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Monday, September 30, 2002

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City advertising under Proposition K

By Paul Kozakiewicz

The SF Board of Supervisors has expressed concern about two publications, the SF Independent and SF Examiner, seeking contracts for the city’s two types of legal advertising. The two publications are owned by the politically connected Fang family. The supervisors are concerned that the Independent is violating the conditions of its current contract and that the publication has excessively raised prices due to a lack of competition for the lucrative contract.

They are also concerned that the Examiner is trying to do an end-run around a city law that requires the publication to be printed in San Francisco.

The city pays for two types of advertising. Type 1 advertising is reserved for daily publications and Type 2 advertising is for publications published on non-consecutive days, but a minimum of three times a week. Ten percent of the contracts are set aside for outreach advertising to the city’s minority populations.

Five members of the Board of Supervisors put Proposition K on the November ballot. It is an ordinance that would open up the bidding process for the city’s legal advertising notices to additional publications – with the intention of increasing competition and lowering taxpayer costs.

SF Independent’s Circulation Woes

One problem the supervisors have concerning Type 2 advertising in the Independent is over the newspaper’s distribution.

The newspaper, which currently publishes notices for non-consecutive daily publications, drastically cut the number of Saturday issues it was delivering in the city, from about 165,000 to 30,000. As a result, many of the city’s legal notices published during that time in Saturday editions were unavailable to large segments of the public.

At the SF Board of Supervisor’s Finance Committee June 12 meeting, the three supervisors on the committee, Tom Ammiano, Aaron Peskin, and Chris Daly, all claimed they had not seen the Saturday edition of the paper for months. Peskin said the Independent’s circulation claims were “laughable and ridiculous.”

“It doesn’t meet the spirit of the contract,” SF Supervisor Jake McGoldrick said of the Saturday distribution changes.

The supervisors were also miffed that no one from the SF Independent was at the hearing to speak for the publication, causing Ammiano to muse that they might not have known about the hearing because the notice was probably posted in a Saturday edition of the newspaper. The hearing was postponed.

According to the last Verified Audit Circulation audit, the Independent published an average of 30,115 copies of the Saturday publication from July 1, 2000 to June 30, 2001. Of the total distribution, 23,045 copies were inserted into the Sunday Examiner for distribution.

The Independent claims the terms of Prop. J, the law passed in 1994 to govern the terms for awarding the legal advertising contract, were being fulfilled because the overall number of newspapers being published weekly exceeded 50,000. They claim the contract does not call for 50,000 copies of the publications to be published on a particular day, even for issues of the newspaper that carry the city’s public notices.

The Independent publishes 211,000 copies of its Tuesday edition and only 500 copies of its Thursday edition. There are no legal notices in the Thursday edition.

In April of this year, the Independent resumed publishing Saturday editions for distribution separate from the Examiner. The publication claims in a written declaration to the SF Purchaser’s Department that it upped its circulation to 150,775 on April 13, 2002, of which 143,475copies are home delivered.

As a result of the circulation discrepancies and updated audit reports being available, the Board of Supervisors has requested an independent audit from City Controller Ed Harrington to verify the Independent’s distribution numbers. As well, the supervisors only granted the Independent a six-month contract, on a month-to-month basis, while they monitor the situation.

Cost of Advertising Increases

After Prop. J passed in 1994, the Independent has been the only publication to win the contract for Type 2 advertising. The Independent was awarded the contract in 1995 and 1996 despite having higher bids than the SF Chronicle and Examiner. The Chronicle and the Examiner did not submit bids after 1996, making the Independent the sole source for the contract.

In 1991, the Independent bid $2.65 per line to publish legal ads, a price that increased significantly by 2000, when the publication bid $4.78 per line. In 2001 and 2002, the price per line bid was reduced to $3.98.

The city’s total cost for Type 2 legal advertising climbed from $230,103 in 1994, when the Hearst-Corporation-owned Examiner last had the contract, to $1.1 million in 1998.

In order to help lower the current costs for legal ads, the city’s purchasing department has been working to lower the cost of legal advertising by rewriting many of the ads with less text.

According to the California Newspaper Service Bureau, the city paid $466,446 to the Independent for posting Type 2 legal notices in the 2001-2002 fiscal year. And despite the cost per line remaining the same for the 2002-2003 fiscal year, the total cost for Type 2 advertising is expected to drop, to about $400,000.

SF Examiner Bid Rejected

After the Fang family took over the Examiner from the Hearst Corporation in November 2000, the newspaper attempted to win the advertising contract for Type 1 legal advertising.

But the purchaser’s department declared the publication out of compliance with city law. The Examiner was ruled ineligible because it is not printed in San Francisco and because it is not in compliance with the city’s “domestic partners” ordinance.

On Jan. 2, 2001, Bob Haddad, the vice president for circulation at the Examiner, sent a letter to the purchaser’s department saying: “The San Francisco Examiner is not printed in the city and county of San Francisco nor does it have plans to begin such printing in the foreseeable future.” The letter sent up a red flag at the purchaser’s department.

Assistant Director of Purchasing Michael Ward requested an opinion from the city attorney’s office to clarify the situation.

“The Examiner cannot continue to be the official newspaper if it doesn’t publish in San Francisco. There is no way to get around this, unless the board (of supervisors) wants to amend the law,” the city attorney’s office responded.

The Examiner now says it does comply with city requirements because five percent of the publication, including the TV Examiner, “X Files” and “Wheels” sections of the newspaper, are printed in the city. As well, Wayne Wash, advertising projects manager at the Examiner, now says the Examiner plans to print the entire publication in the city as of Dec.2, 2002.

According to McGoldrick, the Examiner’s claim that printing five percent of the Examiner in the city amounts to compliance with the terms of the contract is a “cynical ploy.”

Currently, the purchaser’s department has extended the Type 1 advertising contract previously held by the Chronicle, on a month-to-month basis, even though the newspaper did not bid for the city’s business this year.

In 2000, the last year the Hearst-owned Examiner had the contract, the city was paying $3.46 per line for Type 1 legal advertising. The next year, the Fang-family-owned Examiner bid $5.75 per line even though circulation dropped.

Currently, the city is paying the Chronicle $8.85 per line as the only qualifying newspaper. The greater price is based on the Chronicle’s 500,000-plus daily circulation versus the Examiner’s 50,000 daily circulation.

The total city expenditure for the Type 1 advertising contract this year is estimated to be about $30,000.

Prop. K Would Revise Public Notices Law

Sponsored by McGoldrick, Proposition K was put on the Nov. 5 ballot by McGoldrick and supervisors Peskin, Ammiano, Daly, and Matt Gonzalez.

According to McGoldrick, the supervisors are re-evaluating the city’s legal advertising needs and Prop. K is a plan to modify the bidding process for the city’s legal advertising. “It’s time we put competition back into our bid process for official advertising,” he said. Prop. K would retain outreach advertising for specific minority populations and would change the formula for awarding the contract to eliminate consideration for women- and minority-owned publications. Instead, Prop. K would award the contract based on advertising cost, circulation, and cost of the publication to the public.

The current guidelines for awarding the city’s legal advertising contract are governed by Proposition J, passed by San Francisco voters in 1994. Many of the city’s public officials were behind the effort, including Fang-family friend Jack Davis – the political consultant who helped elect Mayor Frank Jordan and Mayor Willie Brown – who helped run the campaign for free.

Prop. J is based on a point system that recognizes minority and women-owned businesses and rewards publications that are widely distributed for free, versus those that cost money to purchase.

Owned by a Chinese woman, Florence Fang, the Independent is a free publication.  Fang has her two sons, James and Douglas, and a daughter-in-law, Angela, helping run the family’s newspapers, which include a number of publications in San Mateo County. A third son, Ted, was fired by Fang over a policy disagreement at the Examiner. Another Fang-family-owned publication, AsianWeek, is an official outreach publication under Prop. J. AsianWeek gets all public notices deemed outreach for the Chinese community, a contract worth about $9,000 a year.

Paul Kozakiewicz is the publisher of the Richmond Review and Sunset Beacon newspapers, where this article first appeared.