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San Francisco Chronicle
October 15, 2008

San Francisco Should Tap Other Revenues to Rebuild Hospital
by Mara Kopp and George Wooding

San Francisco General Hospital requires seismic retrofit, but its proposed, overpriced replacement is poorly planned and faces problems with bond financing.

Proposition A is the largest bond measure in San Francisco ’s history. Due to the city’s poor oversight on bond-financed projects and emerging dire long-term financial problems facing local, state and federal governments, bond measure accountability has never been more important to voters.

The credit crunch is paralyzing municipal government financing. San Francisco not only faces unprecedented delays selling Prop. A’s bonds as the market for bonds has dried up, but it will also pay millions of dollars more as interest rates rise.

A June 2008 San Francisco Civil Grand Jury report released before Prop. A was placed on November’s ballot shows that San Francisco’s bond-financed projects routinely experience cost overruns of between 35 percent and 67 percent. The report concluded: “The ultimate response to the lack of accountability and oversight is for the voters to demand better governance from City officials.” The jury noted there is no accountability from the board of supervisors or the mayor’s office.

With the lack of strong city oversight, voters face paying for San Francisco General’s predictable project mistakes, cost overruns and, inevitably, increasingly expensive debt service.

City officials claim the hospital construction will only cost $887.4 million. Additional costs aren’t included, such as: $30 million for planning; $640 million for debt service; and $75 million for furniture, fixtures and equipment. Prop. A’s minimum cost therefore is $1.63 billion, before predictable cost escalation increases, design changes, and project overruns.

The city could have avoided many of Prop. A’s problems by planning ahead. The need for this project began in 1994 when the Legislature passed SB1953 , which created higher standards for seismic safety, including requiring that hospitals remain operational after earthquakes. Responsible cities, such as San Mateo, completed hospital seismic upgrades in 2002. San Francisco officials irresponsibly delayed for 14 years complying with the law. Fortunately, SB306, enacted in October 2007, allows San Francisco to complete rebuilding San Francisco General by 2020. That is 12 years from now, and time enough to plan it right.

Cost estimates to rebuild the hospital have increased 30 percent, or $265.4 million, in just two years, from $622 million in 2006 to $887.4 million today. Why? In part because the city originally planned a rectangular building; it now plans an oval-shaped, glass-walled building featuring private rooms and $7 million worth of artwork.

Proposition A needs re-evaluation. For starters, San Francisco ’s controller said the city is projected to receive a minimum of $971.8 million from the tobacco settlement through the year 2060, including interest already earned and additional future interest, pushing the total to more than $1 billion. Tobacco settlement revenues should finance the rebuilding of San Francisco General. This will reduce financial burdens on both property owners and tenants, which according to the city’s budget analyst, will cost property owners $58 annually for every $100,000 of property assessments for the next 23 years. Prop. A permits landlords to pass through 50 percent of this tax increase to renters, who face annual $50 to $300 rent increases.

To address the concerns about poor oversight of bond-fund expenditures, the city needs an independent body, staffed by professionals, to track San Francisco’s bonds.

In additon to considering other sources of financing than bonds, the city should build the less-expensive rectangular hospital, retrofit the surrounding brick buildings before construction (not after), and adopt the civil grand jury’s accountability recommendations.

These changes will increase voter confidence that the city is committed to responsible governance. Without these changes, vote no on Prop. A.

Mara Kopp and George Wooding
are official opponents against Prop. A

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