By Matthew Hirsch

Most people who don't pay their bills soon find angry creditors banging at their door. Some get a subpoena to appear in court. At Treasure Island, a former U.S. Navy base that may one day become San Francisco's most valuable piece of developable real estate, the deadbeats are considered good financial managers.

At least that's how Mayor Gavin Newsom has described Annemarie Conroy, the onetime city supervisor who oversaw development at Treasure Island for six years before Newsom last month put her in charge of the city's Office of Emergency Services.

As executive director of the Treasure Island Development Authority, Conroy was responsible for making sure the island's roughly 3,000 daily occupants had access to vital public services: clean water, electricity, and sewage and storm water disposal.

The San Francisco Public Utilities Commission has provided those services since 1997.

But after seven years of delivering cheap water and power, offering Treasure Island some services it doesn't provide any other part of the city, the PUC recently found TIDA owes $3.7 million in unpaid charges.

What's worse, TIDA is making no effort to pay back the money. It's frozen utility rates for Treasure Island customers, and five months ago the mayor's budget office told the agency to cut utility services funding that would have gone to the PUC.

Unless TIDA covers these expenses, PUC ratepayers (that's you) will have to foot the down payment for what will almost certainly be an immensely profitable private development on Treasure Island.

The controversy over the unpaid bills comes at a time when the city's trying to figure out who should own and run the utility system on the island – which could be a crucial outpost for public power and a demonstration of the city's ability to effectively provide retail electrical service.

And already, TIDA's red ink has spurred a PUC consultant to suggest the city should turn over operation of the utility system to a private entity.

Willie's island paradise

Situated on 400 acres of flatland in the middle of the San Francisco Bay, Treasure Island is considered the crown jewel of the San Francisco waterfront. The island offers panoramic views of the city skyline and a one-of-a-kind perspective of its northwest neighbor, Alcatraz Island.

When Willie Brown announced his vision for development on the island back in 1995, after the Navy decided to abandon the former base, one could say only his rhetoric matched the plan in terms of grandiloquence. Early proposals included a theme park, luxury hotels and casinos, an 18-hole golf course, and sports fields to rival the best in the world. After taking office, Brown courted Li Kai Shing, then considered the wealthiest man in Hong Kong, to bring that vision to life.

Brown created TIDA – instead of going through the normal city planning process – because it gave him the power to appoint the director and all five commissioners who oversee the organization. For eight years he ran Treasure Island as a personal fiefdom while much of city hall was kept almost completely in the dark.

"It was a Willie Brown edict that Treasure Island would be off the General Fund," Sup. Chris Daly, who serves as a nonvoting member of the TIDA commission, told the Bay Guardian.

At Brown's behest, the city entered a cooperative agreement with the Navy to operate and maintain the utilities on Treasure Island and Yerba Buena Island while the Navy retained ownership of the system. Once the Navy transfers the last of its Treasure Island property (optimists believe that may happen by the end of the year), the city is expected to take ownership of the utilities as well.

With ownership of Treasure Island's utilities comes the obligation to bring them up to standard. That cost, estimated by consulting firm Raines, Melton, and Carella (RMC), is $52 million.

Each year the PUC continues to operate Treasure Island's utilities under the current agreement, it stands to lose $700,000, in addition to TIDA's $3.7 million outstanding debt.

RMC began a risk-assessment study of Treasure Island's utilities in July 2003 to determine who should own and operate the decrepit system. In order to protect the PUC from losing even more money, RMC recommended TIDA should own the system and a third-party contractor should operate it.

But in a July 12 report to the commission, PUC project manager Julie Labonte said TIDA wants to keep the arrangement as it is for the foreseeable future.

"We've been trying to push internally to have ownership assigned to TIDA, and we've pushed very strongly for that, but TIDA from time to time keeps bringing back up the idea that the city would own it. And if the city owns [it], indirectly the PUC owns it," Labonte told the commission.

The problem is, nobody wants to finance a major utility reconstruction project on Treasure Island. And the city shouldn't have to pay it, Daly told us. Capital improvements for the utility system should be part of a long-term development plan, and developers should cover most of the costs, he said.

As for who should operate Treasure Island's utilities, Daly said it should remain a public power agency. For seven years the lights have stayed on and the toilets have flushed as the PUC has run what is effectively a full-service utility company. "I think it's clear the city has the capacity to run utilities," Daly said.

Newsom's move

After sending Annemarie Conroy off to another high-paying job in the Office of Emergency Services, Newsom named Tony Hall to the TIDA post. Another former supervisor with dubious qualifications for the job, Hall is now responsible for paying the PUC – or not paying, as Conroy had done before him.

Conroy acknowledged TIDA's unpaid bills for PUC utility services, but she told us that "it is wholly inaccurate" to characterize the money as debt. Instead, she called it part of the city's investment in Treasure Island. In essence, Brown offered an unwritten agreement that allowed TIDA to avoid paying its bills until the development was underway.

"Those are moneys that were always agreed to be offset by future utility revenues," Conroy said. "There's been an accounting the whole time, so I don't think anyone's taken issue with the fact that there are some moneys invested in Treasure Island."

When told of the situation last month, PUC president Dennis Normandy wasn't happy. "This issue is no longer to be swept under the carpet. It is very, very important that we know who is going to pay us the $3.7 million and not continue to have our pocket picked as it has in the past," he said.

If push comes to shove, Normandy warned, the PUC might be forced to shut down the utilities.

So what's Hall going to do? We contacted TIDA, where Hall took over as executive director Aug. 4, but he didn't return calls for comment.

P.S. Frank Gallagher, a former spokesperson for Pacific Gas and Electric Co.'s campaign against public power, and a longtime political operative and former San Francisco Examiner columnist, told us Hall had "broached" the idea of hiring him for the new position of spokesperson for the TIDA executive director. He said he told Hall he would be happy to serve, though he didn't know what his salary would be.

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