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SR-104-000-08 (2) e .- J City of Santa Monica" City Council Report City Council Meeting: March 13,2007 Agenda Item: 8- A To: Mayor and City Council From: Maria M. Stewart, City Clerk Subject: Public Financing of Campaigns Recommended Action Staff recommends that Council review the information contained in this report and provide direction to staff. Executive Summary At the November 28, 2006, City Council meeting, Council directed staff to return with information for a comprehensive and coordinated local campaign finance reform program for City elections, with a process that would invite public participation and would result in a measure being put to the voters towards the end of the year, or in the spring of 2008. In addition, staff was directed to return with clarification on Charter Article XXII (The Oaks Initiative), information on a possible broader application of contribution limits, and an analysis and recommendations for possible changes to the current $250 local contribution limit. 1 This report includes information on the law relating to contribution limits, an analysis of campaign contributions and expenditures of candidates for City Council and of independent expenditures from the November 2002 election to the present, a list of cities and states that currently supply public financing for election campaigns and a description of their programs, and options for a local program structure with a discussion of costs and funding sources. The City Attorney will address clarification of the Oaks Initiative through a formal Opinion. Discussion LEGAL LIMITS ON THE CITY'S ABILITY TO REGULATE CONTRIBUTIONS AND EXPENDITURES First Amendment guarantees limit the government's ability to restrict both political contributions and expenditures. In Buckley v. Valeo, 424 U.S. 1 (1976) the Supreme Court recognized that the state's interest in restricting large contributions to combat both actual corruption and the appearance of impropriety justified burdening First Amendment rights through dollar limits on contributions to candidates or their committees. Nonetheless, the state may not impose a greater burden than is necessary to achieve this purpose. Ward v. Rock Against Racism, 491 U.S. 781, 799 (1989). Thus, a contribution limit which is too low to permit candidates to engage in meaningful campaigns may be unconstitutional. See California Prolife Council PAC v. Scully, 989 F. Supp 1282, 1297 (E.D.Cal. 1998), affd 164 F.3d 1189 (9th Cir. 1999)[striking down $250 limit too low to allow candidates for state legislature to campaign meaningfully]. Restrictions on contributions to committees making independent expenditures in support of or opposition to candidates are even more strictly scrutinized. See. Lincoln Club v. City of Irvine, 292 F.3d 934 (9th Cir. 2002). Moreover, in the context of ballot measures, the Supreme Court has invalidated municipal efforts to limit contributions to committees supporting or opposing local initiatives and referenda, finding no sufficiently 2 important governmental interest. Citizens Aqainst Rent Control v. Berkeley, 454 U.S. 290 (1981). Expenditure limits are also more strictly scrutinized than are limits on contributions to candidates because expenditure limits are a much more direct form of restraint on expression and association. California Medical Assoc. v. Federal Election Commission, 453 U.S. 182, 194-97 (1981). In Buckley, the Supreme Court noted that it IS unconstitutional to limit a candidates' personal expenditures unless the limit is conditioned on acceptance of public funds. 424 U.S. at 57, n.65. Likewise, the state may not restrict independent expenditures made by individuals or committees which are not made at the behest of an affected candidate or committee. McConnell v. Federal Election Commission, 540 U.S. 93 (2003). Given this case law, the Council may wish to consider public financing as a means of curtailing expenditures and also may wish to consider raising the current $250 limit on contributions. LOCAL PUBLIC FINANCING OF ELECTORAL CAMPAIGNS Under a full public financing program, candidates for local office (for purposes of this report, candidates for City Council) are eligible to receive sufficient public funds to run a viable campaign for City office if the participating candidates agree to abide by certain contribution and expenditure limits, and to limits on expenditure of personal funds. Candidates are also eligible to receive "matching funds." Matching funds are reserved funds that may be spent only when the initial grant amount has been exhausted, and then only to respond to over-the-grant-limit expenditures by non-participating candidates, or to respond to independent expenditures. 3 Some arguments in favor of such programs are that: real or apparent corruption will be reduced; the number and diversity of candidates will increase; elections will be more competitive; the costs of running a political campaign will be reduced; candidates may spend less time fund raising and more time communicating with the residents; public participation will increase; and there will be a general improvement in governance and legislation. Some arguments against these types of programs are that: taxpayers' money is used to promote certain political views; the independence of the political process may be compromised; programs do not limit non-participating candidate contributions and spending, do not limit independent expenditures, and do not limit the expenditure of personal funds by a non-participating candidate. ANALYSIS OF LOCAL CONTRIBUTIONS AND EXPENDITURES Attached as Exhibit A is a spreadsheet that includes the total amount of contributions and expenditures reported by each candidate's controlled committee, and the amounts of independent expenditures reported for the 2002, 2004, and 2006 elections. The last page of Exhibit A reflects the overall total of contributions and independent expenditures for each election year. Please note that the Fair Political Practices Commission defines an independent expenditure as an "expenditure made by any person in connection with a communication which expressly advocates the election or defeat of a clearly identified candidate or the qualification, passage or defeat of a clearly identified measure, or taken as a whole and in context, unambiguously urges a particular result in an election but which is not made to or at the behest of the affected candidate or committee." 4 Below are average amounts for committee contributions received and expenditures made per candidate, and for independent expenditures per candidate, for the 2002, 2004 and the 2006 elections. These figures do not include candidates that did not establish campaign committees: Contributions and Expenditures Election Number of Year Candidates Contri butions Expenses 2002 08 $ 29,396.00 $ 28,708.00 2004 11 $ 68,920.00 $ 70,108.00 2004* 10 $ 40,531.00 $ 39,033.00 2006 07 $ 39,911.00 $ 42,974.00 Independent Expenditures Election Year # of candidates included in expenditure Total 2002 2004 *2004 2006 06 09 08 05 $ 16,167.00 $ 68,938.00 $ 49,363.00 $136,424.00 *Please note that two different numbers are reported for 2004. Under "Contributions and Expenditures" the first contribution amount reflects the average contributions for all the candidates that established committees. However, because of the wide gap between the highest and the second highest amount of contributions received by candidates in the 2004 election cycle (see exhibit A), the asterisked figures do not include the highest amount of contributions raised and spent by one particular candidate. Under Independent Expenditures, the first number reflects the total of all independent expenditures made; however, the asterisked figures do not include the highest amount spent in support of a particular candidate. 5 EXISTING PUBLIC FUNDING PROGRAMS The cities of Albuquerque, New Mexico, and Portland, Oregon have enacted full public funding of campaigns. Albuquerque's program will be implemented in 2007. Portland's program went into effect in 2006. The states of Arizona, Maine and Vermont also have programs since 1998, 1996, and 1997, respectively. The City of Los Angeles currently has a matching funds only program, but the City Council is expected to review and receive public input for a proposed full public financing program in the near future. Attachment B is a matrix summarizing the structure of these programs. It should be noted that at the time that Vermont implemented its public finance program, it also established limits on non-participating candidates' spending, and limits on contributions to PAC's. In June of last year, the State issued a press release advising that the U.S. Supreme Court issued an opinion in Randall v. Sorrell, a case challenging the constitutionality of some of the contribution limit provisions of the program. The press release states in part: "the court held that Vermont's limits on candidate spending in political races were unconstitutional restrictions on the candidates' first amendment rights to free speech." The press release also advised that, "The court also struck as unconstitutional Vermont's limits on contributions to political campaigns. Although the court acknowledged that some limitations on contributions were acceptable under the constitution, it determined that Vermont's limits on contributions to candidates were so restrictive that they were unconstitutional." 6 Vermont's program does not have a provision for matching funds to allow a participating candidate to respond to over-spending of the limits by non-participating opponents, or to counter independent expenditures. It appears that the lack of matching funds combined with the Court's opinion has made the program unappealing and unattractive. Vermont's Secretary of State's office advises that two candidates for Lt. Governor participated in the program in 2000, and no others have participated since that time. FUNDING SOURCES FOR EXISTING PROGRAMS The majority of funding for the program in the state of Arizona comes from a 10% surcharge on civil and criminal fines. In Maine the funding is derived from general funds approved by the State Legislature, and collected fines for violations of the "Clean Election Law." Vermont's program receives 95% of its funding from a percentage of the annual state fees charged to domestic corporations and fees charged to foreign corporations. Additional funding comes from fines and penalties collected for violations of the State's campaign finance laws. The City of Albuquerque plans to fund its program from .01 % of the approved general fund. In Portland the program is funded by .02% of the general fund. In all the programs, qualifying contributions, remaining seed monies (which will be discussed later in this report), individual/private donations, and any unused grant funds remaining after the election are deposited into the program's account. 7 CITY OF LOS ANGELES PROPOSED PROGRAM AND STRUCTURE On November 14, 2006, the City of Los Angeles Ethics Commission approved a draft proposal for a full public financing program and requested that the program be forwarded to the Los Angeles City Council in order to solicit input from neighborhood councils. The Ethics Commission further requested that after receiving input from all the interested parties, the City Council return the proposal to the Commission for another review before the City puts the charter amendment to the voters. As of the writing of this report, the draft proposal has not yet been presented to the City Council. Under the proposal, candidates for each of the 15 council offices as well as candidates for mayor, for city attorney, and for city controller are eligible to apply for the program if candidates raise the required amount of qualifying contributions. The purpose for requiring qualifying contributions is so that the candidate demonstrates there is enough public support for his/her candidacy. In order to qualify for the program, candidates for City Council must raise $25,000 in qualifying contributions, candidates for City Attorney or Controller $75,000, and candidates for Mayor $150,000 within a recommended three- month window of time beginning 12 months before the primary election. In return, participating candidates may receive grant funding for the primary and general elections, plus matching funds that can be used once the initial grant has been spent to respond to above-the-grant-Iimit expenditures by non-participating candidates, or to respond to independent expenditures. The amount of the grants and of the matching funds are as follows: 8 Office Primary General Matching Funds Reserve Councilmembers $ 350,000 $ 300,000 $ 100,000 Controller $ 1,000,000 $ 750,000 $ 250,000 Attorney $ 1,500,000 $ 1,200,000 $ 400,000 Mayor $ 3,500,000 $ 3,000,000 $ 1,000,000 To put in perspective the amount of funding, please note the following demographics in the City of Los Angeles based on the 2000 Census. The average population of each of the 15 City Council districts is 246,321, with the highest population of 258,789 being in District 3 and the lowest population of 234,870 in District 1. The average registered voter population in each district is 94,432, with District 5 the highest at 152,953, and District 1 the lowest at 49,667. The total population in Los Angeles is approximately 3,694,820, with 1,416,477 registered voters - 38% of the population. This being the case, the grant funding amounts per resident for the primary election are as follows: Office Per Resident Per ReQistered Voter Councilmember Controller City Attorney Mayor $ 1.42 $ 0.27 $ 0.40 $ 0.94 $ 3.70 $ 0.70 $ 1.05 $ 2.47 (per district) (citywide) (citywide) (citywide) In addition, participating candidates are limited to spending $10,000 in personal funds for City Council, and to $25,000 for citywide offices. The proposal for funding the program initially included consideration of several sources of revenue including possible increases in sales tax, parking meter fees, business tax, documentary transfer tax, utility user's tax, transient occupancy tax, parking fines, court 9 fines and traffic fines. A subsequent proposal called for the appropriation of $2,600,000 per fiscal year from the general fund, plus approximately $9,000,000 to be generated by a proposed parcel tax of $0.407 per 100 square feet of improvements. At its meeting of November 14, the Ethics Commission turned down the parcel tax proposal, recommending instead that the full funding come from the City's General Fund. Attached as Exhibit C is the report the Los Angeles Ethics Commission sent on December 14, 2006, to the City Council for consideration. SEED MONEY Portland, Albuquerque and Maine have a provision in their programs that allows candidates to accept "seed" contributions. These contributions are in addition to the qualifying contributions, but may only be used to offset the costs incurred in the gathering of qualifying contributions. The City of Los Angeles' initial proposal contained a provision for seed money that was subsequently dropped. The proposal instead will allow candidates to use qualifying contributions to offset costs incurred in gathering the contributions. The rationale for this decision, as stated in Los Angeles City staff's October 18, 2006, report to the Ethics Commission, is that, "Having both qualifying contributions and seed money contributions is confusing. Because candidates may spend qualifying contributions on start-up costs, seed money contributions are no longer required." 10 OPTIONS FOR A LOCAL PUBLIC FINANCING PROGRAM STRUCTURE Staff considered all the data provided in the preceding pages and more specifically, the City of Los Angeles' data because Los Angeles is a neighboring city and operates under the same County and State laws as the City of Santa Monica. Based on this analysis, staff presents the following option to open discussion for a possible program for the City: Proposed Program: A full public financing program with matching funds to be implemented in the City of Santa Monica in time to be available to City Council candidates for the November 4,2008, general election. Qualifying Contributions: In order to prove adequate public support and qualify for the program, participating candidates must raise $3,000 in qualifying contributions, with a minimum of $5 per contribution and a maximum of $30 per individual contribution. In order to collect this amount, candidates would need to have the support of between a minimum of 100 individuals with $30 individual contributions and a maximum of 600 individuals at $5. The minimum number of 100 individuals is the same as the number of registered voter signatures currently required for a candidate to be nominated by, and to qualify for office. The City of Los Angeles' proposal does not require that the contributor be a registered voter, only that the contributor be a resident of the city. The rationale cited in the Ethics Commission's report is in part that "all city residents are affected by city policies, and 11 they should have a say in the electoral process, regardless of whether they are registered to vote." The Santa Monica City Council can do likewise and only require that the contributor be a resident of the city; or, Council may choose to require that the contributor be a registered voter of the city. For the November 2006 election, there were 57,455 registered voters in the City of Santa Monica. The total population in the City as of 2004, based on the 2000 census, is approximately 86,391. Thus, approximately 66% of the City's residents are registered to vote. Qualifying Period. The proposed structure will include a window of time for collecting the qualifying contributions. In reviewing other existing programs, staff believes that for a November 2008 election a three-month window of time beginning on April 1, 2008, may be the most practical for the City. Potential candidates would have from April 1st through June 30th to gather qualifying contributions. Seed money. There will be no provision for candidates to raise seed money to offset the costs of gathering the qualifying contributions. Qualifying contributions may be used by candidates for start-up costs only. Grant Limits: Participating candidates will receive $50,000 in funds for the general election. A portion will be disbursed after the three-month qualifying period ends and the candidates file required documents confirming receipt of qualifying contributions. The second portion will be disbursed when there is a certified final list of qualified 12 candidates that are to appear on the ballot following the closing of the nomination period. Matching Funds: Participating candidates may also receive an additional maximum amount of $50,000 that may be used only to respond to non-participating opposing candidates that have spent over the amount of the grant limit ($50,000), or to respond to independent expenditures, and only when the original grant amount has been exhausted. Council may also consider the option of limiting the expenditure of matching funds to the period of time prior to the election when most independent expenditures are made. For comparison purposes with the City of Los Angeles, the grant funding amounts per resident, including the initial grant and the matching funds grant are as follows: Office Per Resident Per Registered Voter L.A. City Council S.M. City Council $ 1.42 $ 1.15 $ 3.70 $ 1.73 In considering these amounts, please note that, as pointed out earlier, 38% of the population of the City of Los Angeles are registered voters. In comparison, the City of Santa Monica has a 66% registered voter population. 13 Funding for Program: There were 13 council candidates in the November 2000 election, 9 in 2002, 16 in 2004, and 10 in 2006. Based on these numbers, the initial funding amount could be based on the average number of 12 participating candidates per election since 2000. The total amount of the initial grant pool required would be $600,000, plus $600,000 for matching funds, for a total of $1,200,000. However, anticipating an increase of participants once the program is implemented and publicized, it may be practical to anticipate half as many more candidates. In that case, for 18 potential candidates, the amounts would change to $900,000 and $900,000, respectively for a total of $1,800,000. Funding sources: As the City of Los Angeles did, the City Council could consider increasing a local tax(es) or fee(s), or consider a special parcel tax to fund the program. Albuquerque and Portland's programs are being funded mainly from the general fund. The L.A. Ethics Commission is also recommending full funding from the general fund. The L.A. City Council will be reviewing The Ethics Commission's recommendation and its impact, if approved. Were the City of Santa Monica to consider adopting a program to be funded solely by the general fund, discussion would be needed to determine the impact of the amount of funding on existing services. In addition to the initial appropriation of funds, unspent qualifying contributions and any remaining funds left in participating candidates' accounts after an election will be returned to the program account, as well as any interest earned from the account. 14 Other costs: There will be an on-going, and as yet undetermined, cost for administration and monitoring of the program. Administration of the program will include but not be limited to assuring that the funds are appropriated prior to each election, establishing and maintaining a program fund account, determining the amounts of the grants depending on the number of candidates that gather qualifying contributions within the allowable proposed window of time and planning a disbursement schedule; adjusting the amounts once candidates have been nominated and have qualified; making disbursements as planned, monitoring of expenditures of participating candidates; monitoring expenditures of non-participating candidates and independent expenditures; and, disbursement of matching funds if such funds are provided. Given the size of the city's population, as compared to other entities, rather than creating a new independent unit to administer the program, for purposes of practicality and cost effectiveness, staff proposes that initially Council may consider creating a new division under the Elections Official's department that would be staffed with one individual ful/- time for one year, every other year, to handle the technical portion of the process, and Council may also direct staff to assign a member of the Finance Department to handle the financial, accounting, and auditing aspects of the program. Council can revisit this arrangement and modify it as needed, after the 2008 election cycle. After the election, each participating candidate's committee should be audited to assure that funds were spent in accordance to the program's requirements, that any unspent funds are returned to the program account, to balance the account, and to present a 15 status report to Council with any appropriate suggestions and recommendations for the next election cycle. TIMING FOR ELECTION FOR PROPOSAL BEFORE NOVEMBER 2008 In order to have the program ready to implement and be available to City candidates during the November 2008 election, and in order to provide the window of time required for gathering qualifying contributions, the special election to put the question to the voters should take place preferably on November 6, 2007, if consolidation of the election with the County is possible. If not, the election should take place no later than early March 2008. Enough lead time should be allowed for staff to prepare and to organize implementation of the program, have funds appropriated, and have the underlying technical process, necessary documents and forms, and support staff ready and in place. Elections for Unscheduled Vacancies: An accelerated schedule for gathering qualifying contributions and for the disbursements of funds will be required for a special election to fill an unscheduled Council vacancy. If Council makes a decision on the framework of the preferred program, other issues that will be discussed in a future report include but are not limited to: · The option of setting a limit to the amount of funding that may aggregate in the program's account, so that if the limit is reached a new appropriation for the following election will not be required. 16 . Setting an automatic biannual adjustment of the total amount of the fund by linking to the Consumer Price Index. . Establishing certain requirements that Council may deem appropriate in exchange for the funding (L.A. requires participation in a certain number of debates). . Setting a provision to address a situation of there not being enough funding to provide the full amount of the grant due to an unexpected large number of participating candidates. . Setting guidelines on the permitted uses for funds and prohibition of use of funds for certain activities or uses. . Setting an enforcement process and establishing fees for violations of the program's requirements. . Setting limits on expenditures of personal funds by participating candidates. . Discussion of the applicability of the program to candidates for City Rent Control Board. PUBLIC PROJ;J::SS AND TIMELlNE Once Council reviews the information provided in this report and if Council opts to give direction to staff to return with a specific structure, staff proposes to notify all active campaign committees, civic organizations, neighborhood groups, business groups, known individuals knowledgeable in the field, and members of the public, inviting and encouraging public oral and written comment and suggestions on the proposal and 17 inviting them to attend the meeting(s) at which Council will consider approval of a specific structure. The timeline recommended is as follows: February 27, 2007 Council meeting - review of existing programs, local campaign contributions and expenditures, discussion of possible program structure, process, timing, and Council direction to staff. April 17, 2007 - staff to hold workshop on draft proposal, invite public comment, and discussion of potential funding sources. May 8, 2007 - Council meeting to report on public comment and any changes made to draft program structure. May 9, 2007 to June 7, 2007 - distribution of proposal to various groups and interested parties for public comment, and invitation to attend the June 26,2007, Council meeting. June 12, 2007 - Council meeting to report comment and input from groups and interested parties; Council to fine tune and make final changes to proposed program structure. June 26, 2007 Council Meeting - Hold hearing for public comment on recommended program structure and funding method for FY 2008/2009. Approve a preliminary program structure, and appropriate estimated cost of funding. July 23, 2007 Council Meeting - Council approves wording for the question and calls a special consolidated election for November 6, 2007, if appropriate, or sets date for a special election. 18 BudqeUFinancial/mpact Should Council, at the end of the above proposed process, approve a program structure and call a special election to put the question to the voters, there will be costs associated with the administration of a special election and with public outreach and education efforts. Costs for a special election will vary depending on whether the election is consolidated with the County on November 2007, or it is a stand-alone election. The cost of a consolidated election will vary depending on whether there are any County or State- wide issues on the November ballot that affect Santa Monica. At the present time, there are no such issues scheduled on the November 2007 ballot. The cost of a stand-alone election will vary depending on whether it is an all-mail election, a regular election with polling sites, or another variation of a stand-alone election. The approximate cost of the election is expected to be between $100,000 and $125,000. Outreach efforts to notify the public of a special election may be similar to those incurred for the special 2-day, weekend election in 1999, held to fill an unscheduled Council vacancy. The approximate outreach costs were $10,000. Attachments: Exhibit A - Santa Monica Election Campaigns Contributions and Expenditures Spreadsheets Exhibit B - Other participating Cities and States Matrix Exhibit C - City of Los Angeles Ethics Commission Proposal Exhibit 0 - San Francisco Chronicle Article dated 12/19/06 - The Way Forward for Political Reform 19 Prepared by: Forwarded to Council: Maria M. Stewart, Cit Clerk (Director, Department of Records and Election Services) 20 Exhibit A CC#248 C'o i s::: w>->-zzzz>-z o r-- ~ ~!~ I I . . 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'(3 1: ('0 0. .5 fI) '0 I:: .a 0) N I:: 'c '(6 E ~ >- c: cu I/) ('0 Gi ~ fI) cu >; CD c: 0 E ~ :R g> '2 'iij E ! "0 r::: ('0 I/) C 0 ':;:l ::l .0 'r:: ..- c.... 8 I:: ::l .~8 ~m = (/) m- :;,E C"f! >'0 ~e il a. Exhibit C CC#253 CITY OF Los ANGELES CALIFORNIA GIL GARCETTI PRESIDENT LEEANN M. PELHAM EXECUTIVE DlRe:::TOR CITY ETHICS COMMISSION BILl.. BOYAR5KY VICE PRESIOENT CITY ETHICS COMMIS- SION200 N. SPRING STREET CITY HALL - 24TH FLOOR LDS ANGELES, CA 90012 (213) 978-1960 (213) 978-1988 FAX TOO (213) 976-2609 http://ethics.laclty.org ROBERT SALTZMAN SEAN TREGUA HELEN ZUKIN December 14,2006 BY MESSENGER Frank. Martinez Los Angeles City Clerk 200 North Spring Street City Hall - 3rd Floor Los Angeles, CA 90012 Re: Full PobUe Flnaoeinl! Proposal FOR COUNCIL CONSIDERATION Dear Mr. Martinez: At its meeting on November 14,2006, the City Ethics Commission (the Commission) approved a comprehensive proposal to create a program .in which eligible candidates for elective City offices could receive full public financing for their campaigns. The Commission urges the Council to support the development of a full public fmancing system to increase public participation in City elections and further promote public confidence in City government. This letter provides detailed infonnation about the proposal and the Commission's recommendations. The Commission requests that the Council review the proposal, solicit input from neighborhood councils, and return the proposal to the Commission for additional comment on any changes. POLICY CONSIDERATIONS A. Program Goals In a full public financing program, as with a matching funds program, candidates can qualify to receive public funds to run for elective City office. In exchange for the benefit of receiving public funds, participating candidates must agree to abide by program requirements, such as collecting a specified amount of small contributions to demonstrate their viability or agreeing to participate in election debates. Public financing programs are designed to accomplish a variety of goals: " encourage a broader range of candidates by reducing the role that fundraising plays in detennining who actively participates in the democratic process; ~ AN EQUAL EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER @ CC#25l Frank Martinez. City Clerk Full Public Financing Proposal December J 4. 2006 Page 2 0/9 · encourage more voters to participate in the electoral process by increasing the number of competitive races; · reduce the amount of time candidates must devote to fundraising and, thereby, increase the amount of time they can spend engaging constituents; · prevent corruption and the appearance of corruption in City government; " reduce the influence of special iriterest money on governmental decisions; and · reduce cynicism among the electorate and promote confidence in government. hi keeping with its voter-approved Charter mandate to advance and improve governmental ethics within the City, the Commission supports full public fmancing and the goals it can accomplish. After lengthy deliberation and extensive public input, the Commission now proposes a detailed plan to enact such a system for City races. That plan, and the factors the Commission considered in its development, are detailed below. B. Guiding Information The Commission considered a wide range of information in the course of developing the proposed program. Public input was considered critical, historic City election data provided considerable insight, and legal concerns and policy implications were thoroughly evaluated The Commission also analyzed models from other jwisdictions, including Arizona, New Jersey, Vermont, and Maine. The staffalso considered the full public financing model presented to the voters through California's Proposition 89. Those models provide some helpful guidance in forming 'a full public financing program; however, they cannot be duplicated exactly. Population comparisons provide some context for the unique factors that Los Angeles candidates face when campaigning for office and must be considered in developing any new program. -Por example, Maine has a population of approximately 1.2 million. Each state representative in Maine represents about 7,500 citizens, and each state senator represents about 35,000 citizens. The amount of public funds Maine candidates receive reflects the comparatively small sizes of their districts: candidates for the House of Representatives receive $1,374 in public funds, and candidates for Senate receive $6,487. In contrast, the City of Los Angeles has a population of nearly 3.7 million, and each of the 15 Council districts accounts for roughly 250,000 people. With such a large number of residents and voters who must be reached during the course of a campaign, City Council candidates routinely spend hundreds ofthousands of dollars on their campaigns. The average spent in primary elections since 2001 is $235,336 to $360,101. Mindful ofthe'City's unique characteristics-and the fact that it has had a successful partial public financing program in place for sixteen years-the Commission proposes a new campaign finance system that builds on key elements of the current program to provide full public financing to eligible candidates. CC#255 Frank Martinez, City Clerk Full Public Financing Proposal December /4, 1006 Pagelof9 PROCEDURAL HISTORY The Commission first endorsed the concept of full public financing in April 2006. A staff working group was forme~ and the mechanics of a full public financing program began to take shape, with an eye toward engaging the public in that process. On Iuly 5, 2006, the City Council asked the Commission to provide a detailed proposal regarding a system of full public fmancing for City elections. In response to the Council's reques~ the Commission directed staff to gather public input and present a proposal for 'consideration. To gather public input, the Commission held two public hearings at City Hall and conducted three public workshops. The workshops were held on August 15 at the West Los Angeles City Hall, on August 24 at the Van Nuys Senior Center, and on September 7 at Occidental College. Approximately two dozen individuals attended the workshops, asked questions, and expressed opinions. Through evaluation forms, the participants indicated that they had a "better than average" familiarity with public campaign financing before they attended the workshops. But they also indicated that the workshops improved their understanding of how public financing might work in Los Angeles. The Commission first discussed the proposal on October 10,2006. Revisions to the proposal were discussed at additional meetings held on October 24 and November 14. Members of the public and representatives of policy groups shared their views of the proposal at each of those three Commission meetings. On.November 14, the Commission voted to approve the third version of the proposal (with a modification to the funding source), to forward the proposal to the Council for its consideration, to recommend that the Council solicit input from neighborhood councils, and to request that the Council return the proposal to the Commission for comment once all interested parties have weighed in and the Council has made any desired changes. PROPOSAL OVERVIEW A number of explanatory materials are provided to facilitate a review of the Commission's proposal. The first is the outline that follows, which provides a brief snapshot of the key components of the program: 1. Trust Fund . An annual $11.6 million General Fund appropriation provides funding for the program. 2. Qualifying Period . Fundraising for all candidates begins 12 months prior'to a regular primary election. . Publicly financed candidates have the first three months of the fundraising window to collect qualifying contributions. . CC#251 Franlc Martinez. City Clerk Full Public Financing Proposal December 14. 2006 Page 4 0/9 3. Qualifying Contributions · Publicly funded candidates must raise the following amounts during the qualifying period: - $25,000 for Council. - $75,000 for Controller or City Attorney. - $150,000 for Mayor. . Any resident in the City may make a qualifying contribution. " Individual contributions may not exceed $250 for Council candidates or $500 for Citywide candidates. 4. Funding Amounts " Candidates who q~lify are entitled to funding in the following amounts: $350,000 $300,000 $1,000,000 $750,000 $1,500,000 $1,200,000 Ma or $3,500,000 $3,000,000 Provided in reSponse to independent expenditures and wealthy candidate spending. $100,000 $250,000 $400,000 $1,000,000 .. A candidate who is unopposed or is opposed only by nonparticipating candidates who have not raised or spent a threshold amount on their campaigns ($50,000 for Council and $100,000 for Citywide) receive 10 percent of the primary funding amount. · Participating candidates who are elected to office receive $75,000 per year for expenses related to their official duties. · Participating Council candidates may not spend more than $10,000 in personal funds. Participating Citywide candidates may not spend more than $25,000 in personal funds. In addition to the outline above, several documents are attached to this letter. They provide more detailed information regarding the Commission's proposal: " Attachment 1 is a series of analysis tables regarding key provisions. · Attachment 2 is an election timeline, highlighting key events under the proposal. " Attachment 3 is a snapshot of four different funding scenarios. " Attachment 4 is proposed revisions to the Los Angeles City Charter- (Charter). · Attachment 5 is proposed revisions to the Los Angeles Municipal Code- (LAMe). · Attachment 6 is proposed revisions to the Los Angeles Administrative Code- (LAAC). . The proposed changes to the Charter, the LAMC, and the LAAC are provided in both clean and redline versions. In addition to substantive changes, grammar and punctuation have been updated to eliminate "legalese" and make them as easy to read as possible. CC#257 Frank Martinez, City Clerk Full Public Financing Proposal December J 4, 2006 Page 5 of9 9UALIFYING CONTRIBUTIONS. One way that full public fmancing programs ensure appropriate stewardship of public moneys is by requiring candidates to demonstrate viability (that the public supports them as candidates) before they can qualify to receive public funding. Individuals interested in participating in the program are asked to show a measurable level of public support by collecting a threshold amount of small contributions from individuals within the community. Two particularly challenging policy issues arose during the course of the Commission's work. Both concern the mechanics of qualifying contributions: First, how much should a donor be able to contribute to help a candidate qualify? And second, should the donors be limited to registered voters in the candidate's district? The Commission encourages particular attention on those issues during deliberations by the City Council and the neighborhood councils. These two policy decisions are challenging and weighty. If a full public financing program is going to thrive in Los Angeles, it must be attractive to both citizens and candidates. It must be flexible enough to accommodate the City's unique political framework, but it must not gut program goals in the process. A. Amount of Qualifyiug Contributions The Commission's proposal is modeled on the existing elements of the City's matching funds system. The amount a participating candidate must raise is the same as currently required in the matching funds program, which varies based on the office sought. In considering this approach, the Commission had a lengthy discussion about whether the amount of individual qualifying contributions should be smaller. Programs in other jurisdictions typically cap each qualifying contribution at $5. In proposing that a full public fmancing system for Los Angeles continue to allow qualifying contributions of up to $250 or $500, the Commission seeks to strike a balance between. contributions that reflect a broad base of public support and a program that appeals to and is feasible for candidates. A program that maintains the existing contribution requirements may be more likely to encourage candidates to participate. For example, a Council candidate who collects the maximum qualifying contribution of $250 from every supporter will have to collect 100 contributions to be eligible for the program. If qualifying contributions were capped at $5, that same candidate would have to collect contributions from 5,000 supporters. Full public financing programs are voluntary, and determining .how many supporters a participating candidate must rely upon to qualify has to be balanced carefully to make the program attractive. Whether an individual contributes $5 or $250, that individual represents one contact the candidate must make. Additional arguments hi favor of maintaining the current contribution limits were also made. First, there is no prohibition against collecting $5 contributions-the only requirement is that they not exceed $250 or $500. Second, if candidates can qualify for public money by CC#25l: Frank Martinez. City Clerk Full Public Financing Proposal December /4. 1006 Page 60f9 collecting a fewer number of contributions, that frees them to spend considerably more time engaging with constituents. Finally, some have argued, individuals who have not previously participated in the electoral process are likely to be more enticed by candidates who spend time educating them about the issues than by candidates who spend time asking them for $5 contributions. At the same time, however, there are legitimate reasons for limiting qualifYing contributions to $5 each. One is to encourage individuals who have not previously participated in the electoral process to get involved. By limiting qualifying contributions to very small amounts, government can make the statement that politics is not reserved for the wealthy. Even $5-the cost of some cups of coffee-will give the donor a political voice and help the donor's candidate get elected Proponents of the very small qualifying contribution caps also raised the concern that, even though the proposal permits contributions of less than $250 or $500, the candidates will default to the higher amounts in an effort to limit the amount of work required to qualify for the program. They will simply solicit contributions from individuals they know can give larger amounts and bypass those who can only afford to give $5. Finally, arguments in favor ofthe $5 contribution limit also include the idea that requiring candidates to collect larger numbers of very small contributions is good for the public as a whole. Candidates have to interact with a wider range of people and listen to a wider range of views to qualify for public funds. Not only do the candidates carry those views with them into office if they are elected, they also serve the public without feeling indebted to individuals who gave consid~rably more to their campaigns. They are then free to make governmental decisions that are based on the public good, rather than on private interests. On balance, the Commission felt that it was important to build on the existing program, encourage candidate participation, and avoid onerous qualification requirements~ However, the COmn1.ission seeks the Council's input to help ensure that any new program has strong public support and can achieve the program's goals. B. Source of Qualifying Contributions The source of qualifying contributions is another challenging issue the Commission has grappled with. Because qualifying contributions are an indication of the level of support a candidate has among the electorate, the contributions must come from individuals, rather than entities. This is true even under the existing matching funds program. The Commission considered requi~g qualifying contributions to come from registered voters within a candidate's district. However, the proposal permits qualifying contributions to come from anyone who resides in the City. There were several reasons for not limiting the contributions to registered voters. First, all City residents are affected by City policies, and they should have a say in the electoral process, regardless of whether they are registered to vote. Second, the number of registered voters can vary sharply from distric,t to district. Candidates in . CC#259 Frank Martinez. City Clerk Full Public Financing Proposal December 14. 2006 Page 70f9 districts with fewer registered voters would be disadvantaged by having a smaller pool from which to collect contributions and could find it difficult to qualify for public funds. Economic demographics can also vary widely from district to district, which is why the proposal does not limit contributions to individuals within a particular district. To avoid a disadvantage to candidates whose districts have 'less expendable income, qualifying contributions may be received from any resident of the City. Financial support from residents outside a candidate's district may be an equally good indicator of the candidate's viability. However, just as there are legitimate reasons for capping qualifying contributions at $5, there are also legitimate reasons for limiting qualifying contributions to registered voters within a candidate's district. One argument is that doing so encowages participation in the electoral process. Individuals want to be able to determine who their candidates are--not just who their elected officials are. But when candidates can solicit funds throughout the City, an affluent district can dictate who the candidates are in a poorer district - Additionally, those in favor of restricting the source of qualifying contributions argue that elected officials should be responsive only to the people in their districts. They say the goal of full public financing is to eliminate obligations that result in decisions made to benefit wealthy outsideIS, and a key factor in achieving that goal is to base eligibility for the program on contributions that come from a candidate's actual constituency. On balance, the Commission felt that it was important to permit all City residents to participate in the electoral process, regardless of where they reside or whether they are registered to vote. Again, however, the Commission values the Council's input on this policy issue. FUNDING ISSUES A. Sources In response to a request from the Council, the Chief Legislative Analyst (CLA) reported on possible sources of funding other than General Fund appropriations. After analyzing a number of potential revenue sources and concluding that they were not viable means of funding a full public financing program, the CLA recommended that the program be funded through a property tax of $0.407 per 100 square feet of improvement. Such a tax would generate approximately $9 million each year. The only way to ensure that tax revenues are used exclusively for the full public fmancing program is to designate the tax as a special ~ which must be approved by a two- thirds vote of the people. The Commission does not believe that such a vote will succeed. To recommend a program that is workable and fully funded, the Commission proposes that the 'current General Fund appropriation of $2.6 million for the existing matching funds program be increased to $11.6 million for the full public financing program. A General Fund appropriation would provide a reliable and sustainable amount of revenue for the program. CC#260 Frank Martinez, City Clerk Full Public Financing Proposal December J 4. 2006 Page 8of9 B. Amounts One of the challenges in creating a full public financing program is balancing the amount of available funding with the program's appeal to candidates. If funding levels are too high, the program could fail for lack of revenue. But ifthe funding levels are too low, it could fail for lack of participation. The Commission originally considered a program in which the funding amounts provided to candidates equaled the spending limits in the current matching funds program, with no additional funding for responses to independent expenditures or wealthy candidate spending. However, the Commission determined that such a program was not likely to encourage candidates to participate. The proposed funding amounts are based on the realities of historic spending patterns and include additional funding for responses to independent expenditures and wealthy candidate spending in general elections. .\ Attachment 3 ("Possible Funding Scenarios") provides some perspective on the costs of running a full public financing program. Tables A and B are based on the funding amounts that the Commission originally considered, while Tables C and D are based on the proposed funding amounts. Tables A and C calculate total program costs using the average number of candidates who would have qualified for full public financing if the proposed program had been in place since 2001. Tables Band D assume that the full public financing program will be successful enough to result in one additional publicly funded candidate in each of the Citywide races and a total of three publicly funded candidates in each Council race. Table C shows that, over a 4-year election cycle, it would cost $40.1 million to fund the average number of qualifYing candidates at the proposed funding amounts. Thattranslates into about $10 million per fiscal year. If the full public financing program achieves the goal of encouraging more candidates to accept public funds, Table D indicates a 4-year cost of approximately $68.4 million-roughly $17.1 million per fiscal year. It is important to note that the tables in Attachment 3 are not intended to predict outcomes. They merely serve as examples of scenarios that might occur. Historic averages provide some gauge for understanding the cost associated with a full public financing program, but there is no guarantee that the averages will remain constant. And, as already mentioned, the more successful the program is, the more candidates will participate and costs will go up. CONCLUSION The Commission urges the Council to consider the Commission's proposal, further engage the public, and take positive steps to develop an effective system of full public financing for City elections. The Commission recommends that the Council submit the propOsal to the CC#261 Frank Martinez, City Clerk Full Public Financing Proposal Deconber /4, 2006 Page 90f9 neighborhood councils for further study. Once all interested parties have weighed in and the Council makes any chan~es it deems appropriate, the Commission requests the opportunity to review and provide additional comment on the revised proposal. We look forward to discussing the proposal and answering any questions the Council may have. S\incerely, . () vh ,,- 1- IU) it Le!.t~i~~~~-'ham I.. Executive Director Duplicate original to: The Honorable Eric Garcetti Chair of the Rules. & Elections Committee CC#26: Attae CC#26~ '"C C~ ::s~ LL .~ ..~ 11)- ::s~ .."" I- en e ~ ~ '5 Q) m:C.2 iQ)c-o:::J.BJS '='=~~i~a.; ~O.sU;.oiii.2~ .2-B-c;:l...;'5Q)G) ....I:C~J!+:I:S.x ~i~~};:C!D8 (0).0 en I::'I:! i is- lDCD.s.2~I:'l6S ~ :6 en 6, 1; tV .0 l! .!'5'g'ft;:e! 6 ~ () lIs.2 ~ tJ::g 1S Q. i'tii~lJ.!!:::JJ2~ ~ I:~ mS Q).o is. ~ lJ JLs l!? ~ I: ea>n;.o I: a> I: tV a.. :s e 5.~ :s .;a e _"C I: ..c: I: - Q tV .2'.;a 0 - ~ eu;'$s-c...:. :t::;:I:Ji5~ -~Q)S-I/) i~~-g~.8~ enl:OQ) Q) aa> I: f61U1: .6 :S :fi .c :5 ll:; ESQ)aoai -!.1lI/):::JeE Q)e! 0 .- :50~:58; 'O.s I: c-.:t:a Q)...tVtVl.O..... en Jg .r:: :5 (O):vi ~Q)C1...U)( ~.o;;;JQ)'$Q) ~!~~:J8 ~ .2 Q). ::c U;'tiie I/) ~ ~&. .G5-l! lJ! 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I a.& : lS~a~ s IS ] 'j !:ti t! ~ .. u if~ i 2e:;;~ Q. ..~ g. -a ]! j 9 j!~ ~ -S:5g"B E!eos !:l li}f e -::Ie.>..... oS 'j 8 :8 5:a <<';l i !i -.- 'a g g ~ :a'i~8 l1r"Sc '1- .:. ~ 'i ~"8~ "'!rJ:a ~ u 'S ~ 1.51 b irSl] ~1&~ ~_ e I\) ;;;.~~g :~:5 : II .- II = =... ." · S ! tlD~":S jltl -'B~'B :J g r I 0.5<.5 :: : S I: CC#272 Exhibit D CC#273 OPEN FORUM The way forward for political refo~ Steven Hill Tuesday, December 19, 2006 San Francisco Chronicle http://www.sfgate.com/cgi- bin/article.cgi?file=/chronicle/archive/2006/12/19 /EDGOULJ65Al.DTL AS GOV. Arnold Schwarzenegger renews his call for an independent redistricting commission, a new opinion poll finds that California voters overwhelmingly support improvements in the election process, but there's a catch -~ it depends on who is proposing them. A statewide survey commissioned by the nonpartisan New America Foundation found that 70 percent of voters are more likely to support recommendations made by a panel of average citizens than they are to support the ideas of a government committee or even a panel of independent experts. Only 10 percent said they have more confidence in a government committee. With such distrust for politicians, the survey also found strong support for a citizen-based reform model that was demonstrated recently in Canada. In that case, lawmakers convened a "citizens' assembly" made up of 160 randomly selected average voters. The group spent nearly a year studying the election process and made proposals for improvements that were placed directly on the ballot. In the New America survey, three-fourths of the respondents said they would like to see the governor and the Legislature create a similar citizens assembly in California. More than two-thirds also said they would vote for an initiative to create the citizens' panel if it were on the ballot. The survey, conducted by the Survey and Policy Research Institute at San Jose State University, polled active voters statewide over a three- day period ending Nov. 30. It affirmed general approval of the governor and Legislature in Sacramento, but it still found overwhelming demand for better elections and better candidates that cut across all racial, partisan and ideological lines. Seventy percent of respondents said they "often feel [theyl are voting for the lesser of two evils." More than 3 out of 4 voters said the system favors Democratic and Republican candidates and is unfair to independents or minor party candidates. Nearly 60 percent said the system needs improvement and that government would perform better if a wider variety of candidates were elected. More than half the voters say California needs another major political party. What comes through in the poll is the great faith that Californi~ns have in "We the People" -- that is, themselves -- and much less faith in "Them the Politicians." That bold self-confidence is particularly CC#274 striking in light ~f the many political earthquakes in California in recent years, including the recall of a governor. Yet is anyone in Sacramento listening? In recent years, a number of promising reforms have been proposed for making the California political system more representative and responsive -- from independent redistricting to term limits and "top two" primaries to public financing of campaigns -- but all have faced the same obstacle: entrenched interests, including elected lawmakers, who benefit from the status quo. Oftentimes the reform itself has been viewed as an extension of the partisan war. In 2005, the redistricting proposal in Proposition 77 was seen as an attempt by the national Republican Party to force through a GOP-tilted gerrymander and gain an unfair advantage. This year, Proposition 89, the public-financing proposal, was viewed by some as an attempt by certain labor unions to tilt the playing field in their favor. So while Californians keep voting down reform, what this poll shows is that it is not because Californians don't believe reform is necessary. It is because they want it to be done in a fair and nonpartisan way. What is overwhelmingly clear is that the biggest problem for political reform is not the message, it is the messenger. People don't trust politicians to design their own election system. Yet the poll findings suggest a highly popular method for improving California's election process and creating more pUblic confidence. While some propose using voter initiatives, what the New America Foundation survey reveals is that the best solution is using a citizens' assembly where average voters would be empowered to propose political reforms to California voters, such as an independent redistricting commission, open primaries, campaign-finance reform or alternative electoral methods such as instant-runoff voting. Two California legislators introduced a constitutional amendment, ACA2B, into this year's legislative session, to establish a California Citizens' Assembly. The authors Were termed out and thus have left the Legislature, so this bipartisan legislation is no longer pending and is ripe for new sponsorship. A citizens' assembly is an important vehicle for modernizing our political system because trust is placed in a deliberative process involving average citizens who have more credibility than the political class. For nearly two years, both Gov. Arnold Schwarzenegger and Democratic Speaker of the Assembly Fabian Nunez have agreed on the need for reform but have not been able to agree on the details. Well, here's the solution, one that California voters overwhelming support: Turn the details over to 'a California Citizens' Assembly, and let average citizens decide what political reform is best for California. Steven Hill is the director of the Political Reform Program at the New America Foundation (www.NewAmerica.net <http://www.NewAmerica.net> ) and author of "10 Steps to Repair American Democracy" (www.l0steps.net <http://www.l0steps.net> ). CC#275 CITY OF SANTA MONICA Page 1 of 4 CITY OF SANTA MONICA OFFICE OF THE CITY ATTORNEY TO: Maria Stewart, City Clerk FROM: Marsha Jones Moutrie, City Attorney DATE: February 27, 2007 RE: Interpretation and Application of City Charter Article XXII (The Oaks Initiative) You have requested advice about interpreting and applying City Charter Article XXII, which was adopted by the voters in Santa Monica and other cities and is commonly known as the Oaks Initiative. This memorandum responds to that request. My intent in supplying this memorandum is limited. I want to provide a compilation of answers to various questions which have arisen since the Article was implemented. Hopefully, this memorandum will facilitate consistent application of the measure with due regard to both the restrictions adopted by the voters and the constitutional rights of all community members. As you know, the Oaks Initiative was intended to forestall corruption by, in the language of the measure's findings, "reducing the corruptive influence of emoluments, gifts, and prospective campaign contributions on decisions of public officials in the management of public assets and franchises, and in the disposition of public funds." Article XXII restricts gifts, contributions and other emoluments to a Council member from anyone who has benefited from the Council member's previous vote to confer a public benefit, such as a contract or franchise, upon the donor. Thus, Article XXII limits community members' rights to participate in the political process by making campaign contributions to Council members who voted "yes" on items benefiting the community members. For example, if a Council member voted to award a $100,000 contract to a particular architect that Council member would thereafter be barred from receiving a campaign contribution, in any amount, from that architect for a specified number of years. Conversely, the architect would be barred from making a contribution to any Council member who voted to award the contract. As we have discussed, the language of the measure makes its sweep extremely broad. The language restricts officials' receipt of gifts, honoraria, emoluments and other personal pecuniary benefits of a value in excess of just $50. When applicable, Article XXII prohibits campaign contributions of any size made for any elective office (local or not), as well as all employment. Those prohibited from making campaign contributions include board members of corporations, including nonprofits, which receive grants from the City exceeding $10,000. Also, the prohibitions of the measure are triggered by a Council member's "yes" vote on a wide range of matters involving amounts as small as $10,000. As has been frequently noted, the broad sweep of the language of these prohibitions restricts the exercise of certain constitutional rights. The First Amendment protects the right of individuals to petition their government and to participate in the political process by making file:1 IF: \RecordsAndElectionShare\Meetings\ WWW\2007\20070313\s2007031308-A-5.htm 3/20/2007 City ur SANTA MUNiCA Page L ot 4 contributions to candidates. While cities may restrict the size of contributions for the legitimate purpose of averting corruption and the appearance of corruption, cities may lack authority to prohibit contributions outright. Moreover, triggering prohibitions based upon "yes" votes, but not "no" votes, may be irrational (and therefore unconstitutional) given that either vote could confer a financial benefit upon someone. Additionally, the restrictions on employment also limit the exercise of protected rights. One of the duties of this office is to preserve and effectuate local law. Accordingly, if a local measure is susceptible to interpretation and may be unconstitutional in its application, this office must interpret it to forestall constitutional violation and thereby preserve the measure by safeguarding it from constitutional challenge. Therefore, insofar as Article XXII is ambiguous, this office interprets it narrowly to preserve it and thereby effectuate its purposes and the voters' intent in adopting it. We have received questions about the application of Article XXII to the following groups and have supplied the following answers: City Emgloyees, Th~ir Union_~ and Union PACs - We were asked whether employees, their unions and union PACs may make, and a Council member seeking re-election may accept, contributions if the Council member voted to approve the union contract. Article XXII exempts "public employment" from the restrictions of the Article: "As used herein, the term public benefit does not include public employment in the normal course of business for services rendered, but includes a contract, benefit, or arrangement between the City and any individual [or] association... to ... provide personal services... ." Thus, by its plain language, Article XXII does not prohibit City employees from making contributions to incumbent Council members based upon their votes to approve employment contracts. As the number of City employees who have individual employment contracts with the Council is very small, the exemption for votes on employment contracts was likely intended to encompass votes on union contracts. Therefore, we conclude that Article XXII does not restrict campaign contributions from unions. It is less clear whether Article XXII purports to prohibit contributions from unions PACs. However, since Article XXII is ambiguous on this point and since the right to participate in the political process through contributions is constitutionally protected, a narrow reading of Article XXII is appropriate. Therefore, this office interprets Article XXII to allow campaign contributions by employees, unions and their PACs. We note, however, that other provisions of local'aw apply, notably the campaign contribution limit. Board and Commission Members - We have been asked whether members of City Boards and Commissions are precluded by Article XXII from making campaign contributions to Council members who appointed them. In our judgment, they are not. Their appointments to office might be perceived as benefits. However, Article XXII defines the term "public benefit" through the use of monetary thresholds; and Board and Commission members are not compensated for their services (though some are reimbursed for expenses). !':'!9nQr9iit BQard Members - We have been asked whether persons serving as board members of nonprofits which receive funds from the City may make campaign contributions to Council members who voted to approve the contract or grant. They may not. The language of Article XII is not ambiguous on this point. It makes no distinction between nonprofit and for profit corporations. Thus, Article XXII prohibits members of the Boards of Directors of all nonprofits which receive more than $10,000 in funding annually, or have contracts exceeding $25,000, from the City from making campaign contributions to Council members who voted to approve their contracts. This prohibition currently applies to nonprofit City grantees as well as file://F:\RecordsAndElectionShare\Meetings\ WWW\2007\20070313\s2007031308-A-5.htm 3/20/2007 CITY OF SANTA MONICA Page:'; ot 4 to those nonprofits with which the City has service contracts, i.e., the Bayside District Corporation, the Pier Restoration Corporation and the Convention and Visitors Bureau. It also applies to members of the school district and college boards. Board Members and Employees of Corporations Doing Business Withtbe City - We were asked whether board members and employees of a local corporation from which the City has purchased land can make contributions to Council members who voted for the land purchase. Employees may and board members may not. As to corporations doing business with the City in specified (and relatively low) amounts, Article XXII precludes 10% equity owners, trustees, directors, partners and officers from making campaign contributions to Council members who voted to approve the contract or purchase from the company. However, this prohibition does not apply to employees. City_J.essees and Sublessees -- Questions have also arisen about the impact of Article XXII on City lessees, such as the tenants on the Pier, the master tenant at Bergamont Station and the Viceroy Hotel. Many City leases predate the adoption and implementation of Article XXII. Persons and corporations which are parties to such leases are unaffected. However, Article XXII would affect parties to leases made after the adoption and implementation of the measure. In contrast, sublessees are not subject to the prohibitions of Article XXII. By its plain language, Article XXII applies to contracts, including leases, made with the City. There is no reference which would apply to sublessees, who do not have contracts with the City. Moreover, given that Article XXII operates as a limitation upon individual rights, it should not be interpreted to apply to sublessees. CitY' Contractors and Subcontractors -- Article XXII applies to contracts over $25,000 and to cash payments over $10,000. The disparity between these two numbers creates some ambiguity, particularly since the City seldom, if ever, pays out funds without some kind of contractual agreement. However, this ambiguity may be insignificant since contracts in these relatively low amounts do not go to the City Council. In general, the prohibitions of the Oaks Initiative apply to all contractors working on contracts approved by the City Council. However, Article XXII makes no reference to subcontractors or to indirect beneficiaries. Therefore, this office interprets the prohibitions of the measure to be inapplicable to subcontractors. Recipients of Text Amendments -- Article XXII includes among the list of "yes" votes that preclude contributions a vote to "confer a land use variance, special use permit, or other exception to a pre-existing master plan or land use ordinance pertaining to real property where such decision has a value in excess of $25,000." In Santa Monica, most discretionary land use decisions probably have a value of $25,000 or more. However, variance appeals are not decided by the City Council. Nonetheless, a question has arisen about whether a Councilmember's "yes" vote in favor of a text amendment would preclude a campaign contribution made by and received from the property owner who sought the text amendment. A text amendment does not create a variance or exception to pre-existing land use policy. Rather, it changes the policy through the formal process of amending the Municipal Code. Article XXII does not list the adoption of ordinances among the Council actions which trigger the Article's restrictions. Moreover, as stated above, because the Article limits the exercise of individual rights, it should be narrowly interpreted. That is. a property owner should not, as a matter of law, be compelled to choose between his or her right to participate in the political process and his or her right to petition City government for an ordinance change. Nonetheless, it should be noted that in the case of a text amendment applicable to only one property, it has been argued that the amendment is akin to a variance and therefore the Article XXII prohibition applies. file://F:\RecordsAndElectionShare\Meetings\ WWW\2007\20070313\s2007031308-A-5.htm 3/20/2007 CITY UF SANTA MUNICA Page 4 014 The above information constitutes a compilation of all the advice we have provided about the application of Article XXII to date. If you receive additional inquiries, we will be happy to provide more advice. f: \atty\m u n i\strpts \mj m\oa ksapplication file:IIF: \RecordsAndElectionShare\Meetings\ WWW\2007\20070313\s2007031308-A-5.htm 3/20/2007