Wilkerson, Church Leaders Discuss Exit

The exit strategy for State Senator Dianne Wilkerson will play out longer than was expected by even some of the closest supporters in her community.

It was reported this morning that church leaders in the Ten Point Coalition and Black Ministerial Alliance of Greater Boston would follow the lead of the state senate and ask for Wilkerson’s resignation. But, before their scheduled announcement at the Charles Street AME Church in Roxbury, Wilkerson arrived there to meet them for what her campaign manager, Boyce Slayman, called a conversation that “had to happen.”

When the announcement took place shortly before noon, it was Wilkerson who broke the news by saying she would suspend the sticker campaign she began after losing the Democratic primary September 16 to challenger Sonia Chang-Díaz. And Wilkerson said she would make an announcement concerning the remainder of her current term after the final election, on Wednesday, November 5.

Slayman said the talks before the announcement touched on Wilkerson’s exit strategy and “what could or could not be said legally” due to corruption charges by the US Attorney Michael Sullivan. After the talks, the announcement was made with Wilkerson and the church leaders standing together.

“We’re simply standing with the senator today, recognizing that she is a part of our community. We dearly love her and will continue to pray for her,” said the president of the Black Ministerial Alliance, Bishop Gilbert Thompson.

The chairman of the Ten Point Coalition, Rev. Ray Hammond, said church leaders would also “continue to work to see that, in fact, what is right is done.”

Slayman said Wilkerson’s decision to suspend her campaign was “in large part, primarily for the community,” but that a “significant consideration” was the well-being of her family.

“The press attention to the accusation by the US Attorney caused a lot of consternation within the community,” said Slayman, “and there is also the consideration that she has gotten a lot of calls—mostly in support, but we’ve also gotten a few critical calls.”

Even before yesterday’s vote in the senate—and its seconding by Governor Patrick, the black community’s weekly newspaper, the Bay State Banner, had withdrawn its endorsement of Wilkerson’s re-election. But Slayman says the district would suffer if Wilkerson were to resign before a new senator takes office.

“One of the stories that’s beginning to be told even at the end of this campaign are the contributions she’s made to this community, representing people, working with mothers of children who’ve been murdered, getting people who’ve been sentenced to prison wrongly some compensation,” said Slayman. “The things she’s done took a real strong person to do, and the concern is that the person on the ballot now, if they have the will to do that, it would just take so much time to learn the system and to gain the influence to make the difference, and to really learn the constituency—she hasn’t lived in this community, hasn’t invested very much time here. And so the concern is that the community needs government more than most other senate districts in the state.”

Later this afternoon, Chang-Díaz appealed to Wilkerson supporters in the senate district for their partnership and help.

In a statement issued by her campaign, Chang-Díaz said, “I will go to the mat for the constituents of the Second Suffolk every day on the issues affecting our families the most—whether it's improving our public schools, stemming youth violence, tackling CORI reform, or fighting for affordable housing. We all know solutions won't happen overnight, but I can tell you I will work, from Day One, to build the coalitions both in- and outside the State House necessary to pass the legislation we need.”

The same afternoon, Governor Patrick announced formation of a new bipartisan task force on ethics reform. The task force would be headed by the governor’s chief legal counsel, Ben Clements, a former federal prosecutor who worked four years in the Public Corruption and Special Prosecutions Unit. The move follows developments in the Wilkerson case, but also investigations of lobbying by associates of House Speaker Sal DiMasi.

FBI Pictures Tell Story: Senator for Sale

On the FBI’s undercover video, it wasn’t the senate district that was for sale, but the senator herself.

After losing a tight Democratic primary race September 16, Dianne Wilkerson accused contributors to challenger Sonia Chang Díaz of buying a seat that belonged to the people of the Second Suffolk District. But in the eye of an undercover camera, it was Wilkerson who was the accused, allegedly bought with a cash bribe stashed into her brassiere. For people accustomed to seeing the senator in the center of a large gathering, the shots looked off-angle and even truncated, as if the familiar public figure had been deconstructed.

The affidavit filed with the FBI’s criminal complaint against Wilkerson says she took $23,500 in cash bribes over a period of 18 months. The money was supposedly for help with securing a liquor license and development rights along Melnea Cass Boulevard in Roxbury.

Helping to get the license could just as well have been part of a state senator’s job: pushing for one more step on the long road to realizing the Crosstown area’s potential for economic growth. In other words, a case of “Dianne delivers,” to use the name of the website for Wilkerson’s most recent campaign.

But, as the FBI alleges, the liquor license was arranged after Wilkerson had used her power as a senator to hold up measures affecting the Boston Licensing Board and the 2007 City Council election. And the FBI said Wilkerson tried to provide exclusive development rights on a piece of state-owned land that would normally be awarded after a process of public bidding and review. Without that process, it would be more difficult to know whether the rights were given to the best possible development deal for the state and the community.

According to the FBI, Wilkerson helped secure a partial victory for the applicant—the FBI’s “cooperating witness” —trying to open a dinner club at Crosstown Center. After denying the initial application, the Boston Licensing Board approved some revisions and gave permission to serve beer, wine and cordials. Before that happened, Wilkerson allegedly held up state legislation to give board members a pay raise. Was the board’s later decision influenced by the actions of Wilkerson? The FBI makes it seem this could have been the case. The board has no comment.

Wilkerson also allegedly put pressure on the City Council to help with the license approval, and to increase the supply of new licenses. One of these would potentially benefit the “cooperating witness,” since it would be much less expensive than the cost of getting a license the conventional way, by transfer from another location. And the FBI said five of the coveted licenses were to be set aside for Roxbury and controlled by Wilkerson.

To get cooperation from the City Council, the FBI says Wilkerson threatened to hold up a home rule measure that would have made it possible to skip the preliminary election in September of 2007 for city councilors at large. With only nine at-large candidates on the ballot, and fewer who were considered competitive, supporters justified the measure as a way to save money. The measure eventually passed, and in the final election, voter turnout was 13.59%, little more than half the figure for the two previous elections for city council alone.

If there had been no more than eight candidates to begin with, the preliminary election would have been skipped automatically. It’s hard to prove the lack of a preliminary made much difference in the outcome, though some have blamed it for a reducing public awareness and voter interest.

To go by the FBI account, while the City Council, Mayor Thomas Menino, and the Boston Licensing Board delivered for Wilkerson, there’s no accusation they did so with any knowledge of cash payments from a special interest. To the extent they helped with the license application and the overall supply of licenses, the affidavit doesn’t rule out the motives of promoting economic development and political cooperation.

Former City Councilor Lawrence DiCara says the councilors probably saw their dealings with Wilkerson as horse-trading.

“People do horse-trading,” he said. “That’s what politics is all about.”

If what gets traded benefits the district, or even special interests whose campaign contributions are made legally, it’s quite possible there’s no harm done. DiCara even recalled securing a license at a cost of $1.00 for a Sons of Italy lodge in Roslindale founded by his grandfather.

But if the quid pro quo also includes what the FBI says it captured on video and audio, the story changes.

“If I had done someone a good deed,” said DiCara, “and if I had done any horse-trading and found they were getting bags of money on the side, I would be embarrassed and offended.”

Late Tuesday afternoon, City Council President Maureen Feeney issued a statement that she had met earlier in the day with the FBI and the Boston Police Department, and that she was cooperating in the ongoing investigation.

“This is a disappointing day for all of us who are involved in public service,” she said. “The people are right to expect a higher standard.”

Another interpretation, by one of Wilkerson’s long-time supporters, Louis Elisa, is that there was a double standard: going after Wilkerson at a time when the FBI’s ability to go after criminal activity such as mortgage fraud had been diminished. And Elisa argues enforcement against corruption falls disproportionately on politicians of color.

While critics blame Wilkerson’s ethical problems on her character, Elisa says they are “a continuing pattern of trying to stop her from representing the community she lives in.”

As the affidavit notes, Wilkerson had supported the alcoholic beverages application before there was any question of a payoff. It was only after the initial application was denied that the “cooperating witness” offered the bribe, acting “at the direction of the FBI.” This happened, according to the affidavit, after the witness had told the FBI Wilkerson “routinely took cash payments from constituents and others having business before the Senate.”

If Wilkerson was baited, she still could have refused an illegal payoff. Even if the decision to lay the bait stems from a double standard or even from false accusations, any political weakness or financial strain could have made the temptation harder to resist. As Elisa put it, “It’s like offering bread to someone who’s hungry.”

Elisa was among the supporters at the meeting September 22, when Wilkerson announced she would try to hold on to her seat by running a sticker campaign in November. Two nights after the meeting, the FBI says Wilkerson spoke with an undercover informant about the campaign and legislation for development rights, and asked for $10,000.

Ten days later, according to the FBI, Wilkerson met the informant at Ali’s Roti Wraps and Take Out Restaurant on Tremont Street in Roxbury. The affidavit says, after telling him she filed the bill for the development rights, she took ninety $100 bills and twenty $50 bills and placed them in a manila folder. It was the last payment.

But yesterday’s events have changed the mind of at least one stalwart supporter, the most prominent newspaper in Boston’s black community, the Bay State Banner. In an editorial titled “End of an era,” the Banner weighs Wilkerson’s past accomplishments against the charges, the images in the media and the rest of the FBI’s evidence. “It is evident,” says the editorial, “that Wilkerson has breached the public trust.”

Question 1: Desperate Measure, Desperate Time

After three hours of testimony against the ballot referendum to abolish the state income tax, the last remaining City Councilors were faced with a Joe the Plummer. His real name was Mark O’Connor, and he introduced himself as a “concerned citizen” from Dorchester. He also said recently lost his job with a structural engineering firm—by his own account, a casualty of the credit crisis.

But, unlike so many community activists, labor leaders, and public officials at a public hearing October 21, O’Connor spoke in favor of abolishing the income tax by voting “Yes” on Question One.

“If it were to pass,” said O’Connor, “it would provide me some relief from the burden of taxation.”

By way of “desperate measures” for desperate times, O’Connor said the councilors opposing a “Yes” vote on Question One should come up with other ways to raise tax revenue and create jobs.

“Cut the red tape out,” he said. “This is ridiculous.” When pressed for a new revenue source, O’Conner suggested wind power.

Long before the hearing ended, 11 councilors had declared opposition to a “yes” vote on Question One. The next day the council would unanimously vote for a resolution calling for a “no” vote.

Before O’Connor had his turn, councilors heard a litany of possible outcomes from a “yes” vote: overcrowded classrooms, a cutback in home care for the elderly, higher fares and deteriorating service on the MBTA, and less access to English language classes for immigrants.

At the same hearing the Chief Financial Officer and Collector-Treasurer for the City of Boston, Lisa Signori, said the effect of a "yes" vote on the local budget would be a shortfall of $300 million, or 16% of total appropriations. She said that would require "significant cuts across the baord."

"We would not be in a position to not impact public safety and not impact public schools," she said.

According to the Boston Municipal Research Bureau, the only way for the city to absorb the revenue loss without cutting schools, police, fire and public works (including related non-discretionary overhead such as health care and pensions)--and still avoid runing over budget--is to eliminate spending for all other departments and services.

"No matter how the City responds to Question 1," says Bureau President Samuel R. Tyler, "the cuts in local aid would fundamentally compromise the City’s ability to provide essential and quality of life services to the residents and businesses it serves."

The ballot question has also given rise to rival studies, with the largest net gains argued by the “yes” vote’s main supporters, the Committee for Small Government. The group says a “yes” will give each taxpayer an average of $3,700 a year, create thousands of jobs, while cutting state revenue by only 26.4%.

The Mass. Taxpayers Foundation (MTF) says the loss of income tax revenue would cut the state budget by about 40% and force even deeper cuts in some areas. As far as total state revenue, MTF says the Committee For Small Government pads the figure by double counting and including off-budget revenue such as state lottery proceeds (more than half of which goes back to prize winners).

While refusing to take a side on the ballot question, the Beacon Hill Institute (BHI) tries to show what might happen if approval of Question One were to play out in a “best case scenario,” that is, being partially offset by increases in revenue from sources such as the property tax and the sales tax.

BHI’s strongest argument in favor of Question One is that eliminating the state income tax would produce a net gain of more than 80,000 jobs. The tax break supposedly would spur more people to enter the workforce, while employers would have more incentive to hire (lower taxes needing less offset from higher wages, and a larger pool of labor driving down cost).

By BHI’s estimate, the “relevant increase” in average annual household income from approval of Question One would be $1,500. How much of this would go to the people sitting on the sidelines of the job market? Even if the figure assumes increases in other taxes, it’s far from clear how many people would jump into the lower end of the job market from lower end of the idle labor pool. If the figure does assume new replacements for revenue, then many people from the lower end could still be disproportionately burdened by an expanded sales tax (including levies on food, electricity, and home heating) and property tax (whether as property owners or as renters).

The BHI factors in a number of cost-savings, starting with state spending on welfare (except for Medicaid) and housing and community development. It’s not clear how much welfare cutbacks would involve people who are employable, or a loss of potential added value (through training, or in connection with child care support) that could be costly in the long term. For example, more public subsidy might be needed for health insurance over the long term if a recipient is trapped longer in low-wage jobs.

Some of the other savings envisioned by BHI are iffy, to say the least. These include repeal of the state’s prevailing wage law (sure to meet with vigorous opposition from organized labor) and the Quinn Bill, which provides higher pay and pension benefits to police officers meeting requirements for higher education. In Boston, access to benefits under the Quinn Bill is guaranteed by contract. As popular as a cutback in those benefits might be for local taxpayers, the police union opposition would most likely be fierce, and any loss of benefits would almost certainly come at a price.

Also unclear under the BHI scenario is the chance of raising property taxes with an override of Proposition 2½. Though Boston’s tax rate (at least for residential property) is relatively low, it may be hard to frame an override as a necessary price for quality. In other communities, override campaigns are often directed at trying to protect quality in a public asset, such as a public school system with strong performance across-the-board. In Boston, where the quality is spotty, and where a smaller percentage of households have children in the public school system, an override campaign based on education might have more trouble.

The analysis for the Greater Boston Chamber of Commerce (COC) is confined to the elimination of the state income tax. Among the many resulting drawbacks cited by the COC is an increase in the cost of borrowing for state projects—including the backlog of road and bridge repairs. The COC says cuts resulting from Question One “could cripple public education at all levels.” And that, according to the COC, would hurt growth in economic sectors that depend on skilled workers: biotech, high tech, financial services, health, and education.

What no study looks at in any systematic way is the effect of a “yes” vote on Question One during a sharp economic downturn. In the best possible scenario, the rough patch would be of short duration. But, while it lasts, it’s hard to envision much in the way of relief from the downturn itself—whether by voting “yes” and cutting taxes, or by voting “no” and maintaining the state’s quality of life and workforce.

In their different ways, the BHI and COC show how the world might adapt—for better or worse—to a new landscape in taxes. What voters are not shown—by either reports or referendum campaigns—is how tax policy can adapt to a world that’s changing dramatically.

Subprime Virus: Blame CRA or Loose Market?

Before you blame the Community Reinvestment Act (CRA) or the financial equivalent of affirmative action for the epidemic of subprime mortgage defaults—and the ensuing global economic crisis—consider the case of some condo units in three-deckers near Codman Square in Dorchester.

When Tariq Muhammad bought three units at 43 Whitfield Street in February of 2006, one of the lenders was New Century Mortgage Corp. At the time one of the country’s two largest providers of subprime mortgages, New Century had also given Muhammad a mortgage with 100% financing less than four months earlier for another three-decker unit, just around the corner on Wheatland Avenue.

All four of the loans to Muhammad—all from mortgage companies—resulted in foreclosure petitions. At Wheatland Avenue, Muhammad signed on for a mortgage with interest that would begin at 7.25% and then reset to as high as 14.25%. For the adjustable-rate loan at Whitfield Street, the reset could run as high as 16.575%.

Despite the higher risk associated with subprime mortgages, the higher interest would make it possible for the loan to pay a higher return when sold to financial markets. And, by the time the foreclosure petitions were filed, the loans were often being held by other companies. In the world of early 21st century finance, buyers of securitized loans were also able to ease their anxiety over possible loan defaults through new ways of hedging their investments—or by simply assuming the steep rise in property values would continue forever.

According to the Mass. Community & Banking Council, the transactions involving Muhammad were fairly typical for their time and place: in 2006, 68.7% of the high annual percentage (APR) loans in Suffolk County for purchase of owner-occupied properties were made by independent mortgage companies. They were licensed in the State of Massachusetts, but not subject to a federal mandate for serving a particular area or population.

For the same year, the council’s report on lending patterns shows a distribution of credit that corresponds very closely to regulatory directives for lending to “traditionally underserved” areas and populations. In Boston, of all home purchase loans going to black borrowers, 53.5% had high APR rates. For Latinos, the figure was 45%. For whites, it was 11.7%. Likewise, the share of high APR mortgages for all home purchase loans was 54.4% in Mattapan, 49% in Roxbury, and 41.2% in Dorchester. As it turned out, one person's pattern of community investment could become another's pattern of predatory lending.

So was the subprime lending pattern also caused by CRA or another push for affirmative lending? The author of the mortgage studies for the Community & Banking Council, James Campen, says no. Since most of the subprime mortgages were written by lenders beyond the reach of the CRA, Campen blames the resulting epidemic of defaults on a lack of regulation.

“Basically,” said Campen, “the banks weren’t the worst abusers in this by a long shot.”

The subprime mortgage disaster was not the first case of lending gone bad on a large scale. In the 1980’s, the lending crisis that resulted in a taxpayer bailout was caused by savings and loans, which were also exempt from CRA regulation.

So, if the mortgage companies were a second batch of lenders outside the reach of CRA making imprudent loans, then how account for the growth in subprime lending during the early years of the decade by banks such as Washington Mutual, JP Morgan Chase, and Wells Fargo? According to BusinessWeek in April of 2005, the chief economist with the Mortgage Bankers Association, Doug Duncan, said one reason was that profit margins on subprime loans were “slightly better” than for prime loans. He also mentioned the mutually reinforced incentives for mortgage brokers to arrange loans with higher interest rates—and higher commissions for themselves.

Around the same time, Fannie Mae was significantly increasing support of subprime lending as a secondary source of capital—a practice it began in 1994. The deeper plunge into the subprime market followed regulatory and political pressure to meet more credit demand in low and moderate-income areas, along with the backlash around Fannie Mae’s overstated earnings in 2004.

But the New York Times says the change of direction at Fannie Mae was also due to market forces. As the Times explains, the growth of subprime lending and the growing volume of those loans purchased by investment banks (such as Lehman Brothers, Bear Stearns, and Goldman Sachs) during the housing boom threatened Fannie Mae and Freddie Mac with a loss of market share. The result was more pressure on Fannie Mae—but from the likes of hedge fund managers and subprime lenders such as Countrywide Financial.

As for Muhammad’s lenders at 43 Whitfield Street, New Century filed for bankruptcy in April of 2007. Nation One Mortgage Company stopped writing mortgages in May of 2007. And Fieldstone Mortgage Company filed for bankruptcy protection in November of 2007.

In September, 2006, Muhammad bought and did his own conversion of a three-decker in Dorchester, on Fuller Street. In 2007, when the condo market was already slipping, he sold two units in the house for $355,000 apiece, with mortgages by Homecomings Financial and Wells Fargo. Foreclosure petitions have been filed on both units. The third unit was sold in February of this year for an even higher price--$365,000—to a buyer who purchased another three-decker unit—from the same developer who sold the units on Whitfield Street to Muhammad.

All three of Muhammad’s units at 43 Whitfield Street made it all the way to foreclosure, and two were sold this year. Both buyers were from out of state, and one unit received a mortgage from JP Morgan Chase—for use as a second home. In both cases, the buyer of the units at foreclosure sales, Lord Allah, turned them over the same day for a nominal amount to a company headed by another investor with a string of foreclosures. And that buyer sold them to the current owners within two months.

The subprime debacle has already gained distinction for resulting in the worst global economic downturn since the Great Depression. But the pattern of speculation and bad loans on overvalued properties has been seen before, mainly on loans by thrifts in the late 1980’s and early 1990’s.

In the interim of little more than two years between Tariq Muhammad and Lord Allah, many large companies have gone to ruin or vanished into mergers, and many homeowners and tenants have suffered enormously. Buyers still acquire multiple units in three-decker condos, but at lower prices and with higher down payments. More often these days, the mortgages stipulate use of the property as a second home—but even some of these loans have already begun to fail. Buyers and lenders may come and go but, as those who remember the 1990’s might conclude, the pattern at street level has remained very much the same—at least until the end of the early 21st century.

Changing Schools in a Time of Crisis

Starting her second year as Boston School Superintendent, Carol R. Johnson has to make headway on improvements while looking for ways to save money—all in the midst of a global economic crisis.

“It’s always easy to add and difficult to subtract,” she said last Wednesday night, as she presented her plan, “Pathways to Excellence,” at a meeting of the Boston School Committee.

On the add side are options that are popular with parents and with champions of reform: new and expanded K-8 schools, three new innovative “pilot” schools, a new two-way bilingual program, more enrichment and science programs, and more programs for dropout prevention. There would be single gender programs for grades 6-12, a new school for immigrants needing help with English, and a new transitional school for students with severe attendance problems. There would also be expansion through grade 12 for two schools in Brighton and Dorchester serving lower grades with a more inclusive approach to special education.

On the subtract side of Johnson’s recommendations are the closing of five elementary schools and some winnowing of the experiment with subdivided high schools. With changes in student assignments to increase walk-to enrollment, and possibly with some shorter commutes for students with learning disabilities, officials say the plan would trim costs for transportation over the next five years by $4.7 million. They say the overall savings would be $13.8 million.

When presenting the plan, Johnson called the closings “a means to an end.”

“We reduce the number of seats,” she said, “to redirect resources to quality programs.”

“This is all driven around academic excellence, equity, and access,” said School Committee President Elizabeth Reilinger.

“Some of this will be phased in over time,” she added. “It’s not all at one time.”

The closings would follow a period of declining enrollment—according to the School Dept., by 7% over the past five years. Among the reasons given for the decline are increasing competition from charter schools, and the overall decrease in the city’s school-age population. Officials say the percentage of Boston children enrolled in the school system has been holding steady, but figures also show the number of Boston students enrolled in charter schools is surpassed by the number on the waiting list.

The chair of the Education Committee on the Boston City Council, Chuck Turner, says the superintendent is “between a rock and a hard place.”

“What she has to do, on the one hand, is increase the attractiveness of the system as a whole to parents,” said Turner, while working within a budget “at a time when resources are declining.”

And Turner says the question is less about whether some schools should be closed than which ones.

“You have to persuade the public that, while closing anything is difficult,” he said, “there really is a need there.”

The senior project director at Mass. Advocates for Children, John Mudd, praised the plan as “extraordinary and impressive.” But he says there are still questions about how a change in the use of buildings will affect teaching practices and school management. And he says more has to be known about how changes in transportation affect access to sought-after programs in limited supply, such as advanced work classes.

“How are these organizational changes going to be turned into educational changes for teachers and for children?” he asked.

The president of the Boston Municipal Research Bureau, Samuel Tyler, calls the superintendent’s plan “a good foundation over time.” But he says there have to be even more savings from changes to student assignments.

“I finally think that, in the end, the School Committee or the superintendent will be in the situation where they were last year—where they need to cut more,” said Tyler.

In the previous fiscal year, school officials had to make cuts, but still needed more money, including a one-time rescue of $10 million from the city’s reserves.

According to Tyler, the school system still faces rising costs for personnel, along with a possible reduction in money from the state, due to the economic slowdown. He says the School Dept. also has to develop a new central kitchen—or find a contractor—for a meals program that currently costs the city $6-8 million dollars a year.

“This isn’t the end of going back and looking at how to make cuts in operation,” said Tyler.

Nor was the plan the end of demands from parents. While two parents at the School Committee meeting thanked Johnson for enlarging K-8 options in West Roxbury, others called for more advanced work classes in middle schools and a two-way bilingual program closer to the Haitian-American community in Dorchester, Mattapan and Hyde Park.

But, with a growing financial crisis around the world, Mudd says the effect on students will go beyond the school budget to the direct economic stress on families—whether in homelessness or abuse.

“This is going to hit people pretty hard,” said Mudd. “And usually the people who are most vulnerable will be hit the hardest.”