How city college plays fast and loose with $130 million in bond money
Part one in a Guardian series
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The motto of San Francisco's community college is "The truth will set you free."
For taxpayers, that's a painful irony. Since 1997, the district has moved around $130 million in bond money in a fiscal shell game, taking funds that the voters were told would go to one set of projects and spending the money on others.
The half-billion-dollar bond program is now at least $225 million over budget, in part because of what the school admits was shoddy planning, and City College is considering asking voters to approve yet another set of bonds to catch up.
And all of this happened without a detailed performance audit.
Among the transfers and overruns we've discovered in a review of the bond program:
•<\!s>City College made up for a planned gym's mammoth budget shortfalls by transferring more than $53 million from other projects, like the new Performing Arts Center, improvements to the Balboa Reservoir (that massive, sunken eyesore of a parking lot west of the Ocean Avenue Campus), and an academic partnership with San Francisco State University.
•<\!s>Construction on the Performing Arts Center was supposed to begin in 2004, but it's gone nowhere. According to the school's most recent estimates, the center now will cost $125.8 million, an increase of 152 percent from the original $50 million.
•<\!s>Two new campuses planned for the Mission and Chinatown neighborhoods are now running a combined $78 million over budget. School administrators this May requested an additional $6 million to complete the Mission campus. Plans for the Chinatown facilities were originally unveiled in 1997 to voters, who were later told construction would begin in 2006. Today the designs are mired in a political battle with neighborhood residents, and City College hasn't broken ground on the project.
In at least one case, the school has acknowledged that a $1.3 million reallocation took place without prior authorization from its independently elected overseers, the Board of Trustees. Administrators later asked the board to consent to the transfer retroactively.
"We're always asked to take this money and move it from here to here," complained trustee Milton Marks III, one of the few consistent critics on the board who in the past voted against such reallocations. "It may be justified.... But when I ask if there are programmatic changes, nobody can answer me."
The school calls the transfers "reallocations," and as of May the administration and the board had agreed to shift the bond money five times.
In one case, administrators asked for $70 million in transfers mere weeks after the 2005 election in which voters authorized the school to sell $246.3 million in bonds.
That January 2006 reallocation strongly suggests the office of Chancellor Phil Day knew the school wouldn't be able to complete the projects described to voters but never corrected the ballot handbook or told the media and the public the truth.
Day agreed to a Guardian interview, then canceled it, citing a schedule conflict. But in board meetings he and his staff have insisted that the transfers were perfectly legal.
The school's lawyers say reallocations are acceptable under Proposition 39, a state ballot measure passed by voters in 2000 that lowered the threshold in California for passing school and community college bonds.
Other districts have also relied on reallocations as the cost of construction materials has increased globally in recent years due to Hurricane Katrina and the ongoing expansion of China's economy.
But the San Francisco school has argued the logical extreme that it can transform voter-approved projects in virtually any way it deems necessary.
"What obligation do we have in our reallocation considerations about making sure that those things get delivered all of those projects we listed in both [the 2001 and 2005] bond measures?" former trustee Johnnie Carter asked during a meeting Jan. 12, 2006.
"You have no obligation to complete any of those projects," Mona Patel, a bond advisor for the school, responded. "You can complete one of those projects. You can complete all of those projects or anything in between.... It's solely within the board's discretion."
Despite that explanation, City College's woefully short budget projections mean the school might have to return to voters a fourth time to secure funding for two projects already promised the last time City College went to the ballot, in November 2005.
One of those planned facilities was supposed to house a stem-cell-technology training program lauded by Mayor Gavin Newsom in 2005 as a way to help locals compete for jobs in the Bay Area's growing biotech and life-sciences research industries. The school stripped $25 million authorized by voters from that project and directed it mostly to two other projects running a combined $105 million over budget.
Marks and new board member John Rizzo have urged an expansive performance audit of the bond money, which they say is required under Prop. 39 but had never been completed.
Rizzo and Marks both told us that if unforeseen construction costs, a low number of project bidders, and the lethargy of state regulators are all problems contributing to unpredicted costs, school administrators need to come up with a plan to fix the situation. But the performance audit proposed by Rizzo and Marks would first identify which problems are most severe. Not having it, Rizzo said, "is like flying blindly. We're just writing checks."
Peter Goldstein, vice chancellor for finance and administration, insisted to us that state law, as interpreted by the school, doesn't require the type of audit called for by Rizzo and Marks. It simply requires that the school prove it isn't spending money on projects not presented first to voters. He added that the reallocations weren't simple but said he couldn't answer from memory specific questions about the 2005 bond election, including why the school chose to pursue tens of millions of dollars in reallocations so soon afterward, in January 2006.
"They've been very difficult decisions for both the administration and the board," Goldstein said. "[This has] not been some kind of snap judgment. We've really had to search and try to make sure there wasn't some way to contain costs otherwise."
The trustees often seem just as confused as the voters may be about the cost overruns. The trail is laid out in thousands of pages of bond proposals and ever-changing explanatory documents, all complete with glossy schematics and computer-generated students looking gleeful as they head off to class at one or another of the new facilities.
The section of City College's Web site dedicated to its bond projects is difficult to follow. A brief summary of the projects appears in voter guides, but the full bond proposals are filed with the San Francisco Department of Elections, and you'd have to go there to copy or read the tomes, which contain a lot of qualifying paragraphs that look like this one, which refers to an academic building planned in conjunction with San Francisco State University:
"The college will aggressively pursue state and federal funding to support the 'joint-use' concept with San Francisco State University. If funds are not forthcoming, the 'local' funds will be utilized to support the construction of the new Child Care Center and the new Student Health Service Center."
Such fine-print disclaimers enabled Chancellor Day and Vice Chancellor Goldstein to later depict multimillion-dollar transfers away from academic construction as entirely legal, even though the Child Care Center and health clinic never appeared as official stand-alone projects in bond proposals presented to voters.
Between 2001 and 2005 the school asked for a total of $40 million to construct in tandem with SFSU the joint-use facility, which was slated to include new classrooms and laboratories where students could work toward bachelor's degrees in education, health care, and child development. The project is now $26 million over budget and remains in the design phase. Since 2003 about $20 million that voters were told was going to the project has been reallocated to other projects facing increased costs.
A facilities manager at San JoseEvergreen Community College District, Robert Dias, was incredulous when we presented our findings to him. He said he'd heard of cost overruns statewide but "not to this extent."
"We have experienced rising costs, but we planned for it," Dias said. "Construction costs were going through the roof, but we did creative things to manage it."
On the other hand, Fred Harris, vice chancellor of the California Community College System, based in Sacramento, said the figures didn't necessarily surprise him and that the state as a result has adjusted its guidelines for what individual school districts can claim as costs.*