influence at the state level theses service have.

Tax, Spend and Regulate

Democrats, if they have a chance at meaningful political power, must come home to their true base: working and lower income folks. They are not the party that Bill Clinton tried to create: a party of “win win” Wall Street millionaires “doing good” for the less fortunate by offering a “hand -up and not a hand out” while quietly saving all the handouts for themselves . That old game is over.

Democrats are uniquely dependent on an urban vote. They cannot win without it — but they can’t win with it alone. In addressing the needs of the urban working class — men and women, families, the elderly, immigrants and people of color — they can devise programs and policies that appeal to non-urbanites in the midwest and the south and have a chance to become the dominate national political party.

At the very heart of those policies and programs rests the clear need to tax and spend and regulate. Let that realization start here in San Francisco and let it start this June.