The Nonprofit Industrial Complex and the corruption of the American City

Corrupt Cities: A Practical Guide to Cure and Prevention, by Robert Klitgaard, Ronald MacLean-Abaroa, and H. Lindsey Parris

Bay Area at center of devastating critique of nonprofit malfeasance. From American Affairs.

Nonprofit organizations are frequently the exact opposite of what they appear to be. As a consequence of the benefit of the doubt provided to nonprofits, there is rarely enough oversight to guarantee that they are doing what we pay them to do. In some cities, upwards of a billion dollars of public funds are paid to nonprofit organizations every year with glaringly insufficient safeguards to ensure that the money is used in a manner likely to serve the public interest.

This money is then spent in ways that would shock the taxpayers whose hard-earned dollars are being effectively stolen from them. Non­profits that self-righteously declare themselves providers of homeless services actively lobby to make homelessness worse in order to increase their own funding; nonprofit organizations hire convicted felons—including murderers, gang leaders, sex offenders, and rapists—who go on to commit more felonies while receiving hundreds of thousands of dollars in government contracts; and the executives of nonprofits, the very people in charge of institutions whose stated purpose is not to make money, earn millions of dollars while catastrophically failing to deliver the public services we are paying them to provide.

Go Deeper:

• Nonprofit researcher: Homeless orgs fail from skewed spending, self-perpetuated bureaucracy, demonizing actual treatment
• Case studies SF, Seattle: How so-called "homelessness services" non profits rip off cities
• Opinion: SF's missing the mark with so-called solutions to homelessness (part 2 of 3)

And as all of that is going on, the nonprofits in question receive tax breaks from the IRS, ensuring that the incompetent organizations wors­ening your city’s homelessness crisis exert their corrupting influence all the way to the halls of power in Washington, D.C.

There is a notorious nonprofit in San Francisco called the Tenants and Owners Development Corporation, or todco for short. The Tenants and Owners Development Corporation, despite containing the word “development” in its name, has not developed a single property in approximately twenty years. More and more, todco isn’t spending its money to help its current tenants, either. The San Francisco Standard found that todco’s spending on resident services declined from 62 percent of revenue in 2012 to only 45 percent eight years later. 

The Standard interviewed tenants in one of todco’s buildings and was deluged with complaints about decaying accommodations and rodent infestations. A woman told them bluntly that there were rats in the walls and complaints to management went nowhere; the tap water tasted foul and she sometimes found roaches in her food. One man felt a bite on his neck and assumed at first that he’d been bitten by one of the multitude of vermin that crawled through the building’s light fixtures; in fact, he’d been accidentally shot and the bullet hole was still visible in his wall when reporters interviewed him several months after the fact.

It turned out that instead of spending money on housing development and tenant support, todco boosted executive pay and funneled millions into lobbying. As todco’s spending on its tenants declined by 17 percentage points, executive pay quadrupled. Meanwhile, todco’s president, John Elberling, launched the Yerba Buena Neighborhood Consortium, a political lobbying organization. Between 2012 and 2020, todco’s direct lobbying of legislative bodies increased 95 times, from $5,000 to $470,000. The Yerba Buena Neighborhood Consortium spent another $1.35 million on ballot referenda between 2016 and 2021, and within the small pond of municipal politics, that much money, if strategically deployed, can buy a shocking amount of influence.

Here’s where the story gets strange. Although todco’s nonprofit status is predicated on helping poor people afford housing, todco lobbies incessantly to prevent the construction of affordable units in some of San Francisco’s most expensive neighborhoods. In 2018, todco sued to prevent the construction of a mixed-use building on the grounds that it would cast “new shadows” on a community garden; todco then agreed to drop this lawsuit after the building’s developer paid them $98,000, raising questions as to whether todco was merely using San Francisco’s byzantine permitting process to extract a bribe from another developer. In another case, todco lobbied to block a 495-unit housing development that would have included over a hundred affordable units. In other words, an affordable housing nonprofit has repeatedly sued other developers to prevent the construction of the same affordable units that it is supposed to be working to provide.

Todco is a nonprofit whose mandate is to provide affordable housing. Over the last twenty years, however, todco has produced no additional units of affordable housing, has allowed the units it already owns to decay, and has spent millions of dollars preventing other developers from building thousands of apartments and hundreds of affordable units.

Read the whole thing here.

Follow Opportunity Now on Twitter @svopportunity

Sign up to receive updates on Opp Now articles

Email Address:

First Name:

Last Name:

We prize letters from our thoughtful readers. Typed on a Smith Corona. Written in longhand on fine stationery. Scribbled on a napkin. Hey, even composed on email. Feel free to send your comments to us at opportunitynowsv@gmail.com or (snail mail) 1590 Calaveras Ave., SJ, CA 95126. Remember to be thoughtful and polite. We will post letters on an irregular basis on the main Opp Now site.