Eric Sunada Alhambra, California
December 22, 2017 City Council City of Alhambra 111 South First Street Alhambra, California 91801 Subject: Letter in protest to the appointment of Jessica Binnquist to the position of City Manager Dear Sirs/Mmes, I am writing in opposition to the appointment of Jessica Binnquist (née Keating) to the position of City Manager. As an Assistant City Manager and Deputy City Manager for Alhambra, Ms. Binnquist has mismanaged programs resulting in a disservice to residents that were to be assisted. In her position to administer the city’s housing and community development monies, millions of dollars of federal grant funding dedicated to helping lower income groups were instead used to subsidize favored corporations and businesses. The amount of federal Community Development Block Grant (CDBG) Funding we receive is based on the size of our lowincome population and, accordingly, is dedicated to them. The federal grant program requires that its use must directly address at least one of these objectives: • • •
elimination of slums and blight and blighting influences; benefitting low to moderate income persons or neighborhoods; and/or meeting other urgent community needs imposing an immediate threat to safety and health.
During Ms. Binnquist’s tenure, the majority of grant funding has been misused to subsidize retail and commercial development without an equitable return to the community (reference Enclosure 1). More recently, the city learned in 2015 that it would be receiving a large amount of funding to be used under CDBG guidelines due to a state-imposed sell-off of assets from the city’s infamous Redevelopment Agency. Similar to block grant funding, redevelopment agency revenue was intended to address the lack of affordability within the city. City management and councilmembers are entrusted to properly manage this funding, which in this case totaled $7.9 million. Such a one-time windfall presents unique opportunities for the development of significant, impactful projects consistent with a strategic vision. At a minimum, city management is expected to seek public input and leverage this large sum with other state programs to effectively double its value. Options could then be presented toward desperately needed developments such as transitional and affordable housing, satellite library or study centers for students, vocational training opportunities along with a strategic development of a business-base that brings in jobs with livable wages, to name a few. Instead, the city was seemingly caught flat-footed against a deadline and attempted to use the money to build a parking structure at Almansor Park. After public protest, the city scrambled to use it almost entirely for park and infrastructure improvements. The wasted opportunity represents a gross mismanagement of grant funding in the millions of dollars. Furthermore, such infrastructure projects should be funded through general funds since they are used by the region at large. That the city used grant funding, the amount of which is based on the size of our lower income population and intended for them, essentially amounts to charging the working poor for living here. Of the $7.9 million dollars, only 2.5% of this amount or $200K was actually dedicated to a subset of the target group and used for homeless outreach services. Even this pittance would not have been realized without public pushback. Mismanagement of public funds on this scale is often associated with disciplinary action rather than promotion. There is a consistent theme here. When I posed the question to Ms. Binnquist back in 2010 as to how the city justifies the disproportionate use of grant funding to subsidize retail development when the national objectives clearly intend for the
Alhambra, California
(626) 589-0440 email:
[email protected]
Eric Sunada
2
funding to assist the low-income community, the answer I received was that such programs benefit everyone by their “trickle-down” effect, and they also create much-needed jobs. But without a livable wage ordinance or affordable housing, such jobs do little to nothing to support our community’s upward mobility. Without an equitable return, such practices amount to a giveaway to the business lobby. A case in point: in August of 2014, under Ms. Binnquist’s management the city agreed to give $1.5 million of block grant funding to the Nissan car dealership to promote their expansion efforts across Main Street. The business claimed that it could not expand without this help, which would result in lost sales tax revenue for the city. By then, the community had begun pushing back to demand that fair wage laws be enforced on corporations that took our grant funding. In the end, the Nissan dealership did not accept the funding yet expanded anyway. They reason why they left the grant on the table? Those representing the dealership said they would have been forced to pay prevailing wages. Ms. Binnquist’s management has also contributed to the city’s deplorable affordable housing record. Block grant funding can be leveraged to create meaningful projects, helping Alhambra to do its part in helping with this crisis. It requires strong leadership with a vision. Instead, Ms. Binnquist has repeatedly given incoherent feedback when I have attempted to engage for ideas, often citing misinterpreted federal regulations. She has refused to acknowledge and is complicit with the problem, making corrective measures unrealizable. For example, during an October 2010 conference call with her, city manager Julio Fuentes, and interim Director of Development Services James Funk, she provided double-speak and interference when I questioned the city’s discriminatory practices that have left 95% of our affordable rental stock being off-limits to families (reference Enclosure 2). City management incredulously barked “Where are these people? Show me these families [that are in need of low-income housing]!” When I tried to explain, Mr. Fuentes focused on those for which I had first-hand knowledge and implied that he may be able to do something for them if they were to give his office a call. By selecting Ms. Binnquist, you would be reverting to a paradigm of opaqueness and appeasement that our previous city manager, Mr. Yokoyama, was attempting to break free from. The city council has the authority to appoint the new City Manager, and is ultimately responsible that the person serves in the best interest of the community. You owe it to the community to clearly delineate the criteria for your selection. Your press release listed the two main reasons as Ms. Binnquist’s balancing major business development while providing services to Alhambra’s most vulnerable citizens; and secondly, leading major regional projects focused on the closure of the 710 Freeway gap. However, both the size of our vulnerable population and traffic congestion have only increased over her tenure. I would appreciate a truthful and less insulting rationale for your selection. Sincerely,
Eric Sunada enclosures
Eric Sunada
Enclosure 1
3
SUBSIDIZING RETAIL DEVELOPMENT: MISUSE USE OF GRANT FUNDING BY THE CITY OF ALHAMBRA
CASE STUDY: CITY OF ALHAMBRA
October 3, 2012
Subsidizing retail development: misuse use of grant funding by the city of Alhambra by Eric Sunada
Records have shown that for at least the past 15 years the city of Alhambra spends a grossly disproportionate amount of their federal block grant funding on subsidizing retail development. This practice is not consistent with the U.S. department of Housing and Urban Development’s (HUD) 1 requirements . That is, it is required that funding directly addresses at least one of these national objectives: • elimination of slums and blight and blighting influences; • benefiting low to moderate income persons or neighborhoods; and/or • meeting other urgent community needs imposing an immediate threat to safety and health. The practice of granting money, which is clearly intended for those in need, to businesses is questionable. And it is unethical when those businesses provide no direct benefit to the target community. Federal grant money to local governments originated in the 1960s where the Model Cities program was started as a way to assist low-‐income neighborhoods. This money was directed for specific uses and locations. However, during the Nixon administration this program morphed into the Community Development Block Grant (CDBG) program, which placed the decision-‐making at the city level. The CDBG program removed the previous directives and used less rigorous performance metric standards. It established the national objectives (referenced above), and placed its trust in the cities to do right. The rhetoric of the day was that no one knew better than the cities themselves when it came to helping their working poor. Consistent with the idea of the grant belonging to those in need, the amount of CDBG funding given to Alhambra each year
is based in part on the percent of the city population who are living in poverty and with lower incomes. Up until last year, the city received $1.2 million to $1.6 million of funding annually. An analysis of Alhambra’s use of CDBG 2 funding shows it straying considerably from the intent of the program. As an example, over the past four years from fiscal year 2009 through 2012, only 22% of the nearly $4 million in funding was directly applied to community-‐based programs as shown in Figure 1 and detailed in Table 1. It is noteworthy that no programs were implemented that specifically targeted low-‐ income or homeless populations. In contrast, funds given to retail businesses and developers plus overhead costs totaled 59%. Nineteen percent of the funds, or $734,845, was spent on code enforcement staff to patrol and cite residence owners for violations. Yet only $314,568 of CDBG monies were dedicated for the Homeowner Rehabilitation program to assist low/moderate income homeowners to remedy such violations. Even worse, less than 50% of that money actually got to the homeowner. That is, the overhead exceeded the amount reaching the residents. In summary, Alhambra used $734,845 of grant funding for its code enforcement staff whose job it is to cite residents for violations. But it used only $154,829 to help residents to bring their homes up to code. This appears contradictory to the intent of the CDBG program. During a meeting in 2010 with Assistant City Manager, Jessica Keating, the question was posed as to how the city justifies the disproportionate use of grant funding to subsidize retail development when the national objectives clearly intend for the funding to assist the low-‐income community. The answer was that such programs benefit everyone by their “trickle-‐down” effect, and
they also create much-‐needed jobs. She further stated that establishments that are given grant funding are subject to recruitment requirements: they must advertise the jobs in the vicinity of the project sites. Also, one full-‐time equivalent job must be created for every $35,000 of grant money given to a business. Development is necessary for any neighborhood to thrive and to boost those in lower income groups. Fresh food markets, medical services, recreational and entertainment facilities, good jobs, and the transportation infrastructure to get to those jobs are necessary. Retail establishments provide needed goods and also desired goods to those with the income to patronize them.
Figure 1
The cumulative apportionment of Community Development Block Grant money by the City of Alhambra from fiscal year 2009 through 2012.
But upon closer examination, the stated benefits are not effective. The “trickle-‐ down” effect relies on successful businesses to generate revenue. While such practices may have worked during times of relatively large economic growth such as during the 1990s or during economic bubbles, the recession has resulted in many businesses going under, taking the people’s grant money with them. The list of businesses subsidized with CDBG funding is long. A 3 short list of examples is given in Table 2 . The argument that such funding is necessary to rehabilitate a space is suspect considering that the city will repeat the process at the same location. For example, the owners of o 38 Bar and Grill were subsidized with
SUBSIDIZING RETAIL DEVELOPMENT: MISUSE USE OF GRANT FUNDING BY THE CITY OF ALHAMBRA | October 3, 2012
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Federal'Community'Block'Grant'Funding'(CDBG) Program Section(108((Retail(Development)
Actuals FY'2009= 2010
FY'2010= 2011
FY'2011= 2012
Category
Retail( $415,668( Development
$390,181(
$411,406(
Fremont(Plaza
$237,363(
$251,895(
$254,505(
Main(Street(
$152,818(
$159,511(
$161,163(
CDBG(Administration
$226,723(
$282,250(
$244,728( Overhead
Code(Enforcement
$283,810(
$272,210(
$178,825(
1654
1203
831
496
207
128
No.(of(Complaints(received No.(within(low/mod(income(areas Assistance(to(Businesses(and(Developers((Economic( Development(Program) Case(Management((Seniors(&(Disabled) Youth(Couseling Housing(Rehabilitation(Exterior(Grant(Progrram Applied(to(exterior(improvements Overhead Main(St.(and(Valley(Blvd.(Façade(Improvement Fair(Housing(Services Programs(for(the(homeless
$143,380(
$159,965(
Retail( Development $122,670( Community
$65,000(
$65,000(
$65,000( Community
$196,268(
$56,370(
$61,929(
$80,355(
$23,225(
$51,249( Community
$115,914(
$33,145(
$10,680( Overhead
NA
NA
$25,000(
$25,000(
$0(
HPRP(via( LAHSA
$0(
$1,330,362
Table 1
The use of CDBG grant funding by the city of Alhambra from fiscal year 2009 through 2012.
$450,000 of redevelopment funding at a location which was previously occupied by the now defunct, but then newly renovated California Brewing Company. Same for Cold Stone Creamery, Baja Fresh restaurant, and the list goes on. The city’s justification for subsidizing retail businesses using community grant funding because it creates jobs for low/moderate income groups was found to be a specious selling point. The only restriction placed on businesses was that 1 full-‐time equivalent position be created for every $35,000 granted to them. So for a $350,000 grant, a newly formed business need only have 10 full-‐time equivalent employees to be free and clear with the grant funding; jobs that would have been generated anyway once a retail establishment opens. Furthermore, the term “full-‐time equivalent” means that those 10 positions can be split among much more than 10 individuals. This permits businesses to split what would have been a full-‐time position into several part-‐time jobs with no benefits. But the glaring hole in the city’s rationale is the fact that the large majority of these jobs are associated with retail, a business sector notorious for unlivable wages. The only guarantee for low/moderate income groups
Operation(and( Maintenance
$5,300(
$1,277,501
$26,469(
Retail(and( $132,393( Commercial( Development $25,000( Community HPRP(via( Community LAHSA $1,272,682
is that their income will remain low by working these jobs. Both written and oral inquiries to the city asking for details on their plan to promote livable wages, ensuring those jobs go to those in need, and how they plan to guard against an employer denying health benefits by only offering part-‐time 4 positions were left unanswered . When it comes to CDBG grant usage, the city’s modus operandi over the past two decades favored the new business community without an equitable return to those in the target group. In
summary, the amount of CDBG funding received from the federal government is based on the number of working poor, is intended for the working poor, but is largely used to subsidize retail development that create jobs with unlivable wages. Although new businesses and the chamber of commerce are in favor of the above policies, some existing businesses are also hurt. For those properties under city control, the type of business that opens there is often hand-‐ selected. Yet the city’s “bring in retail establishments at all costs” attitude inevitably introduces competition to those already existing and dilutes the grant funding. This promotes a high turnover rate
among businesses. This zero-‐sum game is made worse from a regional perspective because the city’s concessions to the business lobby is intentionally enticing to those from other cities to the better deal. Given grant subsidies, no wage or benefit restrictions, or no affordable unit quotas for residential developers, businesses are drawn to Alhambra where the residents pay the price with low wage jobs and high housing costs. It is a race to the bottom. !Business!Name Angelena’s)Restaurant
Funding! Granted $350,000)
Status!of! Business Closed
Charlie's)Trio)Restaurant
$250,000) Operataional
French)Restaurant)(Maria’s)
$350,000)
Closed
Bayou)Bar)and)Grill
$350,000)
Closed
Tony)Roma’s)Restaurant
$350,000)
Closed
Sir)Walter’s)Candy)Store
$70,000)
Closed
Zocalo)Restaurant
$225,000)
Closed
The)Diner)Restaurant
$300,000) Operational
Table 2 Examples of retailers in Alhambra that have received grant subsidies.
Note that developers and businesses should strive to be successful, which is to ethically make a profit. This is the goal for everyone, 5 and the city uses incentives to reach for it . But using the people’s grant money to subsidize them is misguided without a proper return to the community. Recommendations were given to the city on how to achieve this and included: •
•
•
•
•
a livable wage ordinance for those business that accept grant funding; prohibit the forced break-‐up of full-‐time jobs into part-‐time jobs in order to deny benefits for those businesses accepting grant funding; have the city’s code enforcement staff work for the people instead of against them through inspections of businesses for compliance with the above provisions; for developer construction projects subsidized with grant funding, require a job-‐site training program to teach construction skills; use more of the grant funding for community programs, such as mental health services for at-‐risk youth, vocational programs, English as a second language programs, neighborhood centers, green energy projects which in
SUBSIDIZING RETAIL DEVELOPMENT: MISUSE USE OF GRANT FUNDING BY THE CITY OF ALHAMBRA | October 3, 2012
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addition to directly benefiting the community, also create jobs. This last point is probably the most applicable during these tough economic times where the city’s desire to subsidize retail development is akin to rearranging the furniture on the Titanic and where the grant funding goes down with the ship. But by investing in the people, this is by definition money well spent because it helps with upward mobility, and it is more in-‐line with the intent of the CDBG program. These recommendations have been repeatedly made to city management as well as city government by the SGVOG dating back to 2009. Responses received have been obstinate without justification, discussion, or 6 clarification of the city’s policies .
The trend continues A more detailed look into the use of CDBG grant funding shows that the single largest line item for the past 15 years has been the use of the Section 108 loan provision. This allows the city to take a 20-‐year loan against grant funds. It is meant to facilitate larger projects that are beyond the reach of an annual budget. The city chose to utilize this vehicle in the mid-‐1990s to fund Fremont Plaza and the Main Street rehabilitation. This totaled over $5 million before interest and will be paid off by 2016. For the fiscal year 2009 through 2012, these Section 108 loans represented 88% of the total retail development expenditures. The proposed budget for fiscal year 2012-‐ 2013 is further tipped toward subsidizing 7 businesses . In addition to the Section 108 loans which consume 20% of the budget, a Special Economic Development program to help developers and business owners will consume $1.4 million of the $2.2 million budget, or 65%, as shown in Figure 2 and detailed in Table 3. There does not appear to be any relief in the city’s practices for the future. In 2010, the city approved the appropriation of $4.9 million for a new Section 108 loan to subsidize the Ratkovich Group development company for the Shops at The Alhambra project. Approval for that loan by the federal government is still pending.
Perspective from the wider viewpoint In 2011, Steve Lopez of the Los Angeles Times wrote a series of three articles describing how the city of Los Angeles was using its 8 grant funding . He questioned their practices of subsidizing retail establishments and the small return provided to the target
group of those in need. What Mr. Lopez described is directly analogous to what Alhambra has been doing for over a decade. At the national level, states such as Texas have been luring businesses away from California with tax breaks and lax environmental regulations. Globally, countries that deny collective bargaining rights for employees draw U.S. businesses overseas with their cheap labor. Although Alhambra’s use of grant funding is not unique among cities in the region, commonality does not make it any more ethical. By battling the bad economy through subsidies to businesses, cities such as Alhambra are treating the symptoms rather than the cause. Businesses cannot survive when the residents do not have the income to patronize them. The solution is not to provide residents with more places to spend their money, it is to get more spending money to those in need through education, training, good jobs, and an enriching environment. The city provides ample options for dining or lounging at local restaurants and bars and to purchase a flat screen television. But what you cannot find is an adult school program with vocational programs or where those learning English can enroll in ESL courses. Even from a supply-‐side, free-‐market perspective, cities such as Alhambra are still an enigma. It directs grant funding to those businesses or favored sons it believes will be successful instead of letting market forces decide, effectively acting as a gatekeeper. At the same time, the city avoids investing in programs that directly help the working poor, instead relying on a trickle-‐down effect. This appears to be socialism for the rich and free-‐market enterprise for the poor. When it comes to CDBG grant money, the city of Alhambra has it backwards.
Federal'Community'Block'Grant' Funding'(CDBG)
Budget
Program
FY'2012= 2013
Category
Section(108((Retail(Development)
$432,934( Development
CDBG(Administration
$128,217( Overhead
Code(Enforcement
$55,023(
Assistance(to(Businesses(and( Developers((Economic( Development(Program) Case(Management((Seniors(&( Disabled) Youth(Couseling Housing(Rehabilitation(Exterior( Grant(Progrram Fair(Housing(Services Programs(for(the(homeless
Operation(and( Maintenance
$1,415,510( Development
$114,913( Community $0( Community $10,000( Community $25,000( Community $0( Community $2,181,597
Table 3
The proposed Community Development Block Grant budget from the city of Alhambra for fiscal year 2012-‐2013.
The solution is not to provide residents with more places to spend their money, it is to get more spending money to those in need through education, training, good jobs, and an enriching environment.
Figure 2
The apportionment of the proposed Community Development Block Grant budget from the city of Alhambra for fiscal year 2012-‐2013. Subsidies to businesses and developers consume 85% of the total budget.
SUBSIDIZING RETAIL DEVELOPMENT: MISUSE USE OF GRANT FUNDING BY THE CITY OF ALHAMBRA | October 3, 2012
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1
The department of Housing and Urban Development administers the Community Development Block Grant program. HUD has specific restrictions for the use of CDBG funding, including that that at least 70% of CDBG expenditures will be for activities that are considered to benefit low/moderate income persons. These may be found at http://portal.hud.gov/hudportal/HUD?src=/progra m_offices/comm_planning/communitydevelopme nt/library/deskguid 2 City of Alhambra, Consolidated Annual Performance Evaluation Report (FY 2009-‐2010). City of Alhambra, Consolidated Annual Performance Evaluation Report (FY 2010-‐2011). City of Alhambra, Consolidated Annual Performance Evaluation Report (FY 2011-‐2012). 3 City of Alhambra, Consoliated Annual Performance and Evaluation Report (CAPER) FY 04/05. 4 Written inquiries and city responses: Correspondence dated September 22, 2010; Correspondence dated September 20, 2011; Correspondence dated May 1,2012. Oral inquiries may be viewed via the city of Alhambra’s videotaped Alhambra Redevelopment Agency/Council Meetings dated October 11, 2010, October 5, 2010. 5 Alhambra was named the most business friendly city in Los Angeles County by the Los Angeles County Economic Development Corporation in November 2010. The LAEDC is a lobbying group in which Alhambra pays $5,000 a year for membership.
6
Alhambra Redevelopment Agency/Council Meetings dated October 11, 2010, October 25, 2010 are typical.
7
City of Alhambra, Action Plan Fiscal Year (FY) 2012/13. City of Alhambra, Ammendment No. 3 to the City’s Annual Action Plan for Fiscal Year 2012-‐2013, Notice No. N2M12-‐120.
8
Steve Lopez, “Why does a thriving business need a $1-‐million handout?,” Los Angeles Times, October 8, 2011, sec. A. Steve Lopez, “At L.A. City Hall, the handouts just keep coming,” Los Angeles Times, October 23, 2011, sec. A. Steve Lopez, “Hollywood businessman criticizes redevelopment grants,” Los Angeles Times, October 26, 2011, sec. A
Eric Sunada
Enclosure 2
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DISCRIMINATORY HOUSING POLICIES AND PRACTICES BY THE CITY OF ALHAMBRA
CASE STUDY: CITY OF ALHAMBRA
October 21, 2012
Discriminatory housing policies and practices by the city of Alhambra by Eric Sunada
For nearly 20 years, the city of Alhambra maintained discriminatory housing policies and practices that have precluded families from access to affordable housing. The city accomplished this by restricting their subsidized housing stock to mostly senior citizens, despite demographics to the contrary. Through this practice of age discrimination, 99.2% of the rental units slated for those of low-‐income are off limits to families. Yet families with children are the group most in need of such housing, a fact 1 confirmed by the city’s own findings . Even when limiting consideration to special needs groups, the needs of female-‐headed households (single mothers) outweigh those of seniors. So follows the obvious question: why is the city of Alhambra practicing age discrimination?
Background The region in the West San Gabriel Valley has very high housing costs. Many residents have most of their income consumed by rent or mortgage payments. Relative to other parts of the nation, many are considered “house-‐poor.” That is, so much of their money goes into their dwelling that they often cannot save for the future. Some have remaining disposable incomes so low that they are effectively living near the poverty 2 line. California law mandates that cities address the affordable housing problem, but gives them the latitude and trust that its most disadvantaged will be served. Also, the federal government provides grant funding to help cities bear the cost of providing affordable housing, and places no age restrictions on who may qualify for such housing, again placing its trust in the cities. Toward this end, the state requires that cities provide incentives to developers to encourage such developments. These incentives are in the form of density bonuses: allowed exceptions to the city’s ordinance specifying the maximum number of dwelling units that can be developed per acre of land.
For developers to gain such waivers to the usual building code, they are required to provide a minimum number of units with reduced costs for the community. This is best explained by an example: Say a developer decides to build a condominium complex and the land on which it will be developed sits within the R3, high density residential area of Alhambra. The Alhambra city code says that such developments are restricted to a maximum of 24 units per acre. To address the need for affordable housing, the state mandates that Alhambra offer the developer the chance to build more than 24 unit per acre in exchange that some of the units be sold at reduced rates for those in need. By being allowed to develop more units per acre, the developer can generate more revenue, which, in turn, is used to offset the lower profit on the affordable units. By having these affordable units available to those in need, the community’s housing needs get addressed which helps to somewhat justify the higher density and associated burdens placed on residents such as increased traffic. Ideally, everyone pitches in to help: developers provide some units at reduced rates, nearby residents adjust to the higher density, and cities are expected to help by properly planning for infrastructure and open space upgrades in the affected areas. Here’s the problem: From 1989 to 2008, the city had laws in place which permitted density bonuses up to 400% if developers were to build units dedicated to seniors only (see Table 2). In the example above, developers would be allowed to build 96 units per acre when they otherwise would only be able to build 24 per acre under existing building codes. At the same time, they offered significantly smaller bonuses for non-‐age restricted units (see Table 1). Developers, whose goal is to provide a return to investors, are all but guaranteed to follow the path where they can build the greater number of units per acre of land. Never mind that the city’s demographics do not support
this need, they can draw in others from surrounding areas. In other words, the city gave exorbitant financial incentives to developers if they built housing and restricted it to seniors only—a deal they could not refuse. Note that this policy conflicts with state law which actually places a bonus cap on units dedicated to seniors, possibly a recognition of the problem at 3 hand.
Figure 1
Alhambra’s affordable housing inventory is largely off-‐limits to families as a result of age-‐based discriminatory polices and practices. Values given are the number of units of a particular type followed by the overall percentage it represents of the affordable housing stock.
By having been given permission to develop up to four times the number of units per acre they would normally be allowed, developers are making out very well. And the city evidently got what it wanted through these skewed set of rules while still satisfying its obligation to the state for the creation of affordable units. But it is the residents and community at large who are left with the short end of the stick. The units created for low-‐income groups are now age restricted to 4 those 62 and older and, as a result, are not available to families, single mothers, and anyone else. And the nearby residents are burdened with higher densities, increased traffic, and additional pressure on city resources such as open space. Ordinarily, residents would be protected from such burdens by the existing building code.
DISCRIMINATORY HOUSING POLICIES AND PRACTICES BY THE CITY OF ALHAMBRA | October 21, 2012
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outdated data and mask an even greater divide; overall, seniors represent only 13% of Alhambra’s population and only 11% of the total in need of low or very low-‐income housing. One cannot discount the need of seniors, and there are obviously significant numbers in need of affordable housing. But why did the city largely ignore everyone else?
Table 1
A comparison between Alhambra’s density bonus ordinance and that of the state of California from 1989 to 2008 for developers providing affordable housing. *SB435, effective January 1, 2006, clarified that a developer must choose a density bonus from only one affordability category. Alhambra did not comply with state law until 2008.
Table 2
A comparison between Alhambra’s density bonus ordinance and that of the state of California from 1989 to 2008 for the special need group of seniors. Alhambra permitted a 400% bonus to developers who generated affordable housing for seniors while that state permitted a maximum of 20%. Seniors represent just 13% of the total population in Alhambra and 11% of the total in need of affordable housing.
But it gets worse. The city of Alhambra also permitted huge bonuses to developers if government assistance funding was used for senior projects, but gave no such bonuses to otherwise unrestricted projects. Furthermore, the city usually decides which projects get government assistance. This is an illogical policy that appears to be driven by something other than what is best for the community. It also makes the city susceptible to corruption. Such unsound policies facilitate situations similar to when a former Alhambra mayor-‐ turned-‐developer was convicted in 2007 of bribery for a subsidized senior housing development. Former mayor J. Parker Williams was caught trying to bribe then-‐ councilman Daniel Arguello for his vote in
support of a senior housing project on 210 N. 5 Monterey Street . This proposed development benefitted from a 75% density bonus by taking advantage the city’s skewed density bonus policies favoring seniors. The financial gains to the developer due to this density bonus and other cost-‐sharing measures by the city appears to be significant because the developer, Mr. Williams, et al., found it easy enough to offer a bride of $25,000 to Mr. Arguello just for his 6 vote of approval.
Why has the city discriminated against families? According to the city’s 2010-‐2015 Consolidated Plan, family households are at least three times more likely than seniors to be in need of very low or low-‐income housing. And these figures suffer from
When the SGVOG interviewed city management on October 22, 2010 and asked this question, city manager Julio Fuentes deflected the question by citing the number of units they city has built for families. When confronted by the disparity as shown in the actual numbers and that the city appears to be taking too much credit for the few family 7 units they have created (see Figure 1 ), his then-‐director of development services, James Funk, jumped in and said “any affordable housing helps. I don’t understand what you are trying to get at here!” Mr. Fuentes then exclaimed, “Where are these people? Show me these families [that are in need of low-‐income housing]!” When the SGVOG cited census data, studies done by the state, the long Section 8 voucher waiting list, and first-‐hand knowledge, Mr. Fuentes focused on those for which the SGVOG had first-‐hand knowledge and implied that he may be able to do something for them if they were to give his office a call. The interview revealed the “regional” stance the city takes with respect to affordable housing, similar to its approach when addressing services for the homeless. That is, they rely on outside entities to address these problems and appear to have little in terms of a strategic plan to address such issues, instead focusing on short-‐term fixes that amount to appeasement. The city tries to comply with state law by doing the minimum possible, and in the case of low-‐ income housing, it did worse by sidestepping the group in need of it. When the three were asked why the city rewarded developers with exorbitant bonuses if they developed senior housing, they cited the need to address the forthcoming baby-‐boomer retirement flood. There was no answer when the SGVOG asked for a fiscal basis for this claim. Nor was there any response when asked why the city incentivized the use of federal grant funding for senior projects. One reason may be the perception by some within the city that lower-‐income families are undesirable neighbors. This income group has been unjustly stigmatized as undesirables that are troublesome to neighborhoods. In Alhambra, lobbying groups such as the chamber of commerce
DISCRIMINATORY HOUSING POLICIES AND PRACTICES BY THE CITY OF ALHAMBRA | October 21, 2012
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and the pro-‐business city council have promoted policies to thwart any images with negative connotations to businesses, however false their assumptions. In other words, the city appears to be saying “the low-‐income element is bad for business,” and that if they must tolerate them per state law, they will take the geriatric crowd as the lesser of evils because they lack the energy to cause problems. But while they guild the streets, the customer’s purchasing power is negated by high rents which, in turn, contributes to the high turnover rate amongst failed businesses. In this regard, the business lobby is hurting its customer base rather than helping it. Characterizing those who qualify for low-‐ income housing as pariahs is unjust. Studies for the Western San Gabriel Valley have shown occupations that would qualify as low income include security guards, EMTs and paramedics, retail salespersons, preschool teachers, mental health counselors, and cosmetologists among others—the very people who contribute to a successful city 8 (Table 3) . These are people who are key to the local economy but cannot even afford to rent a home, let alone purchase one. To afford a two-‐bedroom apartment, a family needs an annual income of $57,880 in Los Angeles County, and this assumes no monthly debt such as car or credit car 9 payments .
Table 3
th
Occupations within the 49 Assembly District, which encompasses the city of Alhambra, that would likely qualify for low-‐income housing.
The trend continues After 2008, the city changed their density bonus laws to comply with state law. But after nearly 20 years of non-‐compliance, the city is mostly built-‐out in terms of large rental units. And although the city now
complies with state law, it hasn’t stopped them from exceeding density bonus regulations. Even worse, they are granting density bonuses without any return to the community in the form of affordable units. Specific Plans are the new vehicle of choice to circumvent city planning ordinances which otherwise restrict the number of units per acre. These are special zones that are engineered by the city to serve their needs. Most recently, they have been employed to allow mixed-‐use housing developments along Main Street with densities that exceed the requirements as listed in the general plan. This policy appears to be at odds with 10 the state law , yet they are routinely passed with little to no discussion at the city’s open meetings. Because they are city-‐engineered maps, there is no requirement for any set-‐ asides for affordable units. The Zen Terrace debacle The city’s development services department was found to be less than diligent when it comes to protecting the city’s affordable housing obligations. Case in point: At the November 15, 2010 Alhambra Planning Commission meeting, the city allowed a group of investors to purchase new condominiums at below-‐market rates which were originally dedicated to low to moderate income seniors. The recently constructed, 64-‐unit Zen Terrace condominium complex located on the Northwest corner of Atlantic and Commonwealth was built with the promise that 16 of those units would be dedicated for low to moderate income seniors. In return, the developer, Sam Wong, was granted a density bonus which would allow him to construct 50% more units per acre than normally allowed under city ordinances. At a previous planning commission meeting on November 1, 2010 city staff placed an item on the consent agenda asking for a revision to the agreement. The proposed revision would have allowed anyone to purchase the units, at the affordable rates, regardless of the purchaser’s need. The proposal also allowed units to be rented out; the only stipulation being that such units must be rented to seniors who meet low-‐ income requirements. At the November 1 meeting, Sam Wong stated the reason for the proposed revision was due to difficulty in selling the units. Wong cited the poor economic climate as the reason and said there was a lack of qualified purchasers.
At the same meeting, James Funk, Director of Development Services, provided statements that were contradictory to the city’s affordable housing policies. He stated that the original agreement did not place any restrictions on the purchase price. Commissioner Gary Frueholz expressed his confusion with the statement. Others also expressed confusion and the meeting was continued to November 15.
One cannot discount the need of seniors, and there are obviously significant numbers in need of affordable housing. But why did the city largely ignore everyone else? But when the commission next met on November 15, it was revealed that the reason for the proposed revision was due to the fact that 9 of the 16 affordable units had already been sold to unqualified investors months ago. The purchasers were neither seniors nor low to moderate income qualified. It is unclear as to why neither staff nor the developer came forward with this information at the previous meeting. If the item were not flagged by the SGVOG at the November 1 meeting, it is very likely that it would have passed without discussion. To further complicate the matter, the city attorney rendered the opinion that the city could not impose any restrictions as to whom the units could be rented. Commissioner Enrique Garcia said, “To me, the spirit was very clear that the 16 units were to be for purchase and occupancy by senior citizens of low and moderate income.” Likewise, Commissioner Gary Frueholz said that “the conditions were clear and he’s not really confused by this.” But Commissioner Stan Yonemoto cited Mr. Wong’s good intentions and the contradictory information provided by the city to him with regard to the agreement. The resulting vote by the commission approved, by a 4-‐3 vote, the proposed revision which essentially allows the 16 units to be open for purchase and rent by 11 anyone . In the end, the 16 units which were originally intended to be owner-‐occupied by low to moderate-‐income seniors are now open to anyone. Investors were allowed to purchase at the same below-‐market rates and allowed to rent out the units unrestricted. This action
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appears to be illegal. It is no doubt unethical as it hurts both those in need of affordable housing as well as local residents who tolerate the higher density provisions and conversion of owner-‐occupied units to rentals. The affordable housing practices of the former Alhambra Redevelopment Agency (ARA) There are many in the city who do not realize that one of the main goals of the redevelopment agency was to provide affordable housing. State law even mandates that a minimum of 20% of the tax increment revenue must be dedicated to the creation of affordable housing. But Alhambra has consistently focused revenues back into subsidizing developers without creating affordable units. The crux of the problem is that the ARA used the redevelopment vehicle as a subsidy for corporations and businesses. It strayed from the core values of the redevelopment program. It paid for such things as recurring costs in the form of leases and maintenance. Still on the books is over $3,300,000 the ARA gave to New Century BMW to subsidize their construction costs; $320,000 to Kohl’s to come into town; and over $35,000 in rental and maintenance payments on behalf of businesses. At the time of this writing, the city is still fighting to have such payments continue to be paid through the tax increment funds that would have gone to the ARA. These specific cases are a small subset of the millions of dollars that have already been spent in similar ways. This was made possible, in part, by utilizing the 20% set-‐ aside that the city was required to dedicate to affordable housing. Whenever the city was required to payout portions of its tax revenue back to the state for things such as the Supplemental Educational Revenue Augmentation Fund (SERAF) to help schools, the city opted to use the affordable housing set-‐aside funds rather take away from its practice of subsidizing retailers. On the books was over $6,400,000 of loans taken out against this account. Efforts by the SGVOG to stop this risky practice since there was a good chance such funds would be lost 12 forever were unheeded . Predictably, when the state shutdown the redevelopment agencies, this money that the ARA was suppose to use for affordable housing projects was completely lost. It is more likely that the businesses will still get their money, with so many people lobbying on their behalf, including the city’s
appointees on the ARA oversight board. But the working poor, without a voice, are left holding the short end of the stick.
Perspective from the wider viewpoint Although Alhambra is not alone in this practice, no other city in the San Gabriel Valley reserves so much of its affordable housing stock for seniors. Pasadena has a senior population with similar proportions to Alhambra’s at 11%, but the city dedicates only 57% of its affordable rental units to them. Baldwin Park, a city which has a similar household income to Alhambra, has a senior population of about 6.2% and sets aside 47% of affordable rental housing to those 65 and older. And Monterey Park, which has a significantly higher percentage senior population than Alhambra at 18%, dedicates 72% of affordable units to them. Nationwide, the net worth of households headed by adults ages 65 and older was 47 times that of households headed by adults 13 under the age of 35 as of 2009. Unlike the working poor, seniors benefit from strong lobbying groups, AARP being one. Efforts to perform wealth redistribution will also favor the elderly in the form of Medicare and Social Security. Locally, cities such as Alhambra only consider income when determining qualification for affordable housing. But while seniors often have fixed incomes, their net worth is substantially higher. In fact, the city relies on seniors being able to sell existing homes in order to afford the many senior units developed in Alhambra over the years. It is worth noting that the senior development at 210 N. Monterey Street which was at the center of the scandal involving a former Alhambra mayor-‐turned-‐developer, J. Parker Williams, and then councilman Daniel Arguello (Arguello was responsible for notifying authorities and was not implicated in the crime) is still in development, albeit with new partners. But at the November 7, 2011 Planning Commission meeting where it was up for approval, Development Services Director Mary Swink responded to a question regarding whether there would be enough seniors to qualify for the low to moderate-‐ income units, she responded “they way seniors get in to these units is by selling their existing homes and then buying these units. It does not count as income. This is what the [county] housing department has told us.” By not providing affordable housing to residents in Alhambra, regardless of age, the city is denying those in need of low-‐income housing the opportunity afforded to them by the state and federal government. After
2008, the city changed their density bonus laws to comply with the state law. But by this time, the damage had been done. The city is largely built-‐out in terms of large rental units. And if recent activities are any indication, the future actually looks worse, as evidenced by the examples cited of the wrongful selling of affordable units to investors, the use of Specific Plans to bypass affordable housing concessions from developers while still giving them large density bonuses, and the borrowing and subsequent loss of former redevelopment agency affordable housing coffers. The question still remains: Why not base it solely on income? Seniors certainly wouldn’t be precluded, nor would families, single mothers, the disabled, or any others provided they met income requirements. By doing so, the city would be closer to addressing the needs of its residents, and that, in turn, would reduce housing stress and promote a more amiable environment. It would also be closer to meeting its ethical obligations.
The question still remains: Why not base it solely on income? Seniors certainly wouldn’t be precluded, nor would families, single mothers, the disabled, or any others provided they met income requirements. By doing so, the city would be closer to addressing the needs of its residents.
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City of Alhambra, Alhambra Consolidated Plan for Housing & Community Development (2010-‐2015), 2010. 2 Kathleen Short and Timothy Smeeding, Understanding Income-‐to-‐ Threshold Ratios Using the Supplemental Poverty Measure: People with Moderate Income, U.S. Census Bureau, SEHSD Working Paper Number 2012-‐18, August 21, 2012. Jason DeParle, Robert Gebeloff, and Sabrina Tavernise, “Older, Suburban and Struggling, ‘Near Poor’ Startle the Census,” New York Times, November 18, 2011. 3 State density bonuses are proportional to those most in need. Bonuses are greater if developers dedicate units for very low-income groups and are less for moderate income. This is done to offset losses to their bottom line. No age restrictions are placed on these bonuses. 4 Kimball, Tirey & St. John LLP, March 2011: In 62+ senior housing, no one under the age of 62 is permitted to live there, with three exceptions: 1) a live-‐in caregiver who might need to live with the senior as a "reasonable accommodation" based on the disability of a resident; 2) an employee under 62 whose duties require that the person must live on the property; and 3) underage occupants residing at the property prior to 1/1/85 (California law) or 9/13/88 (Federal law) are allowed to continue their tenancy. 55+ senior housing is more complex. The California Unruh Civil Rights Act (which sets forth the rules for senior housing in California) was amended in 2000 to require that, for all tenancies beginning 1/1/01 or after, at least one member of the household must be 55 or older. There are no exceptions to this rule in non-‐subsidized housing, which means that underage, disabled residents may not move into a 55+ property by themselves – they would have to live with a "qualifying senior" (someone 55 or older) in order to
legally reside in the community. There are some federal subsidy programs which are entitled "elderly/disabled." In properties operated under those programs, an exception must be made in order to comply with the program requirements. (Effective January 1, 2011, California law was amended to specifically provide that selection preferences based on age imposed in connection with federally approved housing programs do not constitute age discrimination in housing.) With respect to secondary residents (those living with the qualifying senior), the most restrictive rules allowed are to require secondary residents to be "Qualified Permanent Residents." Qualified Permanent Residents must be 45 years of age or older, unless the person is: 1) a spouse or cohabitant of the qualifying senior; or 2) a person who provides primary economic or physical support for the senior; or 3) a disabled child or grandchild who needs to live with the senior or the Qualified Permanent Resident because of his or her disabling condition. Further exceptions would be persons under age 55 who resided in the complex prior to 1/1/85. Finally, if the number of units on the senior property exceeds the minimum requirement of 35 (or 21 in Riverside County) additional units may be occupied by under-‐age employees providing all other requirements of the Unruh Act are met.)
www.housingca.org/site/DocServer/DSR _AD-‐49.pdf?docID=1061, March 2012. 9 Ibid. 10 To an extent, the range of issues that is contained in a specific plan is left to the discretion of the decision-‐making body. However, all specific plans, whether prepared by a general law city or county, must comply with Sections 65450 -‐ 65457 of the Government Code. These provisions require that a specific plan be consistent with the adopted general plan of the jurisdiction within which it is located. For more information, see http://ceres.ca.gov/planning/specific/ 11 ayes:Yonemoto, Teng, Murray, Richetts; noes:Frueholz, Garcia, Lodge; absent:Birrueta, Tello; recused:Bunker
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http://da.lacounty.gov/mr/archive/2007/
060807a.htm 6 Daniel Arguello was not implicated in any wrongdoing. He notified authorities after being approached by Mr. Williams and wore a recording device per law enforcement’s request to help convict the developers. 7 City of Alhambra, Alhambra Affordable Housing Inventory, September 14, 2010. 8 Housing California, “Priced out: The Housing Situation in the 49th Assembly District,”
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San Gabriel Valley Oversight Group,
letter to Assembly member Mike Eng, September 5, 2011. 13 George F. Will, “Government: The redistribution behemoth,” Washington Post, January 8, 2012.
