S.F. developer ducked fees on house that collapsed

Mel Murphy, 67, a partner in Murphy & O'Brien Real Estate Investments, is seen at 125 Crown Terrance on Wednesday, December 18, 2013 in San Francisco, Calif. The home partially broke apart during a major remodeling and expansion effort. less Mel Murphy, 67, a partner in Murphy & O'Brien Real Estate Investments, is seen at 125 Crown Terrance on Wednesday, December 18, 2013 in San Francisco, Calif. The home partially broke apart during a major ... more Photo: Lea Suzuki, The Chronicle Photo: Lea Suzuki, The Chronicle Image 1 of / 18 Caption Close S.F. developer ducked fees on house that collapsed 1 / 18 Back to Gallery

The former president of the San Francisco Building Inspection Commission saved himself at least $15,000 in permit fees when his business partner provided a lowball estimate of the construction costs for renovating an aging Twin Peaks home that collapsed last week and slid down the hillside, city documents show.

The construction costs for a major expansion of the modest hillside home were initially listed at one-tenth, and then half, of what city officials say was the actual price of the work, documents show.

It's the second time this year that Mel Murphy, a politically active friend of Mayor Ed Lee's who now sits on the city's influential Port Commission, has performed major construction work without paying thousands of dollars for proper permits, city documents show. The controversy comes even as the Department of Building Inspection tries to shed a reputation for cronyism and insider dealing that has plagued it for years.

'Where's the fairness?'

"Where's the fairness here? This has to be fair and equitable," a visibly flustered Angus McCarthy, president of the Building Inspection Commission, said at last week's commission meeting as he questioned staff about the price discrepancy for Murphy's permit.

"Everybody who applies for permits has to be treated the same here," McCarthy said. "I'm trying to get my head around how this permit was so low."

Murphy declined to comment on the most recent allegations Friday but has said his earlier permitting problem was "an unfortunate oversight" and not the result of preferential treatment.

The valuation of Murphy's permit is part of an internal investigation that Tom Hui, director of the Department of Building Inspection, ordered last week. City Attorney Dennis Herrera is conducting a parallel investigation into how the modest, unoccupied home at 125 Crown Terrace collapsed in the midst of a controversial renovation project designed to triple it in size and convert it into a modern home for Murphy and his family.

House sent sliding

The accident took place after the 72-year-old building was raised off its foundation in a metal cradle that may have partially given way, city building officials said.

The collapse at about 10:30 p.m. on Dec. 16 sent part of the home, timber and other debris sliding down the steep slope and forced the evacuation of at least one neighboring house. No one was hurt, which McCarthy called "amazing."

Murphy's plan to "remodel" the home, expanding it from 1,400 square feet of habitable space to at least 4,200 square feet, came after the Planning Department denied him a demolition permit for the house in 2007. The expansion plan had been challenged by a number of neighbors.

Estimated construction costs are important in San Francisco, since permit fees are based on the cost of the work being done - the more expensive the work, the higher the fee.

The original October 2011 application for Murphy's plan to add 1,448 square feet of new ground-floor area and two new stories put the cost of the job at $60,000, records show.

Low initial estimate

That number was provided by the permit applicant, a building inspection official said. According to the document, the applicant was Luke O'Brien, a partner with Murphy in Murphy & O'Brien Real Estate Investments, and currently a member of the city's Small Business Commission. O'Brien could not be reached for comment.

A revised construction cost wasn't provided until more than a year later, when a city building official on Nov. 20, 2012, wrote the cost as $300,000, records show.

That updated estimate was still less than half the $610,500 cost building inspectors now say should have been listed on the permit. Even that figure may be too low.

"I'm not sure that $600,000 is correct," McCarthy said. "I'm really concerned that a permit was issued for such a low cost for such a big job."

The median home sale price in the city hit $1 million in June, and 4,000-square-foot homes, even without commanding views from Twin Peaks, are regularly listed for more than $2.3 million on real estate site Trulia.com. One contractor who asked to remain anonymous, fearing retaliation because of Murphy's political connections, estimated the construction costs for a home of that size on the steep site at about $1.2 million.

'No comment. Period.'

Reached on his cell phone, Murphy, 67, said: "I have no comment. Period."

Murphy paid $17,584 in permit and related fees by November 2012, based on the $300,000 estimate of the construction costs, city records show. After receiving an anonymous complaint that the permit amount was too low, building officials changed it to $610,500 six days before the collapse. Murphy paid the additional $15,270 in permit fees the day after that incident, records show.

It's the second time this year city officials have boosted Murphy's permit costs.

In January, the city ordered work halted on an 11-unit housing development that Murphy was building at 3418 26th St., days after The Chronicle questioned whether the building had proper permits.

In April and June of 2012, Murphy applied for permits to pour a foundation, build walls and do other work on the site. But while Murphy didn't pay the $167,833 to receive those required permits, that didn't stop his construction plans.

Cost revised upward

The permits weren't paid for and stamped approved until Jan. 3, 2013, the day after a reporter first questioned Department of Building Inspection officials about the project. By then, the building was already five stories high, although city inspectors had not signed off on the work. The department ordered construction halted the next day.

Building inspectors then revised upward the construction cost from the less than $1.1 million on Murphy's original permit, hiking it to $1.68 million. That resulted in a new site permit fee of $36,000 - about $7,400 more than what Murphy had originally paid - in addition to $167,833 for permits for foundation and other construction work.

Murphy, in a Jan. 8 letter to Hui, said the situation was "simply the result of an oversight on the part of my team, and not evidence of any preferential treatment by DBI."

"As a past president of the Building Inspection Commission," Murphy wrote, "I feel that I should be held to a higher standard."