Menlo Park to spend $518,500 to buy back home Around Town, posted by Editor, The Almanac Online, on Mar 8, 2013 at 10:46 am
Two members of the Menlo Park City Council urged the city to explore criminal charges against a couple who bought a home through the city's below-market-rate housing program, but then within two years of the purchase, took out more than $1 million in loans against the property before defaulting on payments.
Read the full story here Web Link posted Friday, March 8, 2013, 9:38 AM
Posted by What lawyer?, a resident of the Menlo Park: Central Menlo Park neighborhood, on Mar 8, 2013 at 12:40 pm
What lawyer approved the paperwork the couple signed? That person if firm should never be used agin. If it was city attorney McClure. He should be recused from this. And fired. This is absurd and we shouldn't put up with it.
Posted by Outraged, a resident of the Menlo Park: other neighborhood, on Mar 8, 2013 at 5:03 pm
An earlier article in the Merc noted that City staff was responsible for not properly vetting contractual language that impacted work by the title company (which was also shoddy). Am I the only one who sees the irony in the City Manager recently asking for new permanent (pensioned) staff because contract employees don't offer the same high level of skill and care as permanent ones? And might this be the same city staff that did not properly vet the zoning that opened the door for Stanford to propose a huge medical office on ECR? If I were on the city council, I would initiate a quality assessment of staff. Too many big, expensive mistakes are being made.
Posted by for the record, a resident of the Menlo Park: Central Menlo Park neighborhood, on Mar 8, 2013 at 9:48 pm
emmcj, the city attorney position is already a contract position. I don't know how much the city attorney is to blame for this sadly consequential oversight, but until I do know, I'd hate to condemn him. He's done a good job, overall, for the city for many years. More information is needed.
Posted by twee, a resident of the Menlo Park: Downtown neighborhood, on Mar 8, 2013 at 10:11 pm
Menlo has made BMR mistakes before. There should be no more BMR properties in Menlo. Over a period of more than 20 years, MP has mismanaged both selection & resales.
One buyer owned & lived in a Sand Hill Circle townhouse + owned a "weekend" condo in San Francisco. This person somehow got qualified & bought a BMR unit at the cul-de-sac end of the 900 block of Menlo Avenue. The new owner immediately rented it out & had tenants there for years. When it sold, it went on the open market with no restriction to resell through the BMR program. big fat profit for a 1%er. Another of the 4 or 5 BMR units in the same complex was purchased by someone who neglected to mention a gainfully employed & well-compensated spouse. The spouse's income would have disqualified this couple from claiming eligibility.
Your current Riordan story is another example of how dishonest people game the system.
Too bad MP still thinks it needs to provide BMR housing. Using taxpayers' money to provide housing for people who supposedly can't otherwise afford to buy into a community is a form of reverse discrimination which is unfair to everyone else who either buys or rents conventionally.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 9, 2013 at 12:19 am
Why would you say it was taxpayer money that paid for original Vintage Oaks BMR units ? If you know the original history, both the St. Patrick's Seminary and the city did the land and zoning deal with the developer, the O'Brien group with the stipulation that there be some number of BMR units. To hear it from some seminarians, the O'Brien group duped the Seminary whose intent was to see a great many more BMRs built. Bottom line is that the BMRs were "funded" by the developer of Vintage Oaks and, indirectly, the initial purchasers in Vintage Oaks. So don't cry to me about the taxpayer paying. If
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 9, 2013 at 8:02 am
Global - At the minimum, because the property value is reduced, taxpayers aren't getting full taxation from the property. That's a subsidy in my book. But someone is paying for "below market rate" housing. If it's a developer, then they are shifting profits to someone else who is subsidizing the lower revenue.
Most posts understandably focus on the attorneys who failed to file appropriate liens and restrictions on the property which could have prevented these buyers from taking out additional loans. But let's not forget such an obviously flawed process that would allow such a dishonest, undeserving couple to qualify. And as someone else noted, this isn't the first time this has happened.
Posted by Vote , a resident of the Menlo Park: Felton Gables neighborhood, on Mar 9, 2013 at 8:27 am
The fact is that the city has committed millions -- at one point, agreeing to buy two BMR units at Menlo Station -- to this misguided bit of bleeding heart dogoodery. Any time you distort the economy, there will be unexpected consequences, not to mention people gaming the system in whatever way they can.
There are also costs to administer the program, though the city never talks about those.
And McClure is woefully incompetent, a terrible negotiator and apparently not very good at reading contracts either.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 9, 2013 at 4:05 pm
I just see a bunch of hypocritical ideology at play, rather than common sense:
* I see "taxpayers" on the warpath for things that they never paid for, while the people who did pay for the BMRs made very nice returns on the development.
* I see you complaining about "subsidized property taxes" without mentioning the biggest "property tax subsidy" pool in California, the big multi-generational beneficiaries of Prop 13. If you want to complain about subsidies, that's the best place to start.
BTW - I do agree that we should reprimand the city for mistakes and should pursue charges for fraudulent sales of BMRs. I'm not happy about the current incident and costs to the city, either. As for the claims of past abuses, it might be nice to see some evidence, rather than anonymous forum hearsay.
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 9, 2013 at 7:34 pm
Global - I have complained about Prop 13 inequities on other threads for years. Funny, I thought this thread was about BMR housing. You said "...don't cry to me about the taxpayer paying..." and I pointed out how the taxpayer was clearly paying for this in both shifted property valuations and the actual cash loss. Facing these irrefutable facts, you deflect.
It's a common ploy to deflect valid criticism about one program by cleverly pointing to another inequity and saying "oh yeah, well what about that bad stuff over there?" That tactic probably didn't work when you tried that on your Mom and it doesn't work on me either. Try to stay focused on the subject of the thread. You are, of course, free to start a Prop 13 thread if you'd like.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 9, 2013 at 8:11 pm
I merely pointed out that taxpayers didn't pay for these BMRs and the people who did pay have clearly done OK given the extra costs imposed. I'm one of the folks who funded Riodan and I've done just fine on the property valuation, so please don't speak for me. I also pointed out that it's ridiculous to be sanctimonious about "subsidized" property tax diiferentials for a few dozen BMRs when there are hundreds of homes and businesses in Menlo Park that are far more "subsidized" by Prop 13. Your points are driven by ideology and possibly emotion, rather than financial common sense.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 10, 2013 at 10:59 am
I think my messages were pretty much on point. The original BMR in question didn't cost you, the all-complaining taxpayer anything, until this recent, significant fumble on the part of the city (which I agree we should condemn). I see you waving the broad brush of "waste" based hearsay from other posters as evidence, outside this incident. I see a mistake and potential fraud, you see as broad-brush waste.
Posted by Vote, a resident of the Menlo Park: Felton Gables neighborhood, on Mar 10, 2013 at 1:05 pm
You are wrong, Global. The fact is that the city has committed in at least two prior cases to buy BMR units, thus becoming a landlord, when buyers didn't qualify.
One of the Catch22's of this misbegotten process is that you cannot qualify for a unit unless you are below certain income levels. The BMR is priced so that a low income earner can afford it. But BMR owners are subject to the same homeowner fees imposed on everyone in their community. So when prospective buyers try to get a loan, the banks add (low) mortgage payment to (not so low) monthly fees, and decree that the buyer earns to little to get a loan. After months of this, the city agrees to buy the property.
There are also, as previously stated, costs associated with running the program. Given how much the city pays its employees, I'd guess no less than $50k/year, not including the present value of pension obligations.
The entire premise of this program is dumb. We have plenty of low-income (or no-income) residents in our city, including people who paid off their homes long ago and adult children living at home. Jumping through hoops to bring in handful of additional low-income residents is just stupid and a waste of money. Our money.
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 10, 2013 at 3:32 pm
I obviously agree with Vote.
Anytime our politicians decide to subsize ANYTHING, other taxpayers are pay more to make up for it. That goes for shopping centers and office buildings under Prop 13, but it also goes for home mortgages, charities, ethanol, children, company-paid medical insurance premiums, oil drilling, green energy as well as below market rate homes.
The neighbors of those BMR homes will pay more in taxes because the BMR home is artificially assessed for less (by definition). And, of course, in addition to the subsidy and cost of officials to manage the program - all tax paid - Menlo Park's property owners will now foot the bill for the loss on this property due to fraud which will include a very significant legal fee.
But I hope this program made you feel good. I am pretty sure that your largess made the residents of your BMR home feel pretty good!
Posted by twee, a resident of the Menlo Park: Downtown neighborhood, on Mar 11, 2013 at 9:10 pm
Taxpayers do subsidize BMR units. Proprety taxes for BMR units are lower than for non-BMR units.
And no, I won't name in print the violaters of the BMR "rules" on the Meno Ave townhomes,but if you want to research the original purchasers at the time of the new construction, they will probably be quite recognizable to anyone who has lived in MP for a while. One was in fact a well-known member of the community, a MP country club, and a large local church. No way could this person have ever been mistaken for a BMR qualifier.
And Twee, I don't buy into the property tax base "subsidy" for two reasons. When the BMR purchaser sells the property, the proceeds are in line with their assessed tax payments. If they received more out of the sale, I might agree with you. If you go down the path of "their property assessment is kept artificially low", I can show you a much larger group of people and business beneficiaries of Prop 13 who are incurring much larger "subsidies" by the same mechanism, but have the added benefit of being able to sell their property for market prices.
And I agree, if there are people who cheated when they applied, they should be forced out. We're counting on people like you, who are in the know, to flush out the perpetrators of fraud.
Posted by Menlo Voter, a resident of the Menlo Park: other neighborhood, on Mar 12, 2013 at 7:10 pm
I think BTW was refering to Menlo Commons. The developers ended up having to purchase the BMR units as no one qualified to buy them. The developers had to buy them and rent them at BMR. Could be why BMR thinks there's something nefarious going on. There isn't, just socialist stupidity.
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 13, 2013 at 12:44 am
It's funny how people think that when a developer pays for BMR housing that they couldn't possibly be shifting that cost somewhere else. Yes, and when the state recently raised sales taxes, retail store just absorbed that extra cost, didn't they? (Hint: they didn't. Look at your receipt, it's there.)
The rent or properties that the other tenants in that development end up paying are that much higher (meaning they are paying for it) which results in higher costs and taxes for the rest of us. To demonstrate the point, imagine an entire city of BMR homes and just one non-BMR home. Would you similarly suggest that the non-BMR home isn't paying more so others can pay less? Some neighbors always end up paying more because a few get to pay less - that's the very definition of subsidy.
And, of course, these highly flawed programs are subject to fraud (as was the case here), require management (which costs money), all of which require tax dollars. You're paying for it whether you know it or not; whether you admit it or not.
Posted by City Attorney Responsibility, a resident of the Menlo Park: Downtown neighborhood, on Mar 13, 2013 at 10:31 am
I agree with people. Where was the City Attorney (that's his job!) on this issue to review before causing the City of MP to lose all this money that the hard tax-paying citizens are paying? This could be going to schools, improving playing fields, city infrastructure, etc!
I say the City needs to fire the City Attorney! Someone is responsible.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 13, 2013 at 11:52 am
I understand your ideology. And POGO, I acknowledged that the developers and new buyers fund the BMRs. But, I'm tweaked that you speak so stridently when you have minimal skin in the game, when guys like me actually did help fund the BMRs in Vintage Oaks and have absolutely no qualms over it. We've come out well-ahead on the purchase, even if our cost basis was a little higher than it might have been without the BMRs, plus the BMRs bring a diversity to the local community that I appreciate. So please don't pretend to represent me.
ps: there would have been many more BMRs in the development had the developer followed the verbal commitments they made to St. Patrick's Seminary when they originally bought the land
Posted by old gal, a resident of the Menlo Park: other neighborhood, on Mar 13, 2013 at 1:06 pm
New guy, where are you coming from? Did your kid's kindergarten teacher steal his crayons? Did the nurse who stitched up your finger in the ER pull a scam on you? This kind of stereotyping is utterly vile.
Posted by twee, a resident of the Menlo Park: Downtown neighborhood, on Mar 13, 2013 at 1:11 pm
@ Global- You haven't done enough research. You weren't there & I was.
Go back to the initial sales by the developer for the complex at the end of the 900 block of Menlo Ave. The BMR units are on the left, outside the wall confining the other townhouses. There WAS no follow-up with those BMR units. MP didn't maintain control, after the first lucky buyers, there was no requirement that the units be kept BMR. The units were later resold by the individual owners at open market prices with no BMR requirements.
MP hasn't the ability to run a proper BMR program. That's my point.
Posted by Vote, a resident of the Menlo Park: Felton Gables neighborhood, on Mar 13, 2013 at 2:46 pm
BMRs bring "diversity" to the community, "diversity" being code for people of color. So you do-gooding social liberals can boast that you're learning Spanish from your new neighbor ("he's in a BMR, so not as nice as my house, but a super nice guy!") or that you friended your sister's cleaning lady after she bought a BMR condo down the street. Because, you know, you care about all people, and you want the best for everyone. You've got a big heart, and let's not talk about money or subsidies. That's just vile.
But here's the ugly truth: almost all the BMRs in town are occupied by college-educated white people. They are diverse only in that they can only afford Campbell prices, whereas you, at some point in your life (maybe even now) could afford Menlo Park prices.
Is all that diversity really worth the city spending millions of taxpayer dollars? With that mindset, we'll be bankrupt by 2020. Or maybe we'll all be living in Atherton or Hillborough, those cities having decided to offer us homes in exchange for the diversity we bring to their towns.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 13, 2013 at 6:36 pm
@new guy and Voter,
Seems like the word "diversity" brings out the ideologue or classist/racist in both of you. For me diversity means breadth of occupation, race, housing stock (drive though Vintage Oaks and you"ll understand). And it's not an ugly word you seem to want to make it into.
And Voter - once again you talk about the taxpayers paying for it all, but we both know that that's your fallacious mantra rather than any kind of truth. Developers and first time buyers paid for the BMRs, either directly or through in-lieu payments. You do some of your legitimate gripes a real disservice by throwing in intermittent, but blatant lies.
Posted by Menlo Voter, a resident of the Menlo Park: other neighborhood, on Mar 13, 2013 at 7:31 pm
sorry, but you're wrong. True, the buyers of full price units pay a higher price and subsidize the initial purchase of BMR units. That means their tax basis is accordingly higher than it would be without the BMR units. Therefor they continually pay to subsidize the BMR units because the BMR units are assessed a lower value and continue to be, thereby requiring someone to make up the difference. Can you say the tax payer paying full boat plus on their property tax? It's an on going subsidy not just a one time thing.
Posted by Vote, a resident of the Menlo Park: Felton Gables neighborhood, on Mar 13, 2013 at 8:24 pm
Flawed debate tactic: apply slanderous labels to people who point out facts that don't fit your world view.
Fact: most of the BMR owners in Menlo Park and Palo Alto are not only college-educated and white, they hold down white collar jobs. Many, oddly enough, work for the city, or are related to a city employee.
Fact: Menlo Park already has plenty of diversity in its housing stock and occupations. Travel outside Vintage Oaks and take a look. It's simply unrealistic to expect every single block to include houses worth $250,000 and houses worth $10mm, but you can find examples of both without traveling too far.
Fact: BMR homes, by definition, are required to match the look & feel of surrounding residences. Thus, no diversity allowed!
Fact: "diversity" does mean race to most people. Ouch. Painful, I know. But google "Fisher v University of Texas" or read the related article in last Sunday's NY Times. Economic and occupational diversity do not figure into anyone's calculus.
Diversity, as a mandated element of city planning, is rapidly becoming an obsolete concept. With any luck the Supreme Court decision in Fisher will provide, if not the coup de grace, at least the beginning of the end.
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 13, 2013 at 8:56 pm
I'm not getting into the diversity argument at all. I don't think it's relevant.
Global - I'm glad you went from your position that there are no taxpayer dollars in BMR housing to acknowledging that, in fact, EVERYONE's tax dollars are used for this. And I would never even "pretend" to represent you. I have enough trouble representing myself.
There are two schools of thought present. One group thinks it's perfectly appropriate for government to spend taxpayer money in order to bring people who cannot afford to live in their town using subsidized housing (and secondarily to make them feel good about themselves). A second group thinks this is not an appropriate function of a government that is already unable to balance its checkbook. Count me in that second group.
I would ask members of the first group how this latest episode worked out for them. I assure you that this latest outrage won't be the last abuse or fraud perpetrated on such an ill conceived program. But as I said, I hope it at least accomplished that secondary objective.
Posted by twee, a resident of the Menlo Park: Downtown neighborhood, on Mar 13, 2013 at 11:06 pm
Oh, you've looked at records for the last 7 years? Too funny! Did you walk down the street? Try 1988. After 25 years of mismanagement, MP still can't run this type of program properly. Maybe it's time to stop doing any BMR housing.
Posted by Global, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Mar 13, 2013 at 11:20 pm
You still have it wrong - this isn't a case of government using taxpayer dollars, but developer dollars, which I acknowledged are paid partially by property purchasers through the developer at purchase time. But definitely not everyone's tax dollars - wrong on both everyone and on tax. Once you get past that part we can debate policy, but get the facts right first. The BMR fund $$ did not come from any city/county/state/federal excise/property/income tax.
Posted by Menlo Voter, a resident of the Menlo Park: other neighborhood, on Mar 14, 2013 at 7:01 am
you continue to ignore the fact that the non-BMR unit owners in a development pay higher property taxes forever and the BMR owners pay lower taxes forever. That's an on-going taxpayer subsidy. So, you are wrong. Taxes are continualy paid as a subsidy. That's not coming from the developers. It's coming from the owners (taxpayers). So, it is a case of government using taxpayer dollars.
Posted by POGO, a resident of the Woodside: other neighborhood, on Mar 14, 2013 at 10:50 am
I think Global thinks that when the government raises taxes on gasoline, that the oil companies pay it. The oil companies COLLECT the tax, we PAY it.
Similarly, when one property owner in a city gets a break, their unpaid burden is spread out among all of the other property owners who are paying the full rate. I've never seen a city say that they're going to have to reduce the hours of an employee or some reduce some service because they are getting just half of the taxes they expected because a home has a BMR valuation. So that free ride for one property owner is simply being paid by the rest of us.
Now feel free to tell me about all the other subsidies who also - like commercial property owners or senior citizens - to justify this one. As I've said, I'm against those too. In fact, I'm opposed to ALL subsidies, loopholes and deductions. Giving your City Council (or any politician) the power to favor one small constituency over another, is the absolute currency of corruption. Hasn't been working out too well for us lately.
Posted by Couple Getting Loan Money, a resident of the Menlo Park: Downtown neighborhood, on Mar 14, 2013 at 3:10 pm
Irregardless of what failed to occur or occured on behalf of the City, the couple signed an agreement which they breached and leaving the City on the hook for hundreds of thousands of dollars! The question is: Did they know they were skirting rules to get the loan money? If so, criminal intent is established. I believe it is very clear.
Posted by Jim, a resident of the Menlo Park: South of Seminary/Vintage Oaks neighborhood, on Apr 9, 2013 at 7:25 pm
Please everyone. There is no one to blame but the Salcedo couple at most who took advantage of the system. The city does have partial blame but what caused this issue? The Salcedo's went around the system knowing their house was under the BMR progam and still went out and took loans. This is a beautiful city which these people do not belong in. Please city council and Mayor Ohtaki, remove them from our neighborhood.....