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It is known as the Gamble Memo. Mention it within the very small circle of politicians and policy wonks who pay attention to the city's finances, and no additional description is needed. They will know what you mean.
Robert Gamble had no idea when he drafted his bureaucratic missive -- just a page-and-a-half of text with some charts attached -- that it would achieve such renown.
When he wrote it in late January 1997, Gamble was deputy executive director of the San Francisco Redevelopment Agency. He was the main bookkeeper, responsible for counting the agency's beans. A skinny, friendly, bespectacled man, Gamble was soon to finish almost two decades of studious public service and enter the private sector. Politicians build monuments. Public finance wonks leave behind memos, and Gamble's memo has proved an ominous portent for master politician Willie Brown.
Two years into his term, Mayor Brown's agenda has become clear -- he wants to build things. Sports stadiums, housing, museums, hotels, fancy government buildings, office complexes, kiddie parks, whatever it takes to remake vast portions of the city to Brown's liking. Paying for it all, of course, is the tricky part. When pressed for the nagging particulars on how he'll fund his myriad visions, Brown has often pointed to the Redevelopment Agency as if it were a font of riches waiting to be drunk.
But Brown knows that's not true. He knows the Redevelopment Agency is almost tapped out. He's read the Gamble Memo.
The memo was a five-year projection of the agency's finances. It used four different scenarios to illustrate that, basically, the agency was reaching the end of its financial rope. "While these projections are not definitive, they do provide the [Redevelopment] Commission with a broad sense of the financial constraints we are facing," Gamble wrote.
Though relatively dry, the memo contained phrases that are downright incendiary within the circumspect lexicon of financial analysts -- statements like "obviously not feasible," and "clearly not a sustainable course."
In plain English, what Gamble outlined for his bosses was the Redevelopment Agency's descent into a black hole of debt. With budget cuts and a little luck, his scenarios showed, the agency would be able to slog along until the turn of the century. But after that, the agency will have piled up so much debt that it will probably have to abandon many of its plans for fixing up downtrodden areas of the city.
The agency won't literally go broke. It won't have to shutter its doors and send everybody home. Rather, it is rapidly approaching the governmental equivalent of maxing out its credit cards. The agency has borrowed so much money -- some of it for remarkably stupid purposes -- that it may soon be unable to borrow any more. When that happens, most of the cash available to the agency will be required to pay back debt, and there will be little money left over in any given year for actual redevelopment projects.
Improbable as it may seem, even as San Francisco booms the agency that should be most involved in revitalizing and rebuilding scarred portions of the city is careening toward irrelevancy.
An SF Weekly examination of the agency's financial records makes clear what has happened. Year after year -- for at least the last nine years -- the agency has effectively run a deficit, spending more money than it takes in from property taxes, leases, and land sales. Each budget cycle it has covered the shortfall -- as much as $37 million a year -- primarily by selling bonds. That is, by borrowing.
Counting all the various forms of bonds it has issued to finance projects and cover yearly shortfalls, the Redevelopment Agency now has more than $700 million in debt. Most of the borrowed money was used to buy land, build public improvements like streets and sidewalks, or provide affordable housing. In short, the bricks-and-concrete type of work that is expected from the agency.
But big chunks of the borrowed money -- tens of millions of dollars in bond proceeds -- have been sunk into money-losing projects. Other money has been siphoned off to help the agency pay salaries and cover its overhead. Although extracting the exact numbers from the agency's financial documents is tricky, SF Weekly's examination indicates that the agency has effectively skimmed at least $50 million of bond proceeds over the years to pay salaries and administrative costs.
Using debt to pay overhead, although apparently not illegal, is generally considered foolish. The money must be paid back someday, with interest, and that will cost taxpayers tens of millions of dollars well into the next century.
The inevitable result of this freewheeling approach to borrowing is that the agency will strangle on its debt. That's exactly what Gamble foresaw when he wrote his now-famous memo, and in the ensuing year nothing has happened to prove him wrong.
While the predicament is largely not of Brown's making, the mayor is left to deal with it. He received a copy of Gamble's memo, and met with Gamble more than a year ago to discuss the agency's finances. "I was glad that he took it seriously," says Gamble, now deputy director of the Richard and Rhoda Goldman Fund.