San Francisco County 2005-2006 - California Grand Jury Reports

June 26, 2006 — Continuity Report*

Continuity Report 30 pages 5 findings

Findings & Recommendations 5 findings

F1: Recruitment - The department has had difficulty recruiting. This is partly due to cumbersome Civil Service hiring procedures and negative publicity surrounding DBI. Recruitment is also difficult because of lower pay rates than in the private sector. Positive steps have been taken however, and as of May 6, 2006 the de- partment has filled 26 new positions and 20 DBI employees have been promoted.

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F2: Purchase equipment to allow DBI inspectors to remotely enter data from the field. The implementation of this recommendation is contingent upon finding a new permit tracking system that allows remote entry of data by DBI inspectors. Staff needs technical training in implementing the new quality control14 and quality as- surance15 programs. In July 2005, an acting director was hired in the Information Technology Group and one of his tasks is to develop these training programs. A project manager has also been hired through DTIS to assist the department in moving forward in the permit tracking system overhaul.

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F3: Conduct random secondary field inspections. DBI recently hired two analysts to assist in the development and implementation of two programs; 1) a quality control program to ensure that services are designed to meet customer requirements and expectations, and 2) a quality assurance pro- gram that ensures the services fulfill or exceed customer expectations. These pro- grams will include, but not be limited to random secondary field inspections.

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F4: Develop a "Strategic Plan." The Building Inspection Commission approved a Strategic Plan for DBI in June

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F2004: DBI submitted a summary of the Strategic Plan to the Board of Supervisors in its 2005-2006 Efficiency Plan (All City departments must submit an Efficiency Plan to the Mayor and the Board of Supervisors by October of each year). One of the new analysts (hired in May) is responsible for updating and completing the strategic plan by November 1, 2006. The Civil Grand Jury recognizes that the Acting Director of DBI faces several challenges and is taking positive steps to improve efficiency and professionalism in the department. Though not mentioned in the recommendations of the 2002-2003 Civil Grand Jury Report or the Continuity Report of 2004-2005, several additional issues needing attention came to light during 14 Definition: Inspection, analysis and action required to ensure quality of output. Definition: All those planned or systematic actions necessary to provide adequate confidence that a product or service is of the type and quality needed and expected by the customer. 16San Francisco Administrative Code 88.4 Efficiency Plans. The head of each department shall prepare and submit to the Mayor by October 1st and to the Board of Supervisors by November 1st a departmental efficiency plan. Each plan shall include a customer service element, a strategic planning element, an annual performance element, and a performance evaluation element for the previous fiscal year... the Plan shall cover a period of not less than three years forward from the fiscal year in which it is submitted. our interviews and in the Acting Director's May 3, 2006 letter to the Civil Grand Jury (See Ap- pendix C).

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June 26, 2006 — Office of the Assessor-Recorder: Reducing the 4-Year Backlog

26 pages 10 findings 6 recommendations

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Findings & Recommendations 10 findings

F1: 2-3: There are no performance standards for appraisal positions. RECOMMENDATIONS: 2-3a: The OAR’s newly created Standards and Quality Control Group should develop performance standards to measure quality and productivity of individual appraisers. 2-3b: The assessor-recorder should implement an employee performance evaluation program based on the performance standards developed by the Standards and Quality Control Group.

Related Recommendations (1)

R2: “We found a lack of standards and quality control in the OAR. As mentioned earlier, there is no policies or procedures manual. Staff within each unit determines their own arbitrary minimum value for assessing new construction. ... Recommendation 2: Task the assessment standards section with the responsibilities of standards and quality control. Recommendation 3: Develop a comprehensive policies and procedures manual.” ( .) 4 All figures were confirmed by e-mail from the OAR to the Civil Grand Jury on May 15, 2006. State Board of Equalization, Assessment Practices Survey of the City and County of San Francisco, December 2002. 4

F2: Office Procedures Findings: 2-1a: The OAR does not have written procedures or processes for appraisers and other OAR staff to efficiently and effectively perform their job duties. 2-1b: Although the assessor-recorder has created a Standards and Quality Control Group within the OAR, headed by a senior staff employee, to develop uniform standards for day-to-day operations, and some standards have been drafted, no such manual currently exists.

Related Recommendations (2)

R5: Implement a system to control access to appraisal records.” ( .) 4. “We found lengthy delays in processing building permits and enrolling value added due to new construction. … The assessor's delay in the assessment of new construction beyond the four-year statute of limitations, per Section 532(a) of the Revenue & Taxation Code, has resulted in lost tax revenue for the city and county … the city and county have irretrievably lost revenue from assessable new construction as indicated by over 500 permits. Recommendation 25: Eliminate the backlog of assessable new construction.” ( .) In fact, the BOE ranked San Francisco’s OAR as the least efficient of the assessor-recorder offices in the ten largest counties, measured by total assessed valuation.6 Other problems that have plagued the OAR and resulted in low morale and poor staff productivity include: 1. Unfilled Positions and Recruiting Process: Many positions are vacant. The OAR has a budgeted staff of 140 employees, but as of May 19, 2006, there were only 112 employees. This is a vacancy rate of 20%; the December 2002 BOE report found that “The high vacancy rate for assessment positions has adversely affected the assessment of property.” Hiring a new appraiser under the current civil service system takes about six months. Candidates for jobs are lost due to the lengthly hiring process. In addition, there are few mid-level appraisers to replace senior appraisers as they retire. 2. Standardized Filing and Appraisal Procedures: Procedures for filing, retrieving, and securely storing records are not standardized. Procedures for conducting appraisals vary from desk to desk. As of the writing of this report, there are thirty-six real property appraisers, each of whom has his/her own approach and interpretation of appraisal methods for estimating property values, and own procedure for record keeping. As previously noted by the BOE, “There is no policies or procedures manual. Staff within each unit determines their own arbitrary minimum value for assessing new construction.” Within the past year the new assessor-recorder has created a Standards and Quality Control Group to begin development of standards for the OAR’s operations. This group is making progress; the Civil Grand Jury received its draft Operations Manual (undated) for new construction assessment standards. Civil Grand Jury interview with the BOE, November 28, 2005. 5 3. Information Technology: Computer systems are ineffectively used. The OAR uses the EZ Access computer sytem for record keeping, but lacks internal programming staff and has only one operator capable of running the OAR’s I.B.M. AS400 computer. Furthermore, there is no written user’s manual within the OAR, most of the staff are not content with the system, and many think the system should be replaced. 4. Handling of Appeals: The amount of time consumed by the appeals process is excessive. The OAR represents the city before the Assessment Appeals Board, with some assistance from the city attorney’s office, as well as private consultants, who have particular areas of experise. Top flight, expert attorneys and private appraisers represent major property owners, and often the OAR’s advocates are “out gunned.” This unbalanced situation could certainly be greatly improved by better staff preparation of appraisals and appeals, by training, by a more consistent approach to valuation procedures, and by working diligently with property owners to settle appeals administratively. From our interviews it soon became apparent to the Civil Grand Jury that an incessant “push-pull” struggle exists in two major areas of the OAR’s workload. As we see it, the “push” is to keep on top of the daily appraising and assessing required in order to be within the four-year statute of limitations. The OAR has four years from completion of new construction or change of ownership reported to the city in which to appraise and reassess property for tax purposes. If the appraisal or reassessment is done within four years, then the new valuation applies from the date construction was completed or ownership changed, and the city’s treasurer/tax collector bills the property taxes retroactively. If the property is not appraised and reassessed within four years from the date construction was completed or ownership transferred, the treasurer/tax collector may not bill and collect taxes on the property that are more than four years from the date the new construction or transfer is finally assessed. On the other hand, the “pull” that is diverting scarce manpower resources from appraising, assessing and reassessing is the two-year statute of limitations for deciding appeals that property owners bring before the Assessment Appeals Board. The number of appeals will typically spike during a weakening local economy and/or a softening of commercial or residential real estate markets. If the OAR and property owner do not reach agreement during a disputed assessment, the property owner can then take his/her case before the Assessment Appeals Board, which according to statute must decide the appeal within two years. The property owner may agree to waive the two-year deadline, but is not obligated to do so, and many do not. Without a waiver, particularly in cases involving complex high-value properties, the OAR is under pressure to defend its assessed value before the Assessment Appeals Board prior to the two-year deadline. During the past fiscal year, 2004-2005, there were 1,683 appealed assessments that the OAR had to defend. Of this number, 1,198 or 71.18% were settled without a hearing.7 If the two years pass without a settlement or decision, then the OAR must enroll the property owner’s estimate of value stated on the appeals application. Office of the Assessor-Recorder, 2005 Annual Report, , May 2006. The OAR needs guidance and discipline, which have been lacking for well over a decade, and it needs accountability to correct longstanding problems that are costing the city millions of dollars in lost revenue annually. The Civil Grand Jury has confidence in the newly-elected assessor-recorder and his abilities. We hope this call to action will be heeded. V. Findings and Recommendations The Civil Grand Jury submits to the people of the City and County of San Francisco and to the city’s government the following findings and recommendations for the Office of the Assessor-Recorder. 1. Most Critical Concerns: Assessment Backlogs and BOE Recommendations

F3: Information Technology Findings: 3-1a: The OAR uses a packaged computer system, EZ Access, for record keeping. This system is used by other large California counties such as Los Angeles and San Mateo, with vendor modifications. 3-1b: The OAR lacks internal programming staff for EZ Access and only one person in the OAR is authorized and capable of running the EZ Access I.B.M. AS400 computer. There is no written user’s manual available for the EZ Access system in the OAR. 3-1c: Although the EZ Access computer system has been installed for over five years, the OAR staff approaches the system with vague feelings of discontent.

F4: Staffing Findings: 4-1a: The OAR has 112 employees out of a budgeted staff of 140 employees, leaving 28 positions unfilled as of May 2006. 4-1b: The assessor-recorder has an immediate need to fill seven new positions as noted in Finding 1-1b on .

Related Recommendations (2)

R1: “The high vacancy rate for assessment positions has adversely affected the assessment of property. The already high number of unprocessed building permits has increased since the BOE surveyed in 1996. As a result, property in the city and county is being under assessed. Recommendation 1: To complete the Assessor's statutory obligations, we recommend the assessor fill current assessment vacancies.” ( .)

R4: “We found lengthy delays in processing building permits and enrolling value added due to new construction. … The assessor's delay in the assessment of new construction beyond the four-year statute of limitations, per Section 532(a) of the Revenue & Taxation Code, has resulted in lost tax revenue for the city and county … the city and county have irretrievably lost revenue from assessable new construction as indicated by over 500 permits. Recommendation 25: Eliminate the backlog of assessable new construction.” ( .) In fact, the BOE ranked San Francisco’s OAR as the least efficient of the assessor-recorder offices in the ten largest counties, measured by total assessed valuation.6 Other problems that have plagued the OAR and resulted in low morale and poor staff productivity include:

F5: Backlog of Appeals Findings: 5-1a: Resolution of valuation differences with taxpayers varies with appraisers. Some appraisers make an effort to resolve valuation differences with taxpayers and others refuse to negotiate, resulting in the unnecessary filing of appeals to the Assessment Appeals Board. 5-1b: Of the almost 1,700 assessment appeals closed in fiscal year 2004-2005, approximately 70% were resolved without a hearing.

F6: Additional Concerns Finding: 6-1: The OAR has begun making use of the resources of the California Assessors’ Association since the current assessor-recorder took office.

F7: 14 5-3: Except for trade secret information received in closed session, all information submitted to the Assessment Appeals Board is public information and, if relevant, can be used in any other matter brought before it. The OAR does not track or keep a record of this information for use on subsequent appeals.

F8: 5-5: The OAR lacks an adequate number of qualified staff to prepare and defend appeals.

F9: 6-1: The OAR has begun making use of the resources of the California Assessors’ Association since the current assessor-recorder took office.

F10: 6-2: The OAR has not published an annual report to the public or Board of Supervisors in recent history, but has just published an annual report for 2005 and intends to continue to publish an annual report each year.

Additional Recommendations 2

Not linked to specific findings.

R3: Information Technology 2 Charlie Goodyear, “Ting Vows End to Assessment Backlog; Understaffed Office Needs Two Years to Catch Up,” San Francisco Chronicle, page B5, March 16, 2006. State Revenue and Taxation Code, Section 532 (a). 2

R6: Additional Concerns III. Procedure and Resources The Civil Grand Jury’s investigation consisted of confidential interviews, correspondence with the OAR and others, examination of documents, and review of Internet sites. The Civil Grand Jury commenced its investigation in October 2005. We obtained records and conducted interviews with officers and employees from the following: Office of the Assessor-Recorder, City and County of San Francisco Office of the City Attorney, City and County of San Francisco Office of the Treasurer and Tax Collector, City and County of San Francisco Department of Building Inspection, City and County of San Francisco Assessment Appeals Board, City and County of San Francisco Board of Equalization, State of California Office of the Assessor, County of Alameda The Civil Grand Jury also obtained information from the following Web sites: City and County of San Francisco - http://www.ci.sf.ca.us/ Office of the Assessor-Recorder - http://www.sfgov.org/site/assessor_index.asp Board of Equalization, State of California - http://www.boe.ca.gov/ California Assessors’ Association - http://www.calassessor.org/ County of Alameda - http://www.acgov.org/assessor/ County of Santa Clara - http://www.sccgov.org/portal/site/asr/ Web site addresses were correct as of March 24, 2006. IV. Discussion Almost without exception the people interviewed by the Civil Grand Jury commented about the backlogs of properties awaiting appraisal and assessment. Rather than aggressively fix the problem, the OAR’s staff seems to be overwhelmed by the problem. Tax rolls close on June 30 at the end of each fiscal year, and the assessor-recorder conservatively estimated that the city loses $2,000,000 per year in uncollected revenue due to the assessment backlog. In March 2006 the number of parcels awaiting processing was approximately 26,600. This total includes approximately 6,800 properties with new construction, having an estimated value of $1 billion; 3,800 properties with changes of 3 ownership, having a current assessment roll value of approximately $8.14 billion; and approximately 16,000 other properties, including personal property, which currently require preparatory processing before an appraisal can be completed.4 (For definitions of “new construction” and “personal property,” refer to the Glossary at the end of this report.) The assessor-recorder’s goal to eliminate the backlog is to reduce it to twelve months, from three to four years or more. We recommend that it be further reduced to six months, except for appraisals under appeal. There are two reasons for this: 1) even if construction lasts a number of months or years, the OAR has had the same number of months or years to consider the appraisal and should therefore be able to arrive at an appraised value very soon after a Certificate of Occupancy is issued; and, 2) there is an advantage in having a shorter backlog of six months because it allows more “breathing room” if a surge in demand extends the backlog by, for example, three months. A surge in appraisal work is certainly more acceptable in extending the length of backlog from six to nine months, than it is from twelve to fifteen months. Once every five years the BOE conducts a review of the top ten counties’ property tax assessment functions to determine whether properties are being assessed properly and to identify areas where improvements should be made. Issued as an “Assessment Practices Survey,” the report provides an overview of how well the duties of the assessor are performed and includes recommendations to correct asssessment deficiencies and improve compliance with state law. In its 2002 report on San Francisco, the BOE identified numerous problems with the OAR and listed 56 specific recommendations, which are summarized in

June 26, 2006 — San Francisco Jails: An Investigative Visit

22 pages 9 findings 2 recommendations

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Findings & Recommendations 9 findings

F1: 1999-2000 San Francisco Civil Grand Jury Jail Report, San Francisco Superior Court website at http://www.sfgov.org/site/courts_page.asp?id=3730

F2: Associated Students of the University of California, Berkeley (ASUC) website at www.asuc.org/documentation/

F3: Bass, Jr., Gordon. Justice and the Revolving Door: The Jacksonville Experience in Recidivism Intervention, LJN Exchange, 2005

F4: Benner, Jeffrey, 2000. “Politically correct punishment,” Mother Jones, March 16, 2000.

F5: Budget Analyst, “Recommendations of the Budget Analyst for Amendment of Budget Items, 2005-2006,” June 28, 2005

F6: California Code of Regulations, Title 15, Crime Prevention and Corrections.

F7: California Department of Corrections and Rehabilitation: “Minimum Standards for Local Detention Facilities, Title 15 – Crime Prevention and Corrections, Division 1, Chapter 1, Subchapter 4, 2005 Programs and Procedures Guidelines.

F8: California Department of Corrections and Rehabilitation, “Minimum Standards for Local Detention Facilities, Title 24, Part 1, Section 12-102 and Part 2, Section 470A, 2005 Regulations.

F9: California Penal Code

Additional Recommendations 2

Not linked to specific findings.

R2: 1 The continued recruitment and hiring of new deputies should be given top priority. The Department should develop a coordinated recruitment outreach plan so that information about the current deputy recruitment program is disseminated widely to community groups, peace officer associations, and web sites. For example, the Department could list Deputy Sheriff positions on Internet sites such as: • Women Peace Officers Association of California at http://www.wpoaca.com/Job%20Flyers/Cal/cal_jobs.html, • Police Officers Research Association of California at http://www.porac.org/employment.html, • Golden State Police Officers Association at http://www.gspoa.com [Note: The SF Police Department has jobs advertised on this site.], • Other Internet job sites such as www.indeed.com, www.usajobs.com, http://www.deputy.sheriff.jobs.com 2.2 The SFSD should consult with the Department of Telecommunications and Information Services (DTIS) to determine how to maximize the effectiveness of the SFSD website and how to ensure that the Department’s recruitment efforts get maximum exposure on Google and other search engine web sites. Required Responses: Mayor’s Office – 60 days SFSD – 60 days 1 6 Post-release programs

R04-05: budget.11 A recent two-year hiring freeze, instituted due to financial constraints, was lifted in 2005. Since then, however, new hires have just been replacing people who resigned or retired. Thirty-five new deputies were hired in 2006, of which 31 completed the required police academy training. However, during this period, the Department lost 27 officers due to retirement or other reasons. Therefore, in order to ensure that there are a sufficient number of deputies in the jails at all times, the Department must resort to overtime, either voluntary or mandatory. Mandatory overtime is instituted when there are an insufficient number of volunteers for a given shift. There is an open job announcement for 8302 Deputy Sheriff 1, the entry-level deputy position. New hires attend an introductory seven-week Department orientation course, then a six-week jail training Officer program before they are ready to serve at the jails. Deputies also attend a 20-week California State certified course at the Police 11 Murray, Andrew: Legislative Analyst Memorandum, Re: Sheriff’s Department April 21, 2005 Presentation to the Budget and Finance Committee, April 20, 2005 7 Academy during the first year of their employment. Upon graduation from the Academy, deputies are then fully accredited peace officers under California law.12 Understaffing, together with a high level of dependence upon mandatory overtime, is detrimental to the safety of both Departmental staff and prisoners in custody. According to an article in the Contra Costa Times, violence among prisoners in the Los Angeles County jails has nearly doubled in the past three years, largely due to a funding crisis and staffing shortages. L.A. County’s inmate-to-deputy ratio is one of the highest in the country and, as a result, inmate-on-inmate assaults at one L.A. County facility rose from 351 in 2003 to 614 last year.13 Because the San Francisco Sheriff’s Department proactively strives to keep such assaults at a minimum, the prisoner-on-prisoner assault rate is considerably less than in Los Angeles. Staff reported that the total number of prisoner-on-prisoner assaults in all seven San Francisco County jails was 247 in FY 2005. However, the trend of trimming the budget of the SFSD that began with the FY 03-04 and FY 04-05 budgets and continued in the FY 05-06 budget14 is a major concern. D. Nutrition Civil Grand Jurors were served a prisoner lunch consisting of four slices of whole wheat bread, four slices of lunch meat, corn chips, an apple, ½ pint of milk, and condiments (mustard and mayonnaise). Prisoners interviewed said that the food served to the Grand Jurors was a standard prisoner lunch. The lunch served to prisoners who do not have special dietary requirements consists of either lunchmeat or peanut butter sandwiches. No lettuce or other sandwich fillings are offered. Breakfasts and dinners are more varied and are served warm. Vegetables and dessert are served with the evening meal. The menus are fixed and do not allow for individual choices. All prisoners on a particular diet receive the same food on a given day. The Department submitted a sampling of menus that indicate prisoners are provided 12 California Penal Code §13510.1, Peace Officers Standards and Training (POST) training program certification 13 “Los Angeles jail riots underscore rising violence among prisoners,” Contra Costa Times, February 6, 2005 14 Murray, Andrew: Legislative Analyst Memorandum, Re: Sheriff’s Department April 21, 2005 Presentation to the Budget and Finance Committee, April 20, 2005. The following is an excerpt from of the report: The department's FY 05-06 proposed budget totals $144.5M, a reduction of $2.0M over its original FY 04- 05 budget and $1.3M less than its projected FY 04-05 year-end actual. Notably, the department is budgeting $1.5M less for programs, $856,787 less for facilities, and $382,942 less for recruitment and training than it did in its original FY 04-05 budget. It is also budgeting for 11.5 fewer FTE in FY 05-06 than it did in FY 04-05. Significant cuts (savings) that were implemented in FY 03-04 and FY 04-05 include: - Closing three dormitories at County Jail No. 7 ($1.5M); - Eliminating porter services at County Jail No. 7 ($280,000); - Eliminating post-custody drug rehabilitation beds ($1.7M); - Eliminating Station Transfer Unit services ($2.0M); - Reducing hours and staffing at City Hall ($200,000); - Freezing hiring of new 8302 Deputy Sheriffs for last two fiscal years ($1.5M per year); and - Laying off 26 8300 cadets ($700,000) 8 balanced 3000-calorie meals. The food, while somewhat monotonous, meets basic dietary needs. In addition to the standard food offerings certain dietary needs are accommodated if requested by the prisoner or medical staff: Special menus include kosher/halal (offered to both Jews and Muslims), vegan, low salt, or diabetic. Many jurors said it is commendable that the Department both meets the nutritional needs of prisoners and provides special menus to meet dietary p

May 26, 2006 — San Francisco’s Information Technology Highway:

34 pages 7 findings 7 recommendations

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Findings & Recommendations 7 findings

F1: The Department of Telecommunications and Information Services (DTIS), which is responsible for managing IT for the City, is not respected by other City departments. A series of short-term leaders in DTIS, the loss of a significant number of DTIS personnel, and an inability to deliver needed services in a timely manner have affected the functioning of the department. Other City departments find DTIS expensive and unreliable.

Related Recommendations (1)

R1: The Department of Telecommunications and Information Services (DTIS), which is responsible for managing IT for the City, is not respected by other City departments. A series of short-term leaders in DTIS, the loss of a significant number of DTIS personnel, and an inability to deliver needed services in a timely manner have

F2: COMMITTEE ON INFORMATION TECHNOLOGY (COIT) FINDINGS 2.a The COIT staff and COIT leadership do not communicate with one another. 2.b The last announced meeting of COIT, prior to the March 30, 2006 meeting, was on May 10, 2005. 2.c A review of the minutes of prior COIT meetings (one in 2004 and two in 2003) disclosed the agendas consisted mostly of routine IT updates with little emphasis on long-term technology priorities. 2.d Section III of the City Administrative Code stipulates that all departments provide a three-year projection folio and annual progress reports. In 2005, only 11 of 64 departments submitted folios to COIT.

Related Recommendations (1)

R2: The Committee on Information Technology (COIT), the IT policy advisory group mandated by the City’s Administrative Code,1 is not living up to the original expectations. Infrequent meetings, City departmental disregard for the 1 San Francisco Administrative Code, §3.24, Committee On Information Technology. Mayor's Finance Director, a member of the Board of Supervisors, the Controller, the Director of Telecommunications and Information Services or their designee, and one department head from each of the following six groupings of departments: (a) Public Protection, (b) Public Works, Transportation and Commerce, (c) Human Welfare and Neighborhood Development, (d) Community Health, (e) Culture and Recreation, (f) General Administration and Finance. The department heads shall be selected annually by the four continuing members. The Committee on Information Technology shall take a leadership role in encouraging and coordinating departmental efforts in the use of new technology. The Committee shall promote interdepartmental cooperation and City standards. It shall review major interdepartmental and citywide projects and make policy recommendations thereon. (Added by Ord. 223-97, App. 6/6/97) 1 Administrative Code relating to COIT, a reduction of personnel, and internal personnel issues have all contributed to COIT’s ineffectiveness.

F3: BUDGET AND FINANCE FINDINGS 3.a No “citywide” IT planning or governance is functioning in the City. 3.b No individual or department is assigned responsibility for reviewing contracts from a citywide point of view. At this time contracts are viewed from a departmental perspective. 3.c Less than 20% of the City’s IT dollars are spent in the City’s designated IT department—DTIS. 3.d The services offered by DTIS are cited by City departments as expensive compared with those of outside contractors. The use of “loaded costs” and a work order funding process contribute to the high cost of DTIS services. 18

Related Recommendations (1)

R3: Improved leadership, IT knowledge sharing, centralization of some services, and the development of a citywide IT plan were all called for in numerous studies and reports conducted for the City in the last ten years. These recommendations are as valid today as when each of the reports was first issued.

F4: INFORMATION TECHNOLOGY GOVERNANCE FINDINGS 4.a Despite the Mayor’s view that the DTIS Executive Director is considered the CIO for citywide IT functions, in reality the DTIS Executive Director is a department head without authority over other department heads. 4.b While the Administrative Code defines DTIS as the City’s IT Department, because of its unsatisfactory performance ratings and high costs, many City departments have sought IT solutions outside of DTIS. Today, only 18.5% of total IT dollars flows through DTIS.

Related Recommendations (1)

R4: Small departments that rely on general funding for their technology needs are often at a distinct disadvantage financially compared to Enterprise Departments where external funding can be applied to IT projects.2

F5: LEADERSHIP FINDINGS 5.a Despite a number of previous recommendations to establish a CIO, that has not happened. 5.b As a department head, the Executive Director of DTIS does not have adequate authority over other City departments necessary to implement recommended changes or to provide adequate service to the public. 5.c DTIS has had six directors in ten years. 5.d. The median salary for a CIO in San Francisco is approximately $238,000. The annual salary range for the DTIS Executive Director, $116,064-$180,076 (5/06) is not commensurate with the responsibilities of the position or the geographical area.

Related Recommendations (1)

R5: Given the unique needs, requirements, and deadlines of Enterprise Departments, it is unrealistic for these departments to rely on DTIS for all their IT services. City staff has proposed a “hybrid3” IT program as a potential solution to the tug-of-war between centralization and decentralization of IT functions.

F6: City departments seldom share IT knowledge, thus duplicating efforts and increasing costs to the City.

Related Recommendations (1)

R6: City departments seldom share IT knowledge, thus duplicating efforts and increasing costs to the City.

F7: The Executive Director of IT for the City and County of San Francisco is classified as a department head. Given the size and complexity of City IT operations, the Civil Grand Jury recommends reclassifying the position to that of a Chief Information Officer (CIO). This reclassification would provide the necessary authority and recognition for that individual to design and implement overdue changes in administration of IT services citywide. There is ample evidence to support the need to create an efficient and cost-effective IT program. Suggestions for action offered by this CGJ include the following: • Changing the structure and operation of DTIS. • Reviewing the purpose, function, and operation of COIT or the designated IT policy making group. • Monitoring future IT expenditures and cost savings using data from the Fiscal Year (FY) 2005-2006 Budget as a starting point. • Increasing citywide IT collaboration and cooperation. • Establishing and empowering the position of CIO to lead the design, implementation and monitoring of IT changes. Enterprise Departments are large departments with budgets augmented by fees, grants and other funding sources that are generally earmarked for the specific use of those departments. In the hybrid model, IT functions common to most City departments (e.g., e-mail, etc.) would be centralized. IT functions unique to a given department would remain in that department. II. INTRODUCTION Technology at the Crossroads "With $5 million in settlements, don't let anyone tell you we can't afford a computer system. Think of what settlements we could have avoided if we had this technology in advance. Money is not an appropriate excuse. Money is not the reason we haven't put the system in place. It's political will."4 On February 12, 2006, Mayor Gavin Newsom offered the above response to a San Francisco Chronicle series about the use of force by the San Francisco Police Department. Unfortunately, the inefficient and costly use of information technology by the City is not limited to the Police Department. The year 1996 was a pivotal one for IT in the City. KPMG5 and City officials— including Board of Supervisors members, Mayoral representatives, City management, private sector executives, members of the press and the public—completed a “Strategic Plan for Information Technology” for the City. The plan recommended: • A coordinated IT Strategic Plan, leading to common standards, priorities and methods. • The development of a “one-stop shop” for technological innovation, information, advice and support. • A combination of centralized and decentralized resources to provide flexibility. As a result of the KPMG study, several technology organizations within the City were combined to create DTIS.6 Political leaders understood that IT was an uncoordinated function. In May 1996, the Civil Grand Jury released its report, “Information Technology Services in San Francisco Government,” which highlighted the City’s IT issues. In July 1996, as part of the budget process, COIT was created.7 One need only “fast forward” from 1996 and to 2006 to realize how quickly information technology has changed—and continues to change. While DTIS is expected to constantly upgrade and update its technology and its training programs, it has been faced with annual budget deficits for the last several years and a reduction in IT personnel. In addition, the City must compete with the private sector and other regional governments for IT professionals. Civil 4 Sward, Susan 2006. THE USE OF FORCE: Mayor demands accountability. Newsom responds to San Francisco Chronicle police use-of-force series, cites need for ‘political will’ to set up computer tracking system. The San Francisco Chronicle, February 12. KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. KPMG LLP is a provider of audit, risk advisory, and tax services. San Francisco Administrative Code, §11.86. DTIS replaced the Department of Electricity and Tele-communications, the Information Services Division of the Controller’s Office (including EIPSC), Citywatch and 911. (Added by Ord. 293-96, App. 7/17/96; amended by Ord. 58-00, File No. 000198, App. 4/7/2000; Ord. 203-04, File No. 040752, App. 8/5/2004) 7 The amendment to §3.24 of the San Francisco Administrative Code was added by Ordinance. 223-97, approved by the Board of Supervisors on. 6/6/97. Service rules and City pay scales contribute to the City’s difficulties in hiring and retaining individuals with state-of-the-art IT skills. All these factors have had an adverse impact on DTIS and on the City’s ability to keep pace with technological change. City policy seems to put off long-term investments in technology to “another day.” In 2006, and as part of a region known globally for its technology and innovation, San Francisco government continues to lag behind other cities and counties in its use of technology. Sources both inside and outside the City’s IT structure have regularly made recommendations for change but have been routinely ignored during the past ten years. Consequently, neither the efficiencies nor the savings that should result from the development of a state-of-the-art technology program appear to be in place today. In the course of this CGJ investigation and as this report goes to press, positive movement forward is actually taking place. Some of the positive IT activities we have observed include: • The newly created General Services Agency (GSA)8 now incorporates DTIS (Appendix A) and is overseen by the new Chief Administrative Officer (CAO). One goal of the agency is the reassessment of the City’s IT structure. At preliminary budget hearings before the Budget and Finance Committee on April 5, 2006, Chris Vein, DTIS Executive Director, presented general plans for that reassessment. • In November 2005 and December 2005, the Budget and Finance Committee of the Board of Supervisors (the Board) conducted hearings on issues related to IT procurement and maintenance. An update to those hearings was held on April 10, 2006 at the Board’s Government Audit and Oversight Committee. A new IT vision was presented by the DTIS Executive Director. Both the vision and the recommendations appeared to be well received by the Board. • In 2006, the Controller’s Office will be providing a fresh perspective on IT as a result of a Performance Audit of DTIS. • Under GSA, the responsibility for reviewing IT budget items has moved from COIT to the Mayor’s Budget Office. Instructions to departments for FY 2006-2007 budget preparation reflect this change. (Appendix B) 8 GSA was created by the Office of the Mayor in FY 2005-2006 under the auspices of Article III, §3.104, the Charter of the City and County of San Francisco. Departments reporting to the Director of GSA/City Administrator include: The Department of Administrative Services, the Department of Public Works, the Department of Animal Care and Control, the Department of Medical Examiner, the Department of Convention Facilities and the Department of Telecommunications and Information Systems. The City Administrator’s Office also oversees the following programs and other offices: the Grants for the Arts Program, the Mayor’s Office on Disability, the Labor Standards Office, the Entertainment Commission, the County Clerk, the Immigrant Rights Commission, and the 311 Project. 4 • The pending introduction of the 311 Call Center9 and the Wi-Fi installation10 for the City’s citizens indicates that the City is beginning to give technology the needed attention it deserves. • On March 30, 2006, the COIT convened its first meeting since May 2005. At that time, the DTIS Executive Director, introduced a new vision for the City’s IT services (Appendix C) which addresses many of the issues that, if acted upon, will significantly improve the City’s IT capabilities and efficiencies. None of the findings and recommendations of this CGJ's report were disclosed prior to the issuance of this report; however, many of the proposals announced at the March 30, 2006 COIT meeting are similar to our recommendations. The CGJ arrived at its findings and recommendations independently and the majority of recommendations in this report were in place prior to the COIT meeting. We felt that recommendations supportive of the new vision were appropriate and these were added to the report following the COIT meeting. The City staff and others interviewed for this report were candid, cooperative, and generally knowledgeable about the state of the City's IT programs and operations. They provided us with data, directed us to others knowledgeable about the City’s IT programs, and kept us informed of City meetings that addressed IT issues. We are very appreciative of their assistance. In writing this report, we determined some findings and recommendations were appropriately placed under more than one heading so as to provide clarity to the subject. It is our hope that, by implementing the recommended IT solutions, the delivery of City IT services will become more efficient, the use of taxpayers' money will be maximized, and funds will be freed up for other important needs of our fellow San Franciscans. III. PROCEDURE Many Roads Leading Nowhere The CGJ used multiple sources of information to determine the current status and effectiveness of the City’s IT programs and to ensure that our findings and recommendations are credible, valid, and realistic. The CGJ: • Examined “hard copy” documents provided by various City departments and electronic documents available on the www.sfgov.org website. • Interviewed approximately 25-30 individuals and departments knowledgeable about IT and/or in IT-related positions in City government. 9 311 Call Center, a customer service center that will receive public calls for information and requests for government services. The 311 Call Center will provide a single point of contact for all non-emergency City services and allow customers to call one easy-to-remember number to receive information and access City services. Wi-Fi is wireless fidelity—a broadband wireless network. The Wi-Fi project will establish a City-wide universal, wireless broadband network in San Francisco. 5 • Attended open meetings that focused on IT issues. • Conducted Internet research to obtain local as well as national data and information. • Reviewed studies and recommendations by outside consultants and in-house personnel. We looked at material from 1996 to the present that focused on improving the City IT programs and operations. Interviewees included personnel from various City departments, union representatives, City Supervisors, and individuals in the Mayor’s Office. The CGJ interviewed former employees who held important IT positions during the past ten-years. Also interviewed was an East Coast CIO who was cited by several interviewees and a national publication as being responsible for an exemplary governmental IT program. IV. BACKGROUND Roads Not Taken The studies and reports of 1996 set the stage for the development of an IT organization within the City and resulted in the establishment of DTIS and COIT. Selected report/study recommendations were put in place in the years between 1996 and 2000. Then the Y2K crisis served to once again highlight IT in the City. Another series of reports and studies about City IT issues began in 2000 and continues to the present.

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R7: The Executive Director of IT for the City and County of San Francisco is classified as a department head. Given the size and complexity of City IT operations, the Civil Grand Jury recommends reclassifying the position to that of a Chief Information Officer (CIO). This reclassification would provide the necessary authority and recognition for that individual to design and implement overdue changes in administration of IT services citywide. There is ample evidence to support the need to create an efficient and cost-effective IT program. Suggestions for action offered by this CGJ include the following: • Changing the structure and operation of DTIS. • Reviewing the purpose, function, and operation of COIT or the designated IT policy making group. • Monitoring future IT expenditures and cost savings using data from the Fiscal Year (FY) 2005-2006 Budget as a starting point. • Increasing citywide IT collaboration and cooperation. • Establishing and empowering the position of CIO to lead the design, implementation and monitoring of IT changes. Enterprise Departments are large departments with budgets augmented by fees, grants and other funding sources that are generally earmarked for the specific use of those departments. In the hybrid model, IT functions common to most City departments (e.g., e-mail, etc.) would be centralized. IT functions unique to a given department would remain in that department. II. INTRODUCTION Technology at the Crossroads "With $5 million in settlements, don't let anyone tell you we can't afford a computer system. Think of what settlements we could have avoided if we had this technology in advance. Money is not an appropriate excuse. Money is not the reason we haven't put the system in place. It's political will."4 On February 12, 2006, Mayor Gavin Newsom offered the above response to a San Francisco Chronicle series about the use of force by the San Francisco Police Department. Unfortunately, the inefficient and costly use of information technology by the City is not limited to the Police Department. The year 1996 was a pivotal one for IT in the City. KPMG5 and City officials— including Board of Supervisors members, Mayoral representatives, City management, private sector executives, members of the press and the public—completed a “Strategic Plan for Information Technology” for the City. The plan recommended: • A coordinated IT Strategic Plan, leading to common standards, priorities and methods. • The development of a “one-stop shop” for technological innovation, information, advice and support. • A combination of centralized and decentralized resources to provide flexibility. As a result of the KPMG study, several technology organizations within the City were combined to create DTIS.6 Political leaders understood that IT was an uncoordinated function. In May 1996, the Civil Grand Jury released its report, “Information Technology Services in San Francisco Government,” which highlighted the City’s IT issues. In July 1996, as part of the budget process, COIT was created.7 One need only “fast forward” from 1996 and to 2006 to realize how quickly information technology has changed—and continues to change. While DTIS is expected to constantly upgrade and update its technology and its training programs, it has been faced with annual budget deficits for the last several years and a reduction in IT personnel. In addition, the City must compete with the private sector and other regional governments for IT professionals. Civil 4 Sward, Susan 2006. THE USE OF FORCE: Mayor demands accountability. Newsom responds to San Francisco Chronicle police use-of-force series, cites need for ‘political will’ to set up computer tracking system. The San Francisco Chronicle, February 12. KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. KPMG LLP is a provider of audit, risk advisory, and tax services. San Francisco Administrative Code, §11.86. DTIS replaced the Department of Electricity and Tele-communications, the Information Services Division of the Controller’s Office (including EIPSC), Citywatch and 911. (Added by Ord. 293-96, App. 7/17/96; amended by Ord. 58-00, File No. 000198, App. 4/7/2000; Ord. 203-04, File No. 040752, App. 8/5/2004) 7 The amendment to §3.24 of the San Francisco Administrative Code was added by Ordinance. 223-97, approved by the Board of Supervisors on. 6/6/97. Service rules and City pay scales contribute to the City’s difficulties in hiring and retaining individuals with state-of-the-art IT skills. All these factors have had an adverse impact on DTIS and on the City’s ability to keep pace with technological change. City policy seems to put off long-term investments in technology to “another day.” In 2006, and as part of a region known globally for its technology and innovation, San Francisco government continues to lag behind other cities and counties in its use of technology. Sources both inside and outside the City’s IT structure have regularly made recommendations for change but have been routinely ignored during the past ten years. Consequently, neither the efficiencies nor the savings that should result from the development of a state-of-the-art technology program appear to be in place today. In the course of this CGJ investigation and as this report goes to press, positive movement forward is actually taking place. Some of the positive IT activities we have observed include: • The newly created General Services Agency (GSA)8 now incorporates DTIS (Appendix A) and is overseen by the new Chief Administrative Officer (CAO). One goal of the agency is the reassessment of the City’s IT structure. At preliminary budget hearings before the Budget and Finance Committee on April 5, 2006, Chris Vein, DTIS Executive Director, presented general plans for that reassessment. • In November 2005 and December 2005, the Budget and Finance Committee of the Board of Supervisors (the Board) conducted hearings on issues related to IT procurement and maintenance. An update to those hearings was held on April 10, 2006 at the Board’s Government Audit and Oversight Committee. A new IT vision was presented by the DTIS Executive Director. Both the vision and the recommendations appeared to be well received by the Board. • In 2006, the Controller’s Office will be providing a fresh perspective on IT as a result of a Performance Audit of DTIS. • Under GSA, the responsibility for reviewing IT budget items has moved from COIT to the Mayor’s Budget Office. Instructions to departments for FY 2006-2007 budget preparation reflect this change. (Appendix B) 8 GSA was created by the Office of the Mayor in FY 2005-2006 under the auspices of Article III, §3.104, the Charter of the City and County of San Francisco. Departments reporting to the Director of GSA/City Administrator include: The Department of Administrative Services, the Department of Public Works, the Department of Animal Care and Control, the Department of Medical Examiner, the Department of Convention Facilities and the Department of Telecommunications and Information Systems. The City Administrator’s Office also oversees the following programs and other offices: the Grants for the Arts Program, the Mayor’s Office on Disability, the Labor Standards Office, the Entertainment Commission, the County Clerk, the Immigrant Rights Commission, and the 311 Project. 4 • The pending introduction of the 311 Call Center9 and the Wi-Fi installation10 for the City’s citizens indicates that the City is beginning to give technology the needed attention it deserves. • On March 30, 2006, the COIT convened its first meeting since May 2005. At that time, the DTIS Executive Director, introduced a new vision for the City’s IT services (Appendix C) which addresses many of the issues that, if acted upon, will significantly improve the City’s IT capabilities and efficiencies. None of the findings and recommendations of this CGJ's report were disclosed prior to the issuance of this report; however, many of the proposals announced at the March 30, 2006 COIT meeting are similar to our recommendations. The CGJ arrived at its findings and recommendations independently and the majority of recommendations in this report were in place prior to the COIT meeting. We felt that recommendations supportive of the new vision were appropriate and these were added to the report following the COIT meeting. The City staff and others interviewed for this report were candid, cooperative, and generally knowledgeable about the state of the City's IT programs and operations. They provided us with data, directed us to others knowledgeable about the City’s IT programs, and kept us informed of City meetings that addressed IT issues. We are very appreciative of their assistance. In writing this report, we determined some findings and recommendations were appropriately placed under more than one heading so as to provide clarity to the subject. It is our hope that, by implementing the recommended IT solutions, the delivery of City IT services will become more efficient, the use of taxpayers' money will be maximized, and funds will be freed up for other important needs of our fellow San Franciscans. III. PROCEDURE Many Roads Leading Nowhere The CGJ used multiple sources of information to determine the current status and effectiveness of the City’s IT programs and to ensure that our findings and recommendations are credible, valid, and realistic. The CGJ: • Examined “hard copy” documents provided by various City departments and electronic documents available on the www.sfgov.org website. • Interviewed approximately 25-30 individuals and departments knowledgeable about IT and/or in IT-related positions in City government. 9 311 Call Center, a customer service center that will receive public calls for information and requests for government services. The 311 Call Center will provide a single point of contact for all non-emergency City services and allow customers to call one easy-to-remember number to receive information and access City services. Wi-Fi is wireless fidelity—a broadband wireless network. The Wi-Fi project will establish a City-wide universal, wireless broadband network in San Francisco. 5 • Attended open meetings that focused on IT issues. • Conducted Internet research to obtain local as well as national data and information. • Reviewed studies and recommendations by outside consultants and in-house personnel. We looked at material from 1996 to the present that focused on improving the City IT programs and operations. Interviewees included personnel from various City departments, union representatives, City Supervisors, and individuals in the Mayor’s Office. The CGJ interviewed former employees who held important IT positions during the past ten-years. Also interviewed was an East Coast CIO who was cited by several interviewees and a national publication as being responsible for an exemplary governmental IT program. IV. BACKGROUND Roads Not Taken The studies and reports of 1996 set the stage for the development of an IT organization within the City and resulted in the establishment of DTIS and COIT. Selected report/study recommendations were put in place in the years between 1996 and 2000. Then the Y2K crisis served to once again highlight IT in the City. Another series of reports and studies about City IT issues began in 2000 and continues to the present. Recommendations for IT reform are common themes in each study. (

May 25, 2006 — Identity Theft: How Well Is the City and County Coping?

6 pages 7 findings 3 recommendations

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Findings & Recommendations 7 findings

F1: - Department of Public Health: San Francisco General Hospital is the Department of Public Health’s largest cash operation. Cash and credit card operations are handled directly with the Bank of America. The Department of Public Health runs its own information technology operation with applications including patient registration, accounting, lifetime clinical services, laboratory work, and on-line eligibility. To facilitate billing with Medicare and Medi-Cal, it is necessary to keep patient social security numbers on file. Although the Department of Public Health has about 5,000 computer workstations at over 400 separate sites, no credit card data is kept on Department’s computer files. There is no clause protecting the confidentiality of data in the Department of Public Health’s contract with Bank of America. 4

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R3: A clause protecting confidentiality of the City’s data should be included in the Department of Public Health’s contract with Bank of America. VI. Required Responses Department of Public Health – 60 days Office of the Mayor – 60 days Board of Supervisors – 90 days 6

F2: - Office of the Treasurer & Tax Collector: In 2004-2005 the treasurer took in over $2.3 billion in tax revenue. Of this total, $19 million was collected by processing 11,200 transactions over the World Wide Web. The treasurer contracted with VeriSign, a NASDAQ- listed corporation that processes over 14 billion Internet transactions daily3, to handle their Web- related credit card operations. Another $8 million was collected by processing 2,700 transactions through Interactive Voice Response (IVR), an enhanced automated phone service for processing payments made with credit cards. The City treasurer contracted with Official Payments Corporation for these IVR transactions. Official Payments Corporation has been processing government payments electronically since 1996. Official Payments Corporation also does processing for the United States Internal Revenue Service, 25 states, and more than 1,600 counties and municipalities. No credit card data for Web or IVR transactions are kept on City computer files. A clause protecting confidentiality of data is present in the Treasurer’s contract with Official Payments Corporation. (Note: Mail and walk-in credit card numbers are kept on the Treasurer’s cashiering system, and are available only to the vault teller on an audit report. This on-request audit report is produced only when there are cash balancing problems.)

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R1: San Francisco’s widely distributed information technology departments have wisely chosen to contract out credit card processing (and the identity theft risks inherent in this activity) to nationally recognized firms specializing in Web-based remittance processing. The Civil Grand Jury recommends the departments continue this policy.

F3: – Department of Parking & Traffic: The Department of Parking & Traffic contracts out daily management responsibilities for City-owned parking garages to various parking firms. All credit card transactions with parking garages are handled by the parking firms. Once again, no credit card data or social security numbers are kept on City computer files.

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F4: - Parking Citations Division: The Municipal Transportation Agency’s Citations Division receives approximately $14 million yearly from some 250,000 Web transactions. As with the Office of the Treasurer & Tax Collector, VeriSign handles its Web transactions. Approximately $4 million is collected annually through some 78,000 phone transactions. Again, Official Payments Corporation handles phone payment transactions. The Citations Division does not retain any credit card or social security numbers on their files.

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F5: - Payroll: The Controller’s Office has processed City’s payroll since 1985 on a heavily modified package application processor that is run on the City’s mainframe computer system. Although the payroll system must retain social security numbers for tax reporting purposes and bank account numbers for direct deposits, computer access is limited exclusively to payroll and programming staff. Similar to credit card transactions in shops and restaurants, only the last four digits of social security numbers are printed on checks. No credit card data is kept on the payroll system.

F6: - Police Department: Although our investigation of departments which process major credit card transactions revealed no evidence of City-caused identity theft, we conducted a final interview with the San Francisco Police Department’s Fraud Detail to verify our findings. Through early December 2005, police statistics reflect 1,300 instances of all types of identity theft in San Francisco. The police have no records involving identity theft within City government. Statistics are not kept by location of theft because most victims of identity theft do 3 http://www.verisign.com/verisign-inc/index.html 5 not know where or how their personal information was stolen.

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R2: In answer to the question posed by the title of this report, the City and County of San Francisco is thus far coping well with identity theft. The Civil Grand Jury recommends that the City continues to handle sensitive data with the care that is currently in practice.

F7: - Conclusion: The Civil Grand Jury asked all departments listed above and the Department of Telecommunications & Information Services the direct question, “Are you aware of any instances of identity theft caused by the City and County of San Francisco?” All replied negatively to this question.

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Affordable Housing Bond Program:

10 pages 4 findings 4 recommendations

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Findings & Recommendations 4 findings

F1: The maximum sales price for properties set in October 2004 has been overtaken by a rising local real estate market.

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R1: The current maximum sales price limits are based on 2004 real estate prices and are unrealistic in the present real estate market.

F2: The program is on a “first come, first served” basis.

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R2: When the program was established in 1996, section 43.3.7 of the Administrative Code of the City required the Mayor’s Office of Housing (MOH) to file an annual report with the Board of Supervisors on the status of the Affordable Housing and Homeownership Program. The CGJ has been unable to determine whether any report was filed after 2002. The Civil Grand Jury of 2005/2006 offers the following suggestions: (cid:131) Raise the maximum sales price for properties. (cid:131) Establish a waiting list when funds have been depleted. (cid:131) Initiate a ballot proposition that provides additional funding for the DALP (cid:131) Ensure that the Mayor’s Office of Housing files the required annual reports. II. Introduction In November of 1996 the voters of the City and County of San Francisco (the City) approved Proposition A, the Affordable Housing and Homeownership Bond Program, a $100 million general obligation bond to expand affordable housing opportunities for low- and moderate- income residents. $85 million of the bond proceeds were to be spent for acquisition, rehabilitation and construction of rental units for households with annual incomes of no more than 60% of the San Francisco metropolitan area-wide median ($62,000 in 1996). The remaining $15 million was to be invested in down payment assistance loans for first-time homebuyers with annual incomes at or below the area-wide median. The Board of Supervisors ordinance (449-97) that established program guidelines requires that the bond proceeds be deposited in two accounts: the Development Account for the rental housing component of the program and the Down Payment Assistance Loan Program Account for the homeownership component. This latter program is the only focus of the CGJ’s investigation. It works as follows: 1 The City makes interest free down payment assistance loans, which are to be repaid into the City’s DALP fund when the homeowner sells. At such time, the City receives back not only the original principal amount but also its share of the appreciation of the home in proportion to the City’s participation in the financial transaction. Hence the fund is considered an “evergreen” fund, or a “revolving loan fund” that is available to be lent out again and again.1 DALP loans are made on a first come, first served basis. All properties purchased with down payment assistance loan funds must be single-family residences located in the City including condominiums, townhouses or cooperative units. The DALP is administered by the Mayor’s Office of Housing (MOH) with the assistance of six participating lenders each of which is either a bank or a mortgage company selected by MOH. Participating lenders submit applications to MOH for approval after determining that the borrower is eligible for a first mortgage and appears to be eligible for a second loan from the City to assist the borrower with a down payment. III. Procedure The Civil Grand Jury (CGJ) used multiple sources of information to determine the current status of the DALP and to ensure that our findings and recommendations are credible, valid and realistic. The CGJ: • Reviewed studies and recommendations made by SPUR (San Francisco Planning & Urban Research Association), and by the Budget Analyst of the Board of Supervisors • Interviewed individuals and personnel from City departments knowledgeable about the DALP • Examined documents available on the www.sfgov.org website and the www.huduser.org website. Interviewees included personnel from the Mayor’s Office of Housing, DALP Homebuyers Education Counseling Agencies, participating lenders, and the San Francisco Redevelopment Agency. Example: A unit is purchased for $400,000 with a DALP loan of $60,000. When the residence sells it might generate $600,000, an appreciation of $200,000 or 50%. The borrower repays the City the original $60,000 plus $30,000 which is the 50% appreciation of the loan.. IV. Background Those who wish to apply for a Down Payment Assistance Loan must do the following:

F3: The current fund is too small to address the need for affordable housing.

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R3: Be approved by the MOH for a DALP loan. A. Education Counseling Agencies. Borrowers are required to complete an approved first-time homebuyer’s education course. Applicants for down payment assistance must include a certificate of completion with the application package. There are five non-profit education counseling agencies approved by the U.S. Department of Housing and Urban Development. They organize workshops which are free and typically include: A. Credit review B. Advantages of budgeting C. Lender underwriting guidelines D. Down payment and closing costs E. Shopping for a mortgage F. Notice of affordable homeownership opportunities. In addition, applicants attend individual counseling sessions that include a discussion of home maintenance. The agencies serve as liaisons between the buyer and potential lenders. The agencies make an initial determination of the applicant’s eligibility and help to prepare the DALP application. At this point the applicant may shop for a home within the price range set up by the MOH. B. Participating Lenders. The borrower must secure a commitment of a first mortgage from a participating lender. The borrower must contribute a minimum of 5% of the purchase price toward the down payment (3% must be the borrower’s own funds, the balance may be in the form of a gift or grant). The bank decides if the applicant qualifies for the loan and prepares the necessary paperwork. The loan and the DALP application are then forwarded to the MOH for approval. C. Mayor’s Office of Housing. The Down Payment Assistance Loan Program is administered by the MOH in conjunction with the participating lenders. The MOH determines the income limits and subsidy levels for the program. The income limits, and their percentage of median income, depend on the household size – from one person to four or more – and vary from $49,875 to $95,000 (effective February 2005). The maximum DALP loan amount is $100,000 or 30% of the purchase price, whichever is less. The lower the income, the higher the possible DALP loan. The maximum sales price for properties purchased with DALP funds are established by the MOH and as of October 2004, are: Unit size maximum sales price Studio/one bedroom $360,000 Two bedrooms $480,000 Three bedrooms $550,000 Four or more bedrooms $620,000 Other restrictions are: (cid:153) Properties must be single-family residence units in the City and County of San Francisco, (cid:153) The borrower’s household size must be compatible with the property size, (cid:153) Borrowers must occupy the purchased properties as their principal residences, and (cid:153) Properties must remain owner-occupied throughout the terms of the loans (maximum of 40 years). MOH notifies the lender and applicant if it approves the application for down payment assistance. The funds that were approved are sent to the escrow agent and the deed of trust to the property will reflect the City’s contribution and the conditions under which the loan must be repaid upon sale of the residence. V. Discussion A. Education Counseling Agencies. These education counseling agencies are private and non-profit organizations, existing by receiving private grants and through their own fund-raising. The Civil Grand Jury believes these counseling agencies are well managed and staff has their clients’ welfare uppermost in their minds. In interviews personnel from the agencies said they were not aware of any discrimination due to ethnicity in the administration of the DALP or any other unfair rejection of their clients. There is a problem in that the current approved maximum sales price limits are unrealistic. It has become very difficult or nearly impossible to find a one-bedroom home in San Francisco for $360,000, or a two-bedroom for $480,000, or a three-bedroom for $550,000. Thus it is not possible to take advantage of the approximately $3,400,000 of DALP funds that are available today for allocation to new borrowers. An interviewee suggested an increase of at least 15% from the Oct. 2004 value scale would be appropriate. B. Participating Lenders. The lender determines if the applicant qualifies for a loan and helps the homebuyer with the loan application. The lenders interviewed indicate that the homebuyers have not been discouraged by the process. There have been no defaults on the loans under the DALP. Due to the low maximum sales price limits many first-time homebuyers have needed both the Below Market Rate (BMR) Units of the San Francisco Redevelopment Agency and the DALP. There are two problems with this linkage: There are about 200 applicants for each available unit (allocated by lottery); and on resale the appreciation of the BMR Unit is limited to the increase in median income, not to the increase in real estate market value. Thus, the DALP revolving fund appreciates to a much lesser degree. Sometimes it is possible to combine the DALP loan with the California Homebuyers Down- payment Assistance Program (CHDAP) loan. The California Housing Agency web site states “CHDAP offers a unique interest rate, and the repayment of principal and interest is due on the sale of the residences.” The fact that there are 200 applicants for each available BMR unit is an indication of the great need for affordable housing assistance. C. Mayor’s Office of Housing. By the end of the summer of 2002, 240 loans had been made to first-time homebuyers under the DALP. This obligated all the initially available funds. A SPUR report of July 2002 found that the DALP has been an effective and efficient program. In a letter of March 29, 2006, to the CGJ the Director of the MOH provided current statistics: (cid:190) 293 loans have been made since inception of the program (cid:190) The average loan is for $61,000 (cid:190) 68 loans have been repaid by borrowers (cid:190) There have been no defaults (cid:190) $3,400,000 is available to allocate to new borrowers. However, it should also be noted that when the program was established, section 43.3.7 of the Administrative Code of the City required the MOH to file an annual report with the Board of Supervisors on the status of the Affordable Housing and Homeownership Program. In June of 2002, the Budget Analyst criticized the MOH for publishing the Annual report prior to the end of the 2001/2002 fiscal year covered by the annual report. The Analyst insisted that in future years the reports be made after the closing of the fiscal year. The CGJ has been unable to determine whether MOH filed any annual report after 2002 and the MOH was unable to supply the CGJ with a report as regards DALP for the year ended June 30, 2005. The participating lenders indicate that the MOH is responsive and returns application packages within five days. Rejected applicants can appeal to the Director of the MOH. An interviewee stated that there have been no objections to the “first come, first served” basis to lending, however it may be appropriate to develop a waiting list when funds have been temporarily depleted. D. Benefits of Homeownership to the Community. Assisting low- and moderate-income households by providing greater access to homeownership, as an instrument of social mobility is an important tool for enabling the lower middle class to remain in San Francisco, working against a city inhabited predominantly by the rich and very poor. The U.S. Department of Housing and Urban Development has published many studies on the benefits to society of homeownership. A summary of some of their findings follows: (cid:57) Homeownership (HO) benefits neighborhoods as well as individuals because owner- occupiers have a financial stake in the quality of the local community. (cid:57) HO expands individual opportunities to accumulate wealth, enables a family to exert greater control over its living environment, creates incentives for households to better maintain their homes, and may benefit children of homeowners. (cid:57) HO is associated with gaining access to high quality public services and amenities. (cid:57) HO is the primary means of long-term wealth accumulation and financial security for most American families, and plays an important role in promoting neighborhood stability and civic engagement. (cid:57) Parents who own their own home may be helping to boost their children’s educational achievements and even reduce behavioral problems. (cid:57) The greater stability of homeowners is good for child development. (cid:57) Homeowners tend to stay in one place longer than renters. This stability means that children stay in the same schools, and parents and children invest more time in developing positive relationships with their neighbors and the community. (cid:57) A boost in HO strengthens the economy by creating jobs and the need for more durable goods. (cid:57) The longer one puts down roots, the more stake one has in supporting local institutions. VI. Conclusions: Findings and Recommendations The Civil Grand Jury finds that the Affordable Housing Bond Program has been successful but it has some shortcomings that should be addressed. More importantly, a new bond measure should be sponsored for more affordable housing as the program addresses deeply held values such as equity, opportunity, and the right to a home.

F4: The Mayor’s Office of Housing has not filed annual reports on DALP since 2002.

Related Recommendations (1)

R4: The Mayor’s Office of Housing has not filed annual reports on DALP since 2002. Recommendations:

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.

Additional documents

Documents found alongside this year's reports, not grand jury reports or responses.

Status of the Recommendations by the Civil Grand Jury50 pp.
Grand Jury Appendix A6 pp.
Status of Civil Grand Jury Recommendations26 pp.