An audit released today by the Controller’s office reveals that the PUC’s Community Benefits Program is both deeply problematic and deeply mismanaged. In multiple contracts reviewed during the audit, the PUC allowed contractors to fail to completely deliver their promised — and binding —commitments to donate funds to the communities affected by PUC projects.

This is doubly disturbing, as the strength of a bidder’s pledged commitment to the community is a major factor in deciding who wins a lucrative contract from the PUC. Today’s audit revealed at least one situation in which the strength of a contractor’s commitment to fund the community allowed it to beat out a competitor that submitted a less generous offer — but the winning contractor subsequently reneged on the commitment that earned it the job. 

“By awarding contracts based, in part, on Social Impact Partnership commitments and allowing contractors to default on those commitments, SFPUC increases the risk that it will award contracts to contractors that ultimately will not deliver the greatest value to the City or its residents,” sums up the audit.

The purpose of the Community Benefits Program aka Social Impact Partnerships  is simple — on paper. It’s supposed to ensure that the winners of big PUC contracts invest time, resources and money in programs aiding the communities most affected by PUC projects; living next-door to the sewage treatment plant, after all, isn’t always all it’s cracked up to be. 

Yet today’s  audit found unsettling problems with every facet of the Community Benefits Program from nose to tail: with the manner of how proposals are formulated; with inconsistent scoring methodology; with bid-winning contractors changing the terms post-facto; with contractors inflating the value of their gifts and/or making mathematical errors; with critical documents being lost; and, finally, with contractors being allowed to not live up to their end of the bargain and fully fund their commitments. 

An exhibit from today’s audit

It is not addressed in today’s audit, but one is led to question why the 10-year-old Community Benefits Program exists at all. The city could, potentially, simply award contracts to the best and most qualified bidder, and then mandate a community benefit in much the same way that major construction projects must set aside a percentage of costs to fund public art.

It does not make inherent sense  that the most qualified expert in, say, sewage line replacement would lose out on the job to a less qualified competitor due to an unrelated commitment — especially when the PUC subsequently allows that commitment to be ignored.

Also not addressed in today’s audit are the bombshell allegations that the Community Benefits Program is a de facto slush fund, with money going toward PUC staffers’ favored nonprofits, and bidders lavishing millions for “advice” on how to structure their community benefits proposals on a consultant who is also being paid by the PUC. 

But what was addressed — deeply lax oversight and an arguable loss of institutional control — certainly explained why such allegations remain plausible. 

As of Dec. 30, 2020, the PUC had executed 84 contracts with commitments to its community benefits program. They pledged nearly $22 million in financial support; nearly $1 million of in in-kind commitments, and some 82,000 volunteer hours. Nearly two-thirds of those commitments haven’t yet come due, and have not yet been provided. Considering the PUC’s poor record of ensuring the commitments are fulfilled, the ramifications of failing to fix this program are considerable. 

Regarding the situations in which contractors failed to honor their commitments, “none of these contracts could SFPUC provide substantive evidence that it notified the contractor that it was falling behind on its delivery or did not meet its pledged commitment by the end of its contract term,” reads today’s audit. 

“Although the contractors failed to meet these contractual obligations, SFPUC took limited or no action to enforce the contract provisions until after the Controller initiated this audit.”

In the seven contracts cited by the controller, the PUC failed to ensure $685,000 was paid toward community benefits.

A number of contractors have failed to provide their promised benefits at a pace befitting their contracts

Recommendations include the (rather straightforward) suggestion that the PUC should be “proactively reaching out” to delinquent contractors; it should also increase transparency by creating a publicly accessible dashboard that’s “accurate, reliable and updated in a timely manner.” 

Today’s audit was first requested by the San Francisco Labor Council all the way back in February, 2019.

“We can say, ‘shame on the contractor’ for paying to play. But the public agency has created a scheme whereby if they want the work, they need to pay,” former Labor Council president Rudy Gonzalez said today. “What remains to be known is, who instructed them to pay? Will we have to, again, wait for federal intervention to find this out?”

The audit’s findings were acknowledged by both the City Attorney and PUC, with promises to fix this mess moving forward. 

“The lack of clear policies and oversight in the Social Impact Partnership Program has left the program susceptible to favoritism and abuse,” said City Attorney David Chiu. “If this program is to continue and live up to its goals, it must be reformed and authorized by the appropriate policy bodies, including the Board of Supervisors.” 

Newly installed PUC general manager Dennis Herrera, Chiu’s predecessor as City Attorney, also pledged a change: “Moving forward, we are committed to updating this program to provide transparency, accountability, and results. No one at the SFPUC will tell contractors which organizations to make commitments to or how much to give them. This program will be a model of integrity with effective oversight.”

The controller’s office will be revisiting this program every six months to check on its progress. 

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Managing Editor/Columnist. Joe was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left.

“Your humble narrator” was a writer and columnist for SF Weekly from 2007 to 2015, and a senior editor at San Francisco Magazine from 2015 to 2017. You may also have read his work in the Guardian (U.S. and U.K.); San Francisco Public Press; San Francisco Chronicle; San Francisco Examiner; Dallas Morning News; and elsewhere.

He resides in the Excelsior with his wife and three (!) kids, 4.3 miles from his birthplace and 5,474 from hers.

The Northern California branch of the Society of Professional Journalists named Eskenazi the 2019 Journalist of the Year.

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  1. Last year, Mayor Breed announced that tax funds would flow into a number of these opaque non-profits, selectively serving the needs of BIPOC and Latino women. I wonder how many % of that money ended up doing real work for people with needs. And how much ended up in the pockets of people already capable of taking care of themselves – including those running these non-profits?

    Since this was presented as a model for reparations, do we have any evidence that these “reparations” are going to those with actual needs. Do we have any evidence that the recipients are the ones with a valid historical claim entitling them to reparations? Is this just a money-grab for 1%ers who have already transcended historical oppression in the US?

    Additionally it would be nice to see a breakdown of all SF tax funds that is selective going towards specific ethnic / racial groups in SF. And then compared to the needs of people within these groups. How many people have needs, and how many are being helped within each group? Are we supporting a fair model here? One gets the impression that wealth redistribution in SF is more of a pseudo-religious media circus that panders to the desires and prejudices of the upper middle class. This doesn’t seem like a genuine model for sustainable social change.

    I would personally prefer a wealth redistribution model, where centralized services are rendered to people based on objective criteria like income, child care needs, and capacity to work etc etc etc. But more importantly a model that doesn’t take into account race, ethnicity, religion, history, pseudoscience, eugenics, the phase of the moon etc.

    Rant…

    Multiculturalism as it exists in SF, effectively prevents us from combining our struggles and bargain as a collective. People need to wake up and realize that we are jeopardizing meaningful and sustainable social reform, when we bow to the needs and wants of ethno-religious fascists. Even when these fascist are a minority group. This is simply put legitimization of segregationist thinking. It is furthermore enabling negative social control at the hands of community leaders, preachers, patriarchs etc. Cultural oppression.

    The willingness of Democrats to legitimize social justice activists whose only goal is to sabotage public institutions and public life is extremely concerning. Let alone the quality of life issues this has brought, like the complete acceptance of racist minority violence in schools, workplaces, and on the streets. My biggest fear is that all these betrayed alliances and bullshit, will galvanize dissenting swing voters and perhaps even mainstay voters to vote Rep. Don’t let it happen!

  2. A similar fraud took place at SFDPW. It was called the Subdivision Fund, and was created by City Ordinance 1315 on November 15, 2005. It contained mandated audits by the City Controller to ensure the funds were spent as directed, with additional guarantees added to the originally language by its final sponsor, Supervisor Peskin. Its expenditures were also mandated by CA Government Code Section 66451.2, violation of which is a criminal offense. Yet it was used as a slush fund by falsifying the accounting via EA code 0165D. All city authorities were informed, as was the FBI and federal courts; but nothing was done. Deputy City Attorney Rose Ellen Fairgrieve told me during a deposition that “this is done all the time”. So if anyone thinks Herrera or anyone else will clean up any similar practice, dream on.

  3. Send Juliet Ellis, the director of this fraudulent program and longtime girlfriend of (married) Harlan Kelly, to prison for fraud.

  4. Shout out to Warren Hellman here,

    Only reason y’all have any solid numbers to discuss is because Ben Rosenfield and Ted Egan are straight shooters.

    That’s cause Hellman got tired of funny numbers and went to the ballot around fifteen years ago to create their jobs.

    You can trust their numbers and those of Harvey Rose and Rich Hillis.

    All of the rest?

    Not so much.

    Go Niners!

    h.

  5. We might need Will Jarrett and Joe to create a cash flow graphic as a counterpart to the Web of Corruption one they created for the people involved in The City’s corruption. I’m starting to have a hard time visualizing all the money flows (i.e., who got how much from whom and when) which, of course, is key to shining light on all this oppressive darkness.

  6. Great article, Joe. The report could name names, like Ed Harrington then GM & Todd Rydstrom then CFO who were responsible in the “design phase” and longer for this program and helped build this deeply mismanaged scheme. Ed H is now a PUC commissioner providing “oversight.” Rydstrom is the deputy Con also providing “independent oversight” of the PUC. The two of them even made up a “director for internal controls” starting in 2012…and look… a report that found a program designed to lack all controls. All for show & to dupe the public. Herrera needs to start handing out pink slips.

    Both Harrington & Rydstrom should be asked for their resignations. Today. And none in this crew have any real financial credentials, they’ve had to change MQs for every job to get “qualified.”

  7. I’d be interested in knowing what kind of attention to detail that the City Attorneys assigned to the SFPUC paid to contract after contract that they drafted and approved with provisions for community benefits.

    Is the role of the City Attorney limited to certification of a contract as to legal form with no concern as to whether the public gets honest services out of the deal?

  8. I would greatly appreciate knowing which agencies were recipients and it would be easier to connect the dots. It is undoubtedly a slush fund and not the only one. Great reporting and many thanks.

  9. C’mon. If they don’t have the program, how are they supposed to ensure their preferred contractors (meaning the ones that paid the most bribes) get the contract? They probably just pledge a much higher amount, knowing they won’t meet the obligation, but some well greased palms make sure they suffer no consequences.

    In pretty much every City contract…..follow the money.

    1. You are absolute correct.
      A “selected vendor”, I can count them on one hand, pledge a high number in the proposal, SFPUC procurement under Ivy Fine, Greg Lyman and Kyndra Cox, All “lawyers” gives the team a higher score (which is illegal and defy the Brooks Act of qualifications based selection for professional services) and then they rank them with the highest score and award the contract by a commission that rubber stamp since some have actual financial ties to the consultants as I have proven.
      Payment is due by the end of the contract 5- 7 or even 10 years.
      None of the cartel crew lasted that long….. lol …..some in court, some went with the wind with their memories in the garbage can where they belong……

  10. what a dumb program. The city should be trying to get the best deal for it’s taxpayers. This would mean simply getting things done at the lowest cost possible.

    Any community benefit provided is just an extra cost added to the program. If the city did not require the extra community benefit, the bid would be lower and the city would have the money to provide said benefit.

    Multiple people are getting paid under the table to keep this shenanigan going. Greedy fucks….