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20BillionReasons
The Colossal Collapse of the Regional Measure 4 Boondoggle
The Bay Area Housing Finance Authority (BAHFA) was created by the California State Legislature in 2019. Its stated purpose is to administer programs and projects in the San Francisco Bay Area that are
“focused on production, preservation, and protections to help all Bay Area residents have a safe, stable, and affordable place to call home.”
BAHFA announced Regional Measure 4 (RM4) with great fanfare on June 26th. The agency’s proposed 20 billion dollar, general obligation, property tax measure, set to be placed on the November 2024 election ballot.
BAHFA claimed that they spent more than 4 years and invested significant financial resources in the creation of RM4, including extensive collaboration with regional stakeholders and hiring teams of expert consultants.
MTC’s marketing pitch was that RM4 would address the housing shortage in the San Francisco Bay Area by funding the development of new affordable housing, the preservation of existing affordable housing, and protect residents from displacement.
However, on the eve of the ballot registration deadline, an ad hoc, grassroots group calling themselves “20BillionReasons” accused MTC/BAHFA of making serious misleading statements and outright false claims in the ballot measure’s language as well as some really dumb, 5th grade-level math errors.
BAHFA admitted the math errors and could have fixed them and corrected the misleading language in the ballot description but at the last minute, the BAHFA leadership pulled from the ballot for reasons they’ve yet to fully explain.
Could it be this was because public opinion polling results were so bad that the measure was sure to fail and this last minute opposition gave BAHFA cover to avoid a humiliating defeat at the ballot box?
According to polling numbers available from public sources, RM4 was wildly unpopular among San Francisco Bay Area voters and consistently showed less than the support needed to pass the Measure. (The law currently requires that tax measures need a 2/3rds margin to pass.)
However, in response to this embarrassment, instead of going back to the drawing board and rethinking the entire proposal (and learning how to add and subtract), BAHFA has decided that it will now turn its full attention to trying to change the election ground rules for voter approval by supporting the passage of State Ballot Measure 5.
Who controls BAHFA?
BAHFA operates under the authority of The Metropolitan Transportation Commission (MTC), an unelected state agency that has a myriad of sub-committees and advisory panels. Theoretically, MTC receives input from BAHFA commissioners and members of the Association of Bay Area Governments (ABAG), many of whom are locally elected officials. However, since almost all of ABAG’s funding is now controlled by MTC, ABAG has essentially become a hollowed-out, wholly-owned subsidiary of MTC with zero say in anything of consequence. And, members of the BAHFA Administration Board are politically appointed, not elected to their positions.
One way or another, everyone essentially serves at the pleasure, whim, and political wishes of MTC.
BAHFA’s “affordable housing” mantra
Since its inception, BAHFA has been working on a housing bond proposal, the purpose of which was ostensibly to fund the development and preservation of “affordable housing,” which all sounds laudable until we look at the details.
“Affordable housing” is a term that has become so expansive and abused over the past 10 years that it’s become completely disconnected from its original intentions of housing low-income people and those most in need. As it is now, a family of four in San Francisco that makes 130% of the official Area Median Income (AMI) is eligible for taxpayer-subsidized, rental housing.
As such, under the RM4 proposal, the average San Francisco home-owning family of four that makes $146,872 per year (100% of AMI) or an elderly homeowner living on social security would have to pay a hefty property tax to subsidize a family of four that makes $194,800 a year!
This begs the question: on what planet is that equitable?
Worse still, although RM4 touts itself as helping house seniors, retirees, and those with disabilities, ironically, it offers no exemptions from its property tax increases for existing homeowners who are seniors, retirees, or those with disabilities.
No wonder the polls showed that the public took one look at RM4 and said, “No thanks.”
What was RM4 going to cost homeowners?
Despite the restrictions under Prop. 13, the San Francisco Bay Area has some of the highest, assessed property values in the country. (There are approximately 14 million single-family homes in California, and on average about 425,000 of those have been bought and sold every year since 1978, and assessed at the value of the purchase price, which have continued to increase, dramatically.)
RM4’s tax increases were to be based on those values. As shown on the chart, below, the resulting increases in property taxes were dramatic.
In addition, those property taxes would continue to increase for the next 20 years and remain in place for the next 52 years.
All of these added costs of residential property ownership would not just increase the costs of home ownership but would be passed on to renters to the greatest extent possible (making home ownership and rent less affordable).
Still, BAHFA and its supporters argued that RM4 was necessary because housing costs are just too high. This sounds like a valid argument until we look at the expenditure side of the equation.
How would RM4 property tax revenues have been spent?
According to the income/expense spreadsheets provided to 20BillionReasons, by MTC, of the $48.3 billion paid by property owners over the lifetime for this “20 billion dollar” bond measure, $4 billion would go to pay for BAHFA’s overhead and administrative costs and a whopping $28.3 billion would be spent on interest on the debt.
That means that only 1/3rd of the tax payments would have actually gone toward subsidizing housing projects. But, even that number is misleading because it doesn’t count the local administrative costs, which also have to be deducted from the total funds available for construction.
Has BAHFA ever considered alternatives methods of financing affordable housing?
Without going into great detail about housing finance, this type of general obligation bond is arguably one of the least efficient ways to use public funds to subsidize housing development.
For example, housing tax credits, which are a form of financial leverage, produce far more bang for the buck, in part because of the economic multiplier effects from privately financed real estate development that offset most if not all of the cost of the tax credits provided by the government agency. And, all of the funding goes directly toward project costs without paying for a government agency middleman.
(Note: The creation of a new tax credit does not require a bond. Tax credits are not public debt so there is no” interest” or other costs associated with public debt. Credits are a direct subsidy to a developer if and only if they present a "qualifying" project and those qualifications can be as strict and specifically targeted as desired, i.e., for low-income units, “missing-middle” units, etc.
A developer that is granted tax credits typically sells those credits to a corporation or a syndicator for cash that goes to subsidize the project costs. This credit would be in addition to the existing federal and state tax credit programs and be tailored for the needs of the San Francisco Bay Area. This new program would have to be approved by the state legislature.)
Another method that is certainly more efficient is using bond funds to “insure” private housing project development debt by private banks and other investors. This method maximizes the financial leverage by orders of magnitude to produce the greatest number of housing units from any given amount of funding. And, considering that the rents for low-income (Section 8) units are pretty much guaranteed because waiting lists for low-income units that accept rental vouchers are many years long, the risks of default are minimal; lower than market rate developments.
Who is 20BillionReasons?
In response to the news that RM4 bit the dust, legions of self-appointed housing “experts” and professed housing advocates unleashed a campaign to kill (defame) the messenger. In particular, Ken Kirkey, the Chief Partnership Officer of All Home issued a scathing press release, titled “This isn’t over,” lamenting RM4’s demise as “truly devastating” and accusing 20BillionReasons of being,
“The same anti-government, anti-housing extremists who have been blocking progress in California for decades unleashed a barrage of well-timed lawsuits, and they got lucky. These are the people who tried to declare the City of Woodside a mountain lion refuge, and who recently got two Millbrae City Councilmembers recalled for failing to sign a letter of opposition to a single permanent supportive housing development. These are the political descendants of the people who designed Prop 13, which has been sapping the ability of local governments to provide the public services our communities need— education, transportation, housing, public health, and much more—since 1978.” [Emphasis theirs]
With all due respect to the people at All Home, who are probably hardworking and very well-intended, this is complete, gas-lighting B.S.
When will “housing advocates” get past this kind of distorted and mean-spirited political rhetoric that has so poisoned our national political debates? Just because a majority of home-owning taxpayers reject a bloated and poorly-crafted bond measure does not make them the Devil nor do demands to correct glaring addition and subtraction errors rise to the level of being a conspiracy.
The truth is that the 20BillionReasons’ effort was a typical, hastily organized, grassroots, ad hoc story. A group of individuals serendipitously coalesced around shared concerns in a very short time frame and brought a legitimate legal challenge against the gross errors, omissions, and misstatements found in the RM4 bond measure ballot description.
It’s really that simple.
20BillionReasons consisted of a diverse mix of liberals, conservatives, and independents, none of whom lived in or had anything to do with mountain lions in Woodside and many of whom were not even living in California or old enough to vote when Prop. 13 was “designed” and voted into law in 1978.
The group included ex-mayors, councilmembers, and other local elected officials, public advocacy groups, several private sector experts in municipal finance and statistical analysis, grassroots community activists, and a bunch of plain old homeowners. And, the timing of the lawsuit was anything but “well-timed.” They all just came together very quickly and filed their complaint as soon as they could.
What now?
According to All Home, the next battle is to undermine the voters who oppose their plans.
They write,
“Proposition 5 is still on the November ballot, which would deliver structural change to enable voters to approve affordable housing and infrastructure bonds that most Californians consistently support. Passing it would be a huge help to all our efforts, and that will now have more of our attention and resources in the next 83 days.”
Prop 5 proposes to decrease the definition of a “majority” vote needed to approve housing bond tax measures like RM4 from the current requirement of 2/3rd of the voters (66.6%) to 55% of the voters. This would obviously make approval of the next iteration of RM4 much easier.
This is where the MAGA right and the Uber-Progressive Left come full circle to become one and the same. If they can’t win a vote on the merits, they attack the system and work to change the ground rules in their favor.
There are time-honored, good reasons for needing a 2/3rds majority to approve tax measures. A 55% vote is a lot easier to sway with big-money lobbyists and slick, misleading media marketing.
Bob Silvestri is a long-time Mill Valley resident, the Editor of the Marin Post, and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization dedicated to bringing the community's voice to government decision-making and funded exclusively by individuals and nonprofit donors. Please consider donating now to support our work.