Who’s getting aid from the City

You can tell a lot about elected officials’ priorities – and their politics – when you look at the decisions they make about who is entitled to get financial assistance from the government during the coronavirus crisis.

Take the federal “Paycheck Protection Program,” which offers forgivable loans for small businesses.  According to news reports, the Democratic leadership wanted to make sure that a chunk of the money went to minority- and women-owned businesses; some Republicans wanted to ensure that none of it went to Planned Parenthood.

Both efforts only partially succeeded – but each gave its backers something to brag about to their core supporters.

Today, we’ll look at the decisions made by the Alameda City Council about providing financial assistance for Alameda renters and small business owners during the coronavirus crisis – and what those decisions say about the Council members’ priorities and politics.

Let’s start with renters – because that’s where Council started.

On March 17, the day the Bay Area shelter-in-place order went into effect, City staff presented an “urgency ordinance” that would protect a broad group of Alameda renters:  not just tenants who were sick with COVID-19 or caring for a household or family member who was sick with the disease, but also those who had suffered a “substantial loss of income” (defined as a reduction of 20% or more of monthly gross pay), “extraordinary medical expenses,” or “extraordinary child care expenses” as a result of the coronavirus crisis.  (We’ll call this group the “affected tenants.”)

The urgency ordinance did not abolish a tenant’s duty to pay rent for the duration of the crisis.  (As City Attorney Yibin Shen later told Council, such a provision might well be considered an unconstitutional impairment of the obligations of contract.)  But it did the next best thing:  It created an “affirmative defense” that an affected tenant could assert in any “unlawful detainer” action for non-payment of rent filed after March 1.  If proven, an affirmative defense bars recovery by the plaintiff (here, the landlord) of the relief it seeks (here, eviction of the tenant and repossession of the property).

As a practical matter, the ordinance enabled an affected tenant to stay in her apartment without having to pay rent for as long as the declaration of emergency passed by Council on March 17 remained in effect.  For example, suppose that Council didn’t rescind the declaration until May 31.  Thanks to the ordinance, an affected tenant who didn’t pay her April or May rent could defeat any unlawful detainer action brought by her landlord before then to evict the tenant for non-payment of rent.  And why would a landlord bring a case it knew it was going to lose?

But under the ordinance originally drafted by staff, the rent accrued but not paid while the emergency declaration lasted wouldn’t go away.  An affected tenant would still owe it, and, if she failed to pay it upon demand after the declaration was rescinded, the landlord immediately could bring an unlawful detainer action to evict her.  Mr. Shen tried to explain this point to Council at the March 17 meeting, but it took a non-lawyer, Community Development Director Debbie Potter, to get the Council members to grasp it.

And once they got it they didn’t like it.

Vice Mayor John Knox White argued that an affected tenant should be given a “grace period” – although that isn’t the term he used – in which to pay the rent she hadn’t paid during the crisis.  Council members Jim Oddie and Malia Vella quickly jumped on board.  And Council ended up voting to direct staff to revise the ordinance to include a provision giving an affected tenant additional time to pay her back rent after the emergency declaration was lifted.  (At the same meeting, it also directed staff to revise the ordinance so that it applied to commercial as well as residential tenants.)

At Council’s next meeting, on April 7, staff took a crack at implementing the direction.  The draft retained the “moratorium” on evictions for the duration of the coronavirus crisis.  But it also made the “affirmative defense” available for 180 days after the emergency declaration was lifted.  As a result, an affected tenant who hadn’t paid rent during the crisis would be able to stay in her apartment for six more months without having to pay off her debt (assuming she resumed paying rent as it came due after the crisis ended).  Using our previous example, the affected tenant would have until November 30 to pay her April and May rent – and if her landlord brought an unlawful detainer action to evict her before then, the tenant would win.  Again, why would a landlord bother to sue?

But the 180-day grace period proposed by staff didn’t satisfy everybody.  The audio of the April 7 meeting – in which three Council members participated remotely – isn’t completely audible.  But it appears that, for reasons unclear to us (it may have been the audio), Mr. Knox White wanted to add language extending the “moratorium” by 30 days after rescission of the emergency declaration.  This effectively would give an affected tenant 210 days rather than the 180 days proposed by staff in which to pay the rent she hadn’t paid during the crisis.  (Why didn’t he just suggest the longer time period in so many words?  Beats us.)  For her part, Ms. Vella wanted the grace period to last 12 months rather than 180 days.

So staff was sent back to the drafting table.  And the grace period wasn’t the only issue Council directed it to address.  Ms. Vella (joined, we think, by Mr. Oddie and Mr. Knox White) proposed that the ordinance should prohibit any rent increases at all for the rest of 2020.  (As Councilman Daysog pointed out, the maximum rent increase allowed under the City’s rent ordinance is tied to the increase in the Consumer Price Index; in a recession, CPI is unlikely to go up and the maximum rent increase permitted in the future may turn out to be zero anyway.)  Mayor Marilyn Ezzy Ashcraft proposed that it should cover so-called “no-fault” evictions (i.e., those based on owner move-ins and capital improvement projects) as well as unlawful detainer actions based on non-payment of rent.

Once again, staff obliged, and, on April 21, it presented another revised ordinance incorporating all but one of the proposals made from the dais at the prior meeting.  Mr. Knox White got his language about an an extra 30 days; Ms. Vella got her rent freeze (although not a one-year grace period), and Ms. Ashcraft got her no-fault evictions.   It took the Council members fewer than 10 minutes (which included the reading by City Clerk of a public comment) to approve and pass the revised ordinance.

As enacted, the ordinance passed by our Council provides far more relief to tenants than the statewide executive order issued by Governor Gavin Newsom on March 27.   For example,

  • The executive order bans evictions through May 31 of an affected tenant – and the definition is slightly different from the one in the local ordinance – for non-payment of rent.  But it doesn’t prevent a landlord from bringing an unlawful detainer action against such a tenant on that ground immediately thereafter.  By contrast, the Alameda ordinance, as revised, protects an affected tenant who didn’t pay rent during the crisis against eviction for 210 days after the emergency declaration is lifted.
  • As a condition to obtaining relief under the executive order, the affected tenant must notify the landlord in writing before the rent is due, or within seven days thereafter, that she “needs to delay” payment of all or some of it. The local ordinance requires an affected tenant to “take all reasonable steps” to notify the landlord, but there is no penalty for failing to do so.
  • The executive order applies only to evictions based on non-payment of rent; the local ordinance applies also to no-fault evictions.
  • The executive order is silent about rent increases; the local ordinance prohibits them for the rest of the year.

We haven’t compared the ordinance passed by our Council with any other laws recently enacted in other cities, but we’re willing to bet that the City of Alameda leads the pack in the extent of relief provided to tenants affected by the coronavirus pandemic.  If so, expect to hear the candidates running for re-election this November crow about their accomplishment.

Given the Council majority’s desire to burnish their “progressive” credentials, it’s not surprising that they would push through such a pro-tenant ordinance.  Nevertheless, having watched the videos of the three Council meetings, we found it somewhat remarkable how little interest these Council members showed in providing any financial assistance to landlords, who, after all, remain obligated to pay their mortgages, property taxes, and utility bills during the crisis.

At the March 17 meeting, Councilman Tony Daysog offered a rather convoluted proposal intended to force a tenant to “discuss” with her landlord paying a reduced monthly rent while the emergency declaration remained in effect.  All his colleagues would give him was a sentence encouraging a tenant, “to the extent feasible,” to keep paying rent in an amount “commensurate with the tenant’s reduced income and financial ability to do so.”  Likewise, at the April 7 meeting, Mayor Ashcraft acknowledged that “we have imposed a lot on property owners.”  She added, “We don’t want anyone to suffer.”  But all she meant, the context made clear, was that a landlord should not have to wait a full year – as Ms. Vella proposed – to collect the rent the tenant had not paid during the crisis.

Now, of course, if you believe, as former president of the Alameda Democratic Club does, that Alameda landlords consist primarily of “investors from China” and “international conglomerates,” you probably see no need to cut them any slack.  But if you believe that about half the rental units in Alameda in fact are owned by Alamedans and only three percent by out-of-state landlords – as BAE Urban Economics reported to Council a few years ago – you might be more sympathetic.  But other than Mr. Daysog, whom the “progressives” regularly mock when he refers to “mom-and-pop” landlords, and, occasionally, Mayor Ashcraft, no Council member seems especially keen about doing anything for this group, even in a crisis.

Which brings us to small businesses.

Without being asked by Council, staff submitted two proposals providing relief for small businesses at the April 21 meeting.  One would defer for a year – until July 1, 2021 – the scheduled increase in the minimum wage in Alameda from $13.50 to $15.00 per hour.  (This still would be 18 months sooner than the effective date established by state law.)  The other would set up a $600,000 fund to which Alameda restaurants and businesses with one to 25 employees that had experienced a “significant loss of income (20% or more) due to COVID-19” could apply for a grant of up to $7,500.  (Staff also submitted an ordinance applicable to all local businesses that, among other things, would allow them to defer payment of business license taxes and business improvement area fees for six months.)

The staff report for the first item simply recited statistics about job losses and unemployment claims nationwide and statewide; it contained no data for Alameda in particular.   More importantly, it did not explain how delaying the minimum-wage increase might assist local businesses – and the persons whom they employ.  Presumably, postponing the raise would result in lower labor costs for Alameda enterprises over the next year.  But to what extent would it thereby allow local businesses either to keep all of their employees on the payroll – or to avoid having to fire everyone and shut their doors altogether?  And how many local jobs would it thereby save?

By not describing how a deferral of the minimum-wage increase actually might benefit workers as well as businesses, staff left the proposal vulnerable to knee-jerk attacks from the sort of politicians who prefer demagoguery to debate.  Naturally, Councilman Oddie rose to the occasion.  Indeed, he was so eager to rant that he couldn’t wait for the Council meeting itself.  Instead, he had his publicist post a tirade in which he called the staff proposal “a colossal fuck you to our lowest earning men and women.”  When he saw the agenda item, the Councilman was quoted as saying, he “literally cried.”

Now imagine you’re City Manager Eric Levitt.  Do you really want to become a punching bag for “progressive” politicians who pillory you as an oppressor of the working family?  We wouldn’t.  So what do you do?  Abandon the recommendation for a delay in the minimum-wage increase.  And so he did.

Let us hasten to add that this is just our supposition about Mr. Levitt’s thinking.  The City Manager himself was a paragon of diplomacy when we asked him about his decision.  “The item is withdrawn due to further evaluation and the fact that it is a difficult item to discuss in a situation where the public cannot attend,” he told us.  “My perspective as I have further evaluated and looked at the time when it was passed is that it is a value judgment based on negative current economic impacts on businesses as well as employees.”  And when we pressed him specifically about the effect of Councilman Oddie’s screed, he didn’t take the bait:  “[M]ultiple people on both sides of that issue have contacted me,” he told us.  “Based on those multiple discussions, I came to the below conclusion [to withdraw the recommendation] and thought it best to have the general direction discussion prior to having it agendized. . . .”

And, in fact, there was a discussion – of sorts – of the minimum-wage issue at the April 21 meeting.  Only Mayor Ashcraft was willing even to consider – though she was careful not to endorse – a deferral.  “I’m wondering if we don’t want staff to bring us some criteria for implementing a slight delay in the minimum wage,” she said.  “I would hate to see a business go under if there was a way that we could help them out.”

There were no takers.

For staff’s other proposal – to establish a $600,000 fund for grants to restaurants and small businesses who were bleeding cash – it was able to offer supporting evidence.  The first round of PPP money appropriated by Congress for forgivable loans to small businesses was all committed, and the second round – not yet approved as of the date of the meeting – was expected to go quickly, too.  Moreover, staff cited an online survey of 68 local businesses conducted by the Alameda Chamber of Commerce in which 35 reported they had temporarily closed and another 21 stated they had reduced hours or cut back operations.

The grant program received a far warmer reception from Council than the minimum wage idea.  Nevertheless, certain Council members couldn’t resist pursuing their own agendas.  For example, Mr. Oddie stated that he didn’t want any of the grant funds to go to “publicly traded companies.”  (What about locally owned franchisees of such companies? “There may be some issues,” the Councilman said.)  And – irony of ironies for a politician who has been found to have violated the City Charter by interfering with the selection of a fire chief – Mr. Oddie insisted that the four-person panel that would select the grant recipients should undergo rigorous “conflicts and ethics checks.”

Likewise, Ms. Vella stated that she didn’t “want to see all of these funds go straight to landlords or paying rent.”  (The proposed resolution permitted recipients to use the grants for rent, operating expenses, and payroll; it didn’t require them to spend the money solely on wages.)  She also wanted to make sure that preschools, day-care centers, dance studios, gyms (“I’m missing going to my Pilates studio”) and arts organizations got a portion of the money.  For his part, Mr. Knox White stated that he saw an opportunity in the crisis being experienced by restaurants to “reorganize our streets to create social space” such as by – wait for it – removing parking spaces.  Mayor Ashcraft cut him off before he could expound further on his pet peeve.

For the Mayor, the main issue with the grant program was that the financial assistance it provided was so limited.  Of the $600,000 fund, $97,500 would be reserved for Alameda Point businesses; if every other recipient got the maximum $7,500 grant, only 67 restaurants and small businesses would benefit.  Unfortunately, this was a small fraction of the universe.  (Economic Development Department manager Eric Fonstein later gave us data showing that, as of the first quarter of 2019, there were 2,176 Alameda businesses with one to 24 employees.)

The problem is that the City doesn’t have a lot of readily available cash sitting around in the General Fund to finance the grant program.  In fact, the staff report showed that the General Fund would be contributing only about half of the $502,500 earmarked for non-Alameda Point businesses; the rest is coming from the Commercial Revitalization Fund.  Of course, there remains a hefty “reserve” balance in the General Fund, but we suspect staff is reluctant to touch that money until it determines how much of it will be needed to cover expected future operating losses.

Ms. Ashcraft appears to have another source of funds in mind.  At the April 21 meeting, she alluded to discussions she had had about establishing a community foundation that would accept donations from individuals and businesses and use them to assist local renters, small businesses, and other organizations affected by COVID-19.  “I’ve wanted to do something like this for some time, but wasn’t sure where to start,” the Mayor told us later.  Recently, she said, an “Alameda resident I’d met previously who has worked in corporate social responsibility for some major banks and with the State of California” contacted her to ask whether the City was interested in setting up such a foundation.  She arranged a conference call with the resident, City staff, and herself, and “we were all hopeful that this could be done successfully in Alameda.”

In the meantime, the grant program represents a first step.  Council unanimously passed the resolution appropriating funds, and the City began sending out notices Friday.

Our main takeaway from watching the three Council meetings and reading the related staff reports is that Alamedans are lucky to have Mr. Levitt, Ms. Potter, and other City staff at the helm.  (Incidentally, Mr. Levitt told us that he had managed similar financial crises in his last two jobs – Sedona, Arizona, after 9/11 and Janesville, Wisconsin, during the 2008 recession.)  They are the ones generating the ideas.  And they are the ones who appear to have the entire community in mind.  For her part, Mayor Ashcraft also seems to be keeping her eye firmly on the ball (rather than on the next election).

Now if the elected officials who see everything through a political prism would just shut up and get out of the way . . .

Sources:

Renters: 2020-03-17 staff report re moratorium, etc; 2020-03-17 Urgency Ordinance – REVISED; 2020-04-07 staff report re moratorium, etc; 2020-04-07 Ordinance (moratorium); 2020-04-21 staff report re moratorium, etc

Small businesses: 2020-04-21 staff report re minimum wage; 2020-04-21 staff report re Small Business Relief Grant Program

 

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Budget, City Hall and tagged , , , , , , , , . Bookmark the permalink.

8 Responses to Who’s getting aid from the City

  1. Joyce Boyd says:

    Thank you for your blog. I look forward to your wry observations and information about our City Council. Keep up the good work.

  2. Eric Grunseth says:

    …. and when the City Council runs all the small landlords out of town, who will they blame?

  3. Continually Municipally Disappointed says:

    I’m commenting as both a reviled “mom and pop” and also a small business owner.

    #1 – As to the renter protections – there are no words……my lender certainly has no plan to let me hold off on paying my obligation for months on end with no legal recourse. Disgusting. Oddie and Vela and Ashcraft MUST go. We need real leadership, not leaders who only care about one constituency. I’d sell tomorrow if I could, they have made me hate this town – so tired of being the bad guy.

    #2 – As the grateful recipient of a PPP loan, let me share that, having just finished the city’s grant application, I’m surprised the City of Alameda did not ask for my blood type and current Covid status.

    PPP Loan Process:

    Time spent: 30 minutes
    Document upload: 2 easily obtainable documents I had on hand

    Alameda Grant Process:

    Time spent: 6 hours (including website issues not resolved by their contract ‘helpers’
    Document upload: Over 30 pages of sales, expenses, payroll records, etc, many necessarily generated by our accounting team offsite and not readily available in house

    The results?

    The Alameda grant is barely 1/10th of the money for mountains MORE WORK.

    I’m not ungrateful, truly, but to make business owners who are already struggling (and who have contributed to the city coffers for years through ridiculous licensing and permitting fees, taxes, etc) jump through crazy hoops to qualify for what will not even cover a week of payroll is a giant waste of our stressed out and increasingly valuable time.

    Add to that the slow response by the city (Berkeley, Oakland and SF all had business relief funds in place WAY before Alameda) and the lag in rollout of proper posting procedures (we took ours from LA who was AGAIN ahead of the game) and then informing us they were ‘allowing’ us to do things we were already doing and had already been allowed to do by other agencies – yet another reason this is thought of as a ‘sleepy’ town – our leaders are constantly snoozing- unless of course, you are a renter………. then they are always keeping vigil for the evil landlord apocalypse.

  4. dave says:

    Mr. Sullwold,

    I am quite surprised you have not mentioned another item on that same agenda, item 6B, discussion of a planned charter amendment (not a mere ordinance) to increase council members pay to “30% of Bay Area Median Salary.”
    The actual Bay Area Median is left undefined, but if one googles the term, one will see a broad range of figures. At the high side it could be as much as a 10-fold increase in council members’ pay. This on same agenda as a discussion about not increasing minimum wage, on a night when CC members were fully aware that the public couldn’t participate.

    They voted to table the discussion until May 5, but rest assured the item will return.

    I guess I need to update my dictionary to define “progressive” as “filled with avaricious hypocrisy.”

  5. Concerned says:

    Little of this makes logical sense.

    Pelosi said, “Never waste a crisis.” The City continues to create headaches for landlords, most of whom are Alameda residents. These new rules created in the dead of night by an absentee city council with little or no public input or notice, are a perfect example. What is ironic is that the actions of Newsom and progressive politicians in imposing a lockdown, and then refusing to start lifting it sooner after receiving medical evidence that we need to protect older Americans with co-morbidities, and that the virus circulated much earlier than they thought, have actually hurt low income renters the most. Newsom’s demand to shut the beaches is ridiculous n light of the experience of states like Florida, or countries like Sweden, where there was no shutdown. And notice when he floated the idea of opening the schools in July the teacher’s union immediately objected, despite the fact most low income renters (and their kids) are hurt the most by the closing of schools. So please, no arguments about protecting the poor.

    I guarantee the “next” step in the thinking process of JKW, Vella, and Oddie, is how to extend the emergency after the “emergency” ends.

  6. tony daysog says:

    Regarding the matter about the eviction moratorium, here’s what I had to say in response to an East Bay Express article (see https://web.archive.org/web/20200505160251/https://www.eastbayexpress.com/oakland/bay-area-cities-move-to-protect-renters/Content?oid=29357483):

    Re: “Bay Area Cities Move to Protect Renters”
    Thank you for this fair and accurate write-up of my position. Very much appreciated.

    In the end, what I thought was missing in the emergency ordinance was this: if a tenant can still pay part of the original rent even after losing some income because of the crisis, they should do so, and if such a tenant *refuses* to do so, then in my mind that kind of a tenant should *not* be protected by Alameda’s Covid-19 emergency eviction protection ordinance.

    Remember: there’s still a number of people who are still working during this crisis, some full-time, some part-time, many remotely. In the worse-case rent scenario, what if a tenant under cover of this ordinance refused to pay even a reduced rent, even though they could, and then subsequently skipped town when the moratorium ended, leaving the mom and pop landlord behind?

    But even if I didn’t vote for this emergency ordinance, I was happy that the Council adopted the rent pay back idea I raised, which I actually got from San Francisco by the way.

    Again, thank you for the characterizing my position correctly. And, no, this is not a snarky, sarcastic comment – I do mean it. Thanks, Steve!

    /s/ Tony Daysog, Alameda City Councilmember
    Posted by Tony Daysog on 03/25/2020 at 2:32 PM
    https://www.eastbayexpress.com/oakland/Profile?oid=1163691

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