Why did a state-mandated alliance of Bay Area governments lend $12 million to a secretive military think tank to expand its facilities in San Diego?
Berkeley City Councilmember Dona Spring said she’d like to know the answer.
“It’s an outrage,” she said. “It’s out of sync with the political sentiment of the Bay Area and it’s very questionable.”
On Sept. 15, 2005, the Association of Bay Area Governments (ABAG) arranged for an $11,945,000 tax-exempt bond issue for the Institute of Defense Analyses (IDA) for ”expansion and renovation of existing facilities” in La Jolla.
ABAG is a coalition of city and county governments formed under state law to address regional issues. The organization is presently preparing a housing needs assessment that will require Berkeley to make room for several thousand new housing units in the next three decades.
Kathleen Cha, ABAG’s senior communications representative, said that her organization arranged for the IDA funding through its Finance Authority for Nonprofit Corporations.
“We provided conduit funding for a non-profit group which is a government contractor to acquire and rehabilitate a building,” she said. “We’re a financing authority and we offer a full range of services.”
ABAG has arranged for more than $3.2 billion in tax-exempt financing by linking governments and non-profits. Much of the financing goes outside the Bay Area, Cha said.
ABAG connects the non-profits with lenders, in the case of the IDA arranging for a AAA-rated bond issue.
The IDA is a Pentagon-funded think tank whose head at the time ABAG arranged the funds was subsequently forced to resign after a private watchdog group revealed he had advocated for a controversial jet fighter program in which he held direct financial interests.
The IDA is a federally created non-profit based in Virginia.
According to its own website, the organization is a think tank which traces its roots to 1947, when Secretary of Defense and Cold War architect James Forrestal created the Weapons Systems Evaluation Group.
In 1958, the group tasked the Massachusetts Institute of Technology with creating a non-profit think tank to work with university scientists on critical national security problems.
IDA is now entirely federally funded and conducts research for the Pentagon, much of it classified.
In July 2006, the Project on Government Oversight (POGO), a non-profit private watchdog group, released a report called “Preying on the Taxpayer: The F-22A Raptor.”
That study revealed that IDA President and retired Admiral Dennis C. Blair owned stock in two companies with financial interests in the jet fighter project during the time when IDA had urged the Pentagon to fund it in an analysis which the Defense Department paid for.
As a result of the ensuing bad publicity, Blair resigned first from the board of EDO corporation, which manufactures missile-launching gear for the fighter, and then from IDA itself.
POGO’s findings were confirmed in December in a report by the Pentagon’s Office of the Inspector General, which concluded that he had violated conflict of interest rules by his involvement in reports on companies in which he had financial interests.
In September, 2006, one year after ABAG loaned the $12 million, Blair resigned from IDA. Replacing him was retired Gen. Larry D. Welch, a former Air Force Chief of Staff.
According to a Dec. 20 report by R. Jeffrey Smith of the Washington Post, Blair donated his EDO stock to a fund for injured veterans and surrendered his stock options.
One of the IDA’s specialties is communications security, and the organization helped the Pentagon implement battlefield command and control systems used in the occupation of Iraq, according to the Spring, 2006, issue of IDA Research Notes.
The non-profit also analyzed communications systems used in the invasion itself.
“ABAG is supposed to be working for cooperation and regionalism among Bay Area governments and not arranging for financing to be wasted on some military boondoggle,” Spring said, “especially when there are so many pressing needs here for housing, for health care and for emergency services.
“It would be more understandable if something like this happened in someplace like Texas or Utah, but not the Bay Area,” she said. “But I guess everybody’s cashing in.”
The ABAG Finance Authority for Nonprofit Corporations, or FAN, is governed by a five-member committee. None of the current members is from Alameda County or its cities.
The decision to approve the IDA loan was approved by a unanimous vote during the committee’s Aug. 19 meeting, with Jim Kennedy, Contra Costa County community development director, moving for adoption, with a second from Novato City Councilmember Carole Dillon-Knutson.
The oither three votes came from Santa Clara County investment analyst Paul Knofler, Sonoma County Treasurer Tom Ford and Marin County Clerk Michael Smith.
Two representatives of IDA attended.