San Francisco County 2011-2012 - California Grand Jury Reports

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June 01, 2012 — Surcharges and Healthy San Francisco:

29 pages 14 findings 5 recommendations

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Findings & Recommendations 14 findings

F1: The Jury could not identify any government investigation that reports the number of businesses adding surcharges to pay for HCSO employer mandates and mandated paid sick days. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and Office of Labor Standards Enforcement.

F2: The City has not investigated health care related surcharges to determine whether or not employers are generating profits from these surcharges. Responses are requested from the Mayor, the Board of Supervisors, District Attorney, and the Golden Gate Restaurant Association.

F3: Neither the City nor the State of California, to the Jury’s knowledge, has investigated whether sales tax is being added to surcharges. Responses are requested from the Mayor, the Board of Supervisors, Office of the Treasurer and Tax Collector, State Board of Equalization, and the Golden Gate Restaurant Association.

F4: The City has neither a plan nor sufficient staff at the OSLE to audit employers’ surcharges in compliance with HCSO regulations. Responses are requested from the Mayor, the Board of Supervisors, and Office of Labor Standards Enforcement. Surcharges and Healthy SF City and County of San Francisco Civil Grand Jury 2011-2012

F5: San Francisco businesses that collected surcharges prior to January 1, 2012 have no obligation to report surcharge receipts to the City nor reconcile the surcharges with health care expenses. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, and Office of Labor Standards Enforcement.

F6: Due to the varied wording in describing surcharges on consumers’ bills, and the wording of the ordinance, the auditing of surcharges will be difficult. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, Office of Labor Standards Enforcement, and the Golden Gate Restaurant Association.

F7: Consumer fraud is committed if the consumer’s receipt states that a surcharge is being assessed for a stated purpose and is not being used for that purpose. Responses are requested from the Mayor, the Board of Supervisors, District Attorney, City Attorney, and the Golden Gate Restaurant Association. G. Recommendations

F8: Employers with HRAs in 2010 allocated $62 million for medical care, reimbursed employees $12 million, and retained up to the remaining $50 million. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, Office of Labor Standards Enforcement, and the Golden Gate Restaurant Association.

F9: Given similar demographics the 20% reimbursement rate for HRAs is well below the City’s 50% reimbursement rate for MRAs due to lack of program notification to employees, stricter HRA guidelines, and employees’ unwillingness to disclose their medical conditions to their employer. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and the Golden Gate Restaurant Association.

F10: Significant numbers of restaurants utilizing HRAs in 2010 paid out no medical expenses for their employees. Responses are requested from the Mayor, the Board of Supervisors, Office of Labor Standards Enforcement, and the Golden Gate Restaurant Association.

F11: Employees with two or more employers may have two or more HRAs, likely with differing guidelines for what constitutes medical expenses and with differing time limits. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and the Golden Gate Restaurant Association.

F12: HRAs may not be an allowable option in meeting the federal requirements under the Affordable Care Act. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, City Attorney, and the Golden Gate Restaurant Association.

F13: The financial incentive to retain unspent HRA funds could be a motivating force for employers to restrict employee access to these funds. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and the Golden Gate Restaurant Association. Surcharges and Healthy SF City and County of San Francisco Civil Grand Jury 2011-2012

F14: By submitting personal medical invoices directly to their employers, employees are forced to reveal their medical history and current health conditions to their employers. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and the Golden Gate Restaurant Association. H. Recommendations

Additional Recommendations 5

Not linked to specific findings.

R1: Disallow employers subject to the Office of Labor Standards Enforcement regulations from adding surcharges on customers’ bill to pay for HCSO employer mandates and mandated paid sick days. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, and the Golden Gate Restaurant Association.

R2: The Office of the Treasurer and Tax Collector investigate the under-reporting of sales taxes on surcharges. Responses are requested from the Mayor, the Board of Supervisors, and Office of the Treasurer and Tax Collector.

R3: The District Attorney open an investigation to review the Jury’s survey findings for possible consumer fraud. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, and District Attorney. Surcharges and Healthy SF 9 City and County of San Francisco Civil Grand Jury 2011-2012 II. Employers Health Reimbursement Accounts (HRAs) The HCSO calls for an Employee Spending Requirement (ESR) on a per employee basis. This is a minimum dollar amount per covered employee. (See Table 1). An employer may spend a significant amount over the minimum required for their full-time employees by, for example, providing third-party health insurance. In addition, the same employer must still spend the minimum required for covered uninsured employees. Employers have several options as to how they spend the ESR on health care. The most common are: • Provide traditional third-party health insurance. • Pay the ERS to the City (the City Option) and the City will either enroll the employee in Healthy SF, or establish a Medical Reimbursement Account (MRA) for the employee. • The employer can earmark funds to its own HRA for individual employees, which can be administered in-house or by a third party. According to OLSE, most employers provide health care insurance for their full-time employees, which usually cost more than the ESR.10 The report states that most businesses employing part-time or temporary employees use the City Option or establish their own HRAs at a cost lower than third-party health insurance. The report concludes that the Accommodation and Food Service industries were, by far, the largest users of the HRA option. A. The City Option Employees working for an employer who has selected the City Option have one of two programs available to them, depending on whether or not they live in the City. Employees living in the City who do not have any form of health insurance are enrolled in the Healthy SF program. Employees who live in the City and do have health insurance, other than that provided by their employer (for instance, through a spouse’s employer), the City will set up a MRA. An employee, not living in the City has only one option, which is the City’s MRA (Table 4). Lives in City Has Existing Insurance Options Yes Yes City MRA Enroll in Healthy SF Yes No with 75% discount No Doesn’t matter City MRA Table 4. City Option The City contracts with a third party specializing in health care spending accounts to administer the employees’ MRA accounts. The funds remain available to the employee for life 10 Surcharges and Healthy SF City and County of San Francisco Civil Grand Jury 2011-2012 unless there has been a period of inactivity for 18 months. In that case, the City reclaims the unused funds.11 B. The HRA Option The HRA option is becoming increasingly popular with employers for many reasons. Third- party insurance and the City Option require cash payments by the employer, which are non- refundable. By administering their own HRAs, employers earmark the funds and pay out only when actual medical costs are incurred by their employees. Furthermore, after two years, or 90 days after the employee’s termination, employers can retain any unused funds for their own use. Employers may also arbitrarily define what medical expenses qualify for reimbursement under their HRA plan. The OLSE reported in 2010 that 860 out of 4,000 employers used the HRA option.12 The total amount allocated to the employees was $62.5 million. However, only $12.4 million was actually spent on employee medical care, allowing their employers to “reclaim” or “retain” up to $50.1 million or 80% of their required expenditures. This compares to DPH records that show a reimbursement rate of 50% for City managed MRAs.13 This discrepancy is disturbing, and clearly indicates to the Jury that employees are not receiving the full benefit of health care funds intended by the HCSO. C. Legislative Response to HRAs There have been legislative attempts to rectify the abuse of HRAs. In the fall of 2011, in response to the OLSE study and intense media scrutiny, Supervisor David Campos introduced an amendment closing many of the loopholes and abuses of the current system.14 Supervisor Campos’ amendment defined “expense” as actual funds spent on behalf of the employee, not an earmark that can be “retained” later. This amendment passed the Board of Supervisors; however, Mayor Lee used his first veto to kill the legislation.15 Mayor Lee, President of the Board of Supervisors Chiu, and Supervisor Cohen subsequently introduced their own amendment to the HCSO in November 2011.16 This alternative measure passed the Board of Supervisors on November 15, 2011, was signed by the Mayor, and became effective on January 1, 2012.17 Under the new law, all funds that remain unspent in an employee’s HRA account at the end of 2011 now roll over into calendar year 2012. Also, HRA expenditure guidelines must now be “reasonably calculated to benefit the employee.” Further, Employer-to-Employee postings and notifications of the program details, rights, and obligations are now required. Employers must provide statements showing the account balance annually and also upon termination of employment. The new legislation still allows businesses to adopt their own guidelines and manage their own HRA plan. This still forces employees to disclose their medical conditions to their employer in order to obtain reimbursement for medical expenditures. Surcharges and Healthy SF 11 City and County of San Francisco Civil Grand Jury 2011-2012 D. HRAs and the Affordable Care Act New federal laws are also a concern. The Affordable Care Act requires a minimum level of health care coverage. However, HRAs, as currently structured, will not meet the federal guidelines under the new statute. A report published by the Forum for Health Economics and Policy, titled “How Do Employers React to a Pay-or-Play Mandate? Early Evidence from San Francisco,” reveals some interesting information. It reports that the Affordable Care Act will make it more difficult for employers to comply with the San Francisco ordinance because health reimbursement accounts will not be an allowable option under the federal requirements.18 The Affordable Care Act is now under review by the U.S. Supreme Court and a decision is expected shortly. E. The Jury’s Survey Results on HRAs The Jury’s survey of the 28 restaurants that filed with the OLSE (out of the 38 requested by the Jury) for the year 2010 found that: • 22 (80%) used the HRA option; • Four (14%) opted for the City Option; • Two (6%) used third-party health insurance; and • Five paid zero amounts to their employees. As detailed below (Table 5), the 22 employers that used the HRA option in 2010 earmarked $2,040,140, but only reimbursed their employees $123,659 and retained up to $1,916,481 at the end of the year. This represents a miniscule 6% reimbursement rate compared to the City’s MRA reimbursement rate of 50%. # of # of HRA Funds Paid to Reimbursement Retained by Type Restaurants Employees Earmarked Employees Rate Employers Fine Dining 4 190 $306,844 $36,016 11.74% $270,828 Neighborhood 16 1,083 1,225,583 65,856 5.37% 1,159,727 Favorites Convenient / 2 289 507,713 21,740 4.28% 485,973 Fast Food Total 22 1,562 $2,040,140 $123,612 6.06% $1,916,528 Table 5. Employer HRA Reimbursement Rates Our survey found that five (23%) of the 22 employers using the HRA option made zero reimbursements to their employees out of the $415,928 these employers earmarked during 2010. Surcharges and Healthy SF City and County of San Francisco Civil Grand Jury 2011-2012 These five restaurants had a total of 206 covered workers in 2010. Even though San Francisco is ranked #6 on Forbes list of the Top 20 Healthiest Cities,19 the Jury finds it hard to believe that not one of 206 workers had any medical expenses during 2010. It begs the question, did the employers not tell their employees about the program, or did they set the bar for reimbursement too high, or were employees too intimidated to seek reimbursement? F. HRAs and Employees Working for Two or More Employers The ESR applies to full-time and part-time employees not covered by employer-paid health insurance. When choosing the City Option the employer must pay the City the required ESR for each employee. The City then contacts the employee to determine what benefits are available (See Table 4). Employees who are City-residents will be enrolled in Healthy SF if they have no health coverage or in a MRA if they do. Since non-residents cannot enroll in Healthy SF, a MRA will be established for them. The City’s MRAs are administered by a third-party administrator with on-line access for program participants. There is a small monthly fee, currently $2.25, which program participants pay from their accounts.20 When an employee works for two or more employers using the HRA option, each employer allocates and administers its own HRA for the employee. Each employer adopts separate specific reimbursement guidelines and reimburses the employees directly. The employee must submit covered medical expenses to one of their employers for reimbursements. Although employers may have differing reimbursement guidelines, they must be “reasonably calculated to benefit the employee.”21 It becomes even more complex for an employee working for two or more employers when one takes the City Option and the other(s) takes the HRA option. Now the employee must manage reimbursements between their employer(s) and the City in order to take full advantage of various guidelines and time limits. There is no coordination between plan administrators and there is nothing to prevent an employee from submitting the same invoice to different plans enabling the employee to collect more than once for the same invoice. Over a period of several years part-time or temporary workers can and often do accumulate several HRAs from different employers and perhaps an MRA from the City. This system makes it difficult for workers to sort out applicable guidelines and time limits when submitting medical expenses. Surcharges and Healthy SF 13 City and County of San Francisco Civil Grand Jury 2011-2012 G. Findings

R4: Disallow the use of the employer HRA option. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, City Attorney, and the Golden Gate Restaurant Association.

R5: Eliminate time limits for employees to use their MRA funds. Responses are requested from the Mayor, the Board of Supervisors, Department of Public Health, and the Golden Gate Restaurant Association.

Where There’s Smoke… The Need to Strengthen the Art Commission’s Stewardship of San Francisco’s Cultural Legacy June

45 pages 39 findings 24 recommendations

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Findings & Recommendations 39 findings

F1: The City, through SFAC and GFTA, devotes public resources to art and cultural programs in more generous amounts, per capita, than any other municipality in the United States. Responses are requested from the Mayor, the Board of Supervisors, Director of Grant for the Arts, the Arts Commission, and the Director of Cultural Affairs. Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012

F2: SFAC Commissioners have not taken responsibility to adequately ensure administrative excellence in the department they govern. Responses are requested from the Mayor and the Arts Commission.

F3: Commissioners focus on programs at the expense of general administration and the larger interests of the public. Response is requested from the Arts Commission.

F4: SFAC has not developed materials that create awareness among the general public of the array of art opportunities available to them. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F5: SFAC has not created a high-profile community identity for itself as an important contributor to San Francisco’s cultural heritage. Responses are requested from the Arts Commission, the Fine Arts Museums, California Academy of Sciences, and the War Memorial and Performing Arts Center Commission.

F6: SFAC has only made a limited effort at fundraising. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F7: As a particularly community-oriented government agency, SFAC office practices need substantial improvement. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F8: SFAC’s website and published materials are out-of-date. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and City Attorney. B. Recommendations

F9: The Civic Art Collection is a vast assemblage of tangible art and artifacts, representing a substantial cultural and financial asset of the City and County. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, and the Director of Cultural Affairs.

F10: Promotion of the Collection as an attraction of the City is limited. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, and the Director of Cultural Affairs. Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012

F11: There is only a partially complete inventory of the Collection. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F12: No appraisal of the Collection, at its present value, has been undertaken. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F13: The inventory and cataloging function of the SFAC is delegated to at least a single paid staff member and two interns which is insufficient. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, and the Director of Cultural Affairs.

F14: Public access to the Collection has diminished due to SFAC’s suspension of its art loan program to other City agencies and departments. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F15: Despite inadequate maintenance funding, commissioning and accessioning of new art continues under the Public Art Program. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F16: De-accessioning of art in the Collection is infrequent and underutilized. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

F17: The maintenance budget for the Collection is grossly inadequate to the task of preservation of the Collection. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, and the Director of Cultural Affairs.

F18: Art maintenance is more appropriately an operating rather than capital cost as it is a day-to-day responsibility of SFAC. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Capital Planning Committee, the Arts Commission, and the Director of Cultural Affairs.

F19: Art maintenance is inappropriately treated as a capital expense by City government. Where There’s Smoke… 15 City and County of San Francisco Civil Grand Jury 2011-2012 Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Capital Planning Committee, the Arts Commission, and the Director of Cultural Affairs.

F20: Without a clear legal mandate to do so, SFAC has assumed responsibility for maintaining art on Recreation and Park Department properties. Responses are requested from the Arts Commission, the Director of Cultural Affairs, the Director of Recreation and Park, and the Recreation and Park Commission.

F21: SFAC spends most of its current maintenance funding repairing works on Rec & Park property. Responses are requested from the Arts Commission, the Director of Cultural Affairs, the Director of Recreation and Park, and the Recreation and Park Commission. G. Recommendations

F22: The Cultural Centers are a primary responsibility of the Arts Commission under the Charter. Responses are requested from the Mayor, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Bayview Opera House, the Executive Director of the African American Art and Cultural Complex, the Executive Director of the Mission Cultural Center for Latino Arts, and the Executive Director of SOMArts.

F23: SFAC has not given the support and maintenance of the Cultural Centers the priority the Charter requires. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Bayview Opera House, the Executive Director of the African American Art and Cultural Complex, the Executive Director of the Mission Cultural Center for Latino Arts, and the Executive Director of SOMArts. Where There’s Smoke… 19 City and County of San Francisco Civil Grand Jury 2011-2012

F24: SFAC has not addressed the long-term funding, stability and safety needs of the Cultural Centers. Responses are requested from: the Mayor, the Board of Supervisors, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Bayview Opera House, the Executive Director of the African American Art and Cultural Complex, the Executive Director of the Mission Cultural Center for Latino Arts, and the Executive Director of SOMArts. B. Recommendations

F25: The SFAC routinely assigns new Commissioners to the Street Artists Committee due to the lack of interest of other Commissioners. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and the Street Artists Program Manager.

F26: The Street Artists Program is a self-funding enterprise that is funded by fees from the Street Artists. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and the Street Artists Program Manager.

F27: The District Attorney has failed to respond to Sunshine Complaint No. 11023. Responses are requested from the Mayor, Board of Supervisors, District Attorney, Sunshine Task Force, the Arts Commission, and the Director of Cultural Affairs. Where There’s Smoke… 23 City and County of San Francisco Civil Grand Jury 2011-2012

F28: The Street Artists annual fees since 2000 have increased in large part due to the costs of defending the Program Manager for violations of the Sunshine ordinances from the Street Artists. Responses are requested from the Arts Commission, the Director of Cultural Affairs, City Attorney, the Controller, and Street Artists Market Managers.

F29: The Street Artists depend on volunteer managers for the bulk of on-site supervision and program operations. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and the Street Artists Market Managers.

F30: The Street Artists Program Manager is currently under investigation by the DA for violations of the Sunshine ordinance. Response is requested from the District Attorney.

F31: There has been no current memorandum of understanding between SFAC and the Rec & Park Department concerning the use of Justin Herman Plaza since 1991. Responses are requested from the Arts Commission, the Director of Cultural Affairs, City Attorney, the Recreation and Park Commission, the Recreation and Park Director, and the Street Artists Market Managers.

F32: A Street Artist has never served as a Commissioner for SFAC. Responses are requested from the Mayor, the Arts Commission, the Director of Cultural Affairs and the Street Artists Market Managers.

F33: Selling spaces have declined from 433 in 2008 to 375-380 spaces currently. Responses are requested from the Arts Commission, the Director of the Street Artists Program, the Director of Cultural Affairs, and the Street Artists Market Managers. B. Recommendations

F34: For general operating and SFAC Gallery exhibition expenses, SFAC relies on public funds that are designated by Charter for “maintenance of a symphony orchestra....” Responses requested from the Mayor, the Board of Supervisors, the Controller, the City Attorney, the Arts Commission, and the Director of Cultural Affairs.

F35: Since 1935, SFAC has chosen the San Francisco Symphony as recipient of those funds. Responses are requested from the Mayor, the Board of Supervisors, the Controller, the City Attorney, the Arts Commission, and the Director of Cultural Affairs.

F36: SFAC is without legal or practical recourse if SFS revoked its annual contribution of 40% of those funds given to SFAC. Responses requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, the Arts Commission, and the Director of Cultural Affairs.

F37: The manner in which SFAC funds its operations by a giveback donation of SFS monies creates, at the least, an appearance of fiscal impropriety and violates the intent of the 1935 Charter amendment. Responses requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, the Arts Commission, and the Director of Cultural Affairs.

F38: GFTA funds the San Francisco Symphony for over $600,000 annually for operating expenses. Responses requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, and the Director of Grants for the Arts.

F39: Until December 2011, SFAC was out of compliance with City and State regulations and Arts Commission policy governing the gifting of donated Symphony tickets to public officials and other organizations. Responses requested from the City Attorney, the Arts Commission, and the Director of Cultural Affairs. Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 D. Recommendations

Additional Recommendations 24

Not linked to specific findings.

R1: To improve the governance of the department, increase the number of at-large Commissioners to eight members, through Charter amendment. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, the Director of Cultural Affairs, and City Attorney. Where There’s Smoke… 9 City and County of San Francisco Civil Grand Jury 2011-2012

R2: As an alternative, establish a Citizens Advisory Committee of seven members, appointed by the Mayor, to provide expert guidance in governance and administration, aid in non- governmental fundraising, and increase the community stature of the department. Responses are requested from the Mayor, the Board of Supervisors, the Arts Commission, and the Director of Cultural Affairs.

R3: Encourage the creation of a non-profit organization dedicated to raising funds to meet program and operational needs. Responses are requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, the Arts Commission, and the Director of Cultural Affairs.

R4: Improve the orientation and training of Commissioners to provide them with a clear understanding of their administrative responsibilities and roles in budgeting, personnel management, city processes, and their role as ambassadors to the public to increase awareness of art opportunities in the community. Responses are requested from the Controller, Arts Commission, the Director of Cultural Affairs, and the Mayor’s Appointments Secretary.

R5: Furnish the means for each Commissioner to conduct an annual self-assessment to evaluate personal and commission performance in order to promote a focus on the full array of Commission responsibilities. Responses are requested from the Mayor, the Arts Commission, the Director of Cultural Affairs, and City Attorney.

R6: Update the SFAC website and materials to conform to current law and policy. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and City Attorney. II. SFAC and the Civic Art Collection In the April 18, 2011 article published in the New York Times, Bay Citizen reporters described the management by the San Francisco Arts Commission of the 4,000-plus art objects in the San Francisco Civic Art Collection to be slipshod. The authors further asserted that a substantial part of the Collection was missing, lost, damaged or otherwise unaccounted for. The more lurid descriptions of neglect and losses to the Collection described in the Times article were not substantiated by the Jury’s investigation. Nonetheless, the Jury found a number of important issues involving the Collection. These issues require attention, action and leadership from the 10 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 Commission in obtaining resources and setting policy to preserve this valuable cultural asset of the City in the near and long term. One of the core obligations of SFAC, imposed upon it by Charter, is to: Approve the design and location of all works of art before they are acquired, transferred or sold by the City and County, or are placed upon or removed from City and County property, or are altered in any way; maintain and keep an inventory of works of art owned by the City and County; and maintain the works of art owned by the City and County...27 A collection inventory remains incomplete years after its initiation. Although the deadline for the completion is projected to be within the next eighteen months, this task is not a high priority for SFAC. From interviews and budget documents, the Jury learned that the SFAC only recently filled the collections manager position, after being vacant for at least five years. The Commission places a higher value on its Public Art Program (also known as the Art Enrichment Program), in the creation and accession of new pieces, and other programs than in conserving, maintaining, cataloguing, and exhibiting the works currently in the Collection. A. Collection Overview Under the Charter and the San Francisco Administrative Code, SFAC is mainly responsible for acquiring and “accessioning,” placing and maintaining all art in public buildings, public spaces, and in and on other City properties.28 The portion of the Collection at San Francisco International Airport is estimated to be worth $40 million. The generally accepted total value of the entire Collection is $90 million. The Collection ranges in size and scope from items of pottery and jewelry to public statuary and monuments to the massive sculptures found in front of the Main Library and the Hall of Justice. Pieces of the Collection can be found in the structures of public parking garages, as part of the doors and elevators of the Courthouse, in Union Square, and in patient rooms and public spaces at Laguna Honda Hospital. Art works have been loaned to museums and City agencies and departments for exhibition; all others not displayed or loaned are stored in confidential locations on City property. Values ascribed to individual works reflect only their worth at the time of acquisition. SFAC has not sought subsequent appraisals of the Collection. The Collection is not a well-publicized City attraction. An iPhone app has been created to guide the curious to Collection works in public spaces, but it is limited in scope and not complete. The Jury believes that the Collection deserves much greater promotion by SFAC than is currently done. SFAC’s website requires rebuilding, and staff has requested funds to hire an outside contractor for that purpose. Employing other means of promotion of, and education around, the Collection requires further exploration by SFAC. Where There’s Smoke… 11 City and County of San Francisco Civil Grand Jury 2011-2012 B. Inventory There exists no current or complete inventory of the Collection. SFAC has undertaken the task of inventorying the Collection but, according to staff, the resources devoted to that task are not adequate for its expeditious accomplishment. Although the Jury was told that the inventory is to be completed in eighteen months, it is unclear what resources are committed to the task. Confusion among SFAC executives as to which staff members or even how many of them are assigned to the inventory raises doubts for the Jury as to the true level of SFAC’s commitment to the inventory project. To its credit, SFAC has obtained and maintains an industry-standard data program for the Collection, which, if kept current, will provide a reliable tracking system for this vast assemblage of City-owned art works. C. Collection Loan Program Previously SFAC administered a loan program of Collection pieces to various City departments, officeholders and executives for display in their facilities and offices.29 That program, according to the SFAC website, has been suspended indefinitely. Inventory controls supporting previous loans have been inadequate. Return or retrieval of loaned art has been unsystematic, and program rules not enforced. As an example, accurate records of art loaned to San Francisco General Hospital are not available. Tracking of loaned art is only partially computerized. D. Accession and De-accession A substantial portion of the SFAC budget, the Public Art – Art Enrichment Fund ($1,479,446 in the 2011-2012 Budget),30 is devoted to programs under which art is commissioned and accessioned. SFAC does possess the authority to sell or exchange art in the Collection when “it would be advantageous to the City and County....”31 Yet, there is no organized disposal or “de- accessioning” program in place to move pieces out of the Collection despite detailed provisions for doing so.32 Currently, de-accessioning only occurs when a piece becomes too difficult for SFAC to preserve or maintain. No process or policy exists to provide for disposition of works that are incompatible with the character of the Collection or otherwise surplus. E. Maintenance of Public Art SFAC has done an admirable job of finding and fostering art and artists in the City. What SFAC has not done is allocate or seek funds from the City adequate to maintain what it has acquired. The budget for FY2011/2012 maintenance and repair is $75,000.33 While this is nearly a one-third increase over the previous year, it is still woefully inadequate for the task. Most, if 12 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 not all, of the funds have already been expended, with the vast majority going for graffiti abatement. SFAC staff describes “industry” practice as allocating 1% of a collection’s value annually to maintenance and preservation. Other estimates of the costs to repair works already in the Collection have ranged from $1 million to $10 million. In lieu of public support, staff has resorted to seeking private funds to supplement the maintenance budget and in wresting contributions from other department budgets to preserve the Collection pieces benefitting their operations and attractions. SFAC now requires that gifts of art to the Collection be accompanied by a 20-year maintenance endowment. Art, monuments, and statuary on property belonging to Rec & Park may not be a direct maintenance responsibility of the SFAC. SFAC has been maintaining and repairing Rec & Park statuary and monuments for as long as can be remembered by both agencies’ staffs. SFAC does so without contribution or compensation from Rec & Park. Neither believes that Rec & Park has any responsibility for maintaining works of art (including statuary and sculptures) sited on their properties. In interviews, neither SFAC nor Rec & Park staff seems to be aware that art in the parks may be Rec & Park’s responsibility to maintain.34 There is a conflict in local law between the provisions of the Charter, as revised in 1996 at section 5.103.2, and the Administrative Code at section 2A-150.1(a). The Charter imposes a general duty on the SFAC to maintain all art belonging to the City and County. The Administrative Code, in a more recent amendment, carved out exceptions to the duty of SFAC to maintain all of the City’s art by excluding art on properties of the San Francisco Unified School District, the M.H. de Young Memorial Museum, the California Palace of the Legion of Honor, the California Academy of Sciences, and Recreation and Park Commission. The Charter is the constitution of the City and is generally the last word where it describes duties of City agencies. The Administrative Code and the other bodies of local law that make up the Municipal Code provide the “how” to the Charter’s “what” in City governance. The conflict between the Charter and the Administrative Code is, we believe, more apparent than real, regarding maintenance of statuary and monuments on Rec & Park properties. The duty to maintain its art in parks should rest with its owner - Rec & Park, as that burden was, as far as can be determined, placed later in time. The Jury further believes that this result is the more equitable, appropriate, and fiscally responsible interpretation of City law. Rec & Park, while clearly not currently well-funded, is a much larger agency with a significantly larger budget and non-governmental resources (through the San Francisco Parks Alliance, among others). SFAC is a much smaller agency with a miniscule discretionary General Fund budget. Most of the money in SFAC’s budget is committed to program grants before it is even appropriated by the Mayor and Board of Supervisors. Where There’s Smoke… 13 City and County of San Francisco Civil Grand Jury 2011-2012 SFAC has assisted Rec & Park in repairing and maintaining art and statuary located on Rec & Park properties. Interviews informed the Jury that most of the $75,000 allocated for maintenance of the Civic Art Collection in the current (2011-2012) fiscal year was spent on a single, frequently defaced, monument in the Panhandle of Golden Gate Park. Bearing that cost is not fair to SFAC’s accomplishment of its larger mission; to preserve, conserve and maintain the entire Collection. It is not an equitable policy either. Rec & Park can choose to do nothing to protect its monuments and statuary with no financial consequence to its own budget. While SFAC may possess the expertise to maintain and conserve the works of art, large and small in the Collection, it chronically lacks the financial wherewithal to do so. If Rec & Park wants SFAC to continue to care for its works, it should pay for it from its own budget. Rec & Park is doing just that as it has agreed to pay SFAC $250,000 toward the restoration of the murals at Coit Tower - which still does not cover the full costs of repair. Full payment should be the standard for all work done by SFAC for Rec & Park’s art. SFAC is seeking a large increase in maintenance funds for the conservation and repair of the Civic Art Collection. The increases sought are still not adequate to the task. Art maintenance funds, for reasons not made clear to the Jury, are deemed to be capital maintenance expenses by the Mayor and Board of Supervisors and are subject to review and approval by the Capital Planning Committee. The Jury believes that maintenance of the Collection is more appropriately a normal operating expense of the SFAC as it executes its Charter mandates. The Civic Art Collection requires a dedicated stream of adequate funding not subject to the vagaries of capital expenditure procedures. GFTA/Hotel Tax Fund gives grants for operating expenses to a wide variety of public and private organizations to make San Francisco more attractive to visitors. If maintenance of the Collection is, as the Jury believes, an operating expense of the SFAC, GFTA/Hotel Tax Fund monies should be made available for the maintenance and conservation of this singular asset of the City. F. Findings

R7: The Collection Loan Program remain suspended until the inventory and appraisal of the Collection is complete, and a tracking system for loaned art is developed and in operation. Responses are requested from the Arts Commission and the Director of Cultural Affairs.

R8: Human and material resources adequate to the task be devoted to the rapid completion of the inventory, appraisal, and cataloging of the Collection. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Arts Commission, and the Director of Cultural Affairs.

R9: Re-designate maintenance and conservation of the Collection as an operating expense of the SFAC rather than a capital budget item. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Capital Planning Committee, the Arts Commission, and the Director of Cultural Affairs.

R10: Redirect and dedicate $1 million, over two years, of the Grants for the Arts/Hotel Tax Fund on a one-time basis to the Arts Commission to fund the inventory, maintenance, storage, de-accessioning, exhibition and installation of the existing Collection located in the City, at San Francisco International Airport, and at other City properties. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Arts Commission, and the Director of Cultural Affairs. Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012

R11: Designate Hotel Tax Funds from the initial $1 million for the development of educational print, on-line and phone app materials to showcase the existing Civic Art Collection located in the City, at San Francisco International Airport, and at other City properties to make the Collection more accessible to City residents and visitors. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Arts Commission, and the Director of Cultural Affairs.

R12: Designate Hotel Tax Fund monies of 1% of the value of the Collection (up to $900,000) on an annual basis for the maintenance and care of the Collection. Responses are requested from the Mayor, the Board of Supervisors, the City Administrator, the Controller, the Arts Commission, and the Director of Cultural Affairs.

R13: Clarify ownership and maintenance responsibilities for art and statuary on Rec & Park property. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, the Arts Commission, the Director of Cultural Affairs, the Director of Recreation and Park, and the Recreation and Park Commission.

R14: Complete a SFAC - Rec & Park agreement to ensure compensation for maintenance of art in the City’s parks is adequate to support that task and does not impair conservation and maintenance elsewhere. Responses are requested from the Mayor, the Board of Supervisors, City Attorney, the Arts Commission, the Director of Cultural Affairs, the Director of Recreation and Park, and the Recreation and Park Commission. III. Neighborhood Cultural Centers In 1967, San Francisco became the first municipality in the nation to establish a Neighborhood Arts Program. Within SFAC, Community Arts and Education (CAE) supports the City’s four neighborhood and two virtual cultural centers in furthering cultural and community revitalization and development through grants to non-profit organizations. Currently, the brick- and-mortar neighborhood centers, located in underserved communities, include the African American Art and Cultural Complex (in the Western Addition), the Bayview Opera House, the Mission Cultural Center for Latino Arts, and SOMArts. The virtual centers, Queer Cultural Center and Asian Pacific Islander Cultural Center, are sub-grantees of SOMArts. General Fund money for CAE is supplemented by the Youth Arts Fund (Transit Advertising Funding), Hotel Tax Fund, GFTA, and work orders from the Library, Department of Public Works, and DCYF. CAE’s total FY2012 budget is $3.7 million of which $2.0 million or 54% goes directly to the Where There’s Smoke… 17 City and County of San Francisco Civil Grand Jury 2011-2012 Cultural Centers. Over the years, this figure has flat-lined, despite increasing costs and more severe capital needs. The Cultural Centers act as community anchors and collectively provide free or low-cost arts classes and studio space for children, youth (as part of after-school and summer arts programs), and adults. The Centers also provide artist and curatorial residencies and free or low-cost venues for performances, exhibitions, and professional development services and other community organizations. They also provide technical services for fairs and festivals, case management services for “at risk” youth, and fiscal sponsorships for community artists and arts organizations. CAE authority lies in the Charter at section 5.103, which describes, among other requirements, Commission responsibility to: [p]romote a neighborhood arts program to encourage and support an active interest in the arts on a local and neighborhood level, assure that the City and County-owned community cultural centers remain open, accessible and vital contributors to the cultural love of the City and County, establish liaison between community groups and develop support for neighborhood artists and arts organizations.... Under “Cultural, Educational, and Recreational Appropriations” the Charter35 requires the Board of Supervisors to annually appropriate “[t]o the Arts Commission, for the City and County–owned Community Cultural Centers, an amount sufficient for the purpose of maintaining, operating, providing for the security and superintending of their facilities and grounds….” (Emphasis added.) Further, in each of the lease agreements for the Cultural Centers themselves, the City is obligated to “repair and maintain the structural portions of the Building….” The 2006 Arts Task Force report noted the City’s failure to meet its Charter responsibilities to support neighborhood arts. Some of its findings included: “the cultural centers … are in advanced states of neglect” and recommended that the City “develop and implement financing plans for long-overdue capital improvements, seismic upgrades, and life-safety upgrades to City-owned arts facilities” and the creation of “more substantial and stable support for the neighborhood Cultural Centers.” The City never fully instituted these recommendations. The City and County Capital Planning Committee lists over $100 million of facility needs for the Cultural Centers and their plan describes the current state of affairs as: Building deficiencies, seismic issues, and other needs remain unaddressed at the city's cultural centers. The severity of these facility needs, the cost of renovating the existing sites, and the possibility of relocating to other sites requires additional review and analysis.36 18 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 In recent years, some repairs and interior upgrades to floors, walls, and stages have been completed. Construction of ramps and renovation of bathrooms to meet ADA requirements has been undertaken. Repairs to heating and ventilating systems have been completed at some of the Centers. Funding for these repairs came from the Mayor’s Office on Disability, the American Recovery and Reinvestment Act through the Public Utilities Commission, the Capital Planning Committee, and a very small SFAC fund for facilities maintenance. Major needs such as roofing (particularly at the Mission Cultural Center), elevator repair, and seismic upgrades have not been done. In 2012, SFAC submitted FY13 and FY14 funding requests of $1,676,700 to the Capital Planning Program for improvements to the Cultural Centers. The Capital Planning Committee came back with recommended funding for $1,519,154. Cultural Center staff have also begun looking for capital improvement loans and grants from private sources. Year-to-year lease agreements at the Cultural Centers have hampered the ability of lessees to secure private, often multi-year, funding due to the uncertainties inherent in these short-term leases. Security is also a major concern, particularly in the immediate environment of the Bayview Opera House. Two separate incidents reported in the news, the shooting of a child nearby and an assault against a construction worker at the Opera House, have jeopardized the use of this Cultural Center as a venue for classes and events. Burglaries and vandalism have also occurred at the Centers. A. Findings

R15: SFAC hold public hearings about the Cultural Centers and their short- and long-term funding (for programs and facility maintenance), facility, and safety needs to develop an action plan to secure the Cultural Centers. Responses are requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Bayview Opera House, the Executive Director of the African American Art and Cultural Complex, the Executive Director of the Mission Cultural Center for Latino Arts, and the Executive Director of SOMArts, and the Director of the Department of Children, Youth, and their Families, the Police Department, the Capital Planning Committee, and the Department of Public Works.

R16: SFAC enter long-term leases with their Cultural Center operators. Responses are requested from the Mayor, the City Attorney, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Bayview Opera House, the Executive Director of the African American Art and Cultural Complex, the Executive Director of the Mission Cultural Center for Latino Arts, and the Executive Director of SOMArts. IV. Street Artists Program The Street Arts Program (Program) arose from a 1972 political movement led by artists (specifically handicraft workers) who were being arrested for selling their hand-made goods illegally on the public sidewalks. They organized, brought their suggested program to the ballot with Proposition L in 1975, and achieved legitimacy by majority vote. The ordinances governing the Program are found in the San Francisco Police Code,37 under the rationale that the Street Artists’ activities are conducted on public property, streets, and sidewalks. There are currently about 400 licensed Street Artists paying $664 each in annual fees. This represents a 90% increase from 2000, compared to a Consumer Price Index increase of 34% during the same period. Current program revenue is approximately $262,000. This funds two full time administrative positions, Program overhead at SFAC, inspectors to enforce product policies, 20 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 legal costs and some other non-Program overhead costs at SFAC and the City. The Program does not rely on General Fund monies. Estimated annual contributions to the San Francisco economy from Street Artist sales is $2-3 million, generating approximately $175,000 to $262,500 in sales tax revenue to the City. Street Artists derive no other benefit from the City beyond the use of designated sidewalk space to sell their art. There are approximately 375-380 selling spaces, a decrease from 433 in 2008, accessible to artists at Fisherman’s Wharf, the Cliff House, the Union Square area/Downtown, Justin Herman Plaza, and the Castro. United Nations Plaza is not used by Street Artists because of crime. During the Holidays, from November 15 through January 15, more spaces are made available at the Union Square area/Downtown and Harvey Milk Plaza in the Castro. SFAC has published program policies, procedures and regulations in the “Bluebook” which is made available both in print and on-line at the SFAC website to new applicants and to the Commissioners. Prior to applying for a selling certificate from SFAC, applicants must obtain a business license from the City and have a current Resale License issued by the State of California. According to Program guidelines, Street Artists must make, create, and produce their own art and be its only on-site seller. Applicant art is then screened and certified by a committee of experts, who are appointed by the Mayor. After screening, applicants pay their license fee and are issued a certificate, which describes and limits the types of goods/crafts that the Artist is qualified to sell. At present, the Program certifies artists’ wares in 38 distinct categories of arts and crafts, from hand-made crafts to computer-enhanced photography. All Street Artists are self- employed and most make their living solely from sales as Program licensees. The Jury undertook the investigation of the Program when it received a citizen complaint on November 2, 2011. The 10-page complaint described past and present problems with the Street Artists Program Manager, the Arts Commission’s then-President and SFAC in general. During review of this complaint, the Jury discovered the following: ● An audit report issued by the Office of the Controller on July 12, 2011, cited a need for improvement of the Program’s internal controls and accounting practices. This audit found unjustified expenses allocated to the Program and concluded that the charges resulted in increased Street Artist certificate fees. ● In a June 28, 2011 report from the Sunshine Ordinance Task Force, it was alleged that the Program Manager had “willfully” violated two provisions of the Sunshine Ordinance38 in handling public records requests from two Street Artists. The Task Force also found that the Program Manager resorted to a practice known as “sand-bagging” the requestors, i.e., burying requested information in a huge volume of superfluous texts. In the end, the Task Force filed a petition with the Ethics Commission urging it to impose a fine and/or penalty on the Program Manager for the willful violations. Also, a “Notice of Failure to Comply with Order of Determination” (Complaint No. 11023) was filed with the District Attorney’s office for appropriate action on February 3, 2012. Where There’s Smoke… 21 City and County of San Francisco Civil Grand Jury 2011-2012 ● Both legal expenses incurred due to the alleged misconduct of the Program Manager as well as copying expenses for requested documents were charged to the Street Artist Fund. These expenditures account for much of the recent fee increases, striking the Jury as unfair and possibly having a chilling effect on complaints against City staff. ● The Jury learned that a Street Artists Liaison Committee, originally formed in 2010, was terminated a year later by SFAC. Formal communications between the Street Artists and its parent committee were thus cut off. ● SFAC has never had a current or former Street Artist as a Commissioner. Jury interviews with staff, Commissioners, and Street Artists revealed a lack of regular inspections and enforcement of the rules by Program staff. SFAC considers the Program self- policing. The statement “they take care of themselves” was heard from Commissioners. It is routine for newly-appointed Commissioners to be assigned to the Street Artists subcommittee because of lack of interest from more senior Commissioners. This institutionalized neglect has real consequences. One consequence of that neglect is that, as estimated by practicing Street Artists, a quarter of items displayed do not meet the requirements for artist-made products. The Street Artists have formed their own volunteer management teams and elect Market Managers at Fisherman’s Wharf and Justin Herman Plaza. The Market Managers run a lottery for selling spaces, enforce product rules, communicate Street Artists’ concerns to the Program Manager, and generally keep the peace among group members. The Market Managers and lottery helpers are allowed first choice of selling spaces as compensation for their extra work in support of the Program. As other indicators of neglect and lack of interest in the Program, the Jury was told that SFAC makes no effort to promote the Program and is not allowed to use Street Artists fees to do so. Funds from other accounts have never been used for this purpose, although, we were told much later that an upcoming 40th Year celebration of the Program, originally not scheduled, will be funded by up to $12K from General Fund money. Also, according to our interviewees, very few new selling spaces have been developed at the initiative of SFAC. This task is not considered part of SFAC responsibility. Once the Board of Supervisors designates an area for Street Artists’ use,39 non-Street Artists cannot use the area for any other kind of sidewalk vending or street performance. Street Artists may, but rarely do, call upon the San Francisco Police Department to remove unlicensed vendors from designated Street Artists spaces. Beat officers are reluctant to take the time and trouble to process such violations and seem unfamiliar with Street Artists ordinances and regulations. The Market Manager tries instead to work with the non-certificated vendors and direct them away from the Street Artists’ spaces. There is no current memorandum of understanding between Rec & Park and SFAC for the use of Justin Herman Plaza, which is under Rec & Park’s domain. Rec & Park may lease Justin Herman Plaza for other commercial uses and does so with little notice to the Street Artists who 22 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 sell there. With the Plaza occupied by tenants of Rec & Park, the Street Artists are sometimes left to fend for themselves and lose significant business and income when displaced. Although Justin Herman Plaza has not yet been rented out during the upcoming America’s Cup races and events, Street Artists are justly afraid that they may be shut out from their usual venues during this prime event. A complicating factor is that a host of public and private entities manage the Embarcadero and adjacent public spaces. Rec & Park, the San Francisco Port Commission, the Department of Public Works, the Real Estate Division, and Boston Properties all claim interests in Justin Herman Plaza and its surrounds. In light of the above, the Jury questions whether SFAC is the best agency to administer the Street Artists Program. There are similar programs in other City departments, including Rec & Park and the Real Estate Division, both of which issue permits to street vendors for non-food items in flea and farmers’ markets. We discovered that the Real Estate Division program has on- site managers, a component missing in the SFAC program. The Jury also considered the Office of Small Business (OSB) as a potential home for the Street Artists who are, after all, small businesspersons. That agency’s mission is to “foster, promote, and retain small businesses in San Francisco”40 by marketing their contributions and developing assistance programs, among other initiatives. Rec & Park and the Real Estate Division expressed no interest in taking on the Street Artists. OSB appeared intrigued by the proposition and evinced a willingness to do the necessary work to help the Program succeed. The Program is a creature of ordinance and not the Charter. Its relocation would only require amendment of the Police Code to designate a new host department. A. Findings

R17: Move the Street Artists Program to the Office of Small Business. Responses are requested from the Mayor, Board of Supervisors, the Arts Commission, the Director of Cultural Affairs, the Executive Director of the Office of Small Business, the Small Business Commission, and the Street Artists Market Managers. Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012

R18: The District Attorney respond to Sunshine Complaint No. 11023. Responses are requested from the Mayor, Board of Supervisors, District Attorney, Sunshine Task Force, Arts Commission, and the Director of Cultural Affairs.

R19: Legal expenses for the Sunshine Ordinance defense be paid from an account, other than the Street Artist Fund. Responses are requested from the Arts Commission, the Director of Cultural Affairs, City Attorney, and the Controller.

R20: Appoint a current or former Street Artist to whichever Commission oversees them. Responses are requested from the Mayor, the Executive Director of the Office of Small Business, the Small Business Commission, the Arts Commission, the Director of Cultural Affairs, and the Street Artists Market Managers.

R21: Develop new spaces for the Street Artists. Responses are requested from the Arts Commission, the Director of Cultural Affairs, and the Street Artists Market Managers. V. Symphony Fund The San Francisco Symphony (SFS) celebrates its centennial this year and from all signs is robust, successful and world-renowned. This was not the case in 1935 when the country was in the Great Depression and the Symphony was near bankruptcy. The voters of San Francisco, at the urging of the Board of Supervisors, agreed to tax themselves at a rate of one-half cent per $100 of assessed property valuation “for the purpose of maintaining a symphony orchestra.” That tax money was to be granted to SFAC to disburse for the stated purpose.41 The 1996 revision of the Charter retained that provision in section 16.106, subdivision 2, but lowered the levy to one- eighth of one-cent. That rate currently raises approximately $2 million per year. In election materials authorized in 1935 by the Board of Supervisors to promote this Amendment, it was stated: San Francisco’s sponsorship of cultural musical activities at admission prices within reach of the masses has become a fixed policy of the city government and the municipality has received national and international commendation for its attitude toward music during more than twenty years. Recently the effect of economic conditions has interfered with private endowments of major musical enterprises throughout the world, necessitating the addition of public funds to whatever private endowments Where There’s Smoke… 25 City and County of San Francisco Civil Grand Jury 2011-2012 can be obtained. This Charter Amendment No. 3 is to provide sufficient financial backing to continue the major music educational enterprises which have added to San Francisco’s fame as a cultural center throughout the civilized world and particularly to guarantee the continuance of a symphony orchestra, including 85 expert musicians, which represents the axis around which all major musical activities of the community revolve.42 While investigating SFAC, the Jury discovered the existence of a multi-year Agreement between SFAC and SFS requiring the SFAC, pursuant to the Charter, to grant approximately $2 million per year to SFS. The Agreement provides for the performance of four series of 12 concerts each during its four-year period by SFS; the donation of 34 tickets for each series to SFAC; provision of an additional 20 tickets on an “as-available” basis; giving of 24 more tickets to the Mayor and Board of Supervisors; and, other ticket grants to SFAC for its Cultural Centers. Within the Agreement is a provision for a “Promised Contribution to Arts Commission” which is described as 40% of the tax allocation distributed to SFS under the Charter provision described above. In the course of its investigation, the Jury found that no person currently employed by either SFS or SFAC knew how or why this giveback provision of the Agreement came to be. SFS personnel, solely as a matter of oral history, recall that prior to 1994, SFS gifted SFAC with a portion of the ticket revenues from some concert series “co-produced” by SFS and SFAC. In 1994, SFS and SFAC executed the first of these tax giveback agreements. The current Agreement runs from 2010 through 2014. SFAC and its counsel acknowledge that the donation provision of the current Agreement is entirely a gift and is revocable at the pleasure of SFS. SFAC personnel described dire consequences should that SFS revoke that gift as it is relied upon for a substantial part of their general operating budget and to fund exhibitions at the SFAC Gallery. The concert ticket provisions of the Agreement are also shrouded in the mists of time. Distribution of free tickets to public agencies and officials is subject to regulation by the Fair Political Practices Commission (FPPC) of the State of California.43 Once SFAC receives tickets to SFS events it must account for them and publish that accounting on its website. SFAC failed to start doing so until December 2011, although it did adopt a ticket policy in November of 2009 as was required by State regulation. How thorough that accounting is remains questionable. A. Charter Obligation of the SFAC to Support a Symphony Orchestra Since 1935,44 SFAC has received property tax revenues for the maintenance of a symphony orchestra and has disbursed those monies to the SFS. As property values have climbed, the revenues received and distributed have grown apace. The current amount is just under $2 million in the current fiscal year. The Charter does not provide for any other use of these revenues, including any requirement for a particular number of concert programs. The SFS has always 26 Where There’s Smoke… City and County of San Francisco Civil Grand Jury 2011-2012 been the recipient of the tax revenues earmarked “to maintain a symphony orchestra” and disbursed to it by SFAC. SFS, a private non-profit organization, has a current budget in excess of $67 million. It provides more than 220 concerts per year in a variety of venues but primarily at Davies Symphony Hall, a City-owned building managed by the War Memorial Commission. In contrast, the current budget of SFAC amounts to a little over $10 million. On top of the money given to SFS from property tax revenues, GFTA awards the Symphony approximately $600,000 for operating expenses. B. San Francisco Symphony Donations to the Arts Commission The Agreement between SFS and SFAC binds the Symphony to provide twelve (12) concerts per year, provide free tickets to SFAC, the Mayor, the Board of Supervisors, and designee sub- organizations under the SFAC. In that Agreement, SFS promises to donate 40% of the property tax money it receives for its maintenance to SFAC for “use for any Arts Commission purpose....” There is no ordinance or other local law governing the use or redistribution of the money received by SFAC, given to SFS, and then given back to SFAC for non-symphony orchestra purposes. The gifted money is cryptically described in the current SFAC budget45 as “Other Non-operating Revenue.” SFAC does nothing that could or would qualify as consideration or compensation for the approximately $800,000 that SFS contributes back to it under the Agreement. SFS could decide to decline to give that money back to SFAC without legal consequence. Due to its status as a gift, nearly 8% ($800,000) of SFAC’s $10 million budget is therefore subject to the whim and generosity of a non-governmental agency. The provision of free tickets by SFS to SFAC is described in detail in section 5E.(1-4) of the Agreement. FPPC regulations require identification of persons or organizations receiving donated tickets from public agencies; disclosure of the purpose for the donation; and, whether or not the recipient will declare the ticket as income. There are also recordkeeping and publication requirements. SFAC did adopt the required ticket policy in November of 2009, but it was not actually implemented until December of 2011, after a question was raised by the Jury regarding the practice. The completeness and reliability of current reporting by SFAC is made suspect by the absence of any past accounting for free tickets received from SFS. Staff at SFAC is not knowledgeable about their own ticket policy and its reporting requirements. Where There’s Smoke… 27 City and County of San Francisco Civil Grand Jury 2011-2012 C. Findings

R22: The Arts Commission/Symphony Agreement comply with the intent of the Charter, and the full amount of the tax revenues go toward Symphony operating expenses. Responses requested from the Mayor, the Board of Supervisors, the Controller, City Attorney, the Arts Commission, and the Director of Cultural Affairs.

R23: Redirect Hotel Tax Fund money allocated to the SFS by GFTA to the SFAC. Responses requested from the Mayor, the Board of Supervisors, the Controller, the Arts Commission, the Director of Cultural Affairs, and the Director of Grants for the Arts.

R24: SFAC properly report the disposition of the concert tickets given to it by SFS in compliance with City and State regulations. Responses requested from the City Attorney, the Arts Commission, and the Director of Cultural Affairs.