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Bid fails to restrict political spending by affordable housing groups

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Proposed legislation from Supervisor Mark Farrell that sought to further restrict nonprofit housing developers from using profits from affordable housing developments on political campaigns was rejected by the rest of the Board of Supervisors on Tuesday. (Kevin Kelleher/2015 Special to S.F. Examiner)

Further restricting political spending by nonprofit affordable housing developers was rejected Tuesday by the Board of Supervisors.

Supervisor Mark Farrell proposed legislation that would have restricted nonprofit housing developers from using profits derived from loans provided by the Mayor’s Office of Housing for housing developments on political campaigns.

But the proposal was defeated in an 8-3 vote, with Farrell supporting it along with supervisors Katy Tang and Jeff Sheehy. Opponents said it would have a chilling effect on free speech. Mayor Ed Lee offered no opinion on the issue when asked by the San Francisco Examiner. “I’ve been neutral on it because I just have not been really aware of it,” Lee said of Farrell’s legislation.

Farrell said that profits related to these loans is tantamount to public dollars and should instead be used only for affordable housing, not political purposes. Nonprofits can use up to 20 percent of their proceeds for political purposes under regulations enforced by the Internal Revenue Service.

Farrell’s proposal would have taken those restrictions further by specifically prohibiting nonprofit housing developers from using profits, called in the proposal “cash out proceeds,” from refinancing for political campaign contributions. The restrictions would have remained in place until the loans were paid off. Proceeds from refinancing could instead be used on affordable housing related items like tenant improvements or building more affordable housing.

“I firmly believe that we should ensure every penny available for affordable housing in San Francisco is being solely used for affordable housing,” Farrell said.

The proposal grew out of last year’s political spending by affordable housing nonprofit Todco, whose executive director, John Elberling, also set up the Yerba Buena Consortium, and used refinancing proceeds from the nonprofit’s properties to contribute to seven progressive backed ballot measures and oppose real estate backed measures.

But Farrell’s measure was widely criticized by affordable housing developers and progressive board members who said Farrell was attacking the free speech of groups who politically oppose his own political agenda.

“Government and this board does not punish entities who spend money on speech we disagree with by restricting or prohibiting the first amendment right to speech,” Supervisor Jane Kim said.

Supervisor Aaron Peskin criticized the proposal for only targeting 100 percent affordable housing nonprofit builders and said, “I do feel it is designed to chill the lawful free speech of nonprofit organizations.”

Farrell countered that “this in no way at all is prohibiting first amendment speech. That is false and misleading. This is saying you cannot use public taxpayer dollars for political campaigns.”

City officials were uncertain just how widespread the practice was. “In the Todco case, this law would not apply because Todco paid off all of its loans to The City. It did not owe The City a single penny,” Peskin said.

Amy Chan, of the Mayor’s Office of Housing, said they were aware of only two cases where nonprofits cashed out proceeds while still having outstanding loans with The City.

Supervisor Malia Cohen said that the proposal wasn’t as clear cut as being portrayed by Farrell.

“The way this conversation is being framed is that these are public dollars being spent in a political nature. It’s a little bit more nuanced,” she said.

Local Income Tax

In a 8-3 vote, the board approved a resolution introduced by Supervisor Aaron Peskin supporting Assemblymember Phil Ting’s effort in Sacramento to pass a bill that would allow San Francisco to ask voters to tax income. Currently, state law does not allow local cities to tax income. Peskin and Ting are working together on the effort. The bill would only grant the authority to San Francisco. Peskin said that the tax is one of the best ways that The City could address income inequality.

Board President London Breed voted against the measure, along with supervisors Jeff Sheehy and Mark Farrell.

Mayor Ed Lee told the San Francisco Examiner that he wouldn’t give the local income tax idea much thought since he said it was unrealistic.

“I am going to be focused on realistic approaches to balancing our budget,” Lee said. “Right now I just don’t think that’s going to be realistic because all indications are that the governor would never support it.”

The mayor did not say he would propose other tax increases, but that he was open to the idea of others.

30 Van Ness

In a 9-2 vote, the board approved the $70 million sale of 30 Van Ness Ave. to Lendlease Development, Inc. Board President London Breed and Supervisor Ahsha Safai opposed it. The deal includes a commitment to provide 25 percent below-market-rate housing on site, including 15 percent low-income and 10 percent middle-income.

The sale proceeds will go toward the planned $440 million new office building at 1500 Mission St., as well as $52 million from the sale of another city-owned property, also approved by the board, at 1660 Mission St. and 1680 Mission St. to SF Prosperity 2, LLC. SF Prosperity intends to keep the building as office space.

Construction of the 1500 Mission St. office building is expected to begin this year and finish by 2020. During the three-year period, The City would lease space at the buildings sold.

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