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Making Scents at SFO 

Bad stuff's hitting the fan out at the airport. Can mayoral confidante Eleanor Johns help keep the smell down?

Wednesday, May 28 2003
On Thursday, San Francisco Mayor Willie Brown tapped Eleanor Johns, a woman long known for handling Brown's personal, financial, and political affairs, to serve on the city's Airport Commission. Since she began working as a legal aide at Brown's private law firm in the mid-1970s, Johns has served as a sort of financial valet for the politician. During the mid-'80s she managed the finances of various Brown-controlled campaign committees while simultaneously drawing a small fee from Brown's private law firm to manage his personal finances. She served as campaign treasurer during a Brown mayoral run. And in 1999, when SF Weekly reporter Peter Byrne asked an attorney who had arranged a real estate partnership about Brown's stake in the venture, the attorney said he usually spoke with Eleanor Johns, not Brown, about the mayor's financial affairs.

"She's the sort of insider who's so far inside, nobody ever sees her," one city staffer noted last week.

In a statement to the Board of Supervisors, Brown explained the appointment by attaching a résumé citing Johns' years of service as his aide and saying that she "will make a valuable contribution to the Airport Commission." So it's not been made crystal clear why, precisely, Willie Brown appointed his personal assistant of 25 years to the Airport Commission.

Still, I have my ideas, and they involve long-standing mismanagement at the airport that may soon become much more obvious to the general public.

A recent management audit by the city budget analyst reveals troubling problems in the way the airport awards consulting contracts. A lawsuit by the City Attorney's Office regarding alleged overbilling of SFO by construction giant Tutor-Saliba Corp. may well produce revelations that further question the airport's contracting and management practices. And in Honduras, a new lawsuit connected to the business activities of SFO officials there suggests little but further trouble.

As the airport's management problems become ever more apparent, its overall financial situation will very likely continue to deteriorate; war, terrorism, SARS, and general economic malaise have deeply cut into air travel, sharply reducing airport income well into the foreseeable future. All about the San Francisco airport wafts the smell of shit hitting the fan. And given that a small group of Brown's top-level airport officials has, for far too long, seemed to face no repercussions for apparent management problems, the smell is oddly sweet.

It'll be interesting to see if Ms. Johns' brand of air freshener works in her new environment.

If you're looking for a perfect place to hear yourself think, you might stop by SFO's new, $2.1 billion international terminal. It's a huge public space, quiet, with ceilings high enough to host a weather system. Its halls are adorned with eclectic pieces of valuable art. There are half a dozen restaurants at hand, yet no lines anywhere. And the air -- ah, the air -- is crisp and infused with the sweet, musty, rejuvenating scent of Schadenfreude.

After years of economic boom, during which airport managers appeared invulnerable to criticism for cost overruns, inappropriate contracting practices, opulent expense accounts, and shady public-private business deals, I'm smelling comeuppance in the air. All of a sudden, it seems, there isn't enough money to paper over the waste and impropriety.

No matter how one looks at it, San Francisco's colossal, $600 million-per-year airport appears to be in bad shape.

According to a recent report by airport consultants John F. Brown Co., passenger traffic at the airport will shrink by 25 percent next year. The same report says traffic may return to previous levels by 2008 -- an estimate based on guesses regarding economic recovery, terrorism, SARS, how anchor tenant United Airlines handles its ongoing bankruptcy, and whether or not airport management takes seriously the consultants' warnings about high costs. A slide-show presentation prepared for senior airport managers might just as easily have been titled "You're Running the Airport Into the Ground."

One slide in the presentation, titled "NEED FOR ACTION: SFO Cost Structure Is Too High," detailed, in language apparently meant for people unfamiliar with sound management principles, why it's a bad thing for SFO to spend far more money per passenger than any other airport in the region. Overspending "reduces flexibility to respond to adverse situations (war, terror, earthquake, airline bankruptcy), jeopardizes ability to finance future development, and is inconsistent with Management goals, values and vision for the Airport," the presentation said. (In case you wondered: John F. Brown Co. billed $7 million for its efforts to help reduce costs at the airport.)

Another report -- a management audit of the airport's Airfield Development Bureau, the name given the war room that Willie Brown set up to push through a $3.5 billion plan to expand SFO's runways -- depicts management practices seemingly tailor-made for cost inflation of the very type the John F. Brown Co. warns against.

The audit, which focuses on $89 million in bureau contracts, was released last week by Board of Supervisors Budget Analyst Harvey Rose. It once again puts on display the high-living consultants the airport's been known for: a $799.55 restaurant tab here, a $4,252 SFO-Dulles plane ticket there. And then there's that $4,686.60 monthly phone bill -- for one person.

But the report describes practices more worrisome than consultants who live like sultans. According to the audit, airport managers routinely subvert the city's contract bidding process by, essentially, handpicking subcontractors to work on airport construction projects. The game worked this way, according to the audit report: Airport construction contracts would be put out for competitive bids, in the normal fashion. A general contractor would be chosen, after staff had determined the bid was the best submitted.

But then, in an astonishing departure from normal purchasing procedure, airport managers themselves would choose subcontractors who would work on the project, cutting out the primary contractor altogether. This practice, called "seconding" in governmental jargon, essentially nullifies the contract bidding process, which exists to get the government the best price on a given contract, and to prevent cronyism and overcharging.

In some cases, the audit says, airport officials would go so far as to require contractors to hire subs for tasks that had nothing to do with the job the contractor was hired for; one engineering-related contract, for instance, included expenses for public relations consultants handpicked by airport staff. The original engineering contract did not require any public relations work.

According to the City Attorney's Office (as quoted by the budget analyst), "seconding" has a pernicious effect that goes beyond allowing government officials to choose contractors without regard to competence or cost. Because primary contractors aren't directly responsible for subcontractors under this arrangement, the primary contractor may not be responsible for cost overruns connected to the subcontractors' work, or for negligent behavior by a subcontractor.

The Airfield Development Bureau entered into 50 "seconding" agreements, at a cost of around $6.5 million, according to the audit report. In the context of the airport's $600 million annual budget, $6 million seems like microscopic potatoes. But the management audit covered only a small portion of the total airport budget; it says nothing about whether the seconding practice extends to other areas of airport operations.

In the world of television Mafia families, sports teams, Third World business concessions, and secretive airport-management teams, bad times have a way of building on themselves. Problems beget bickering, and bickering begets more problems, until things really start to fall apart.

I was reminded of this fact last week while talking to Raul Torres Lazo, the Tegucigalpa, Honduras, industrialist whom SFO officials recruited in 2000 to form part of a consortium that would handle the privatization of Honduras' airports. (In case you missed it: I talked to Torres Lazo for a column noting, among other things, that the Honduran government is fining the SFO-led consortium $20,000 per day for a lack of compliance with obligations laid out in the privatization contract.)

Now, Torres Lazo says, he's slapping the consortium with another potential liability -- a million-dollar lawsuit alleging that $500,000 of Torres Lazo's money is being unfairly withheld from him by other consortium members. The lawsuit is based on technical details of the Honduras privatization contract. To wit: In 2000, after the SFO-led consortium won the contract to manage and upgrade Honduras' national airport system, each partner was required to post $1 million as part of a $10 million bond guaranteeing that the group would fulfill its obligations. Torres Lazo recently reduced his ownership share of the consortium from 10 percent to 4.7 percent; by Torres Lazo's logic, his required share of the bond should decline from $1 million to $470,000.

So far he hasn't got his money back, and he's suing. "To the extent that San Francisco's a part of the consortium, they're implicated too," Torres Lazo says.

San Francisco's Honduras privatization deal may be small; it involves less than $1 million per year in expenses and revenue. But it shares some important connections with management problems that apparently exist in other areas of the airport; an implosion there could expand elsewhere.

For one thing, the privatization scheme was led by key airport management figures. Deputy Director and Airport Chief of Staff John Costas is nominally in charge of the Honduras operation; it's said to be his brainchild. Acting Deputy Director for Business and Finance Leo Fermin was involved in handling the accounts of the Honduras operation. Mara Rosales, recently appointed by Willie Brown as deputy airport director for regulatory and legislative affairs, served as staff counsel to SFO Enterprises, the shell firm used to route S.F. taxpayer money to the Honduras operation.

SFO director John Martin is scheduled to step aside soon; Willie Brown's mayoral term expires in January 2004. But I believe our mayor's airport mess could expand exponentially in coming months, and stay on to plague him and his handpicked airport management team for a long time to come.

Perhaps an airport leadership insider will turn, and start talking with regulators or investigators. Perhaps problematic contracting practices extending far beyond the allegations surrounding Tutor-Saliba Corp. will come to light. Who knows? If unchecked, the smell of problems could waft all the way up to the top reaches of current city management.

Perhaps there's a reason Willie Brown assigned the woman long responsible for managing his personal financial affairs to four years of duty at the increasingly aromatic San Francisco International Airport.

About The Author

Matt Smith


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