Measure G and developer subsidies

October 2, 2014

OPINION By RICHARD SCHMIDT

San Luis Obispo is launching a radical change in who pays development’s infrastructure costs, and this is intimately related to Measure G, the city sales tax on November’s ballot. Simply stated, if you vote for Measure G, you will be taxing yourself for massive new city subsidies to developers.

Never heard this? No wonder. City Hall’s not going to tell you, nor will anybody at the G campaign, and our daily newspaper, which has the resources to dig out a story like this, doesn’t.

Here’s the story, based on numerous public sources.

In the 1970s, San Luis Obispo’s leaders looked at other growing cities which were assuming massive debts from rapid development, and realized that could possibly not end well. They chose a different course – a really smart one that would spare resident taxpayers the risk and indignity of subsidizing developers’ profits.

They decided development here must pay its own way. The idea that development should pay its own way is based on fairness and common sense. The developer gets the profits, so shouldn’t he also shoulder the costs and financial risks that create those profits? This has been the law since 1977, enshrined in our general plan.

Thanks to the foresight of our 1970s leaders, San Luis Obispo has maintained financial health and decent public services while cities as close as Santa Maria have been stressed to the breaking point and their services driven to sub-basement levels by picking up costs of development. We should have learned, from our own success and from bad outcomes elsewhere, that development-pays-its-own-way is a wise and prudent way to do things, one we ought to continue.

But a pro-development anti-resident new general plan the city council intends to adopt this month radically changes that concept, apparently to please a powerful pro-development campaign-donating lobby headed by the Chamber of Commerce.

Since the 1990s, the Chamber has lobbied for an end to development-pays-its-own-way. They argued instead for a “fair share” alternative, in which the developer pays what he feels is fair, and the rest is “shared” by taxpayers.

To do this, a constant stream of tax dollars – our dollars – will be steered to developers.

This change will have all of us assume financial costs and risks of development. We’ll go from “development pays its own way” to “city taxpayers subsidize development.”

We’re talking deals with developers like Chevron, the multi-national oil corporation, to send them tens of millions of our tax dollars for 25 or more years, so, in Chevron’s case, they can develop toxic land along Tank Farm Road.

With this type of deal, Chevron’s payback from taxpayers comes first, municipal services to the public come later — if any money is left.

This is public debt the city is creating, and it seems like a really reckless type of debt to create.

History shows subsidizing development rarely produces public benefit, only public debt. Our city council, by jumping onto this broken bandwagon just as its tail lights disappear around the most distant curve in the road, displays a colossal failure of common sense. They behave like the banks that continued issuing mortgages to people who couldn’t pay them even after the banks could see the mortgage bubble was deflating. Good times don’t last forever, and when they end, there’s inevitably trouble if a city is entangled in this sort of debt obligation.

Why San Luis Obispo wants to jump into subsidizing developers is a good question. Local government development subsidies were pioneered by backwater towns in poor states like Tennessee, Mississippi, Louisiana – places so desperate they would try anything. But San Luis Obispo isn’t a backwater town, and it’s hardly desperate for development. It’s Happy Town, one of the most desirable places on earth to develop. Developers will do their thing here without incentives and subsidies. To pretend otherwise is silly.

While the very idea that San Luis Obispo needs developer subsidies seems absurd, it’s been vigorously promoted by the Chamber, and is now conventional wisdom within city hall.

You might ask, what’s this got to do with Measure G? Simple: the backers of forcing taxpayers to subsidize development and the backers of G are the same organizations, even the same people.

The overt backers of Measure G are the Chamber of Commerce (which despite its free-market posturing receives hundreds of thousands of city taxpayer dollars each year) and the Downtown Association (which is run with tax dollars collected by the city). The principal backers of developer subsidies are the Chamber and the less-well-known Economic Vitality Corporation. The boards of directors of these organizations have overlaps.

Enter City Manager Katie Lichtig, hired from Beverly Hills, who leans towards giving the Chamber what it wants rather than asking city residents what they want. Lichtig set up a multi-step “process” by which to bring about a 180-degree shift in who pays for development, and to get the change written into a revised general plan.

First came the Economic Development Strategy task force, a small hand-picked group sympathetic to the “needs” of real estate development. Lichtig sold this one-sided task force to the city council by telling them it was just to help her in her work, but it soon became obvious her plans were for something with much greater impact — and the council allowed that to happen.

This task force added to the city’s collection of “planning” documents an Economic Development Strategic Plan, which incorporated the Chamber’s “Economic Vision” plan and similar input from the Economic Vitality Corporation.

By this sleight of hand, Lichtig turned private economic pleadings into official city policy, and got it adopted by the city council.

And what did this “plan” include? Surprise, surprise! Development-pays-its-own-way must give way to “fair share.”

That was just the beginning. Lichtig also engineered the Economic Development Strategic Plan’s “informing” the entire general plan update, which got started just about the time the economic plan came into being. Amazing coincidence of timing!

Lichtig’s planning process eventually revealed what “inform” the general plan means: it means the economic plan is adopted by reference as part of the general plan, an action that’s poor public policy (since contents of the economic plan can change on a whim whereas a general plan is a long-term development “constitution”), and may be illegal since the economic plan never withstood the layers of public participation, scrutiny and hearings required of general plans, and was never subject to the environmental impact report required of general plans.

But we get ahead of our story. The next step of Lichtig’s “process,” after the economic task force, was manipulating the general plan update by primarily using another “task force” rather than the planning commission, as has been past practice, to vet staff drafts of the update.

Using a task force meant lots of things – for example, that planning commissioners, who are intimately familiar with the whole general plan, were relegated to a secondary position in creating the draft while persons less familiar with the plan were doing the “planning.”

But it also provided another opportunity to hand pick “recommenders.” The members of this task force, approved by the city council, were supposedly chosen to represent the city’s neighborhoods, since the council had directed the general plan update was to be resident-based. There was a map dividing up the city into “neighborhoods,” with each being represented on the task force.

These “neighborhood representatives” included three Chamber board members, three additional active Chamber members – so-identified by the Chamber itself, two Economic Vitality Corporation board members, three developers, two real estate attorneys, two members of Lichtig’s Economic Development Strategy Task Force, two development land planners, one architect, and one developer’s real estate sales manager.

Simultaneously the Chamber had its own general plan committee, churning out recommendations that pleased the Chamber’s developer contingent (like view-blocking 60 foot tall buildings on Foothill and lower Higuera, and higher density in every existing neighborhood), and feeding these directly to city staff for incorporation into the draft general plan that went to the task force.

No other group got the Chamber’s privileged access. Nor was any group allowed to balance their one-sided input. For the 1994 general plan, an environmental quality task force had provided quality-of-life balance. When enviros requested something similar this time, Lichtig’s staff told them to scram. Lichtig’s “process” was by intent one-sided, and the general plan now before the city council puts business first, residents last.

This general plan task force joined the chorus for “fair share” subsidies to developers.

There are many problems with “fair share,” starting with the fact “fair” is subjective (fair to whom? is the first issue it raises), while the “share” part is clearer, for it means we the public will “share” the costs of development with developers who profit from it.

But where will the tens of millions of “fair share” developer subsidy dollars come from? This is where connections between Measure G and Lichtig’s planning process get really interesting.

The Yes on G campaign has three co-chairs: Clint Pearce, Andrea Pease, and Pierre Rademaker.

While their names may be familiar, their affiliations may be less known to the public.

1. Pearce heads Madonna Enterprises, the development arm of the former Alex Madonna empire. He is on the Chamber’s board of directors, and is the Chamber’s vice-chair, Economic Development Division, whence “recommendations” went to city planners. His company’s development projects will benefit from “fair share.” (As we write, Madonna-Pearce figures in the breaking-news story of the “fair share” subsidy blow up in Atascadero, which apparently leaves that city’s taxpayers picking up a huge unanticipated debt.)

2. Pease is an architect who was on Lichtig’s Economic Development Strategy task force, and has been active at the Chamber, serving on several of its committees.

3. Rademaker is on the Chamber board, the Downtown Association board, was on both Lichtig’s economic development task force and the general plan task force.

So, the key people promoting Yes on G are in the thick of promoting the new regime of taxpayer subsidies for developers.

A final piece of the Measure G promotion puzzle is the Tribune. Traditionally, to preserve the appearance of objectivity and fairness, newspaper people never joined groups that might generate news. This aloofness – an important canon of journalistic ethics — was a sacrifice newspaper people endured to lend credibility to their work.

So it should raise eyebrows that the Tribune’s publisher – its top person, sits on the Economic Vitality Corporation board and until less than a year ago on the Chamber board. A Tribune representative also sits on the Downtown Association board. One senses this breach of traditional journalistic ethics may explain the paper’s poor public affairs reporting. Resulting intimacy with power brokers may also explain the Tribune’s endorsement of Measure G with an editorial that reads like a City Hall press release.

Normally by this time in a campaign, we’d know a lot about who’s financing the Yes on G campaign. But thanks to our city council’s recent sell-out of another long-standing good government policy, the city’s campaign finance regulations which for 30+ years had required frequent reporting of contributions larger than $50 so the public knew who was financing what early enough for knowledge to influence votes, we know very little. At this time – as absentee ballots are about to be mailed out and voting begins — all we know is who’s contributed at least $1,000 – a contribution level the state requires to be disclosed promptly.

There are three $1,000 contributions: one from Mangano Homes, another from Michael Cannon, the third from MindBody Inc. Mangano Homes, owned by Fresno-based Wathen Castanos Hybrid Homes, has current and future projects in the city’s “annexation areas,” where developers stand to gain most from the “fair share” concept. Cannon, nominally an engineer, has done some development and represents others in the city’s “annexation areas.” MindBody, an internet health information company, occupies one of Cannon’s buildings and is developing a huge complex on Tank Farm Road, in the airport annexation area.

If Measure G is really about saving open space, fixing neighborhood sidewalks, filling potholes, helping neighborhoods, and the other pro-G propaganda lines developed by pollsters and election consultants to sell the measure to us, why would these outfits care to give $1,000?

One cynical view we’ve heard is it’s a way to curry favorable city treatment for their projects. But it might simply be an “investment” in funding the “fair share” subsidy regime. A thousand bucks is peanuts compared to future gains.

It’s no secret among those in the game that G is a potential funding source for new developer subsidies. While G people talk publicly about open space preservation, every so often covering development costs with Measure G money slips into the public conversation.

When Chevron speaks to the city, it sure sounds like they’ve got “fair share” and Measure G in mind. They’ve demanded a 25-year stream of “income” from the city, from money sources other than those normally garnered from the area of development.

Sometimes, though, there’s no beating around the bush. At a recent council meeting, a developer who said he also represents other developers in the airport annexation area, made it explicit, calling Measure G “supplemental money for these projects out there.”

Nobody on the city council or staff objected, saying, “No, No, that’s not right!” because they also know G’s for funding developer subsidies.

So that’s how G interfaces with the new regime of developer subsidies. As stated at the beginning, anyone who votes for G is voting for a pot of money from which developers will be subsidized by taxpayers.

Is this what residents of San Luis Obispo want?

Richard Schmidt is a former journalist, an architect and teacher who lives in San Luis Obispo. He signed the ballot argument urging a No vote on Measure G.

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