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West of Twin Peaks Observer
September 2008

Grand Jury: Another Blank Check Bond?
by Patrick Monette-Shaw

Deeply concerned about November’s San Francisco General Hospital “Proposition A” bond measure, San Francisco’s Civil Grand Jury released its report, “Accountability in San Francisco Government,” on June 26, highly critical of the previous Branch Library Improvement project (BLIP) and Laguna Honda Hospital (LHH) replacement general obligation bonds.

A footnote in the Grand Jury’s report indicated a current City Supervisor acknowledged nobody has been minding the City’s information technology expenditures store, apparently including himself. Similarly, the Board of Supervisors also hasn’t been minding the bond measure store.

The Jury concluded the Citizen’s Obligation Bond Oversight Committee (CGOBOC) can’t utilize its experience to improve projects prior to placing bond measures on a ballot, including the proposed rebuilding of SFGH. The Jury is concerned key lessons weren’t learned from the BLIP and LHH bond fiascos, which may be repeated.

Among other findings, the Grand Jury recommended increasing CGOBOC responsibilities. The Jury determined that pre- and post-election independent analyses of the Controller’s voter guide estimates to establish whether the Controller’s projections are accurate isn’t being performed by either the Controller or the Board of Supervisors Budget Analyst. Failing to test accuracy of the Controller’s financial projections leaves the Controller’s Office unaccountable, the Jury noted.

Underestimating the Laguna Honda bond measure in 1999's Voter Guide misinformed voters

San Francisco’s elections code requires the Controller estimate increases to City government costs from ballot measures. The Grand Jury is critical that the Controller’s Office has previously neglected to address whether proposed legislation may result in increasing the cost of City government.

The Bay Guardian’s August 13 editorial “And now, the controller’s big lie,” exposes Controller Rosenfield vastly overestimated by “billions” this year’s Clean Energy Act. In stark contrast, Rosenfield’s August 11 Proposition A voter guide statement vastly underestimates City government cost increases, neglecting to mention the $36 million annual operating costs that will result by adding 212 employees to SFGH when its rebuild is complete.

The Grand Jury noted that in both the BLIP and LHH bonds there was a lack of sufficient funding upfront to complete the facilities promised to the voting public, since both projects “far exceeded what could actually be constructed” from bond proceeds. Both projects also had grossly underestimated escalation costs. The Grand Jury noted LHH’s escalation factors alone may well increase construction costs as high as 69% over its baseline budget. Another of the Jury’s findings was that the Mayor’s Office, the CGOBOC, and the Department of Public Works either “knew or should have known that escalation calculations were inadequate for both projects.”

Mayor Newsom, for his part, has noted a “lot of angry people don’t trust” the City after the Laguna Honda bond measure; he claims the proposed costs to rebuild SFGH have been made “clear,” right from the start. But both Newsom and Rosenfield have neglected mentioning the SFGH $887.4 million bond may underfund the project by at least $55.6 million, if the Department of Public Health’s estimate SFGH construction costs may reach $943 million turns out to be accurate.

To complete BLIP projects, the Mayor and Board of Supervisors have abused issuing revenue bonds that don’t require voter approval to supplement the BLIP funding shortfall. Even though the LHH project has been scaled back by 35% to rein in costs, the Mayor and Board are also abusing issuing $185 million in Certificates of Participation (COP’s) to supplement bond financing for LHH, also without voter approval.

Astute observers have noted the Mayor’s Office of Public Finance has defined clear policies for issuing COP’s to accomplish future savings to the City’s General Fund. But the LHH replacement project is funded by general obligation bonds and tobacco settlement revenues, not the General Fund, so it doesn’t appear to meet these, and other, COP best-practice policies.

If the SFGH bond is already underfunded by $55.6 million, the Mayor and Board of Supervisors will be handed a blank check to issue additional revenue bonds or COP’s to augment yet another inadequate general obligation bond, without voter approval.

The Jury noted private-sector projects experiencing significant cost overruns and delays would likely replace project managers. And the Grand Jury found that the Mayor and Board of Supervisors should authorize the CGOBOC to evaluate bond measures before placing them on the ballot to assure proper project “plans, escalation factors, milestones, damage clauses and the like are in place to deliver projects on time and within budget the voters are asked to approve.” Although the City had several months to implement the Grand Jury’s recommendations before placing the SFGH bond measure on November’s ballot, none of the recommendations were adopted before doing so.

The Jury noted “voters are left holding the financial bag and burden,” from “the lack of accountability and oversight” of bond projects. The Grand Jury concluded the appropriate response is for voters to demand better governance from City officials.

We need both of our County hospitals. But we shouldn’t sacrifice increasing government accountability and project oversight to rebuild either LHH or SFGH.

Send City Hall a message it must implement the Grand Jury’s recommendations before we’ll pass another bond measure. Vote “No” on Proposition A’s blank check.

Patrick Monette-Shaw
is an Accountability Advocate
The Grand Jury’s report can be found on its web page at:

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