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The ENRON-ization of Democracy - Multi-Part Series - Part II

Posted by: Bob Silvestri - August 20, 2013 - 4:25 PM PDT

The Enron-ization of Democracy - Part II of a four part report investigating the history and politics behind the push for Northern California's Plan Bay Area regional planning initiative, and how the abuse of joint powers authorities (JPAs) is robbing communities of representative government.

RHNA and the Housing Element

The RHNA housing mandate system was part of the original Housing Element laws first enacted in 1969. It required that all cities and counties create detailed plans for residential growth. It asked local policy makers to identify potential housing sites and enact policies that would facilitate more housing units of all types.

Its intention was more to help cities plan for potential growth and budget accordingly than it was about promoting affordable housing or social equity.

Keep in mind that at that time California was just making a name for itself as the “land of opportunity” for what seemed like a lifestyle that was one big party: the place where jobs were plentiful, living costs were low and every person under 30 wanted to be.

Some on our Board of Supervisors still cling to this vision of California. Memo to BOS: Put down the bong. Times have changed.

Housing Element Laws Have Been Problematic

Over time Housing Element Regulation goals have become more politicized. That’s made of RHNA quotas more problematic. In his study, California’s Housing Element Law: The Issue of Local Noncompliance, Paul Lewis of the Public Policy Institute of California notes three basic problems (as paraphrased by David Lyon, the Institute’s president):

“First, it (Housing Element Law) often goes against the grain of local politics by asking cities to plan for the needs of the wider region, not just those of current city residents. Second, it may represent a mismatch of goals and policy tools. Specifically, it attempts to tackle the problems of overall housing underproduction with a process-oriented approach developed to prod cities and counties into planning for their share of affordable units. Third, the statute itself is unwieldy, embraces multiple objectives, and is difficult for non-experts to understand.

“Lewis concludes that the time is ripe for policymakers and affected interest groups to seek a more workable, transparent, and straightforward approach to housing. These policymakers may need to resolve whether their major goal is a sheer increase in residential construction or an equitable distribution of affordable housing. Lewis warns that using a fair-share planning approach as a tool to encourage overall housing production places an unrealistic burden on a fairly fragile policy.”

Mr. Lewis’s report was done in 2003 but its conclusions remain just as relevant today. The top down RHNA driven system is badly broken even as its methods of coercing cities to comply have become more formidable (e.g. SB375 and Plan Bay Area).

At the epicenter of this process is ABAG, the allocator of RHNA quotas. Today, operating as Sacramento’s office of Housing and Community Development’s (HCD’s) “bag man,” ABAG seems to work completely opposite of its original purpose: working for its members.

All this notwithstanding, ABAG continues to argue that they represent the interests of their members, first and foremost.

But is that really the case?

Follow the Money

In 2002 ABAG’s total operating budget was $11,688,923, up $1,740,644 from the previous year (a 17.5 percent increase), but that was nothing compared to their 2004 budget of $17,677,000 (a whopping 51 percent increase in revenues and expenses!).

By 2012 ABAG’s operations had grown to $30,351,356. In a period of 8 years, during which time California fell deep into debt, the world economy collapsed, the Bay Area had negative job growth, and we began to see the first significant net migration out of California in decades, ABAG had grown more than 70 percent. From 2002 they have grown almost 300 percent in revenues.

Nice work if you can get it.

ABAG’s Funders

ABAG purports to represent its members yet less than 6 percent of their entire operating budget comes from member dues (the 101 Bay Area cities and counties). The rest comes from federal agencies (55 percent), state agencies (16 percent), so-called “Contracts” revenues (6.5 percent) from local government agencies (MTC, BAAMQ and East Bay MUD), and special interest groups like PG&E, the Hewlett Foundation, San Francisco Foundation, and the Silicon Valley Foundation (all of whom fund Smart Growth and urbanization advocacy groups). The rest comes from “Service Programs” (about 10 percent), most of which are from fees it collects for its programs (training, publications, financial services, etc.).

So ask yourself this. How likely are they to bite the hand that feeds them? Is it any wonder then that Plan Bay Area fails so miserably to adequately address the needs of Marin communities?

Plan Bay Area offers:

In sum, it offers little Marin needs.

As a footnote, it’s probably worth mentioning that all the areas in Marin that were or are still designated as Priority Development Area (PDAs) are also designated as Transit Priority Project (TPP) areas on the MTC / ABAG maps in Plan Bay Area. The removal of the local designation as a PDA removes the added burdens of being one of the places where 80 percent of all affordable housing development funding is targeted to go (per Plan Bay Area), but it doesn’t change the fact that the Plan still targets those areas for particularly dense growth.

Social Equity and Displacement of Those Most in Need

At the last minute some wording was added to the final draft of Plan Bay Area to acknowledge “social equity” goals. Among them that measures should be considered to TOD stop from displacing the poorest of our residents. Unfortunately, it’s just words.

Those displaced by redevelopment are already offered the first shot at living in new developments (if they can qualify and can afford it), which is typically at least 2 years later. So there’s nothing new about that.

However, in reality these assurances are essentially meaningless.

An Example: San Francisco

A recent conversation with a former Deputy Director of Housing in San Francisco confirmed that less than 5 percent of existing residents ever return after an area that has been redeveloped into new high density, mixed use, “affordable” housing. He confided, “No one ever comes back. It’s a big problem that no one talks about.”

Part of the reason is that the new rents are always higher than before (except for the 10 percent of “in lieu” low income units), too high for the majority of former residents who were lower income. But it’s not just about income. The redeveloped area is also likely to be “gentrified” as the result of the public investment and ends up catering to high paid, young professionals, not very low income Section 8 tenants who don’t shop at Whole Foods.

But more importantly, most former neighborhood residents have simply moved on and started a new life somewhere else. Why? Because they have no choice. They need a place to live and much of their employment is either temporary or low paying service work, so they need to find another job quickly. After all, they can’t just go live in their Lake Tahoe condo for two years while they wait.

Perhaps the six figure salaries and generous pension benefits for ABAG and MTC executives, many of whom enjoy that kind of lifestyle, has clouded their understanding of all this.

Unintended Consequences of Smart Growth and TOD

Like an old time, snake oil elixir, Smart Growth (TOD) has been promoted as the tonic for everything that ails us. Proponents claim it will result in less pollution, walkable communities, and construction of affordable housing. But Smart Growth has never lived up to those claims.

A field report entitled Transit-Oriented Development and Communities of Color, (2011) by Gen Fujioka of the Planners Network, a progressive planning organization, shows that case study after case study reveals a very different picture.

Although Smart Growth advocacy has certainly produced some shiny new market rate developments in urban and ex-urban areas around the country, aside from adding more shopping and dining choices, none of the lofty social equity goals have resulted.

In every instance he studied Fujioka found that Smart Growth resulted in the wholesale displacement of low income residents (predominantly people of color) and an increase in overall housing costs for everyone. The new high density housing mostly serves middle class and upper middle class tenants. And even those units that are truly affordable number only a small fraction of what was there before.

Some of Fujioka’s findings are as follows:

1. Seattle’s International District

When the city adopted “transit-oriented up-zoning” to allow for more high density development, it did not result in any increases in affordable housing. As noted by Ken Katahira of the Interim Community Development Association, “Zoning for higher densities does not necessarily create more affordable housing.” In fact, Fujioka writes, “up-zoning for greater densities and greater densities has compounded the development pressure already generated by the new transit infrastructure. And as a practical matter, taller buildings cost more.” (i.e. forcing sale and rental pricing to rise out of reach of most low income residents).

2. San Francisco, Mission District

As the Mission District became a target for urban redevelopment, the real estate market predictably responded. UC Berkeley’s Center on Community Innovation’s study found that evictions reached record levels. In particular,“Neighborhoods within a half-mile of major transit were particularly at risk of gentrification and displacement, suffering marked declines in the number of households of color.”

3. Boyle Heights, Los Angeles

Fujioka’s study found that during the early phases of rebuilding its regional transit system, evictions of the poorest residents rose. Isela Gracian, director of community organizing for the East Los Angeles Community Corporation (ELACC), commented that “After they started construction we had a wave of evictions near the station. Landlords were looking for any excuse to evict tenants.”

4. Regionalism in St. Paul, Minnesota

As St. Paul moved further toward regional control of planning and development, Fujioka commented that “the shift towards regional governance may favor large developers while undermining public engagement.”

He goes on to state, “The shift towards regionalism is reinforced by progressive initiatives such as HUD’s Sustainable Communities Regional Planning Grant Program and California’s greenhouse gas reduction legislation (SB 375), each giving MPOs more influence over local processes. But MPOs are more insulated than city governments from local and neighborhood-based organizing and are often governed by a mix of elected and unelected appointees and agency representatives. Furthermore, their structure and highly technical forms of discourse pose new challenges for democratic participation.”

As described by Veronica Burt, an organizer with the Preserve and Benefit Historic Rondo Committee, a coalition that includes the local NAACP, church groups and community development organizations, “The Met Council (their MPO)went through the motions of holding meetings but didn’t listen to community concerns. There has been no way to make them accountable.”

All this correlates with what we can expect to experience from regional planning and MPO decision making (ABAG/MTC) here in the Bay Area. However, more significantly, Fujioka found that new development in and of itself failed to create “community.”

Most planners will dismiss these conclusions out of hand. How can it be, they ask, that when we create investment incentives to revitalize “blighted” areas, the lowest income residents don’t benefit? After all, aren’t these new places perfect for them to live and work and not have the burden of owning a car? But their confoundedness is because planners know little about how markets or economics and remain convinced that if it “looks” like a community, it must be one.

Life is more complicated.

The Dynamic Nature of Markets and Property Values

Development professionals have always known that any kind of public investment creates value. It’s the life blood of a real estate broker’s stock and trade. In fact, most real estate developers base their business decisions on following public investment and improvements in roads, sewers, water lines or transit lines just as much as they follow zoning changes and entitlements. To be successful, one has to appreciate how each improvement impacts property value.

For example, here’s what typically happens when a city or agency announces a new public transit station or a major redevelopment initiative in an existing, single family and commercial, mixed use neighborhood.

This area was probably chosen because it had aging or second rate commercial and retail, some scattered office space (some of it converted from a former use), and small scaled multifamily buildings in need of updating, surrounded by single family neighborhoods built 40 to 50 years ago (e.g. Marinwood, Santa Venetia, etc.).

These are where the area’s “starter” homes are, regardless of relative price. As one gets further from this neighborhood’s “core,” housing prices typically rise until the most expensive homes in its sphere of influence are perched on hilltops or tucked away in cul-de-sacs out of view.

Winners and Losers

As soon as the Smart Growth goals are announced, land values of the second rate commercial and retail land directly adjacent to the improvement area begin to rise in value. This is because developers know that transit and higher density development will have a beneficial impact on those uses. And if there are going to be density bonuses attached, prices can rise even more.

With as few as 10 percent of the units required to qualify as affordable (very low, low, moderate and 80 percent of median income) plans for “in lieu” development spring to life. Developer’s know that their predominantly market rate projects can be very profitable.

This activity also results in the displacement of lower cost, month to month commercial and office leases, and evictions of low income renters, who typically also have the least political influence. Property owners do this to “clear the decks” for possible sale and building demolition.

At the same time values of single family homes within about a half mile radius of the improvement area begin to fall. This is because the development that’s coming is the antithesis of the valuation metrics for single family homes: more traffic and congestion, more noise and pollution, more people, less privacy, less parking, loss of views, etc. - all negatives for anyone wanting to buy a single family home. This generally results in selling pressure as people move out and on to areas with more appreciation potential, which exacerbates the fall in prices.

The bigger the area impacted by Smart Growth development, the bigger the area of single family homes whose values are negatively affected. And if the development is predominately tax exempt, low income units, which will over burden schools and public services, values drop even more. This is because good schools and well-funded public services are one of the core goals of single family home buyers.

However, the values of the better located single family homes, outside of the local impact area (in the hills, etc.) begin to rise. This is because the public investment in the high density redevelopment area has increased their “scarcity” value: there are now fewer opportunities to enjoy all the benefits of single family ownership in this area.

This explains why high density TOD is generally considered a negative by middle class homeowners. Since most middle class and first time homeowners live in the single family neighborhoods in the immediately impacted area (wealthier residents live in the outer un-impacted area), their homes are the most impacted. This is also why these residents tend to be the most outspoken group (people don’t complain about rising values).

Calling people NIMBY’s simply because they see a loss of value in the biggest investment of their lives seems counterproductive or ignorant at best. But try telling that to the Marin Community Foundation, HUD, MTC or ABAG.

But the displacement of the poor and the loss of home values for some and financial gains for others are not the only casualties of top down redevelopment. What is also most often lost along the way is the sense of community that existed before redevelopment.

What is “Community?”

What planners always miss is that just because a place isn’t new and shiny, doesn’t mean it’s not a “community.” I would argue that many poor and disadvantaged neighborhoods have more community, more sharing, more mutual generosity, more residents who lend each other a hand to overcome the trials of daily life than any of our rich and cloistered neighborhoods where residents live behind high walls and security cameras.

Large scaled development, TOD or otherwise, does not create community. It has failed to do so for more than 100 years. When is enough enough? In truth, it more often than not results in the opposite: isolation.

A Housing Authority’s Dilemma

A group of real estate developers that I work with were recently approached by the Director of a public Housing Authority in a major western city. It seems his city’s Housing Authority has been redeveloping large sections of its most “blighted” areas, for decades. But, in the words of the Housing Authority director, they seem to have created what he called “a Section 8 wasteland.”

The problem was that the more high density projects they were building, the more “community” they were losing. No one knew each other anymore. “Street life” was vanishing and neighborhoods were no safer than before.

However, in all this there was a modest bright spot. When several square blocks of demolished buildings, right in the middle of their worst area, were left fallow after the Crash of 2008, some of the poorest residents had started growing vegetables there. “Community” was sprouting again.

The housing director asked us to help figure out how to nurture this and create a permanent, working urban farm, complete with a farmer’s market, a restaurant and an urban farming educational center.

It’s interesting to note that there’s a great deal of evidence that urban farming has many beneficial effects. In South Central Los Angeles, one of the worst areas in the city, where the now famous South Central Farm was once located, bureaucrats and planners were surprised to find that during the years the farm was operating, academic test scores rose, crime declined and visits to health care clinic went down. The farm “nourished” the community in many ways.

But predictably, our housing director friend had little support for his urban farming idea within his own agency. He confided that his biggest challenge was to find a way to convince HUD and other top down agencies not to fund any more high density, affordable housing! The funding agencies saw no value in his community building dreams. All they wanted was more high density units, more “progress.”

This kind of thinking is at the very core of what’s wrong with SB375 and Plan Bay Area and the concept of TOD. But as wrong-headed as all this is, the growing influence of Joint Powers Authorities (JPAs) like ABAG is even more troubling.

The Perfect Storm

The confluence of forces created by SB375, Plan Bay Area, and ABAG’s growing financial strength has transformed ABAG into a JPA on steroids. And ABAG’s decision-sharing arrangement with MTC, BAAMQ and BCDC makes it a particularly unwieldy beast (please note: these agencies are all also members of a larger, “Mega” JPA called the Joint Policy Committee).

ABAG ostensibly represents 101 Bay Area cities and counties while also collaborating with these other agencies. In that role ABAG serves many masters but none of them very well. The result seems to be a defensive indifference or inability to be responsive to the needs of any of its members except its largest: San Francisco, Oakland and San Jose.

The Fix Is In?

Anyone involved in the “public outreach” process for Plan Bay Area (ABAG and MTC’s Sustainable Communities Strategy required by SB375) wouldn’t have to be a cynic to have come away feeling that the Plan was bought and paid for before residents and taxpayers ever even heard about it.

In response to the Plan’s Draft EIR, I personally wrote well researched comments about the Plan’s lack of positive environmental impacts and its failure to address our real affordable and low income housing needs in Marin.

I wonder now why I bothered.

To paraphrase, the “legal” response from MTC boiled down to this: ‘You have expressed objections to and opinions about the methods and conclusions of the Plan. However, MTC followed guidelines and used methods and studies approved by the government. Therefore, your comments constitute a “disagreement.” Under CEQA case law, a disagreement does not legally constitute a failure or inadequacy of the Plan. Therefore, no change in the Plan is required. Thank you for your comments.’

Wow.

The fact is Plan Bay Area was created by unelected and unsupervised ABAG and MTC staff behind closed doors. It was “marketed” to the public through carefully orchestrated and professionally facilitated “workshops” then pushed at cities and counties with coercive tactics and threats of the withholding unspecified transportation funding.

In the end, Plan Bay Area was approved with hardly a single word changed. What are the odds of that in a truly democratic process? I can’t get a group of neighbors to agree on the wording of an email announcement for a block party without sixteen versions of revisions.

But as darkly comical as all this is, ABAG and MTC executives know that the Plan still has a fatal flaw. It lacks a sufficient funding source to actually build high density TOD housing. Yes, there is some money for new transportation improvements but without a lot more funding for housing development itself existing tax credit financing and low cost loan subsidies are not going to cut it.

But it hasn’t been for lack of trying.

The Quest for Funding for High Density Transit Oriented Development

Since the passage of SB375 in 2008, its creators have been working overtime to come up with ways to finance new development. They’ve proposed a variety of regressive taxes, punitive fees and special charges to accomplish this.

1. Real Estate Document Fees: In 2012 there was SB 391, which proposed charging a $75 per document fee for every document recorded at the county that was related to real estate. They estimated that this would produce a cool one billion dollars to fund super slush fund to be controlled by bureaucrats and their cronies in Sacramento to fund high density, transit oriented development (TOD).

Thankfully, this failed to gain enough support to become law. But it’s not dead.

2. Raise Gasoline Taxes: MTC has continued to study the feasibility raising gasoline taxes, because as much as gas prices have spiked, taxes on gas have not gone up in a long time. So they see this as “low hanging fruit” for Sacramento lawmakers. But this hasn’t been very popular, politically, so for now it’s a nonstarter.

3. Roll Back Prop 13: A variety of groups are studying something called the “fiscalization of land use,” which is mumbo jumbo terminology for dismantling Prop 13. This includes getting rid of the annual adjustment cap for commercial property and potentially increasing the cap for residential. This would represent the biggest tax increase in California history for small businesses, at the wrong time in the economic cycle. And if the home adjustment cap is changed, it would be the biggest regressive tax increase on the elderly we’ve ever seen.

Once again, the plan is for the revenues to go toward promoting TOD. The jury is still out on the fate of this idea.

4. Impose Development Overlay Fees: Alternative #3 of Plan Bay Area proposed a “Development Overlay Fee” on all single family zoned parcels in the nine county areas. These “impact fees” are designed to “discourage” single family home construction. Once again, the funds would go into a discretionary fund, administered by MTC and ABAG to promote and fund high density, transit oriented development (TOD) without any voter oversight.

The fees increase, based on the miles your property is from the Plan’s predetermined Transit Priority Project (TPP) sites. In some cases in Marin that means a construction fee of as high as $12,500 to build one new single family home. And there’s a similar fee levied on a per square foot basis against new commercial development that is too far away from the designated TTP and Priority Development Areas (basically, the 101 corridor, north to south).

MTC apparently feels confident it has the power to levy this kind of property “fee” so long as they establish a legal nexus (in plain English, a “study” by high paid lawyers and consultants) showing its benefits to the goals of Plan Bay Area. They believe it’s perfectly legal to tax and penalize single family real estate development this way without any vote or input from those being taxed.

The disturbing truth is it might actually be legal.

The Development Overlay Fee didn’t make it into the current Plan that was just approved, but look for it to resurface in a few years when the Plan is “updated.” HUD and MTC seem intent on assessing punitive property development fees on single family home construction to fund high density development in Transit Priority Project (TPP) zones.

5. 24/7 GPS Tracking of All Bay Area Drivers: Last but not least, Alternative #5 of Plan Bay Area proposed that every car and light truck owner in the Bay Area be required by law to purchase and install a GPS tracking device so that MTC can monitor our movements, 24/7 and so that we can be charged 10 cents a mile for driving in the nine county Bay Area. Once again the revenues, estimated at a billion dollars (a number they really seem to like for some reason), would go toward funding TOD in PDA and TPP zones, as outlined by Bay Area Plan.

As preposterous as this may sound, they have not given up hopes of this. So it’s another one to look for in round two. As I’ve said in my public speaking appearances, the only thing holding them back is that too many people in the Bay Area are having affairs to approve 24/7 monitoring of driving habits. But then, of course, politicians will probably exempt themselves from the requirement, which will cut down the number of people cheating by at least half.

Suburbia under Attack

These proposals are part of an attack on suburban living. This is not by chance. It’s grounded in HUD, ABAG and MTC’s shared belief that the only development worth doing is high density, transit oriented development. They see it as society’sonly future option. And they assume that single family home owners have a moral responsibility to pay for it, whether they can afford it or not.

However, this is not a new phenomenon. It’s been going on for decades. For a concise expose, read “ The Childless City,” (Wall Street Journal, August 6, 2013) by Joel Kotkin and Ali Modarres.

Planners have been in love with urbanism for a hundred years. In the 1920’s famous commentators like Lewis Mumford scathingly called the suburbs “dissolute landscapes.” And starting in the 1960’s they went into overdrive. Self-proclaimed experts like pundit Jane Jacobs fashionably despised the suburbs, as a follower of the “women’s lib” movement, and led the cause for urban living. Even today, it’s the mantra that every planning and architecture student has drummed into their heads.

The only problem is, despite endless expert opinions and high handed studies, 85 percent of all families with children don’t want to live there.

The unintended consequence of this planning myopia is that schemes like Plan Bay Area are treading every closer to killing the goose that laid the golden egg: the American dream of home ownership. Home ownership and the taxes it pays, and moreover the community stability it brings, are the backbone of our economy.

The unabashed attack on suburban living may be every planner’s social engineering wet dream but it is economic engineering at its worst.

More TOD Regulations Waiting in the Wings

Amazingly, MTC and ABAG continue to claim that their actions do not impact local control. But if they ever get their hands on the revenues from these proposed taxes and fees, what chance do you think your local government will have against ABAG/MTC-backed, deep pocket developers bringing Smart Growth and Transit Oriented Development in your town?

Ironically, the saving grace in all this has been that with our lackluster economic recovery, it’s still hard to get any of the schemes noted above approved.

But that may be about to change, too.

Pending legislation in Sacramento intends to build on SB375 and SB226 to change the way development is promoted and funded in California. Senate Bill 1 and Senate Bill 628 represent the next wave of assault on local control.

Go To Part III