Close to Home: Why $42 million for affordable housing in Santa Rosa is missing

On Oct. 16, 1990, the Santa Rosa City Council, faced then as now with a housing affordability crisis, took courageous action.

To fund affordable housing the council tripled the tax paid when real property is sold. (As a result, a median-priced home now pays $1,700 in tax at close of escrow instead of $600.)

I was there that evening. I had chaired the committee that developed the recommendation. As with others, I saw this funding as critical to protecting struggling families.

That night we heard Mayor Jack Healy answer opponents’ criticism with a ringing statement of accountability: “I was elected to serve the public interest. The need is real. We need to do this now - not later. Now!” (Paraphrase from memory.)

Since then, $42 million has flowed into the city treasury from the tax increase, enough leveraged subsidy to have built 1,000 affordable-housing units. That’s $42 million that would have housed 1,000 families at affordable rents - $42 million that would have reduced rents for thousands of others, due to greater housing supply.

The operative phrase is “would have.” The commitment made that evening was broken. The 1,000 units don’t exist.

The $42 million was stolen - diverted by the city to other purposes.

Why was it stolen? Because it could be.

The tax increase in 1990 was technically not a specific tax for a restricted purpose. That would have required a public referendum. Without a separate referendum, the council action effectively put the new revenue into the general fund where it could be spent on anything.

Everyone understood that the funds were for affordable housing. That was the whole point. (For clarity, 10 percent was to be used to pay county jail booking fees, a last minute tack-on.)

Not one spoken or written syllable implied the funds would be used for anything else. But legally the funds could be used differently from what was intended.

And so they were.

Except for periods in which a small share of the tax increase was used for housing, subsequent city councils diverted the dollars into salaries, pensions, more police services, consultants and into maintaining reserves during recession.

Over time, memory of what the council did in 1990 faded. People retired; Jack Healy died. A subsequent city manager - not Sean McGlynn - called this history an “urban myth.” (How convenient.)

Today we face another housing crisis. Like then, what we do now is a moral as well as practical test.

Current council members are not culpable for the past. But they are for what happens next. Budget pressures will make it hard for them to do what is right. But they must live up to the city’s commitment. This means restoring 90 percent of the tax increase for affordable housing in the 2016-17 and subsequent budgets.

Ongoing City Hall discussions suggest that some minor percentage of tax funding may go to housing. That is not good enough. Anything less than the 90 percent commitment continues to be a breach of faith.

If this breach of faith continues, when a home seller reads on the closing statement “City of Santa Rosa, Transfer Tax, $1,700,” or $2,000 or $3,000, then he or she is reading a lie, a theft, a broken promise.

That $42 million is gone. But what about the next $42 million?

The lives of thousands of Santa Rosans will be profoundly changed if the City Council redeems the promise made by the city that October evening.

Council decisions often must be made in hues of gray. Not this one. It is black and white. To do what was promised or not. To help those in need or not. To continue the indefensible or not.

Remember Jack Healy’s words. Do what is right. Do it now.

Hugh Futrell is a Santa Rosa-based developer whose recent projects include the reconstruction of the former AT&T building, now known as Museum on the Square, in downtown Santa Rosa.