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Pinocchio and SFO 

Once upon a time, there were airport officials who wanted to spin tall tales, spend $745,000 on Honduran boondoggling, and not explain very much

Wednesday, Jun 12 2002
Not being a devotee of equivocating editorials, unreported columns, and predictable letters, I don't often read the opinion pages of our local dailies. But last week I found something that may change my daily reading habits. The San Francisco Chronicle carried a letter to the editor, written by San Francisco International Airport Director John Martin, that was so ludicrous, so preposterous, so sublimely outlandish that I may again become a regular of the local editorial page. Martin's missive came in response to a previous Chronicle guest editorial in which San Francisco Supervisor Aaron Peskin made the unremarkable suggestions that our mismanaged, secretive, fiscally irresponsible airport be audited, and that the Board of Supervisors be allowed to annually review all major capital spending at SFO. Martin was, apparently, outraged.

"He claims airport finances are cloaked in secrecy," Martin wrote. "Not true."

In the history of Pinocchioan whoppers, this statement stands out. Secrecy is almost a cause at SFO. The San Francisco International Airport is an Oz of obfuscation, where billions of dollars in over-budget construction projects have slipped quietly away from the public gaze. It's a Constantinople of concealment, home to multimillion-dollar fees handed to lobbyists for a furtive propaganda campaign in support of a controversial, bay-filling, runway-expansion project. It's a banana republic of back-room boondoggles, where bureaucrats take inappropriate trips to France, Italy, Oman, Honduras, Jamaica -- then divert and commingle public funds in strange private business ventures in the Third World.

To me, the idea that Martin and his boys run anything less than an ongoing covert operation is an idea so boisterously, delightfully absurd that I can't resist the fun of shedding a little light on it.

Perhaps the best way to defrock Martin's claim that airport finances aren't cloaked in obfuscation and secrecy is to quote ... John Martin.

Last month, Martin offered testimony at a Board of Supervisors committee meeting that dealt with SFO's next budget. Martin was trying to explain away an odd line item in the airport's proposed budget asking the city to approve $745,000 in expenditures by an unusual Delaware corporation known to regular readers of this column as SFO Enterprises LLC.

"It is a nice, small, but solid revenue producer," Martin said, sporting his trademark permanent half-smirk. "It is now at a very steady operation. The revenue flow is very predictable. The expenses are very predictable. The payment plan is in place. We're not pursuing risky ventures. We're just staying with what we have. Now it's generating close to $250,000 in annual profit. It's bringing in $955,000, with costs of $745,000."

Let us count obfuscations.

First, and most general- ly, Martin presented this $745,000 infusion of city funds as unexceptional when, in fact, it is an astonishing break with the airport's official line. In 1997, SFO Enterprises was chartered as a private firm specifically to separate the city's treasury from a scheme concocted by airport managers in which they and SFOE would become players in a 1990s airport privatization boom. For a variety of legal reasons, just five years ago airport officials and city officials contended the private firm had to be completely separate from the city. Now, Martin was proposing a large city participation in the venture, without so much as an attempt at explaining away the legal problems and financial risks such a course could engender.

Martin's use of the word "steady" was also -- how shall I put it? -- troubling. SFO Enterprises' sole line of business consists of involvement in a consortium that manages airports in the Central American country of Honduras -- a consortium whose other members appear to be furious at San Francisco airport officials for conducting business in a misleading way, and who seem to be looking to rid themselves of their San Francisco partner.

For Martin to call SFO Enterprises' activities not risky belies the fact that the company appears to have made the City and County of San Francisco potentially liable for future mishaps in what experts describe as the most dangerous airports in the world.

Martin's term "profit" is an absurd concept to apply to SFO Enterprises, a company that kept a significant portion of its expenses off book, charging them to the City and County of San Francisco, until I began writing about those expenditures last year.

And "nice" doesn't adequately describe a company being investigated by Honduran authorities for what they suspect has been a fraud on the Honduran government and for alleged mismanagement of that country's airports.

"It's very difficult to have a positive view of them [SFO Enterprises]," says Jose Gilberto Aquino Guevara, director of the Superintendencia de Licencias y Concesiones, a Honduran government agency that regulates infrastructure concessions. "Ideally, we'd like to rescind their contract. The general populace is very dissatisfied with their behavior. We'd really like to find a way to disentangle ourselves from them."

I guess that makes five. Obfuscations, I mean.

In 1997, at the suggestion of Martin and airport Deputy Director John Costas, the San Francisco Board of Supervisors approved the creation of a bizarre private, for-profit corporation that would have a single shareholder -- the City and County of San Francisco -- and would carry out foreign airport consulting projects. This authorization included what was supposed to be a one-time infusion of taxpayer funds -- $10,000 in start-up capital. From then on, Costas and Martin insisted, the company, eventually dubbed SFO Enterprises, would be self-funding. The new firm, the idea went, would win contracts at airports around the globe. It would earn enough money to expand and to repatriate, at some unnamed future date, profits to the city.

But Third World airports are a risky business, liability-wise. To protect San Francisco from liability for the company's activities, the company would have to be completely separate from city government. To ensure that separation, the private firm's books and other activities would need to be kept secret from most city officials, airport officials argued at the time.

About The Author

Matt Smith


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