To: self
From: Commissioner Thomas Lord
Subject: prepared comments
Date: April 5, 2018

In Honor, Commemoration, and Rememberence

This month marks 50 years from an important milestone in the history of housing policy.

Fifty years ago to the day was the first full day of riots in reaction to Dr. King's assassination. Rebellions broke out across the country, in segregated, Black neighborhoods of cities. These were neighborhoods devastated by disinvestment, the product of decades of bad housing policy.

As the National Guard was being rolled out and people were being killed for participating in the rebellion, Congressional leaders met with President Johnson and agreed to strong arm passage of the Civil Rights Act of 1968, also known as the Fair Housing Act.

In its initial form, the act prohibited (on paper, at least) "housing discrimination on the basis of race, color, religion, or national origin."

Closer to home, tomorrow marks 50 years from the assassination of Bobby Hutton. The Black Panther Party's 10 point program responded to the conditions of Black urban neighborhoods in many ways including a demand that "... the land should be made into cooperatives so that our community, with government aid, can build and make decent housing for its people." (emph. added)

Housing policy matters.

Item 5: Election Procedures and Commission Governance

[I will ex-temporize about the election process.]

I would remind us all that this is not a partisan body, it is, by City rules, an egalitarian body composed of individuals.

Every time the Chair or Vice Chair act as if their job is to control outcomes from this commission, or even to end-around this commission while blocking this commission from its work, they sin.

It is a symptom of sin when the Mayor says from the dais that he will speak with this commission but what he means is that he'll chat with Igor.

It is a symptom of sin when, even with the disclaimer that he speaks only for himself, Igor stands at the podium and announces to council that he will try to advance their agenda.

This has become so ridiculous that when we discussed the idea of bonding against U1 revenues, and the idea was criticized, the Vice Chair terminated the discussion and announced that the Mayor's task force would make a bonding plan -- and then City Council, in the end, has returned our U1 recommendations asking why we didn't consider that question and reminding us, by the way, of our actual duties under our enabling ordinance.

It is so ridiculous that the 4x4 committee, on which our Chair sits, is apparently in the business of reviewing code enforcement under the Residential Housing Safety Program when, as I tried to point out multiple times in the past, that is by ordinance the duty of this Commission.

That all of this follows such a shabby election process, if you even want to call it an election, just adds insult to injury.

I think is important that, as a group, we hold these executives to account during the remainder of their term and that next year, we hold proper elections that include some vigorous discussion of the role of the Chair and Vice Chair.

Item 6: Meeting Process Guidelines

What I'm struck by most, about these guidelines, is how the chairs wield them against people when it suits them, and ignore them when they please.

Last month I was, literally, interrupted in the middle of making a motion by the acting chair who began to make a hostile replacement motion.

No more of that, please!

Item 7: ADU Pilot

This item comes to us as the result of a referral from City Council made in, I believe, December of last year.

In my opinion, there is some stuff to really like in here and some stuff to not like so much. I'll speak to that a little more shortly.

As originally drafted by Councilmember Bartlett, this referral would have gone to the City Manager, but it was revised to send it to us instead.

I haven't seen much in the subcommittee's version that is substantially different from the initital version. As the item has noted, the financials are not clear. I would go further and argue that this is not a fiscally sensible approach, as drafted -- for either the city or homeowners. (It offers aid to the comfortable but under terms onerous to them.).

Because this was diverted from the City Manager to us, I think it would be an error to simply rubber stamp it and try to send it back to the City Manager after all.

I'd much rather we spend some time with this concept and try to add some value rather than just ping-ponging it around until it drops into a void. Perhaps we can improve the proposal.

I'm going to suggest we explore two things before returning this:

  1. We can simplify the financial analysis by reformulating it as a master tenancy. That is, the subsidy to the homeowner would be in the form of pre-payment of rent for the unit, for some period of time, and the City could then allocate that unit as it saw fit.

  2. We can further assist homeowners and City Policy, perhaps, if the City is able to provision property management services for its master tenancies. This would tie in, incidentally, with the discussion of property management services found in the moderate income housing item coming up later this evening.

My suggestion is that we take no action tonight unless the ADU subcommittee would like to work further on it. Instead, let's please bring this item back for consideration during the work plan session.

Item 8a: Measure U1

I would like to hear from City Staff any details they might have on hand about the proposed revenue bond. I don't see how a revenue bond could apply to a garage before it is built.

I suspect that Council is winkingly asking us to, instead, propose bonding U1 revenue, aiming for not less than taking on $25 million in new debt, payable over 20 years.

The schedules the City Manager put together assume a 3% bond rate which is essentially equivalent to a 5% bank loan, from the City's perspective. The small difference is that with a bond, the City's equity in the project builds slightly faster but the only benefit to the City of that will be an annual return on the cash value of accumlated equity -- that return on capital will be at the City's internal rate of return on funds -- and that rate of return is below the typical rate of inflation.

[1.25M principle, 750K bond service]

Furthermore, in bonding U1 revenue, the City would take on an enormous and foolish risk. In the next 20 years there is a 2/3 chance of a major earthquake. There are non-negligable odds of a collapse of current rent prices brought on by some other cause. In short, it is probable that over a period of 20 years U1 revenue will be volatile. Should that volatility develop into a shortfall, the City will still be on the hook for annual bond service and principle accumulation. In my opinion, trying to bond against future revenues from a tax on residential rents is flatly insane.

Meanwhile, there is the matter of our annual report -- a new duty under Measure U1 -- and a duty that was blocked from consideration during the work plan process last year.

Councilmember Harrison pointed out that we ought to have an annual report no later than May.

I plan to write one for May, summarizing the substantive and relevant recommendations that we did make and pointing out which appear to be implemented (and I think that may be most or all of them, those not yet before council notwithstanding).

Item 8b: Moderate Income Housing

[See item]

Also, there is a new paper that is highly relevant:

Article: "A Plan to Solve the Housing Crisis Through Social Housing"

Paper: "Social Housing in the United States"

Peter Gowan and Ryan Cooper

Finally: The written item proposes that the City would own a majority shares of holding companys that act as a kind of land trust and structure trust. I learned earlier this week that it is unclear that particular ownership model is permissible under California state law. It might not be permissible on the basis of a general prohibition against owning certain kinds of equity. Or it might be permissible on the basis of our charter city power to own a public utility.

Regardless, the same effect can be achieved by other means. For example, the City could help to establish a California B corp (a form of for-profit but public benefit corporation), and then grant that corporation a City franchise. The corporate charter of that B-corp, and its franchise agreement, could grant City Council full discretion to, at any time, condemn, acquire, reorganize, and reconstitute the corporation -- precisely the powers direct City ownership would give.

I believe our plan is to incorporate some changes Igor is preparing and I believe that I will also propose adding Gowan and Cooper's important paper as an appendix. That paper will save us a lot of work.

Item 9a: BRIDGE's Berkeley Way: Funding and Public Parking

In this version its $15M bond for 10 years at $2M/year

This is the same 3% (5% bank loan equivalent).

The default risk from U1 volatility is reduced but is not less than a 1 in 3 chance of major earthqake in that period.

Annually, this $500K in bond service.

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Copyright (C) 2018 Thomas Lord