The supes will consider Tuesday/23 a risky plan to bail out the developers of the Treasure Island housing development. This so-called “Alternative Financing” plan, embodied in the Disposition and Development Agreement amendment, could leave the city on the hook for more than $200 million at a time when the city is already facing a huge deficit.
This should be taken seriously.
Alarmingly, many in the city, led by Mayor London Breed and Supervisory Matt Dorsey, have remained conspicuously silent about the plan’s obvious deficiencies, even in the face of the board’s own budget analyst’s dire warnings.
Instead, the mayor and the D6 supe are rushing to pass the plan without questioning if it constitutes an undeserved bailout that puts the city’s bank account and its future bond ratings, as well as the economic stability of the entire City and County of San Francisco, at risk.
Both the developers’ shortcomings and the legal dispute among the consortium’s own members, suing each other over a shrinking amount of profits they themselves project to be available, suggest they are a bad risk, not worthy of the “double down” gamble they seek from the city. Such an obvious omission would make any financial analyst nervous.
Compounding that anxiety is the testimony of the board’s own analyst at the Budget and Finance Committee’s meeting April 17. He informed the committee that he was unable to do his job of advising them on the proposal’s fiscal soundness since he had not been given a copy of the study that staff referred to in a couple of the committee hearings as proof of their due diligence in structuring the COPs. So that analysis is “unavailable” to the BoS, he told the committee.
“We consider approval [of the Alternative Financing plan] to be a policy matter,” he concluded.
Fortunately, Supervisor, Connie Chan, who chairs the committee, with the support of President Aaron Peskin, proposed amendments to the plan to deal with these issues. She said she had reservations about taking on the level of debt issuing COPs (Certificates of Participation, a form of city bonds) would entail — a $115 million loan that when interest is added will leave the city with a $235 million payment. Would this loan action set a precedent for when other projects get in trouble?
The amendments:
(1) The COPs would be issued in three tranches, one per year (first year $50 million, second year another $50 million and third year $15 million).
2) Issuance of the COPs wouldn’t start until after the city revises its 10-year capital plan to hold the issuance of the COPs accountable to the city’s long-term plan.
3) The city would defer debt service fees to the last year.
4) Before each of these three tranches are issued, a performance review and assessment must be done for transparency and accountability.
The city and the developers have not been transparent on when and how the development’s promise of 27 percent affordable units will be finished.
The TI project was sold to the people of San Francisco as an affordable housing project, one that would have 27.3 percent of its units being affordable. That means of the 8,000 units planned, 2,175 must be affordable. When asked at the April 4 meeting when those units would come on line, TIDA Executive Director Robert Beck only mentioned that 290 units are currently built with another 200 projected in the next couple years. He gave no indication when the remaining 1,775 affordable units would be available.
This record leaves us with a lack of confidence in the program and wondering who is being held accountable, especially in a project that is more than $1billion over budget and eight years behind schedule, according to the BoS legislative analyst.
Chan’s amendments to the financing plan are reasonable and rational, and should be adopted by the Board. In the meantime, a couple of other issues should be addressed now before the vote.
In accordance with the Sunshine Ordinance and the city’s commitment to transparency, the board should demand the release of the fiscal impact study the staff has cited to assure board members that the numbers will all work out. If it proves it, prove it.
The supervisors need to take the legislative analyst’s advice to “pause” the Alternative Financial Plan until that is done.
In the meantime, the board must demand a plan for when and how the promised affordable housing will be built, and tell anxious TI residents when it will be ready for occupancy.
Steve Stallone is a retired journalist and a founding member of the Treasure Island Organizing Committee.
