SR-104-084-01 (2)
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MAR - B 2005
F :\atty\m un i\strpts \mjm \oakscasereport. doc
City Council Meeting 3-8-05
Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Report on the Status of City v. Stewart and Alternatives Available to the
City Following the Court of Appeals Decision Not to Decide the
Constitutionality of the Oaks Initiative
Introduction
This staff report provides information and recommendations on the City's alternatives
for responding to the Court of Appeals decision in City v. Stewart, the case seeking a
final determination of the constitutionality of the Oaks Initiative. The appellate court
declined, on procedural grounds, to rule on the measure's constitutionality, holding that
California law does not authorize the City to seek a judicial determination of
constitutionality through a common law validation action. Now, the Council must again
decide upon a course of action appropriate to these two realities: the voters have
passed a measure and two trial courts have ruled it unconstitutional.
Backqround
In 2000, the Oaks Initiative was placed on the ballot in a number of California cities
through the initiative process. The measure's findings explain that it is intended to
forestall corruption in local government by precluding public officials from conferring
benefits through their votes to gain future favors. The text of the measure is attached
as Exhibit 1. A copy of the City Attorney's Impartial Analysis is attached as Exhibit 2.
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MAR - 8 2005
In summary, the measure prohibits an official from receiving a "personal or campaign
advantage" from anyone whom the official has voted to grant a "public benefit" for stated
periods of time. A "public benefit" is, among other things, any contract or permit
exceeding $25,000 in value. A "personal campaign advantage" includes, among other
things, any campaign contribution, any gift worth more than $50, and any employment
for compensation. If the public benefit is conferred upon a corporation, the prohibition
applies where the applicant had a 10% or greater interest in the entity.
An example may serve to illustrate the breadth of the measure. In the situation where
the Planning Commission votes to grant a permit worth $25,000 (as most discretionary
permits are in Santa Monica), the measure would prohibit the permittee from making, for
a period of years, any political contribution to any Planning Commissioner who voted to
grant the permit and later opted to run for City Council. This would be the case even if
the Planning Commissioner did not know that the potential contributor had a 10%
interest in the proposed project. This prohibition appears to interfere with the
constitutional right of individuals to participate in the political process through
contributions. Additionally, the prohibition purportedly applies even where the official
who voted for the project opts to seek state or federal office. This aspect of the
measure appears to be preempted by state and federal law which regulate contributions
to state and federal candidates. Moreover, the measure appears to impermissibly
discriminate in favor of those who oppose projects. Thus, the measure would not
prohibit a neighbor who opposed the project and stood to gain financially from a denial,
from making a contribution to a commissioner who voted against the project.
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These and other aspects of the measure raised questions about its constitutionality
even while it was circulating. The City Attorney of Vista contacted Santa Monica and
asked us to join in a pre-election challenge intended to keep the initiative off the ballot.
(California law provides that a court may order an initiative measure kept off the ballot if
the measure is manifestly unconstitutional.)
The City declined to join in the attempt to keep the measure off the ballot. This
decision was based upon several considerations. Historically, this City has avoided pre-
election challenges because they may be inconsistent with the City's commitment to
facilitating the broadest possible opportunities for public input to government.
Moreover, California law disfavors pre-election challenges on the theories that voter
expression should be facilitated, the initiative measure may not pass, and a post
election challenge may be filed if an illegal measure does pass. These considerations
are the basis of the high standard of "manifest unconstitutionality" which must be met
to keep an initiative measure off the ballot.
Vista went forward with its pre-election challenge. The trial court judge agreed with the
City of Vista. He found that the Oaks Initiative was manifestly unconstitutional and
ordered it kept off the ballot. The Court of Appeal issued a temporary stay for the
purpose of gaining time to consider the matter. This stay allowed the measure to
appear on the ballot. The Oaks Initiative passed in Vista but was overridden by a
competing measure and therefore did not become the law. Meanwhile, Vista's case
remained pending in the Court of Appeal.
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The measure also passed in Santa Monica, presenting the City with the problem of what
to do in the situation where an initiative passes but has already been adjudged
manifestly unconstitutional. The obvious solution was obtaining a judicial decision on
constitutionality from an appellate court. So, Santa Monica filed an amicus brief seeking
a decision from the appellate court in the Vista case. Pasadena (where the measure
was on the ballot) joined in that request. Nonetheless, two judges on the appellate
panel voted that the case was moot and therefore should not be decided. The third
judge issued a scathing dissent explaining that the case was fully briefed and presented
an issue of ongoing public importance as was obvious from the fact that it had passed
or was on the ballot in other cities which needed to know if the measure was
constitutional or not.
The appellate court's decision that the matter was moot left Santa Monica and other
cities without a clear remedy. Because the measure had been adjudged "manifestly
unconstitutional," attempting to implement the measure posed the risk of violating the
constitutional rights of, among others, members of the public and past and present City
officials. On the other hand, the City could not simply ignore the election results. Of
course, the issue of constitutionality could readily have been presented to the courts
had the measure's proponents merely filed suit. They declined to do so. Ultimately,
faced with no good alternative, the City opted to file a common law validation action for
declaratory relief to obtain a final judicial decision on constitutionality.
Accordingly, City v. Stewart was filed in June of 2001. A few months later the
proponents of the measure, who had declined to sue, intervened in the case. This was
a positive development in that it arguably assured that their rights would be protected
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and that any claim that the matter was not vigorously litigated would be obviated by their
participation.
However, the measure's proponents argued strenuously that the
question of constitutionality should not be settled and that the remedy of a validation
action should not be available to the City. The trial judge asked for extended briefing.
Ultimately she agreed that the validating procedure was not available to the City.
However, she also rejected the proponents' argument that the City's suit was collusive,
finding that the litigation was brought in good faith.
Meanwhile, Pasadena and Claremont were facing the same dilemma because the
measure had passed in both cities. In Pasadena, the Clerk refused to certify the
election results. An action was filed to obtain certification, the proponents intervened,
and the City cross-complained for declaratory relief and filed a motion challenging the
complaint in intervention. The trial judge in the Pasadena case granted the motion and
ruled that the measure was unconstitutional. An appeal followed. That appeal was
consolidated with the City's for hearing in the Court of Appeal, which ruled against
Pasadena on procedural grounds.
Thus, to date, two trial judges have separately determined that the measure is
unconstitutional or manifestly unconstitutional. Moreover, in the City's case, the court of
appeal expressly recognized that the measure raises very serious constitutional
questions of ongoing importance to the public. The appellate court said:
"We recognize the constitutional question posed by Santa Monica and the
City Clerk undoubtedly is of significant and continuing public import.
Significant substantive issues remain and must, at some point, be addressed
on their merits. Those issues include such important constitutional questions
as whether ... the Initiative is invalid because it discriminates in favor of
those who oppose specified city projects, even if they do so for self-
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interested or competitive reasons, whether the Initiative is unconstitutionally
underinclusive with respect to its proscriptions against those who receive
certain public benefits, but impermissibly sweeping with regard to its
allegedly overbroad bans on contributions and employment. Strong public
policy and public interest principles are at stake, issues which are of great
interest to the parties to the litigation and the public at large. That is not
enough." Opinion at p.29.
Nonetheless, two appellate panels have declined to rule on constitutionality on
procedural grounds. The Oaks Initiative's proponents have steadily and vigorously
opposed any ruling on the constitutionality of their measure. Meanwhile, news reports
indicate that the proponents are working to get the measure on the ballot in Los
Angeles. So, the Oaks controversy continues to present an issue of ongoing public
importance.
Discussion
Though the courts have consistently recognized the existence of serious constitutional
issues, the remedy remains in dispute; and the City's options continue to be limited and
unsatisfactory. Faced with the reality of a measure passed by the voters which courts
have recognized violates constitutional rights, the City appears to have four basic
options:
1. Implement the Initiative.
The City could attempt to implement the measure. The Court of Appeal suggested that
doing so would require no more than sending notice to bidders for City contracts. This
suggestion does not take into account various aspects of the measure including, but not
limited to, the facts that it applies to the City's permitting work, that it appears to require
City officials or the City to keep track of all of those individuals upon whom they vote to
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confer "benefits", and that it carries criminal sanctions. Thus, it continues to appear that
implementation poses serious risks of violating individuals' constitutional rights and
thereby fostering litigation and undermining confidence in government.
2. Take No Action And Decline To Implement the Initiative.
Refusing or failing to implement the measure could have both direct and indirect
consequences. Litigation would likely be filed. Moreover, the City would run the risk of
appearing to disregard the wishes of its own voters.
3. Continue to Seek Judicial Resolution of the Issue of Constitutionality.
Continuing to seek judicial resolution is another possibility. This course requires
petitioning the California Supreme Court for review of the Court of Appeal's decision.
Partly because of time constraints, the Council has previously directed preparation of a
petition which would be filed on March 9th. Of course, the odds are always against the
Court granting review, particularly in civil cases. Moreover, since the appellate court
decided the case on procedural grounds, review, if granted, would likely not focus on
the constitutionality of the measure. On the other hand, preparing a petition in this
case is not particularly time consuming because the issues have been thoroughly
briefed.
4. Take the Matter Back to the Voters For A Charter Amendment.
The final alternative may be placing a Charter amendment on the ballot to attempt to
achieve the Oaks Initiative's purposes while eliminating its constitutional infirmities. To
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assess this option, the Council may wish to direct legal staff to provide an analysis of
the possibilities for such a measure.
Each of these options carries risks, and the City has no good option. That said, some
are probably better than others in terms of fulfilling the City's legal responsibilities,
protecting constitutional rights, effectuating the voters' intent, and maintaining public
trust. Council may wish to discuss the four options with these goals in mind.
Financial/Budqet Impact
Each of these alternatives entails costs to the City. Alternatives 1 and 2 would likely
entail both administrative and litigation costs. Alternative 3 would entail further litigation
costs. Alternative 4 would entail administrative costs. All such costs are difficult to
quantify at this time.
Recommendation
Staff recommends that the Council consider the City's options and provide direction to
staff.
PREPARED BY: Marsha Jones Moutrie, City Attorney
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EXHIBIT 1
SANTA MONICA
Charter Amendment
The Santa Monica City Charter shall be amended by the addition of Article XXII, to read as
follows:
ARTICLE XXII. TAXPAYER PROTECTION
Section 2200. Title
This Article shall be known as the City of Santa Monica Taxpayer Protection Amendment of
2000.
Section 2201. Findings and Declarations
(a) The people of the City of Santa Monica ("City") find that the use or disposition of public
assets are often tainted by conflicts of interest among local public officials entrusted with
their management and control. Such assets, including publicly owned real property, land
use decisions conferring substantial private benefits, conferral of a franchise without
competition, public purchases, taxation, and financing, should be arranged strictly on the
merits for the benefit of the public, and irrespective of the separate personal or financial
interests of involved public officials.
(b) The people find that public decisions to sell or lease property, to confer cable, trash
hauling and other franchises, to award public construction or service contracts, or to
utilize or dispose of other public assets, and to grant special land use or taxation
exceptions have often been made with the expectation of, and subsequent receipt of,
private benefits from those so assisted to involved public 'decision makers'. The people
further find that the sources of such corruptive influence include gifts and honoraria,
future employment offers, and anticipated campaign contributions for public officials who
are either elected or who later seek elective office. The trading of special favors or
advantage in the management or disposal of public assets and in the making of major
public purchases compromises the political process, undermines confidence in
democratic institutions, deprives meritorious prospective private buyers, lessees, and
sellers of fair opportunity, and deprives the public of its rightful enjoyment and effective
use of public assets.
(c) Accordingly, the people declare that there is a compelling state interest in reducing the
corruptive influence of emoluments, gifts, and prospective campaign contributions on the
decisions of public officials in the management of public assets and franchises, and in
the disposition of public funds. The people, who compensate public officials, expect and
declare that as a condition of such public office, no gifts, promised employment, or
campaign contributions shall be received from any substantial beneficiary of such a
public decision for a reasonable period, as provided herein.
Section 2202. Definitions
(a) 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, corporation, firm, partnership,
association, or other person or entity to:
(1) provide personal services of a value in excess of $25,000 over any 12 month
period;
(2) sell or furnish any material, supplies or equipment to the City of a value in excess
of $25,000 over any 12 month period;
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(3) buy or sell any real property to or from the City with a value in excess of $25,000,
or lease any real property to or from the City with a value in excess of $25,000
over any 12 month period;
(4) receive an award of a franchise to conduct any business activity in a territory in
which no other competitor potentially is available to provide similar and
competitive services, and for which gross revenue from the business activity
exceeds $50,000 in any 12 month period;
(5) 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;
(6) confer a tax abatement, exception, or benefit not generally applicable of a value
in excess of $5,000 in any 12 month period;
(7) receive cash or specie of a net value to the recipient in excess of $10,000 in any
12 month period.
(b) Those persons or entities receiving public benefits as defined in Section 2202(a)(1)-(7)
shall include the individual, corporation, firm, partnership, association, or other person or
entity so benefiting, and any individual or person who, during a period where such
benefit is received or accrues:
(1) has more than a ten percent (10%) equity, participation, or revenue interest in the
entity, or;
(2) who is a trustee, director, partner, or officer of that entity.
(c) As used herein, the term personal or campaign advantage shall include:
(1) any gift, honoraria, emolument, or personal pecuniary benefit of a value in
excess of $50;
(2) any employment for compensation;
(3) any campaign contributions for any elective office said official may pursue.
(d) As used herein, the term public official includes any elected or appointed public official
acting in an official capacity.
Section 2203. City Public Official Shall Not Receive Personal or Campaign Advantage
From Those To Whom They Allocate Public Benefits
(a) No City public official who has exercised discretion to approve and who has approved or
voted to approve a public benefit as defined in Section 2202(a) may receive a personal
or campaign advantage as defined in Section 2202(c) from a person as defined in
Section 2202(b) for a period beginning on the date the official approves or votes to
approve the public benefit, and ending no later than:
(1) two years after the expiration of the term of office that the official is serving at the
time the official approves or votes to approve the public benefit;
(2) two years after the official's departure from his or her office whether or not there
is a pre-established term of office; or
(3) six years from the date the official approves or votes to approve the public
benefit; whichever is first.
(b) Section 2203(a) shall also apply to the exercise of discretion of any such public official
serving in his or her official capacity through a redevelopment agency, or any other
public agency, whether within or without the territorial jurisdiction of the City either as a
representative or appointee of the City.
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Section 2204. Applicable Public Beneficiaries Section. Responsibilities of City Public
Officials and Advantage Recipients
(a) City public officials shall practice due diligence to ascertain whether or not a benefit
defined under Section 2202(a) has been conferred, and to monitor personal or campaign
advantages enumerated under Section 2202(c) so that any such qualifying advantage
received is returned forthwith, and no later than ten days after its receipt.
(b) City public officials shall provide, upon inquiry by any person, the names of all entities
and persons known to them who respectively qualify as public benefit recipients under
the terms of Sections 2202 and 2203.
Section 2205. Disclosure of the Law
The City shall provide any person, corporation, finn, partnership, association, or other person or
entity applying or competing for any benefit enumerated in Section 2202(a) with written notice of
the provisions of this Article and the future limitations it imposes. Said notice shall be
incorporated into requests for 'proposal', bid invitations, or other existing informational
disclosure documents to persons engaged in prospective business with, from, or through the
City.
Section 2206. Penalties and Enforcement
(a) In addition to all other penalties which might apply, any knowing and willful violation of
this Article by a public official constitutes a criminal misdemeanor offense.
(b) A civil action may be brought under this Article against a public official who receives a
personal or campaign advantage in violation of Section 2203. A finding of liability shall
subject the public official to the following civil remedies:
(1) restitution of the personal or campaign advantage received, which shall accrue to
the general fund of the City;
(2) a civil penalty of up to five times the value of the personal or campaign
advantage received;
(3) injunctive relief necessary to prevent present and future violations of this Article;
(4) disqualification from future public office or position within the jurisdiction, if
violations are willful, egregious, or repeated.
(c) A civil action under subdivision (b) of this section may be brought by any resident of the
City. In the event that such an action is brought by a resident of the City and the
petitioner prevails, the respondent public official shall pay reasonable attorney's fees and
costs to the prevailing petitioner. Civil penalties collected in such a prosecution shall
accrue 10% to the petitioner, and 90% to the City's general fund.
Section 2207. Severability
If any provision of this Article is held invalid, such invalidity or unconstitutionality shall not affect
other provisions or applications which can be given effect without the invalidated provision, and
to this end the provisions of this Article are severable.
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EXHIBIT 2
IMPARTIAL ANALYSIS BY THE CITY ATTORNEY OF PROPOSITION
This measure would amend the City Charter by adding language purporting to prohibit
elected and appointed City officials from receiving benefits from persons to whom they have
previously awarded contracts or other public benefits.
After an official exercises discretion to approve the allocation of a "public benefit" to a
recipient, the measure would prohibit that official from receiving a "personal or campaign
advantage" from the recipient for a specified time period. The measure defines "public benefit"
as any contract, benefit or arrangement between the City and any person or entity to provide
services or goods or to lease property with a value in excess of $25,000, to receive a franchise
with gross revenue exceeding $50,000 in twelve months, to confer a tax benefit exceeding
$5,000 in twelve months, or to receive cash or the equivalent with a value exceeding $10,000 in
twelve months. The measure defines "personal or campaign advantage" as including any -
personal benefit or gift worth more than $50, any employment for compensation, and any
campaign contribution for any, elective office. If the public benefit is allocated to a corporation
or other entity, the prohibition applies to personal benefits received from a person who had a
10% interest in the entity or was a trustee, director, partner or officer when the public benefit was
received by or accrued to the entity.
The prohibition against receiving a gift, contribution or employment would run for two
years after the expiration of the term when the official acted to allocate the public benefit, two
years after the official's departure from office, or six years from the date the official acted to
allocate the public benefit, whichever is first. Unspecified obligations would be imposed on
officials to "practice due diligence" in ascertaining whether public benefits have been conferred
and to monitor receipt of personal benefits to avoid violations.
The measure includes both criminal and civil remedies. Willful violations would be
misdemeanors. Additionally, City residents would be authorized to bring civil enforcement
actions. Civil remt;dies would include penalties, restitution to the City, injunctive relief and
disqualification from future public office in the City in a case of willful, egregious or repeated
violations. A resident prevailing in a civil action would be entitled to attorney's fees and costs
and 10% of any civil penalty, with the balance going to the City's general fund.
It is unclear how the City would be able to monitor compliance with the measure's
requirements. The cost of monitoring is unclear but would likely be substantial.
This measure may be subject to a legal challenge. Such a challenge would likely include
constitutional claims because the measure purports to impose stringent limitations upon protected
activities, including participation in the electoral process through making and receiving campaign
contributions.
PREPARED BY:
Marsha Jones Moutrie, City Attorney
Joseph Lawrence, Assistant City Attorney