From time to time, our shiny little City Hall receives very large chunks of money from investors. Those investors trust that we will pay the money back because if we don’t, they can come take whatever public doodad was used to secure the loan. This is the essence of a municipal bond: a big fat public mortgage, if you will.
Voters usually get a say in whether The City will issue municipal bonds because the promise of property tax revenue (increased as necessary) is often the revenue stream that investors are relying on to repay the loan.
But did you know that it only takes the vote of six supervisors to take public property down to the pawn shop and get quick cash? Called Certificates of Participation, the scheme works like this: The City owns a piece of property, a courthouse, for example. We give title to the property to a trustee and lease that space to ourselves, paying the rent from our General Fund. This rent is a now a revenue stream — a constant and reliable source of money. The Board of Supervisors can then vote to issue debt backed by that revenue stream. Default on the lease and we lose the property.
Supervisor Mark Farrell had called for a hearing, set to take place Thursday in the Government Audit and Oversight Committee, to learn more about The City’s reliance on these certificates.
In preparation for the hearing, the legislative analyst issued a report showing that, as of June 2010, The City had $782 million in COP debt — and that’s just the principal. In at least two instances, certificates were used to raise money to pay for projects that the voters had rejected at the ballot — a new juvenile hall in 2003 and the San Bruno jail replacement project in 2000.
When the analyst surveyed 15 jurisdictions for comparison (including Los Angeles County, Alameda and San Diego) it found that San Francisco’s COP debt is higher than any other city or county surveyed at $735 per capita. The next highest is the city of Los Angeles at $393 per capita.
Now, there’s nothing illegal or shady about this debt mechanism, but anytime publicly owned property can be put in hock for millions by a vote of six supervisors, everyone should shudder. Even if COPs have been used judiciously up to this point, there is nothing legally stopping a majority of supes in the future from going off the rails. Look for some limitations to be proposed by Farrell as a result of this hearing.
In a sure sign that the apocalypse may yet be around the corner, I write today in praise of a recent effort at City Hall.
Unused prescription drugs often end up in one of two undesirable locations: The City’s ill-equipped water system, having been flushed down the toilet, or a teenager’s ill-equipped digestive tract, having been left unattended.
In October 2010, Supervisor Ross Mirkarimi tried to pass a law requiring all drug companies who sell pharmaceutical pills and potions in San Francisco to create and pay for a “take back” program so people could send unused drugs to a safe facility.
After a dose of reality served up by then-Mayor Gavin Newsom who promised to veto the legislation, Mirkarimi worked with the Department of the Environment, Mayor Ed Lee and (gasp!) pharmaceutical industry representatives to come up with an alternate plan.
The new regime is an 18-month pilot program that uses a $110,000 grant ($100,000 from the Pharmaceutical Manufacturers Association and $10,000 from Genentech) to install and manage containers for safe drug disposal in five police stations and several pharmacies that have volunteered to serve as drop centers.
At today’s Board of Supervisors meeting, the supes will pass a law requiring pharmacies in The City to display information about these new places to safely scrap unused pharmaceuticals.
Kudos to Supervisor Mirkarimi, Mayor Lee and the Department of the Environment for finding a reasonable solution. For once, everyone seems to be taking their meds.
Today is the deadline for any member of the Board of Supervisors to introduce a proposed amendment to our City Charter for consideration on the November ballot.
Because most of the parameters for local public employee pensions are enshrined in our charter, this deadline means that any pension reform agreement negotiated by Mayor Lee and public employee unions must be introduced today. As of this writing, the mayor and all unions have come to some accord with one notable holdout: the Service Employees International Union. That union is by far the largest public employee union in the City, representing over 10,000 workers.
Regardless of whether a last-minute deal can be worked out to appease the SEIU, the mayor’s proposal will remain precarious. It still has to go through the legislative process, where it can be amended; or as one friend put it, “where steak becomes sausage.” With mayoral hopefuls like Supervisor David Chiu and John Avalos, plus a candidate for sheriff, Ross Mirkarimi, all mucking around in the details and trying to get union support, the end result could be a far cry from what is put forth today.
In fact, the only insurance against the mayor’s pension proposal becoming too watered-down is the fact that we will have another option in November. Public Defender Jeff Adachi’s proposal is well on its way to qualifying for the ballot through voter signatures. No way will he withdraw his robust pension initiative and stick voters with one lame choice.