Money for Nothing
Last month, the San Francisco Board of Supervisors agreed to pay more than $10 million for a 73-year-old building that is not worth half that sum. The building -- a three-story, seismically suspect industrial structure at the corner of Potrero Avenue and 25th Street -- does have one virtue worth mentioning. It happens to be the property of a business partner of the president of the Board of Supervisors, Barbara Kaufman.
Under normal circumstances, a vote by the supes to lavish millions of dollars of profit on the business partner of the board president would have us howling about conflicts of interest -- and, perhaps, worse.
But the circumstances surrounding the May 19 vote to buy the building from one Thomas Plant are anything but normal. And, in fact, President Kaufman appears to be the least blameworthy among the supervisors when it comes to this incredible waste of public money. (Check that -- she's the second-least blameworthy. Supervisor Leland Yee actually registered a "no" vote on the sale; President Kaufman hid in the hallway as the deal went down.)
The story of the building on 25th Street doesn't necessarily reveal sleaze at the board of supes. It does illustrate how three mayoral administrations' worth of business ineptitude will bleed the city's General Fund of millions of dollars.
The story of the building on 25th Street begins back in 1990, during the one-term tenure of Mayor Art Agnos, when the city of San Francisco went shopping for a home for its emergency paramedic operation.
The city eventually signed a 10-year lease (and option to buy) with Plant Properties Inc., owner of the building at 2789 25th St. As part of the deal, Plant Properties agreed to bring the structure up to code by making it more earthquake resistant. The city, meanwhile, agreed to monthly rent of nearly $60,000 and annual rent increases of 5 percent, a generous arrangement for Plant.
Still, the arrangement was fiscally defensible, at least in the short term. The paramedic operation did need space.
In February of 1994, however, a letter from "a concerned citizen" advised the bureaucracy, governed then by Mayor Frank Jordan, of something the bureaucracy ought to have known -- that state law required paramedic dispatching operations to be housed in facilities that far exceeded the seismic-resistance standards for ordinary commercial buildings. After all, emergency response to the Big One might be delayed if the ambulance dispatching center collapsed in the quake.
So the city's director of real estate, Anthony DeLucchi, was sent crawling back to renegotiate the lease with Plant Properties, whose president, Thomas Plant, had a business partner, Ron Kaufman, whose wife, Barbara, had recently won a seat on the Board of Supervisors.
When DeLucchi explained to Plant that the building needed $1 million of additional reinforcement for the city to keep using it, Plant knew he was in the driver's seat.
Plant agreed to strengthen his building all right -- but stuck the city for the cost of that improvement, and more. He would pay for the retrofit if San Francisco extended the generous lease another five years and agreed to repay Plant for the upgrade -- at 11 percent interest -- through higher rent. How much higher? Lots. Between 1990 and 1995, in the midst of a recession in commercial real estate, Thomas Plant managed to secure a 40 percent increase in monthly income on the building, and it would keep ticking up 5 percent per annum. (For those of you who are addicted to detail, the monthly rent went to $81,834.25.)
But San Francisco wasn't finished throwing money down the Plant Building rat hole.
Even though the city is about to break ground on a new 911 communications center, which will combine all emergency dispatching services and render the 25th Street building obsolete for such purposes by the year 2000, the bureaucracy, under yet another mayor, Willie Brown, has made a decision. It has decided to exercise an option to buy a building the city doesn't really need.
On the advice of bureaucratic drones, the Mayor's Office, with the consent of the Board of Supervisors (minus Yee and Kaufman), has approved a plan to pay Mr. Plant $8 million for his crummy, aging building. Another $2.4 million will cover tenant relocation and other costs.
Because the city must borrow the money needed to acquire it, over the next 20 years San Francisco will pay some $36 million in principal and interest for the building on 25th Street.
This for a building that, professional appraisals suggest, is worth millions less than the sale price.
Documents prepared by the city's bean counters claim the building is needed as a so-called "hot backup" for the new 911 facility. But that just isn't true. Had anyone bothered to ask him, Lucian Canton, the mayor's director of the Office of Emergency Services, would have explained, as he did for us, that San Francisco, like most every other major city, has mobile communications equipment that would be used if the new emergency facility collapsed in an earthquake or were otherwise rendered inoperable.
In reality, the Public Health Department wants to spread out in the old Plant Building, and continue spreading into it as the city's new 911 center comes on-line. A conservative estimate of the cost of this new comfort room is easy to calculate, but we'll spare you the details and cut to the bottom line.