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November 9-15, 2005

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Silicon Valley News Notes

A Hard Town Is Good to Find

Most of the time, you don't want your city to have a reputation as "difficult"—just ask Oakland. But when it comes to development, it's a different story. And a massive change in how the department of Housing and Urban Development determines which cities qualify as "difficult to development" is about to sucker-punch San Jose. Now, to hear the definition of a Difficult Development Area—"an area which has high construction, land and utility costs relative to area median gross income"—you'd think we'd be a shoo-in. And indeed, San Jose has made this list every year for quite some time, which in turn has increased our eligibility for Low Income Housing Tax Credits. In case you haven't been keeping up with how important those are—and if you don't work at City Hall, why on Earth would you?—the over $300 million the city has received in LIHTCs are what has had San Jose's affordable housing construction cooking with gas since 2000. Problem is, HUD decided in August to change how it determines what makes a DDA—and they've crossed us off their list in the process. That means about a 20 percent reduction in the equity available to finance affordable housing projects in San Jose. All right, you're thinking, but what does that mean? Well, look at it this way: if HUD had been using its current wacky formula over the last five years, we'd have lost $64 million, or about 1,032 affordable units. Now, considering that the building of said affordable units is one of the top accomplishments being touted by the Gonzales administration, you can bet no one in Domeville is willing to take this sitting down. "This was really a surprise," says San Jose Department of Housing director Leslye Krutko. "We're going to appeal it." What the city is petitioning HUD for is an alternative formula for calculating DDAs. Because while HUD's new formula supposedly determines whether very-low-income residents are paying too much for their affordable housing, city officials argue that what it does not do anymore is adequately measure whether an area has high construction, land and utility costs—which was the intent of the whole thing in the first place. They calculate that San Jose is still one of the highest rental markets in the nation, averaging $1,184 a month for a two-bedroom rental, and that we're still one of the most expensive places to develop, with an average land cost of $2.4 million per acre. In case you needed further proof that HUD is in outer space with this new formula, consider that it also led to San Francisco being crossed off the list. Krutko sums up the absurdity of it all rather nicely: "It makes it look as if people can afford to live here."

Bad News Travels Fast

Last week, a letter written by Knight Ridder's largest shareholder, Private Capital Management, was circulated so fast that by the same afternoon every reporter within a 100-mile radius of a Knight Ridder-owned paper had a copy. Why was it such a hot property? Because the letter, signed by Bruce Sherman, PCM's chief, called for the sale of the company. A day later, another major KR shareholder, Southeastern Asset Management, made it known to the Securities and Exchange Commission that it wants to talk sell, too. Moreover, an article in last Thursday's Wall Street Journal contends that Knight Ridder "appears amenable" to a breakup. Gulp. So who buys the Merc? Well, hold your horses—industry insiders have already deemed a sale "unlikely." But of particular interest were the reasons cited in Sherman's letter for wanting Knight Ridder to sell: not only were the operating margins described as "unexceptional," but Sherman also complained of Knight Ridder's lack of a nationally read paper. Are properties like their flagship the Miami Herald, and the Merc—which just went through all that is-it-a-section-or-isn't-it hubbub over local news coverage—coming off as too provincial to their bosses? If so, Luther Jackson, executive officer of the San Jose Newspaper Guild, thinks shareholders aren't getting it. "I think we are a little bashful, the industry is a little bashful, talking about itself, about what value it has," he says. "I think there's two ways to go. If you cut the resources as you have been doing, or, what we support, to put more investment into the paper—not only in the editorial product, but in core business functions, circulation, marketing."

Protection for Whom?

Fly has been getting some disturbing calls from locals who've run into trouble with Child Protective Services and in some cases are taking action against the agency. One case they've all been pointing to is that of Hollister resident NATHAN FORT. One April day more than seven years ago, Fort was confronted at his home by a San Benito County CPS official, who informed him that they had received an accusation about him concerning his wife's daughter and asked to interview the child. For four years, Fort would not see his adopted daughter again. CPS officials wanted him to admit that he molested his adopted daughter, something he refused to do. The agency gave custody to the girl's biological father, an admitted drug user with a criminal record. Here's the twist: Fort has been vindicated, making what initially sounded like a story of government intervention attempting to do good seem more like a seven-year Kafkaesque nightmare. Last month, Fort, with the help of San Jose attorney ROBERT POWELL, won a $1.25 million settlement against the county, one of the largest such settlements in the state's history. The story is seen by many parents' rights activists as an indictment of CPS—the other side of the coin, perhaps, of the notorious 2002 case where a leader of local parents' rights group was convicted of abducting two children in the East Bay from their father and hiding them in San Jose. In that case, the black eye went to the parents' rights activists; in this case, the black eye went to CPS. Bonus trivia: Powell was also the attorney for the convicted activist leader, FLORENCIO 'JUNIOR' MANING.


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