Public housing: what’s wrong with this picture?

May 10, 2007 | HUD, San Francisco

Some stories are so complicated, contentious, and downright bewildering that outsiders venture in only with the greatest caution. [Hey, you’re a blogger, you’re supposed to do this so we don’t have to! — Ed.]



David’s going to write a blog!


Even with that caution, we have to shine a light on the long-troubled San Francisco Housing Authority, whose current troubles read like the pleadings in Bleak House’s celebrated chancery case, Jarndyce v. Jarndyce.


Jarndyce and Jarndyce drones on. This scarecrow of a suit has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least, but it has been observed that no two Chancery lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause; innumerable old people have died out of it. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce without knowing how or why; whole families have inherited legendary hatreds with the suit. The little plaintiff or defendant who was promised a new rocking-horse when Jarndyce and Jarndyce should be settled has grown up, possessed himself of a real horse, and trotted away into the other world. Fair wards of court have faded into mothers and grandmothers; a long procession of Chancellors has come in and gone out; the legion of bills in the suit have been transformed into mere bills of mortality; there are not three Jarndyces left upon the earth perhaps since old Tom Jarndyce in despair blew his brains out at a coffee-house in Chancery Lane; but Jarndyce and Jarndyce still drags its dreary length before the court, perennially hopeless.





These are not the SFHA’s board members.


As reported in the San Francisco Chronicle, it all starts with a tragedy a decade ago:


In 1997, a fire engulfed a Hunters Point public housing unit, killing a grandmother and five children. The agency was found to be negligent for not having installed a smoke detector or having fixed a faulty heater. Relatives of the victims were awarded $12 million. The authority paid $4 million, but the judgment has grown again to $12 million because of interest and attorneys’ fees.


In 1998, a painter at a public housing development sued the agency, saying she had been sexually harassed by a foreman and retaliated against after she reported it. A judgment for her stands at $2.5 million.


In 1999, an administrative assistant at another development sued the authority, saying she had been sexually harassed by her supervisor. A judgment for her now stands at $650,000.


(To simplify matters, let’s stipulate the plaintiffs are entirely in the right, and that the judgments were completely sound in all respects.)


The total tab is $15,000,000, and rising.


“The polar ice cap has melted faster than these people have moved,” Tom Brandi, a lawyer for the plaintiffs, said of [Authority director Gregg] Fortner and other Housing Authority officials.




Mr. Fortner (center) has been working for housing authorities for nearly twenty years.


Why hasn’t the authority paid it? Under the public housing dependency schema, SFHA must ask HUD:


The U.S. Department of Housing and Urban Development funds the Housing Authority and has prohibited Fortner from using federal money to pay the judgments.


Meanwhile, SFHA is technically insolvent, since (like many housing authorities) it cannot cope with all its financial responsibilities. From another San Francisco Chronicle article:


The Housing Authority, which operates 6,400 public housing units and serves 35,000 residents, has seen its budget cut by the federal government every year for the past five years. It has had to lay off scores of workers.


Because the authority has no money of its own, finding this money means it must come from some other households. Let’s assume (charitably) that the typical SFHA apartment needs $5,000 per year of operating subsidy (the difference between operating costs and resident rent contributions). Paying these eight deserving plaintiffs (six fire victims and two sexual harassees) means that roughly 3,000 SFHA families will lose their funding — or 200 employees (at say $75,000 a year) will have to lose their jobs. Enter a judge, wielding judicial vengeance:


A San Francisco Superior Court judge is expected to turn over control of the city’s Housing Authority today to Art Agnos, charging the former mayor with ensuring that the agency’s $15 million in legal debts are paid.




Former mayor, former HUD regional administrator, today’s happy receiver


Receivership, as the judge contemplates, is a remedy for incompetence or insubordination, not insolvency, a distinction the judge has chosen to overlook:


Still, Judge Kevin McCarthy has said the agency’s troubled finances are no reason for the victims to remain unpaid.


In November, McCarthy said he was likely to tap Agnos, also a former regional director for the federal housing department, to temporarily take charge of the Housing Authority with one chief task: “Find the checkbook, write the check, give it to the plaintiffs’ attorneys and hand back the keys.”





Judge Kevin McCarthy showing he has clean hands in this matter.


What happens when the check bounces, Judge McCarthy?


Eric Dewalt, an attorney for the Housing Authority, argued in court Wednesday [March 21, 2007 — Ed.] that HUD won’t grant Agnos permission to pay the judgments either.


“I just don’t see how approving a receiver will resolve this,” he said. “Nobody in San Francisco can force the federal government to release funds to pay the judgments.”


“I’m not so sure about that,” McCarthy countered. “The last time I checked, the Speaker of the House is from San Francisco.”



Yes I’m from San Francisco, and No I can’t help you.


I am sure the judge, who should have known better, now regrets making a quip whose implication is that elected officials can override the law.



Yes, but did he go to law school?


Nevertheless, Judge McCarthy is on the warpath, and he’s investing Mr. Agnos with extraordinary powers, and a budget to match:


The appointment could cost the Housing Authority even more money. Under a proposal given to McCarthy last week by lawyers for people owed money by the Housing Authority — and reviewed by Agnos — the former mayor would receive $400 an hour as receiver. He would be guaranteed a minimum of $100,000 for taking the job. The money would come out of the San Francisco Housing Authority’s budget.


The lawyers also have proposed that Agnos have the right to hire any accountants, attorneys, consultants or other professionals he deems necessary. They also would be paid out of the Housing Authority budget.


So the plaintiffs’ lawyers, who may well be compensated with a contingent percentage of their recovery, are proposing that their collection agent be handsomely paid. Again to put that in cruel human terms, every day and a half Mr. Agnos works will de-fund another San Francisco family for a year, a choice Mr. Agnos says he regrets:


“I’m told that’s the standard rate,” Agnos said Tuesday [March 20 — Ed.], adding he doesn’t want the job and wishes it wasn’t necessary for a receiver to be appointed. “The taxpayers are already paying for this job to be done by the city leaders, and it should have been done a long time ago. It’s too bad the taxpayers have to pay twice.”


The proposal also would give Agnos complete control over every aspect of the Housing Authority and states that anybody working in the authority who doesn’t cooperate with Agnos or “follow his instructions” could be held in contempt of court.



How San Francisco dealt with contempt of court a hundred years ago


“Anybody can go in with a meat ax, write a check and to hell with everything else,” Agnos said. “That’s not what I’m about, nor what I would do. That’s why it’s important to have as much authority as possible to maximize the opportunity to pay the debt without doing damage to a lot of people who need that housing.”


Mr. Agnos’s sensitivity is appropriate and laudable, but if he is appointed with a job of finding money, he has to get it from somewhere.People will be hurt.


Gregg Fortner, director of the Housing Authority, called the proposal “a bad idea.”


“If we could afford to pay people that much money, we could afford to pay the judgments,” he said. “That proposed order would jeopardize the services we provide to the low-income families and individuals of public housing.”


Fortner added that HUD already has said it won’t give a receiver permission to use federal funds to pay the judgments.



HUD’s standard answer to impertinent questions


“You could pay Art Agnos $1 million an hour, and he can’t do anything without their permission,” he said.



The home screen on HUD’s computers?


Where, the reader may ask, is the city? Shouldn’t the mayor backstop funding obligations of a city authority?


Mayor Gavin Newsom two weeks ago [early March — Ed.] sent a letter to HUD outlining a new city plan to get the judgments paid. He proposed buying a plot of land on Candlestick Point from the Housing Authority that is currently used by the 49ers as a parking lot. In addition, the city would back a bond issue by the Housing Authority.



Evidently $15 million is buried there somewhere


So the Housing Authority has in fact got assets — valuable land — that it is neither using for housing nor monetizing. One wonders what other assets the authority might have?


The lawyers for people owed money by the Housing Authority sent a letter to the mayor last week asking for a private meeting. They don’t like the proposal to buy land and back bonds because they think it will mean further delay on paying the judgments.


Instead, they want the mayor to dip into the city’s general funds to pay the judgments.


Am I the only person bothered by the prominence of lawyers making business decisions for their clients?


[Matthew Franklin, director of the Mayor’s Office of Housing], said that was a nonstarter.


Evidently not J.


“That’s absolutely out of the question and that’s not appropriate,” he said. “We’re eager to help, but there’s no basis for use of the general fund. The city is not and cannot be a backstop for federal liability.”


Federal liability? From the San Francisco Examiner:


The Mayor’s Office of Housing had offered to transfer land on Candlestick Point from the Housing Authority and issuing a bond to pay off the judgments. But HUD officials have apparently sent word that they do not approve of that package, even though the official letter from Washington had not arrived this week [late April — Ed.].


What’s HUD got to do with it?



What’s HUD got to do with it, do with it?


[Continued tomorrow in Part 2.]