City Council postpones item asking for firing of Assistant City Manager
on April 3, 2013
Efforts to have Richmond Assistant City Attorney and Human Resources Director Leslie Knight removed from her position were deterred Tuesday evening, when a resolution calling for her dismissal was taken off the city council agenda shortly before the meeting.
The resolution, introduced by Councilmember Jovanka Beckles, recommended that City Manager Bill Lindsay, who has the power to fire employees, terminate Knight for violating city policies, as found in a city-funded independent investigation.
In a public statement Lindsay released in March, he listed the policies Knight had violated, according to the investigation—which include using a city car while collecting a car allowance and using city employees and time for work unrelated to the city—and said he’s taken disciplinary action short of terminating her from her job.
Beckles said at the beginning of the meeting that she was removing the item from the regular agenda so it could be scheduled for the next closed session meeting. “I think it’s also a personnel issue, which is raised and handled in closed session,” Beckles said.
The employee who brought the complaints against Knight last year, Finance Manager Stacie Plummer, said before the meeting that Beckles called her around 4:30 that day to tell her the item was being removed. Plummer said removing the item might have a more favorable outcome for those calling for Knight’s termination if this means the city council will be able to look at the full investigation during closed session. The city released part of the investigation’s findings last month, and Plummer said she has not seen the rest yet.
At a rally held outside city chambers before the meeting—the second one in two weeks—a group of about 20 people called for Knight’s removal, saying it was the only acceptable action. Two speakers likened her continuing employment to an illness that’s infected the city’s administration, and said the only cure would be to fire her.
“Until this is done, we cannot heal as a city,” said Andres Soto, a member of the Richmond Progressive Alliance.
More than a dozen speakers spoke on the resolution during the public comment period, and many voiced a similar call to action, asking for accountability for the city’s staff. “It’s the notion that the powerful shouldn’t get to create one set of rules for themselves and another set of rules for everyone else,” said Richmond resident and political activist Charles Smith.
RecycleMore reviewing bids for a new post-collection contract
As the meeting moved into its regular session, the council heard a presentation from RecycleMore, the agency that handles waste collection in Richmond and four other cities. The presentation laid out the process for reviewing RecycleMore’s contract with Republic Services, Inc., the company that handles trash and recycling after it’s been collected. The current agreement with Republic Services, Inc. is nearing its expiration date, and six companies, including Republic Services, Inc., submitted bids to handle the city’s waste post-collection, the steps taken after trash is picked up from the curb.
Republic Services, Inc. is paid $18 million annually to process and dispose of nearly 130,000 tons of material from five cities within the West County—Richmond, San Pablo, El Cerrito, Hercules, and Pinole. The agency’s post-collection agreement with Republic is scheduled to end in 2014, while its collection agreement will remain in effect until 2025.
Rob Hilton, a consultant who is a part of the evaluation team looking over the companies’ bids and who gave the presentation to the council Tuesday, said the process will lead to better prices through competition, something that’s been lacking within cities’ waste management for the last 70 years. “This was huge to get a transparent process here,” Hilton said.
The West Contra Costa Waste Management Authority, otherwise known as RecycleMore, was created more than two decades ago in an effort to reduce the amount of trash going to landfills by at least 50 percent. As a joint powers agency, the board includes councilmembers from participating cities, including Richmond. The board is responsible for deciding which company will win the new contract.
Hilton said the agency would like to reach a goal of 75 percent of the cities’ waste being recycled.
City Councilmember Corky Booze made a motion to pass the item, which has no financial impact, but allows RecycleMore to go forward with its selection process. He praised the city’s sanitation staff and RecycleMore for their presentation on options to increase recycling intake and decrease the cost to residents.
Councilmember Jael Myrick seconded the motion, following with more praise for the agency. “You’ve got services increasing, rates going down and I think at the end of the day, this is going to be good for the Richmond rate-payer,” Myrick said.
The council passed the item unanimously. RecycleMore’s board will likely award the new contract in July.
Port of Richmond Public Art Project
One of the most discussed items on the agenda was approving a one-year, $33,750 contract with Regina Almaguer, who would become the project manager for the Port of Richmond Public Art Project. Almaguer’s job would be to review and select artist proposals and oversee all aspects of construction, budget, and installation for public art at the Port of Richmond.
In 2012, the Port of Richmond allocated $225,000 for the project. But at Tuesday night’s meeting, Arts and Cultural Manager Michele Seville said she was notified last week there was another art project already planned for the same area, near Shipyard 3, that was proposed through the San Francisco Bay Trail Project.
Both projects could move forward independently, but Bruce Beyaert, chair of the Trails for Richmond Action Committee, spoke during public comment and said he would like to see his project’s artist selected for the Richmond Public Art Project, since she has already been paid and created the design for the art installation. The installation would include a 12-foot tall Rosie the Riveter welcome sign and a 55-foot-long sculpture of a Victory ship, much like the SS Red Oak Victory that can be seen across the port.
Beyaert sent an email to the council earlier Tuesday morning arguing that hiring a project manager to select an artist for the project would essentially be a waste of money, since the Bay Trail Project has already found and approved an artist’s work. But Beyaert said the group’s chosen artist’s installation couldn’t be completed because the project ran out of funding.
The fact that the group has already chosen an artist poses some difficulty to the city, because according to the city charter, public art installations require an open proposal process so that all artists can apply. Seville said the Bay Trail art project was grant funded, and did not follow those guidelines.
Seville said that the money is already there for the Port of Richmond Public Art Project and the city is ready to start taking proposals. “Now, we do have the money in place,” Seville said. “We’ve got a project manager in place and we are ready to go.”
After the presentation outside of the chambers, Seville said a solution could be to extend the geographical area for the Port project so that it could include the Bay Area Trail, and invite the artist to submit her proposal for the Port of Richmond Public Art Project. If her work is selected, the funding would be available for the 12-foot-tall sign and Victory ship sculpture.
Councilmember Tom Butt had several problems with the project, one of them being the cost of hiring a project manager. “I’m appalled that you would spend 15 percent for someone to administer the program. I think you’re getting taken for a ride,” Butt said.
The motion to hire the project manager passed with Butt voting no and Myrick abstaining.
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This article does not cover the last element during the meeting. The agreement with mortgage Resolution partners will likely completely wreck our city’s finances for the foreseeable future. I am including a detailed analysis below, and have emailed this to 4 of our council members (couldn’t find the emails of the others). Apologies for the long comment below, but I think we need to organize around this, and make our voices heard so that we keep city finances and city services safe.
I will quickly summarize the important points of the agreement, the reasons why it is a losing gamble for our city, and the safeguards we must have in the agreement if we decide to go ahead with it anyway.
Summary
The city council approved an Advisory Services Agreement with Mortgage Resolution Partners, LLC to acquire mortgage loans through the use of eminent domain, in order to restructure or refinance the loans. It was clarified several times during the council meeting that the agreement was not about reducing the interest in order to have a more manageable mortgage. Rather, the agreement was about reducing the principal on the mortgage.
Just to have a rough sense of the numbers; if the city reduces the principal on 1000 homes by 100K each, and is found liable to the banks, the liability bill will be 100 million. If the court awards some portion of the lost interest on the mortgage, this number will increase or even double.
Reasons why it is a losing gamble for our city
Reducing Principal has nothing to do with forced foreclosures
At the outset, it is important to remember that the amount of the principal in a mortgage is critical primarily in two cases:
1. The person wants to sell the house and move.
2. People who want to take out home equity loans on their house for whatever purpose: put a kid through college, sometimes even live the high life, etc.
For most other reasons, the amount of the mortgage payment is far more critical than the principal. Let us not kid ourselves that reducing the principal will help people stay in their houses by preventing forced foreclosures. It will only reduce voluntary foreclosures where the home owner decides that the high principal has turned their house into a bad investment. Only reduced mortgage payments will decrease forced foreclosures. There is no reason why the city council should risk our city’s finances and the welfare of the average Richmond taxpayers, to increase the value of some residents’ investments.
Consider this scenario, very likely since MRP acknowledges that it can’t help everyone, but would likely be best able to help those least in need. The principal on a house is 400K, and it is currently valued at 150K. The city takes the mortgage from the bank at 200K, and gives it to the owner at that amount. Our city loses in court, and we the average richmond tax payers are left holding the bag for the 200K. Meanwhile, property values go back up to 400K in a few years. The owner sells the house, pockets the 200K, and moves to Walnut Creek. Or perhaps, the owner is a loyal Richmond resident, and only takes out a 120K home equity loan to live the high life. Now decide if the city council should force the average Richmond taxpayer to pay for this.
Our city is almost certain to incur massive legal liabilities
There are two issues here: the chances that the courts will agree with us about our eminent domain taking, and whether we would be reimbursed if we lose in court.
Now, I am not a lawyer, and this is obviously not meant as legal advice. But there is almost no chance that the courts will agree with us on the eminent domain taking issue. Just because the Supreme Court agreed that the city could take property to build a shopping mall does not mean that they will allow us to simply grab the bank’s property and give it to the home owner to increase the value of their investment in their home. Let us also not forget that our current Supreme Court is the most right-wing and business friendly Supreme Court since the 1930s. So there will be a likely knee-jerk reaction to something seen as left-wing, even if it has legal merit (I strongly doubt that our eminent domain taking position has any legal merit).
It was also disconcerting to hear some of the proponents claiming that the amount of money that the city could save by preventing foreclosure could be used as a justification. Indeed, under the contract clause of our constitution, any city action that benefits the city will only invite heightened scrutiny of our actions.
The next issue is what chance we have of being indemnified by MRP after (“if” is absurdly optimistic) we lose to the banks in court. No one even claimed that MRP would indemnify us: they are only a startup. Our only hope is that MRP’s insurance will indemnify us. This again is highly unlikely. The courts will almost certainly not make them pay us for the following reason. We are a third party, and the insurance company can’t be expected to cover the liabilities of third parties. If they did, businesses would simply set up as de facto indemnity shops. They would have massive insurance coverage for a nominal premium, and then agree to indemnify very high risk undertaking for huge profits. The result would be that the business insurance sector would collapse in no time (this is an important sector for our economy). The courts simply will not go down such a reckless path. Again, we will lose, and be left holding the bag.
No guidelines for what MRP can do
The city has agreed to engage in extreme high risk behavior at MRP’s urging. Yet, there are no guidelines for MRP’s conduct.
Can they for example, knock the principal down from 400K to 300K, but increase the interest so that the mortgage payment stays the same? This way, the only people making out would be the bank. They can recover the lost 100K from us, recover a higher interest from the owner, and recover it for longer since the owner will probably not choose voluntary foreclosure as early as they otherwise would have.
Can MRP simply reduce the principal from 400K to 390K, something probably easy to do, and make a quick 5K? It wouldn’t help the owner, but would likely leave our city with substantial attorney fees.
It is also important to remember that this may result in the owner not gaining much, but being locked into a mortgage that they may not be able to refinance as early as their current mortgage.
ACCE support of MRP
Our Mayor often sited ACCE support of MRP (I am assuming it is this organization. I heard it as we would pronounce “ace”) as a reason for putting our faith in MRP despite the agreement feeling not right to others on the council. We must remember that for a national organization, using us as a test case (guinea pigs) is a perfectly appropriate position. Even if there is only a 1 in 20 chance that we would be successful, because we are only 1/300 of America, the ratio of gain to loss adjusting for probability is 15:1. But I don’t think we signed up to be guinea pigs on a chopping block when we voted for a very progressive city government. The city council must keep the residents’ interest first, rather than bringing on a financial catastrophe in the unlikely chance that our test case would be successful.
Essential safeguards if we choose to go ahead with MRP
If the city chooses to go ahead with MRP, our city should at least insist on the following two safeguards:
1. We need a written assurance from MRP’s insurance that they will cover all our liabilities arising from this program. Since we are very likely to lose both on the eminent domain taking issue, and on the third party liability issue, such an assurance must be in writing.
2. Our city must lay out clear guidelines for the kinds of mortgages that can be negotiated under this program. The housing crisis occurred primarily because sophisticated financial players (banks, realtors, etc) took advantage of many naïve Americans. We don’t want to go through all this, and end up in the same place again.
The better option is of course to not go through with the agreement. Alternatively, if the agreement has already been signed, we can choose to ignore their advice to exercise any eminent domain taking. It is after all, an advisory services agreement.
Thanks for the comment, Vinay. Covering everything at every meeting is difficult, so I appreciate your addition.
Rachel de Leon
Sorry, for an error. Richmond is 1/3000 of the American population. So re-doing the numbers. Even if the city has only a 1/100 chance of success, the gain to loss ratio for the country (from ACCE’s perspective) will be 30:1. All the more reason for not taking their support at face value.
For what inane reason would a city government with a history of financial mismanagement (it was only a few years ago that we had a county administrator to untangle city finances), why would we even THINK of becoming Mortgage Managers, Bankers, or making some ‘deals’ in a volatile housing market? Did the City Council get some secret degrees in Accounting? In Marketing? Is the latest $280,000 plus position of an Assistant City Manager running around in City Cars and running a little side-business an example of accountability?
Why don’t we just give our tax money outright to defense attorneys and save the trouble of running government at all. You know, save all the boring normal corruption jokes on the street, and TV News.
If the Council wants the properties, just condemn them as they are unlivable, dangerous, offer to pay the Banks a ‘Lot Value’, and aquire the land. Demo the worst, and sell to builders? As much as politicos think Richmond is some kind of Athens of the West, it all comes down to Richmond is really a slightly oversize small town. This kind of financial myopia proves it.
Is it ok to put part of this on my site if I include a reference to this web page?