Peter Schweizer - Throw Them All Out

Phase I of the project was heavily funded by the Federal Transit Administration's New Starts program. Pelosi helped secure the funding, to the tune of $532 million, to get the project under way, and another $200 million to continue construction and begin planning for phase two of the project. For the initial $532 million, she actually secured "cost-effectiveness exemptions" from the federal government to make the deal possible. In 2008, she got an additional $11.7 million to help finance Phase II, and over the course of three years she set aside $28 million more for it. 3

The new transit line serves as a "key infrastructure improvement to help support revitalization of communities along the corridor," in the words of the San Francisco metro authority. Interestingly enough, that happens to include one of Nancy Pelosi's most valuable real estate assets. 4

Pelosi and her husband own a four-story office building at 45 Belden Place. The building is worth between $1 million and $5 million, according to their financial disclosure. Paul Pelosi receives a management fee for handling the property (which he is not required to disclose) on top of net rent of between $100,000 and $1 million per year.

Phase II of the Third Street project runs just two blocks from the Pelosis' commercial buildings. Two stops on the line—Chinatown and Union Square/Market Square—are three blocks from the Pelosis' buildings. Why does this matter? Realtors have a name for it: "transit premium." The National Association of Realtors says that high-quality mass transit (like this project) can increase property values by "over 150 percent." A $3 million commercial building can become a $7 million building practically overnight.

According to a study by the association, location is key: you don't want the metro stop to be too close or too far. There's a sweet spot for obtaining the maximum transit premium: two to four blocks away is ideal. 5

Another study by two academics found that a light rail system in Santa Clara County, California, boosted commercial real estate values by 120%. 6

WE BUILD ANOTHER SPEAKER A LIGHT RAIL SYSTEM

Nancy Pelosi seems to have a history of advancing earmarks that are near her family's commercial real estate. (Actually, Pelosi doesn't like to use the word "earmark." At a 2007 press conference she said, "Why don't we leave here today forgetting the word earmark?" She suggested the phrase "legislative directive" instead.) In 2005, Pelosi pushed for another $20 million earmark, for waterfront redevelopment only two blocks away from the Belden Street property. The earmark was killed in July of that year. The Pelosis increased their financial stake in the property, and the next year Pelosi asked for the earmark again, and this time she succeeded. 7On another occasion she secured $12 million for the beautification of Geary Boulevard in San Francisco, which happens to abut an investment property the Pelosis own on Point Lobos Avenue.

Nancy Pelosi is not the only elected official who earmarked a mass transit project that was in close proximity to real estate holdings and apparently profited handsomely from it. Congresswoman Carolyn Maloney represents parts of Queens and Manhattan, including the Upper East Side "silk stocking district." A former member of the New York City Council, Maloney was first elected to Congress in 1992. For many years she was married to an investment banker, Clifton Maloney, until he passed away in 2009.

In 2007, Congresswoman Maloney, together with New York Senators Charles Schumer and Hillary Clinton, secured an earmark of $167 million for a new MTA subway line. In 2009, she helped obtain another $277 million for the project. In 2010, a third earmark, for $197 million, was approved. The long-sought-after Second Avenue subway, running up the East Side of Manhattan, could finally begin construction. It will likely take years to complete, at a cost running well over $10 billion.

Maloney owns a building at 409 East 92nd Street, valued at between $5 million and $25 million. On her personal financial disclosure, she lists it as a "rental property & residence." Plans for the new subway line feature a stop that happens to be three blocks away from her building—again, right in the "sweet spot."

Congressman Bennie Thompson of Mississippi inserted into the 2010 federal budget an earmark to expand a small regional airport. 8The airport was not in his district. It was not in the state of Mississippi. Indeed, it wasn't even in the South. Thompson's earmark was for $800,000 to upgrade the Napa Valley, California, airport—specifically, for a "runway 36L glidescope."

Why would a congressman from Mississippi put in an earmark for an airport dubbed "Skyport to Wine Country"? Perhaps the answer lies in the fact that Nancy Pelosi had contributed to his rise to the chairmanship of the House Committee on Homeland Security. The Pelosis own a vineyard and home in St. Helena, California, worth between $5 million and $25 million, and another property nearby. They also own a stake in an exclusive resort called Auberge du Soleil in Rutherford, worth between $1 million and $5 million. All of these properties are north of the airport, sitting beneath what had been the flight path for planes coming in to land. But with the new glideslope, according to the airport, more planes would be able to approach from the south. The Pelosi properties would be spared from overhead noise. 9

Funding for the expansion of the Napa Valley airport by a congressman from Mississippi is not the only earmark that has benefited Pelosi's personal investments. Also in 2008, an earmark was inserted in the federal highway bill to widen and improve an exit ramp on California's historic Highway 101. That might not strike anyone as unusual, except for the fact that the interchange is next to a shopping mall owned by Pelosi and her husband. According to her financial disclosure forms, that mall brings in between $100,000 and $1 million a year in net income.

So why did legislators do Pelosi a favor? She is the most powerful Democrat in the House. If you want to get something done, it needs to go through her.

The earmark game is bipartisan. Republican Senator Judd Gregg of New Hampshire, whose father, Hugh Gregg, served as governor and was long active in the New Hampshire Republican Party, has spent the bulk of his adult life in political office. Judd was first elected to Congress in 1980, elected governor in 1988, and to the U.S. Senate in 1992. A little more than a decade after joining the Senate, he became chairman of the powerful Budget Committee. In a show of bipartisanship, President Obama tried to nominate Gregg to be his secretary of commerce in 2009. Gregg first accepted, then withdrew, deciding instead to stay in the Senate. He retired in 2010.

Judd Gregg had a reputation as a fiscal conservative, but he was always fond of earmarks. He obtained $266 million in research and development money for the University of New Hampshire, for example, and the school generously named its new technology center Gregg Hall. 10

While he served as chairman of the powerful Senate Budget Committee, Gregg earmarked some $66 million in taxpayer money to transform Pease Air Force Base in Portsmouth, New Hampshire, into a business park. He managed to secure $24.8 million for a new federal building there, and at least $24.5 million for New Hampshire National Guard projects at the base, including a new fire and crash rescue station. In addition, he garnered almost $9 million for a new wing headquarters, and $8 million to transform the base from military to civilian use, including buying snow-removal equipment and building a parking lot. For good measure, he was able to pull down $475,000 for structures to shield office buildings at the base from airplane and other noises.