Citizen Complaint to Bond Oversight Committee and Civil Grand Jury Concerning Illegal Diversion of General Obligation Bonds

October 24, 2004

Pamela S. Jue
Citizen’s General Obligation Bond Oversight Committee
c/o Office of the Controller
City Hall, Room 316
1 Dr. Carlton B. Goodlett Place
San Francisco, CA 94102-4694

Arlene Singer
Civil Grand Jury
San Francisco Superior Court
400 McAllister Street
San Francisco, CA 94102-4512

Re: Citizen’s Complaint: Misuse of LHH Replacement Facility General Obligation Bond Financing

Dear Ms. Jue and Ms. Singer,

This is a formal complaint asking that the Citizen’s General Obligation Bond Oversight Committee conduct an investigation into potentially unauthorized use of tobacco settlement revenues dedicated for the rebuild of Laguna Honda Hospital and Rehabilitation Center (LHH), by the City and County of San Francisco (CCSF), in particular by the Office of the Mayor and the San Francisco Board of Supervisors.

1.  In June 2003, in order to balance the City’s out-of-balance budget for FY 03-04, then Mayor Willie Brown convinced the Board of Supervisors to pass, unanimously, Ordinance 191-03 (Enclosure 1), diverting $25 million from the tobacco settlement fund earmarked for the rebuild of LHH in order to bring Brown’s budget submission into balance, as required by the City Charter. As the Bond Oversight Committee and the Civil Grand Jury must surely know, Proposition A passed by the voters in 1999 made no such provision that tobacco settlement revenue could be used to balance the City’s budget.

2.  When former City Attorney Louise Renne got wind of the first diversion of the $25 million at question, she threatened to sue CCSF to recover the potentially misappropriated funds, claiming that the diversion was both improper and illegal. When the Board of Supervisors proposed a tentative settlement with Renne et al. (the additional plaintiffs), the Board proposed an unlitigated settlement of $20 million. I attended the Board's Rules Committee hearing in December 2003, during which I asked “show me the money,” and what the Board intended to do with the $5 million difference between the $25 million diverted and the $20 million proposed as a tentative settlement. Within five hours of that hearing, a new “final” settlement (Enclosure 2) with Renne et al. was signed by the City Attorney’s office on the same day as the Rules Committee Hearing, restoring the missing $5 million, and awarding the full $25 million to Renne et al., but not for use in constructing a “facility or facilities,” as promised voters in the text of Proposition A. Instead, the $25 million was further diverted, for a second time, into acquiring furniture, fixtures, and equipment (FFE) for the LHH replacement facility.

     To be fair to Ms. Renee, the additional plaintiffs, and the Board of Supervisors, when the final settlement with Renne et al. was reached in January 2004 none of the parties involved knew that Turner Construction Company, the general contractor for the LHH Replacement Project, would subsequently issue a revised budget for the LHH rebuild in Spring 2004 pushing the estimated cost overrun for the replacement project to just under $44 million.

3.  At Enclosure 3 is a “smoking gun” letter from the law firm representing the Renne et al. plaintiffs, in which Matthew D. Davis, notes (elliptically), first, that the initial decision to utilize the $25 million in order to balance the City budget was, indeed, a “diversion,” and second, that Proposition A had made no provision to use tobacco settlement funds for acquiring FFE.

Due to the size of the estimated $44 million cost overrun, discussions are occurring among City officials in order to consider downsizing the LHH replacement facility by up to 300 to 400 beds. Indeed, the bidding processes now underway have asked potential bidders to submit a second bid to reduce the scope of the LHH replacement facility by up to 120 beds, and possibly more, in order to bring the project in “on budget,” not in on the original “scope.”

As you know, allegations have also been raised that bond financing passed by the voters to build the Mental Health Rehabilitation Facility (MHRF) — now known as the San Francisco Behavioral Health Center — was also not used as promised to voters, since by the time the MHRF was eventually built, it was not utilized nor constructed as promised to voters of that bond initiative.

Based on the facts in the enclosed documents, it appears that for at least a second time in recent memory, voters will not be getting what they were promised under Proposition A to rebuild LHH.

Finally, I attended a meeting on September 7, 2004 attended by the Executive Director of Laguna Honda Hospital, Larry Funk, and the LHH Replacement Project’s architect, Michael Lane. During that meeting, I was told that the City is actively investigating whether it can further skirt the intent of Proposition A, which indicated, and was pitched to voters, that only the first $100 million in tobacco settlement funds would be used for construction of the LHH replacement facility. Prop A promised voters that any funds in excess of the first $100 million would be used to reduce the need for bond expenditures, and that their property tax bills would be lowered to pay for the bond should additional tobacco settlement revenues in excess of the first $100 million accrue to the tobacco settlement accounts. The City is now attempting a further “creative reinterpretation” of the intent of Prop A language, and is actively seeking to divert funds in excess of the first $100 million in order to potentially bring the project in on full “scope” (i.e., the 1,200 beds voters were lead to believe in 1999 would be built to replace LHH).

The Board of Supervisors has a ministerial duty to exercise budget authority for CCSF, and it is their responsibility for what ultimately happens regarding the rebuilding of LHH. Similarly, the Bond Oversight Committee has a separate ministerial duty to ensure general obligation bonds are spent as promised to voters who approved bond initiatives.

Therefore, in light of the cost overruns which have surfaced since the $25 million was first diverted, and then subsequently re-diverted, I am filing this citizens complaint asking that both the Citizen’s Bond Oversight Committee and the Civil Grand jury immediately investigate the propriety of the diversion of the $25 million from the tobacco settlement account, and require that the funds be returned in order to build the replacement facility at the full scope promised voters in 1999.

For further information, please visit Should you have questions, I can be reached at my home number (415) 292-6969. I ask that when the Bond Oversight Committee and the Civil Grand Jury schedules hearings on this matter, that I be asked to attend to present testimony.

Respectfully submitted,

Patrick Monette-Shaw
Independent Community Observer/Accountability Activist

Enclosures (as stated)

cc:   San Francisco Board of Supervisors:
The Honorable Matt Gonzalez, President, District 5
The Honorable Jake McGoldrick, District 1
The Honorable Michela Alioto-Pier, District 2
The Honorable Aaron Peskin, District 3
The Honorable Fiona Ma, District 4
The Honorable Chris Daly, District 6
The Honorable Sean Elsbernd, District 7
The Honorable Bevan Dufty, District 8
The Honorable Tom Ammiano, District 9
The Honorable Sophie Maxwell, District 10
The Honorable Gerardo Sandoval, District 11
Gloria Young, Clerk of the Board



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