The budget’s opening battle

Pub date June 19, 2007
WriterSarah Phelan


Mayor Gavin Newsom and Sup. Chris Daly have been engaged in a high-profile clash over city budget priorities in recent weeks. Newsom appeared to win the latest battle when he galvanized an unlikely coalition and Daly clashed with some of his progressive allies, prompting Board of Supervisors president Aaron Peskin to remove Daly on June 15 as chair of the Budget and Finance Committee.

"This is not about personality, and it shouldn’t be about the mayor’s race. It should be about making sure we have a good budget," Peskin told the Guardian shortly before announcing that he would be taking over as Budget and Finance chair just as the committee was beginning work on approving a budget by July 1.

Yet this latest budget battle was more about personalities and tactical errors than it was about the larger war over the city’s values and spending, areas in which it’s far too early for the Newsom camp to declare victory. The reality is that Newsom’s "back-to-basics budget" — which would increase spending for police and cityscape improvements and cut health services and affordable-housing programs — is still likely to be significantly altered by the progressives-dominated Board of Supervisors.

In fact, while the recent showdown between Newsom and Daly may have been diffused by Daly’s removal as Budget and Finance chair, it’s conceivable that a clash between Newsom and the supervisors is still on the horizon. After all, eight supervisors voted for a $28 million affordable-housing supplemental that Newsom refused to sign, and the mayor could yet be forced to decide whether to sign a budget that lies somewhere between his vision and Daly’s.

Stepping back from recent events and the supercharged rhetoric behind them, a Guardian analysis of the coming budget fight shows that there are difficult and highly political choices to be made that could have profound effects on what kind of city San Francisco becomes.

If Daly wanted to spark a productive dialogue on whether the mayor’s budget priorities are in the best interests of the city, he probably didn’t go about it in the right way. But the approach seemed to be born of frustration that the mayor was refusing to implement a duly approved program for an important public need.

Daly has argued that when he introduced his $28 million affordable-housing supplemental in March, he thought it would be "noncontroversial." Last year the board approved and Newsom signed a $54 million supplemental budget, including $20 million in affordable-housing funds. Daly wrote on his blog that he hoped his latest $28 million request would help "stem the tide of families leaving San Francisco, decrease the number of people forced to live on the streets, and help elders live out their days with some dignity."

But Newsom objected, first criticizing Daly in the media for submitting it too late, then refusing to spend money that had been approved by a veto-proof majority, with only his supervisorial allies Sean Elsbernd, Michela Alioto-Pier, and Ed Jew opposed. Daly pushed back against what he loudly labeled the mayor’s "backdoor veto," which he considered illegal.

"You may not believe the question of affordable housing and affordability is more important than redesigning the city’s Web site or perhaps installing cameras in police cars or fixing a pothole, but to say that the money does not exist is a lie," Daly said at a board meeting.

So when Newsom submitted his final budget June 1, Daly proposed restoring the funding and taking away $37 million from what he called the mayor’s "pet projects." His suggestion triggered a political firestorm, since his targets included a wide array of programs, including $700,000 for a Community Justice Center, $3 million for one police academy class, $10.6 million for street repairs and street trees, $2.1 million to expand the Corridors street cleaning program, and $500,000 for a small-business-assistance center. In their place, Daly argued, the city would be able to restore funds cut from affordable housing, inpatient psychiatric beds, and services for people with AIDS.

In addition to uniting against him those constituencies whose funding he targeted, Daly’s proposed cuts in law enforcement — and his brash, unilateral approach to the issue — threatened to cost him the support of Sup. Ross Mirkarimi, a progressive with public safety credentials who represents the crime-plagued Western Addition. So it was a precarious situation that became a full-blown meltdown once the Newsom reelection campaign started phone banks and e-mail blasts accusing Daly of endangering public safety and subverting the normal budget process.

Pretty soon, with Daly’s enemies smelling blood in the water, it became a sort of feeding frenzy, and various groups urged their members to mobilize for a noon rally before the June 13 Budget and Finance Committee meeting. "We are a sleeping giant that has awakened," small-business advocate Scott Hauge claimed as he e-mailed other concerned stakeholders, who happened to include Friends of the Urban Forest and public housing activists, thanks to Daly’s call for a $5 million cut in Newsom’s Hope SF plan, which would rebuild public housing projects by allowing developers to also build market-rate condos at the sites.

"Mirkarimi seems to feel strongly about having cops and infrastructure, which are typically the priorities of conservatives," Daly told the Guardian as he announced plans to cancel the June 13 budget hearing, which he did after accusing Newsom of engaging in illegal electioneering.

Daly also accused Newsom of abusing his power by securing the City Hall steps for a budget rally at the same time, date, and place that Daly believed his team had secured — a mess-up city administrator Rohan Lane explained to us as "an unfortunate procedural thing."

But while Daly told us he "needed to hear from progressives who enjoy diversity, because if we don’t get more affordable housing dollars, San Francisco is going to become increasingly white, wealthy, and more conservative," all anyone could hear the next day was a pro-Newsom crowd chanting, "No, Supervisor Daly, no!" outside City Hall.

Newsom spoke at the rally and claimed that Daly’s proposal to cut $5 million from Hope SF would eliminate "$95 million in local money to help rebuild San Francisco’s most distressed public housing," a figure that includes the bond issue Newsom is proposing. With the 700 to 900 market-rate units included in the program, Newsom claims the cuts will cost the city $700 million in housing.

"Stop the balkanization of San Francisco!" Rev. Al Townsend roared, while Housing Authority Commissioner Millard Larkin said, "People are living in housing not fit for animals. Protect policies that give people a decent place to live."

"This is about your priorities," Newsom said as he made the case that fixing potholes, sweeping streets, and putting more cops on the beat are now San Francisco’s top concerns.

"I’ve never seen this type of disrespect to the public process," Newsom said, addressing a crowd that included a couple of Daly supporters holding "Homelessness is not a crime" signs alongside people dressed as trees, a dozen people in orange "Newsom ’07" shirts, Newsom campaign operative Peter Ragone, and former Newsom-backed supervisor candidates Doug Chan and Rob Black (the latter of whom who lost to Daly and now works for the San Francisco Chamber of Commerce).

"Gavin Newsom’s budget reflects that he has been listening to you. It’s not something he has dreamed up is his ivory tower," Townsend said, while Kelly Quirke, executive director of Friends of the Urban Forest, pointed out that Daly’s proposal would mean the 1,500 trees that the Department of Public Works planted this year "would not be watered," and Police Commissioner Yvonne Lee said the proposal would "eliminate 50 new officers that could be on streets, plus a $400,000 system to identify the source of gunfire."

What Newsom’s supporters didn’t mention was that his proposed budget, which would add $33 million for the Police Department to help get more officers on the streets and pay existing officers more, also would drastically shift the city’s housing policies by transferring about $50 million from existing affordable-housing and rental-support programs into spending on home ownership and development of market-rate units. And that comes as the city is losing ground on meeting a goal in the General Plan’s Housing Element of making more than 60 percent of new housing affordable for low-income residents.

Daly doesn’t think people fully understand the implications of Hope SF and said public hearings are needed so they "can understand it better." Yet the Newsom rally still touted the mayor’s concern for those in public housing projects.

"We’re not interested in rebuilding unless the tenants are supportive," Doug Shoemaker of the Mayor’s Office of Housing told the Guardian, promising that existing public housing units will be replaced "on a one-to-one basis" and noting that 85 affordable rentals, along with 40 to 50 units for first-time home buyers at a below-market rate (for a household of two with an income of about $58,000 annually) and hundreds of market-rate condos, will be built.

"The market-rate condos will cross-subsidize the rebuilding of public housing," said Shoemaker, who claims that the "lumpiness of the mayor’s budget" — in which home-ownership funding increases by $51 million, while programs benefiting the homeless and senior and families renters appear to have been cut by $48 million — "is best understood over the long term" and is related to the redevelopment projects in Bayview–Hunters Point and Mission Bay.

"The hardest thing about explaining these figures is that it sounds like a game of three-card rummy, but we need to fuel whatever is coming down the pipeline," he said.

The confusing fight over affordable housing has even split its advocates. Coleman Advocates for Children and Their Families publicly urged Daly not to hold Hope SF funds hostage to his housing supplemental, while the Family Budget Coalition urged Newsom and the supervisors to "work together to find at least $60 million during the add-back process to prioritize affordable housing."

But with Daly gone from the Budget and Finance Committee, how will his proposals and priorities fare? Sources say Peskin was irritated with Daly’s budget fight and his recent Progressive Convention — both actions not made in consultation with colleagues — as well as his increasingly public spat with Mirkarimi. Yet Peskin publicly has nothing but praise for Daly and supports many of his priorities.

"We are working with the same schedule that Daly’s office laid out," Peskin said, noting that a lot of the decisions about funding will depend on "what ends up coming from the state." San Francisco could still lose money from the state or federal budget. During a June 18 budget hearing, Sup. Bevan Dufty introduced a motion to amend the mayor’s interim budget by appropriating $4 million for HIV/AIDS services, to be funded by General Fund reserves, for use by the Department of Public Health.

This was one of Daly’s top priorities, and as the hearing proceeded, it became clear that there was a method in the former chair’s apparent budget-dance madness. Newsom’s budget would restore $3.8 million of the $9 million in AIDS grants lost from federal sources, with Newsom asking Congress to backfill the remaining reductions to the Ryan White Care grant. Sup. Sean Elsbernd questioned the wisdom of appropriating $4 million now, when the feds may yet cough up, and Mirkarimi questioned whether doing so would send Washington the message that it doesn’t need to help us.

"It’s a discussion we have every year," Controller Ed Harrington said. He recommended appropriating $4 million now and sending the following message: "Yes, we think this is important, we’ll try and figure out how to fix it, but this shows it isn’t easy. It’s a political call rather than a technical one."

In the end, the Budget and Finance Committee voted 3–1, with Sup. Tom Ammiano (the only supervisor to publicly support Daly’s alternative budget) absent and Elsbernd dissenting, to appropriate $4 million, on the condition that if additional federal and state funds are granted to backfill the Ryan White Care grant, the controller will transfer the $4 million augmentation back to the General Fund.

The same kind of balancing act is expected on Daly’s other suggestions to restore funding for affordable housing and public health departments, so it’s still too early to tell whether his priorities might ultimately win the war after losing the battle.*

Steven T. Jones contributed to this report.

For more details on the city budget process and a schedule of Budget and Finance Committee meetings, visit