Does tax-break promoter have a conflict of interest?

Randy Shaw testifying in favor of the tax exclusion zone on March 16.
Luke Thomas

In last week's Guardian, my investigation of the Twitter/Mid-Market tax exclusion zone showed that Tenderloin Housing Clinic director Randy Shaw played a central role in creating the district and policy that would cost city taxpayers about $22 million in lost payroll taxes (which officials hope to recoup in economic stimulation to the area).

Now, my continuing investigation reveals that THC business partner Paul Boschetti owns a hotel that was specifically targeted for the tax breaks, raising conflict of interest issues that city officials never asked Shaw about.

The legislation is sponsored by Sup. Jane Kim, whose supervisorial campaign was vociferously supported by Shaw and the BeyondChron blog he operates out of THC offices, and David Chiu, the board president and mayoral candidate. The proposal is scheduled for a vote by the Board's Budget and Finance Subcommittee tomorrow (Wed/23) at 10 a.m. in board chambers.

THC operates low-income rental housing in the Tenderloin and beyond on a city contract, receiving $15.7 million in government support in 2009 and recently being awarded a five-year city contract worth $82 million. Boschetti – a real estate investor who owns the Aida Hotel on Market and has owned the hotels Verona and Burbank in the Tenderloin and other commercial properties around town – owned the 126 Hyde building that is THC's headquarters.

In 2009, Boschetti and THC became co-owners of the building, with the documentary transfer tax indicating the sale was for just $150,000, which is very low for a large commercial office building. Officials with the Assessor/Recorder's Office say they are still in negotiations with the property owners to determine what the building is really worth.

So what exactly is going on here? Could this relationship – and perhaps others that Shaw has developed with property owners who would directly benefit from the tax exclusion – be why Shaw has so aggressively expanded and pushed this district? And why have public officials so blindly followed the lead of a private power broker whose clout was built with public funding?

Over the last week, I've asked Shaw several times by e-mail whether he has any personal economic interests in the tax exclusion zone, and he ignored the question each time – even as he vociferously denied making threats to labor union officials who are opposing the plan. When I finally discovered the Boschetti documents in a public records search and asked him about it, Shaw wrote, “We own our headquarters at 126 Hyde with Paul Boschetti. We have no other business dealings or investments with him, and our entire space is used by THC. We moved into this space in 1986 and have occupied the entire building since 1991.” When I repeated my questions about whether he has any economic interests in the district, he responded “only 126 Hyde.”

Now that we've learned more about this transaction, Boschetti's other property holdings, and a relationship between the two men that dates back for 25 years, we've forwarded Shaw a list of detailed questions. We've also placed calls with Boschetti and various city officials involved with the deal, all of whom have yet to call back, and we'll let you know what we learn as our investigation continues over the coming days.