Is Berkeley Squeezing Newspapers to Subsidize Developers?

By Becky O'Malley
Wednesday March 25, 2009 - 06:15:00 PM

It wasn’t despair, exactly, but it was with a feeling akin to despair that I watched the clueless City Council majority on Tuesday night enthusiastically endorse a program to make loans to wannabe developers who couldn’t even come up with the standard city permit fees to get their projects started.  

I believe the graceless term in the Economic Development Department’s report was “backfill”—that is to say, the city covers the developer’s permit fees until he, presumably, gets his act together. I’m not quite sure what the discussion was, however, because the city’s streaming video conked out just as the first irate citizen started speaking, and by the time I’d found the audio stream from KPFB the tiny wedge of public comment was over. And I’m trying hard to resist paranoid impulses, but it would have been easy to attach some significance to the fact that the video tanked just as said citizen seemed to be starting to complain about a similar loan made to the notorious Patrick Kennedy, which turned out to be mighty hard to collect. 

I know, I know, they’ll promise to pay the city when the money comes in. But to an outside observer the city looks a lot like the mortgage brokers who touted the merits of sub-prime loans to impecunious buyers, and got a lot of people in over their heads with no way to pay back the money. It’s been done before, e.g., for Kennedy, with council approval, but now city staff wants to be able to waive permit fees for all comers without even asking council.  

Here’s how the scheme was pitched in the council agenda: 

To “grant the City Manager authority to defer up to $200,000 in building, plumbing, electrical and mechanical permit fees for new development projects and substantial remodels on a case-by-case basis after staff analysis determines that such deferral will facilitate project implementation and that the project will provide substantial economic benefit to the City through tax base development, job creation/retention or by other measure as determined by the City Manager.” 

Sounds reasonable, moderate even. But the only two astute councilmembers, Worthington and Arreguin, just happened to notice that the actual language drafted by staff for council adoption didn’t mention any $200,000 per project limit, nor did it recite any standards for the staff analysis of “substantial economic benefit,” nor did it set any limit for how much city money could be used overall for these subsidies. The two tried valiantly to get the proposed ordinance amended to apply only to small businesses and nonprofits, and to include per-project and overall caps, but the heavy hammer of the chair slammed the measure through without the controlling additions.  

The mayor finally came out of the closet with a remarkable statement that he wanted any kind of development, big, small, whatever, he didn’t care. Does this mean that when Wal-Mart wants to come to town we’ll even front the fees for them? Perhaps. 

A particularly pathetic part of the meager councilmembers’ discussion was provided by Councilmember Capitelli, who said he’d been trying for two years, each time a development was approved, to persuade city staff to supply supporting documentation that would show how it benefited the city economically, which he was sure would be possible. Well, the sad truth is that many developments provide no benefit to the city of Berkeley whatsoever. Most construction jobs, for example, go to workers who commute in cars from distant suburbs. That would be easy for staff to document, but of course they’d rather not.  

Ever since Proposition 13 passed, adding new residents who require new services has usually meant adding more cost than benefit to city budgets, in Berkeley and everywhere else. That’s been documented again and again. And when these unsuccessful buildings end up being sold to the University of California, like the Golden Bear, they come off the tax rolls altogether, though of course they’re still connected to our overstressed sewer system. 

Planning Department salaries are supposed to be funded by permit fees, so when development slows down, staff should be laid off, but this won’t happen if fees are “backfilled” from the general fund. And what happens if the developer can’t pay the city back? A $200,000 advance would cover fees for a $10 million project, but the other $9,800,000 might be hard to find in this economy. What are our remedies if the project goes bankrupt, as at least one San Pablo Avenue building has? 

Watching this travesty was particularly disheartening when I contrasted it with the other Berkeley city meeting I attended this week. A letter from the city’s code enforcement officer said that the city manager wanted a meeting with all newspaper publishers operating in the city of Berkeley about the “adverse impact of non-compliant newsracks in the city’s commercial districts.” He further said that, commencing on April 7, “routine enforcement” would begin, with penalties at $250 per violation per day, and $500 per day per violation for “dangerous newsracks.”  

For small businesses like ours, that’s a major threat, so we hopped to. The publisher and I, principals in a mom-and-pop small business, went to the meeting ourselves, as did Steve Buel, the owner/editor/circulation manager of the other free weekly in the East Bay, the Express. The big guys were there too, experienced distribution managers for the many Media News papers, the Chronicle and the New York Times, among others.  

The city sent its code enforcement manager, a burly blunt-spoken guy we’ll call Mr. Stick. To play the good cop role, there was a pleasant apologetic assistant city manager we’ll call Ms. Carrot. Ms. Carrot led off the meeting by suggesting that we should all just make nice. She said that if the papers would just voluntarily fix all their boxes and get rid of all the graffiti on them there would be no problemo.  

The Media News guy pointed out that all the other cities he worked in, including San Francisco, notified papers by e-mail when boxes were broken, and he fixed them promptly when asked. Why couldn’t Berkeley do the same thing, instead of just pasting easily removed stickers on offending boxes as they do now? After all, he pointed out, the city ordinance technically requires 30-day notice to publishers before penalties are assessed. 

Too expensive, said Ms. Carrot. Didn’t we know the city was short of money? She was sure that papers had “more substantial resources” than the city. Pretty clearly, she doesn’t read the papers herself, or she’d know how silly that sounded, given the parlous state of the news biz these days. 

The Express had a real reporter at the meeting, Robert Gammon, who’s done a good job in their current issue of documenting the potential effect of strict enforcement on his company. He notes in his piece that “the Express could be slapped with fines of up to $60,000 a day, which works out to about $22 million a year.” He quotes his editor, Buel: “Suffice it to say that that far surpasses our annual revenues.”  

The Planet’s figures are comparable. Of course we’ll fix “dangerous” boxes as soon as we hear about them, but we can’t promise that all boxes at all times will be graffiti-free—we just can’t afford that. And even after an extensive dialogue at the meeting, Mr. Stick was not willing to back down from the April 7 deadline, though Ms. Carrot was wringing her hands.  

City officials appear to be willing to turn over what could be millions of dollars in uncollected building permit fees to any and all developers—so perhaps they think they can squeeze the money out of newspapers instead. Or maybe they’re not trying to get money from us, but instead are trying to get rid of us. If so, the plan just might succeed.  

Steve Buel told Gammon that if the city follows through with its threats, the Express would have no choice but to remove all of its newsracks from Berkeley streets. The Planet’s in the same boat.  

Is that what the city of Berkeley wants? Perhaps.  

City officials, both politicians and staff, have no reason to love the press. The city manager’s recent raise was roundly criticized here and in the Media News papers, and the mayor’s relationship with newspapers has historically been dicey. A crackdown on newspaper boxes would be even more effective than throwing away a few papers, wouldn’t it? We’ll wait and see what happens on April 7.