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

The Enron-ization of Democracy - Part IV 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.


Senator Steinberg’s Legacy

In 2012, Governor Brown vetoed senate bill 1156, which was drafted and promoted by Senator Darrell Steinberg, the author of SB375. It proposed to resurrect the state redevelopment agencies dissolved by the California Supreme Court.

In 2013, Darrell Steinberg, whose term in office ends next year, introduced Senate Bill 1 (SB1) which is virtually identical to SB1156.

In his remarks on SB1 before the Appropriations Committee on August 16th, Senator Steinberg noted that the passage of Proposition 30 (the “millionaire’s tax”) in 2012 put the state in "a much stronger fiscal position" to consider SB1. His implication was that we can now afford to appropriate funding for his latest redevelopment agency resurrecting scheme.

He added, "I believe that 2013 will be the year that we can find new ways to move forward and fill the void in local economic development and housing policy."

Senator Steinberg’s Asperger’s-like single mindedness to realize his transit oriented development (TOD) visions aside, this statement is remarkable for several reasons, not all of which are obvious at first glance.

On the surface what he said might even seem helpful since it purports to support local housing policy. However, once viewed in the context of SB375 and Plan Bay Area, his statements take on a more ominous tone.

While richly compensated ABAG executives continue to spin nonsense about how Plan Bay Area and SB375 have no effect on local control, we have Steinberg, the chief architect of the Sustainable Communities Strategy (aka, Plan Bay Area), lobbying for the creation of yet another “off the books,” quasi-governmental, regional planning and development agency (the Sustainable Communities Investment Authority in SB1), which further erodes local voices, local voters and local control.

These guys need to get their “spin” straight.

What’s equally remarkable is that Senator Steinberg never seems to consider that local governments, working from the bottom up, might better solve local planning and affordable housing challenges in more creative, effective and appropriate ways.

But most interesting of all is that there’s really no connection between the funds generated by Prop 30 which go into the state’s General Fund, and the proposals of SB1 which propose using local tax increment financing (a percentage of local tax dollars) to fund TOD.

So why would Steinberg say that? It's one of the questions that led me to look further into the list of complex new laws being proposed today in Sacramento. Laws that will all impact how Plan Bay Area will ultimately be implemented.

We’ve Only Just Begun

Commenting on Governor Brown’s 2012 veto of SB1156 (the former incarnation of SB1), Dan Carrigg, legislative director of the League of California Cities (a supporter of SB375 and SB1), said, "I don't think any doors were slammed last year. I think we're early in the process.”

Senator Steinberg himself, pleading before the Appropriations Committee last week to get them to approve SB1, asked the committee to appreciate that SB1 was just one of many new pieces of legislation that would all work together. He assured them that any shortcomings of SB1 would be remedied in other legislation that’s forthcoming.

He wasn’t kidding.

2013 has witnessed a dam break of proposed legislation that in concert, make it clear that SB1 is just the beginning.

What follows is a partial list of pending legislation that works to give teeth to Plan Bay Area and fund high density, transit oriented development.

SB628 – Jim Beall, D-San Jose: This bill would eliminate the requirement of voter approval for the creation of infrastructure financing districts or its issuance of debt to finance TOD.

Existing laws allow cities and counties to form infrastructure financing districts (IFDs). But it requires voter approval to do so or allocate taxpayer money or issue debt (bonds).

SB628 would allow cities and counties to create infrastructure financing districts without voter approval and it would remove local voter approval of how their tax money was spent to support high density TOD. SB268 also goes a step further by requiring that a city or county commit at least 25% of the tax increment financing revenues put into the IFD, toward developing TOD.

As justification, SB628 states that:

“Transit priority projects, through the use of IFDs, will provide a new tool for green development to help achieve the sustainable communities strategy and regional transportation plan goals of Senate Bill 375.”

Remember, under existing law, a transit priority project (TPP) that meets specified criteria (SB375 and Plan Bay Area and soon SB1) is automatically designated as a “Sustainable Communities Project” and is therefore exempt from certain CEQA environmental review requirements. So in combination with SB628 this further erodes local government autonomy.

Like SB1, SB628 justifies its need by reiterating the faulty “findings” of SB375 about greenhouse gas emissions and TOD’s benefits. This is problematic. As more and more laws seize upon the same wording and non-scientific “truths” about the environmental benefits of TOD, the more they become the legal version of “if you tell a lie enough times, it becomes accepted as the truth,” and the more politicians are able to build other laws on that faulty logic.

What is dangerous here is these “legal” definitions were created for political reasons (not because of any reasonable study of TOD) but are now codified and tied to new fees and tax spending. SB628 not only removes taxpayer input into spending on infrastructure and affordable housing development, but in combination with SB375, SB226, Plan Bay Area and SB1, it virtually eliminates all checks and balances by the electorate.

As if this were not enough, there are actually two versions of this idea being pushed forward in Sacramento.

SB 33 - Lois Wolk, D-Davis: This bill authorizes the creation of new “Infrastructure Financing District Authorities” (joint powers authorities – JPAs).

SB33 is very similar to SB628 but it goes a step further by creating more government “off the books.” SB33 tries to do for existing infrastructure financing districts what SB1 is proposing to do for defunct redevelopment agencies.

Again, existing law allows cities and counties to create infrastructure financing districts, use tax increment financing and issue bonds but only with a 2/3rds voter approval. These IFDs are like the old redevelopment agencies in that they are part of the city or county government and under their direct supervision and control.

SB33 would authorize the creation of new joint powers authorities (Infrastructure Financing District Authorities - IFDAs) that would have all the powers of the existing infrastructure financing authorities to plan, issue bonds, and develop projects. And their statutory lifetime would be extended from 30 years to 40 years.

But as a JPA, SB33 would eliminate all voter approval, or even voter knowledge of, how much and for what purpose a city’s tax increment financing was being used, or the JPAs other business dealings and bond issuance.

The only checks and balances option SB33 leaves us with is voting our local City Council Members and County Supervisors out of office every four years. But just ask our current candidates for the Marin Board of Supervisors how easy that is when the incumbents have slush funds to curry voter favor and the power to steer funding and make decisions that favor their biggest supporters.

The precedents set by these two laws would be unsettling. SB1, SB33 and SB628 are laws only MTC and ABAG would love.

More New Funding Schemes

SB1, SB33 and SB628 create mechanisms to build more transit oriented development using local taxes to fund it. But bureaucrats know that “tax increment financing” will not generate enough money to build large scaled projects.Dan Carrigg recently lamented that SB 1 and other new bills on redevelopment won't recreate funding "as robust as redevelopment” agencies used to do. The push for TOD needs to find more money.

AB 294 - Chris Holden (D-Pasadena): This bill directs the California Infrastructure and Economic Development Bank to fund transit-oriented development.

The California Infrastructure and Economic Development Bank, another out of sight, out of mind, “off the books” governmental entity that allocates taxpayer funds, is authorized to issue bonds, invest money and make loans without any input or oversight from our locally elected representatives or voters. The Bank works in concert with the Department of Finance, the Metropolitan Transportation Commission (MTC), the Department of Housing and Community Development (HCD), and the Office of Planning and Research.

This bill directs the California Infrastructure and Economic Development Bank to work with local government or regional JPAs (i.e., SCIAs, ABAG, etc.) on transit-oriented development and affordable housing projects. The measure would also allow infrastructure financing districts to reallocate Educational Revenue Augmentation Funds toward infrastructure and TOD projects.

SB 391 - Mark DeSaulnier (D-Concord): This bill proposes to tax the recording of every real estate document recorded in California to create a super Sacramento controlled slush fund for TOD. SB391 has been moving toward approval since 2012.

The goal of SB391 is to establish a permanent, ongoing source of funding dedicated to affordable housing development. The bill would impose a fee of $75 upon the recording of every real estate instrument, paper, or notice required or permitted by law to be recorded in the state of California.

Regardless of what they call it, this “fee” is a regressive tax on homeowners and home buyers.

The bill would require that revenues collected at the county level be sent quarterly to HCD’s new “California Homes and Jobs Trust Fund.” These discretionary funds would support TOD and affordable housing development and administering state housing programs, without any voter or elected representative’s input or oversight.

Talk about a “honey pot!”

This bill would also require the Department of Industrial Relations to enforceprevailing wage requirements for construction contracts funded by the Trust. This pretty much guarantees union wages and benefits. And it pretty much guarantees that smaller Marin developers and contractors won’t be involved in the new high density development projects in PDA and TPP zones.

And just to turn the knife, SB391 eliminates the California Constitutional requirement that the state reimburse local government agencies for costs associated with collecting the fees.

These guys think of everything.

Just For Good Measure

SB731 - Darrell Steinberg (D-Sacramento). This bill amends CEQA and removes key local arguments against TOD that were previously allowed.

Presently, CEQA requires a “lead agency” (typically the JPA like ABAG) to prepare and certify an environmental impact report (EIR) on a project that may have a significant effect on the environment. Under CEQA many types of arguments are allowed to show why the project should or should not be approved. The law requires that significant impacts be mitigated as a condition of approval, unless the lead agency makes a “negative declaration” stating that the impacts cannot be mitigated but the public benefits outweigh their burdens.

Even though CEQA presently gives enormous powers to the lead agency, as we saw in the case of the very flawed EIR for Plan Bay Area, it still provides the public the chance to argue against a project in many important ways. In fact, local resident arguments represent the last bulwark against the increasing power of regional development interests.

SB731 provides that presently allowed arguments about negative aesthetic and parking impacts of a residential, mixed-use residential, or employment center project on an infill site (as defined), within a transit priority project area (TPP),“shall not be considered significant impacts on the environment.”

And just for good measure, SB731 slips in this condition (Section 1(a)):

“It is the intent of the Legislature… to provide greater certainty for smart infill development, and reduction of greenhouse gas emissions from automobiles and light trucks in a region.

“This bill would state the intent of the Legislature to appropriate $30,000,000 annually… for the purposes of providing competitive grants to local agencies for planning activities for the implementation of the sustainable communities strategy.”

This begins to answer the question I asked in the beginning about the relationship between the revenues from Prop 30, the General Fund and TOD. Apparently, Mr. Steinberg feels that California is now sufficiently in the black to start tapping the General Fund directly for TOD money.

The Taxpayer’s Last Stand?

The next time you hear someone talking about how Plan Bay Area will have no impact on local control, think again. In combination with this tidal wave of new TOD proposals and brazen attempts to pilfer taxpayer money to pay for it, the guiding light of local control is becoming fainter by the minute.

In combination, many of these proposals could conceivably achieve the TOD advocates’ goal of finding that “billion dollar” honey pot to dip into. But even with these measures in place, a 2/3 majority approval by voters still stands in the way of the biggest slice of available tax dollars.

But that may not last for long.

SCA11- Senator Loni Hanock (D-Oakland): This bill would reduce the voter approval requirement percentage from the current 2/3rds majority to 55 percent for imposing special taxes.

The California Constitution (pursuant to Proposition 218) requires that any new special tax by a local government (like the kind that could be used to finance infrastructure financing district authorities, to fund TOD) be approved by 2⁄3rds of the voters.

SCA11 would reduce that to only require the approval of 55% of the voters.

Apparently, the elimination of voter approval remains the last obstacle for TOD loving social engineers.

Is Regional Government Only Being Driven Regionally?

One of the most perplexing questions throughout the Plan Bay Area process has been trying to figure out where all this push is coming from for TOD. Yes, it’s clear that Senator Steinberg is supported by big union labor and big development interests (public sector unions, lawyers and building trades unions have been his top contributors over the years). And, yes, the 100 year old TOD concept continues to be loved by academics and planners, who are not discouraged in spite of it having zero success over all that time. But is that all there is to this?

Are Steinberg and his colleagues really this clever to have dreamed all this up, or are they following the lead of people with whom they wish to curry favor?

HUD – The Ultimate in Top-Down Planning

In a May 2013 Marin IJ article Dick Spotswood shined a light on an important legal argument that’s been going on in Westchester County, New York. It seems that this upscale New York City suburb has become, in the words of Ron Sims, the Deputy Secretary of the Department of Housing and Urban Development (HUD), the department's "grand experiment."

As Spotswood describes it, Westchester’s trouble started when an activist group sued the county for racial discrimination. It seems that although Westchester has about the same racial mix as Manhattan, most of the residents who live in single family homes are white.

Now an impartial observer might think, oh, okay, I get it. We need to help more minorities be able to afford the American Dream of single family home ownership. Wrong! Instead HUD has taken the position that single family residential zoning in and of itself, is a form of discrimination.

Yes, you read that right. And HUD’s solution to this “rampant” form of “discrimination?” You guessed it, more TOD.

HUD is saying that it can simply take the latest census, and if it sees that all the racial groups are not proportionately represented in the city’s single family zoned areas then that city and its residents are guilty of racial discrimination and must make amends.

In July, Spotswood went deeper into this story. It seems the town of Mount Holly, New Jersey, has been accused by HUD of not mitigating the “discriminatory effects” of its planning and zoning history.

In plain English HUD is saying that the very fact that Mount Holly did planning and set down zoning and the results of that zoning (particularly its single family zoned neighborhoods) didn’t result in perfect integration (based on its racial census counts), it means that Mount Holly is guilty of racial discrimination and is in a violation of Fair Housing Laws. Furthermore, HUD’s position is that Mount Holly can be sued and should be financially penalized and forced to zone for TOD, even though HUD acknowledges that the lack of racial mix in single family neighborhoods was not intentional.

I know. Read it again. It’s mind blowing. Little did you know that according to HUD, the single family home you probably worked your tail off to own and maintain just made you guilty of discrimination.

A similar case was recently before the appeals court in St. Paul, Minnesota. But the appeal was withdrawn at the last minute. It seems the Obama Administration feared that if the court considered this absurd definition of what constitutes discrimination, HUD would lose.

It appears the Administration would rather have HUD continue to bully, blackmail and intimidate municipalities, unencumbered by the checks and balances of our justice system.

HUD – A Perennial Backwater of Cronyism and Over-reaching Staff

Few government agencies have as sordid a history as HUD. Its story is too long to even begin telling here. But one could argue that HUD has on balance been a failure since the day it was created.

HUD was the result of the consolidation of federal housing programs after President Richard Nixon saw to it that the government got out of the business of building affordable housing, back in 1965. It quickly became a bureaucratic backwater filled with patronage job appointments and little congressional oversight. This led to a series of scandals and special investigations that have happened with great regularity.

On July 19 of 2013, HUD issued the latest is a series of memos outlining its unique interpretation of our Fair Housing laws (Title VIII of the Civil Rights Act of 1968). In it, HUD lays out its ‘novel’ legal theory that “directs HUD's program participants to take steps proactively to overcome historic patterns of segregation, and promote fair housing choice.” As HUD goes on to explain, it’s not enough to practice fair housing by the letter of the law. It’s our legal “obligation” to “affirmatively further fair housing” – whatever the heck that means.

Of course, it turns out that it means whatever HUD decides it means, without limits.

This is the basis of the legal arguments described by Spotswood. It would be an understatement to say that HUD’s legal theory on racial discrimination is worthy of the kind of justice system depicted in the play, “The Crucible,” by Arthur Miller.

Spotswood thinks Marin County may be the next target on HUD’s list. HUD’s new legal theory is the basis of the consent agreement that our Board of Supervisors, as overseers of the Marin Housing Authority, signed.

And lest you think this is all just obscure theory, think again.

This spring, Bradley Real Estate Company issued a disclosure to alert their brokers and potential buyers and sellers about the possible impacts of Plan Bay Area and high density housing. The Marin Association of Realtors followed their lead. The realtors did this because it is a clear requirement of real estate law that anything that might affect the value or desirability of a property must be disclosed to buyers and sellers. Having formerly been a broker for over 20 years, I can attest to this being the ‘prime directive’ of real estate practice. The mantra is, when in doubt, disclose.

There is nothing even remotely improper about what the realtors did. It is the law. And regardless of your political views, there’s no way that building a five story multi-family project next to your house (even if it were all luxury units) wouldn’t affect your property value.

However, no sooner had the realtors issued the disclosure than Fair Housing of Marin, a nonprofit housing ‘advocacy’ organization that describes itself as a “housing counseling agency in Marin County certified by the US Department of Housing and Urban Development (HUD),” threatened that their actions would be reported to HUD for possible violations of housing law.

Huh? You get reported to HUD for following the letter of the law?!

Talk about loss of local control. How about loss of the legitimacy of our state laws?

So when you wonder where all this is coming from look up the ladder. Senator Steinberg is a clever guy, but he’s not that clever.

HUD is tying all federal funding and grants to this new “legal requirement.” And that impacts every city, county, state and quasi-governmental agency’s projects and lifeline, from the Marin Housing Authority to the Metropolitan Transportation Commission to Plan Bay Area.

Perversely, the more Sacramento politicians continue to connect everything to everything with the kinds of legislation described in this article, the more the shaking of one branch will shake the whole tree.

And here you thought being in a Priority Development Area was your biggest problem.

Cap and Trade Revenues - The Answer to TOD's Funding Needs?

Cap and Trade is an idea that’s been around for a while. The concept is that if you put a “cap” on the amount of something (like carbon dioxide emissions), it makes that thing more precious and therefore gives it a value that people will trade for. Scarcity creates value.

Cap and Trade for greenhouse gas (GHG) emissions is a new state program to promote this kind of trading.

The program sets limits on CO2 emissions and allows stakeholders to bid for “pollution permits” at auctions, to purchase the right to pollute. A person holding a CO2 permit who is not a polluter (e.g. his company does not produce GHG emissions above state targets) can sell the permit to someone who needs to offset their CO2 emissions to be in compliance with the state’s pollution laws. The theory is that the person who sold the polluter the permit can invest his profits in his own non-polluting business, thereby promoting clean industry.

At least that’s the theory. We’ll have to wait and see if it works.

I first heard about cap and trade from people I knew at Environmental Defense Fund, in the late 1970’s and 80’s. Rod Fujita, a very smart scientist there, was working with fishing fleets in the Pacific Northwest where the fisheries had collapsed from over fishing. The logic was that if a “cap” was set on how many fish could be caught in a season, and if fishing fleets had fishing quota permits to trade for cash, they would all make a living and the fishery would be saved from over-fishing.

It worked. This was a clever way to solve their “tragedy of the commons” and save everyone’s job.However, regardless of whether the Cap and Trade Program actually reduces GHG emissions, the state of California collects fees from the permit auctions. The estimates on how much money these auctions will generate vary enormously, but I’ve read estimates as high as $30 billion dollars.

This brings me back again to my original question about why Senator Steinberg sees a connection between the improving health of the state’s General Fund, and his grand SB375/Plan Bay Area/SB1 scheme.

Eyes on the Prize?

$30 billion is a lot of money. Already the haggling and deal making over how to spend it has reached a fever pitch in Sacramento. Governor Brown has his eye on it to help cure the state’s budget imbalances and the unfunded liabilities of the public employees' pension fund. But could the precedents laid down in SB375 (Part I of this series) give Steinberg and his cronies a way to get their hands on a chunk of it, too?

Cap and Trade was sold to the public as a method to decrease GHG emissions and fund a wide variety of environmentally beneficial programs. These included things like investments in clean technology and subsidies for the installation of solar and other alternative energy sources by homeowners and businesses. It sounded like a win/win.

That said, with Steinberg’s SB375 and all the newly proposed legislation legally defining high density TOD as "environmentally beneficial” it's not too much of a stretch for funding earmarked for "environmental" benefit to now go toward SB375’s “solution” to reducing GHGs: e.g., Plan Bay Area.

This means that instead of money going towards the truly beneficial programs originally envisioned, a portion of the Cap and Trade revenues would instead go to big development interests building big projects using the same old environmentally destructive methods we’ve been using for a hundred years.

If the prospect of this wasn’t so depressing, I’d have to admit I’m amazed at the cleverness of it all.

The ironic result of all this, of course, is that we now have big “progressive” environmental nonprofits like Greenbelt Alliance and NRDC heavily and apparently unwittingly supporting big union labor and big development and banking interests (the same guys who brought us the Crash of 2008) so they can continue to profitably pillage the planet.

And remember, this time it will be easier because it will take place via JPAs: government “off the books.”

But is Steinberg really this clever, to have seen all this coming when he was drafting SB375? I doubt that very much. This is more like a “Bermuda Triangle” of bad policy and serendipitous timing coming together in the most unfortunate way possible. But I see no reason why funding for Plan Bay Area's TOD would be precluded from tapping Cap and Trade revenues.

The Joint Policy Committee – The Big Kahuna of JPAs

There’s been a lot said and written about how local government and quasi-governmental agencies like ABAG are unresponsive to the concerns of those they are supposed to serve. But it should be clear by now that there is nothing in the way JPAs are set up that would encourage them to act otherwise. And the tidal wave of new proposed legislation will certainly make the whole situation much worse.

However, as unwieldy as government “off the books” has become, there is yet another layer of regional government that has not even been mentioned: a joint powers authority so removed, so inaccessible and impervious to voter input that it’s been able to hide in plain sight throughout the Plan Bay Area turmoil.

This “Mega” JPA is called the Bay Area Joint Policy Committee (JPC).

The JPC’s members are local representatives who sit in appointed positions at ABAG (a JPA) and BCDC, BAAMQ and MTC (government agencies). Voters have no say about who becomes a member of the JPC or its Executive Committee. By virtue of multiple degrees of separation, for all practical purposes, none of the members are accountable to the voters, if only because no one has a clue that this organization even exists much less makes decisions that affect them.

However, according to the JPC’s web site, their job is to “coordinate planning efforts” of the four member organizations. And like any other JPA it has broad powers and latitude about how it spends its time and money.

A knowledgeable source who used to work for the state government told me that she thinks this organization is “virtually untouchable by the voters.” If you look at the attached chart of the interrelationships of the JPC with a myriad of other state and regional agencies, I guarantee you it will make your head spin.

The next time you wonder why Plan Bay Area was railroaded through local opposition and why it felt like the Plan and its approval timetable were a fait accompli, think about the JPC.

Final Thoughts

Government “off the books” seems to be the method of choice today to deal with any scheme that meets with voter’s objections. The problem, however, is that the more removed government decision making gets from the people it serves, the less it serves the interests of those people. Operating out of sight led to the corruption and malfeasance at ENRON and our biggest multinational banks, and it’s guaranteed to invite the same thing in government.

Actually, when you think about it, we're seeing the results of this lack of concern for the people our government is supposed to serve, every day.

When I spoke at the Marin Town Hall Meeting in March, I mentioned the need for us to provide free healthcare and free college education to every American citizen. And I said I thought the minimum wage needed to rise by at least 50 percent.

The “grassroots progressives” laughed and mocked me for it. They said it would never happen (So I guess then why bother talking about it?). Or that raising the minimum wage from $8 to $12 an hour would be meaningless (Really? Do you think that’s true to the people making $8 an hour?).

But I ask you this. On balance, are our affordable housing and social equity problems more a function of the kinds of buildings we build or are they the result of decades of historic degradation of the average citizen’s standard of living and educational opportunities and access to healthcare?

Consider the following:

In the face of all this, can anyone really sit there with a straight face and tell me that building high density, transit oriented development is the answer to enhanced social equity?

Imagine if we actually spent time and money addressing the underlying problems. Yes, I realize those need national policy leadership that’s completely lacking, but there’s a lot we could do locally with the billions we’re planning to spend.

We could lead with new ideas rather than trying to force 100 year old ones onto our 21st century world.

TOD: A Simple-Minded Idea That Refuses to Die

The New York Museum of Modern Art just opened an exhibition on the life’s work of Le Corbusier, a turn of the century Swiss architect who was one of the leading proponents of modernism. Le Corbusier’s concepts for high density, transit oriented development laid the groundwork for all the TOD ideas promoted today. In fact he pretty much invented TOD with his plan for La Ville Radieuse (the Radiant City), something I discussed in my book, “The Best Laid Plans: Our Planning and Affordable Housing Challenges in Marin.”

Among Le Corbusier’s grandest ideas, at least according to architecture’s cognoscenti, was his “Plan Voisin:” A proposal to demolish the entire downtown of Paris, an area that included precious neighborhoods along the banks of the Seine that today are among the most beautiful and architecturally significant in the city, and replace it with high density TOD. It included “walkable, triple-tiered pedestrian malls adjacent to residential, governmental, and cultural buildings surrounded by green space, integrated with highways, train and subway lines.”

It was a big, top down, one size fits all development plan that ABAG and Darrell Steinberg would have loved.

I think it’s a good example of what we get when we leave planning to big government and “experts.”

Maybe ABAG could take a page out of their own past as an advocate for the concerns of their members, and start to think about the real challenges I’ve touched on in this series. Then maybe government could come back into the light of public scrutiny and work for all our interests again.