SR-072308-7B~r
~;tYof City Council Report
Santa Monica
City Council Meeting. ,
Agenda Item: ~' g
To: Mayor and City Council
From: Marsha Moutrie, City Attorney
Subject: Proposed Ordinance Modifying Municipal Code Provisions Regulating
Campaign Contributions and Suggestions Regarding Possible Future
Modifications
Recommended Action
Staff recommends that the City Council consider the attached proposed ordinance,
which would amend provisions of the Municipal Code relating to campaign
contributions, and consider directing staff on future modifications.
Executive Summary
In recent years, the Council has adopted measures and considered various issues
relating to the local election process and campaign financing with the goal of ensuring
that the elections in Santa Monica remain democratic, fair, transparent, and inclusive
and thereby promote public trust. Most recently, on October 23`d, 2007, Council
directed staff to propose Municipal Code amendments that would resolve any
ambiguities in local law and address issues relating to independent expenditures in
particular. The attached ordinance responds to that direction. It would clarify existing.
law and minimize legal risks by updating the findings and adding language on
contributions to independent committees. Additionally, this report provides information
on other possible options that the Council may wish to consider at some time after the
November election.
Background
Efforts to Regulate Campaign Financing at the Federal, State and Local Levels.
Federal, state and local legislative bodies have grappled with regulating campaign
financing for decades. The challenge has been to craft regulations that safeguard the
democratic process by ensuring that large contributors do not dominate election results
and also protect constitutional rights, including the First Amendment right to participate
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in the electoral process. That challenge has been as difficult as the issues are
important.
At the federal level, the Federal Election Commission administers the extensive system.
of restrictions imposed by the Federal Election Campaign Act and the Bipartisan
Campaign Reform Act of 2002 and implemented by federal regulations. The current
federal contribution limit for a contribution to ah individual or non-multicandidate
committee is $2300 per election. Contributions from federal government contractors,
foreign nationals, and the general treasury funds of corporations, labor organizations
and national banks are prohibited, as are contributions made in the name of another.
Federal laws governing contributions; particularly contributions by and to groups, have
been subject to numerous court challenges.
In California, the voters have weighed in repeatedly, proposing and adopting four major
campaign reform measures in the last twenty years (Propositions 68, 73, 208 and 34).
The first three of these were overturned by the courts. At present, Proposition 34
imposes a range of contribution limits for state offices from about $3,600 to $7,000 and
allows contributions by corporations and unions as well as natural persons and PACs.
Currently, state law expressly does not limit contributions to candidates for local offices.
Gov. Code 85703.
Many local jurisdictions have chosen to exercise their authority to impose campaign
financing limitations, and the local regulations they have adopted vary widely. Most
impose dollar limits on contributions to candidates. and their controlled committees.
Many also limit contributions to independent committees that support or oppose
candidates.
Some local jurisdictions prohibit contributions from business entities, contractors with
the local government, and lobbyists. For example, San Francisco prohibits corporate
contributions but allows corporations to establish a segregated fund to be used for
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political purposes in compliance with the requirements of federal law. Berkeley prohibits
contributions from corporations and. unions. San Diego's law provides that only persons
who are individuals may. contribute to candidates, and Oakland's prohibits contributions
by business entities.
As to dollar limits, local laws vary, but most appear to retain relatively low limits despite
recent developments in case law indicating that very low limits may be uncohstitutional.
Thus, Berkeley and San Diego have $250 limits for Council candidates. Huntington
Beach and Irvine have $300 limits. Culver City has a $500 limit on contributions to
candidates. Pasadena has no limit at all.
Some cities exclude independent committees from contribution limits. Thus, in Culver
City the $1000 limit applicable to contributions to committees does not apply to
independent committees: Likewise, the Huntington Beach contribution limit of $300 only
applies to controlled committees. These, exclusions probably reflect the. case law
summarized below.
Recently, some cities have moved to voluntary expenditure limits. These systems often
include atwo-track system of a very low limit with an option for a higher limit available to
candidates who voluntarily accept an overall expenditure limit. For example, Beverly
Hills and San Jose have a general $100 contribution limit. But, in Beverly Hills that limit
increases to $250 if the candidate accepts an overall expenditure limit of $60,000. In
San Jose, the limit goes up to $250 for council seats if the candidate accepts an
expenditure limit of $1 per district resident.
Besides acting as a check on runaway election costs, variable limits also may level the
playing field and protect against unusually high expenditures by or on behalf of one
candidate skewing results. Thus, in San Jose if a candidate who is not participating in
the voluntary expenditure limit program expends more than 75% of the limit, the limit
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triples. Similarly, if an independent committee spends more than 50% of the limit to
support or oppose a candidate, the limits triple.
The Constitutional Challenges
Like the federal and state governments, cities must follow the basic ground rules for
regulating campaign financing established by the United State Supreme Court in
Bucklev v. Valeo, 424 U.S: 1 (1978). In Bucklev, the Court held that both contribution
and expenditure limits implicate First Amendment rights but that they are subject to
different levels of judicial scrutiny.. The Court upheld a $1000 contribution limit on
contributions to a single candidate as "closely drawn to match a sufficiently important
interest," that being the interest in preventing corruption and the appearance of
corruption. 424 U.S. at 25-26. The Court refused to impose any particular minimum for
contribution limits, and instead established a general standard that contribution limits
may not be so low as to impede a candidate from amassing resources sufficient to
effectively advocate. Additionally, the Court struck down the federal limit on
independent expenditures, explaining that, limits. on independent expenditures are
subject to "strict scrutiny" by the courts - a test that is very difficult to meet because
independent expenditures do not pose the same corruption risks as contributions to
candidates.
In the years since Bucklev, the Court has grappled with a string of cases relating to
campaign. contribution limits and other election issues. Those cases were all decided by
applying the basic analytical framework established in Bucklev. That is, the Court
scrutinized the likelihood that the restriction would actually prevent corruption or the
appearance of corruption. In California Medical Assoc. v. Federal Election Commission
(FEC), 453 U.S. 182. (1981), the Court upheld federal limit of $5,000 per year on
contributions by individual and unincorporated associations to -any multi-candidate
political committee. In FEC v. National Right to Work Committee, 459 U.S. 197 (1982).,
the Court upheld a complex federal restriction on corporate contributions to political
candidates.
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While limits on contributions by corporations and multi-candidate committees were
upheld, limits on independent expenditures were not. In FEC v. National Conservative
Political Action Committee (PAC), 470 U.S. 480 (1985), the Court struck down a federal
provision limiting independent expenditures by political committees as unconstitutional.
As in Buckley, the Court explained that the danger that money would be given as a quid
pro quo for improper commitments from the candidate was alleviated when the
expenditure was independent of the. candidate. Therefore, the measure could not
withstand strict scrutiny because it did not advance any compelling state interest.
In addition to addressing contributions to and by organizations, the Court has also
addressed dollar limits. The Court upheld Missouri's contribution limits for state office
which ranged from $275 to $1075. Nixon v. Missouri, 528 U.S. 377 (2000): Most
recently, in Randall v. Sorrell, 548 U.S. 230 (2006), the Court struck down Vermont's
campaign finance law, which imposed expenditure limits ranging from $2,000 to
$300,000 and contribution limits (on both individuals and parties) of $200-$400 per two
year election cycle. The Court explained that the contribution limits were so low as to
"burden First Amendment interests in a manner that is disproportionate to the public
purposes they were enacted to advance." The court particularly noted the burden that
low contribution limits place on challengers and the lack of evidence of any corruption in
the state which would warrant such severe restrictions on expression and association.
This body of case law establishes a general principle which the Ninth Circuit
summarized in Montana Right to Life Assoc. v. Eddleman, 306 F.3d 874 (2002):
"[S]tate campaign contribution limits will be upheld if (1) there is adequate evidence that
the limitation furthers a sufficiently important state interest, and (2) if the limits are
"closely drawn" - i.e., they (a) focus narrowly on the state's interest, (b) leave the
contributor free to affiliate with a candidate, and (c) allow the candidate to amass
sufficient resources to wage an effective campaign." Id. at 881 Based on very strong
evidence of actual corruption, Eddleman upheld a Montana law that limited individual
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contributions and also limited the. aggregate amount that a candidate could receive from
all PAC's contributing to his/her campaign.
California Cities Struggle to Regulate Participation By Independent Committees
Recently, California cities have experienced particular difficulty applying these legal
principles to activities involving independent committees. While the holding in Buckley
would appear to create a solid foundation for such regulation by drawing a distinction
between contributions expenditures, the distinction becomes blurred in the case of
uncontrolled committees. Thus, in Lincoln Club v. City of Irvine, 292 F. 3d 934 (9~h Cir.
2002), plaintiff nonprofit corporation and its affiliated political action committees claimed
that their First Amendment rights of speech and association were violated by a city
ordinance that limited .the amount of contributions they could receive from a single
source during an election campaign. The Lincoln Club charged its members dues in the
amount of $2,000 per year. The Irvine ordinance provided that any person or
committee making an independent expenditure during an election cycle in support of or
opposition to a city candidate, could not accept any contribution from any person
exceeding the city's contribution limit of $320.. The Lincoln Club dues were considered
a contribution. The Ninth Circuit opined that, under the ordinance, the Lincoln Club
must either lower its dues or refrain from making independent expenditures. Therefore,
the Ninth Circuit held that, although it was worded as a contribution limit, the ordinance
functioned as an independent expenditure limit. Thus, it was subject to strict scrutiny
(and subject to invalidation) under Bucklev.
Similarly, in San Jose Silicon Valley Chamber PAC v. San Jose, 2006 WL 3832794
(N.D. Cal.), plaintiff organization challenged a San Jose law that established a $250
limit on contributions to independent committees acting "in aid" or "in opposition" to
candidates and required such committees to segregate contributions and expenditures
for city elections in order to comply with the limit. The federal court invalidated the
ordinance, ruling that it actually-effectuated both a contribution and an expenditure limit,
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regulated more speech than necessary to advance the interest of averting corruption,
and was vague.
In 2006, a federal court enjoined enforcement of Oakland's ordinance limiting
contributions to independent committees. The Court held that, although the facts were
somewhat different, the rationale of Lincoln Club should be followed and strict scrutiny
should be applied because Oakland's law effectively restricted plaintiffs independent
expenditures. OakPAC v. City of Oakland, C06-5266 (N.D. Cal. 10/19/2006).
And, last fall in Committee on Jobs Candidate Advocacy Fund v. Herrera, 2007 WL
2790351 (N.D. Cal.), a federal district court preliminarily enjoined enforcement of a San
Francisco law which regulated independent expenditures. Though the ordinance spoke
to contributions, the court explained that strict scrutiny applied because of the impact on
expenditures: "Limits on contribution to independent expenditure committees are
.subject to strict scrutiny because they place a substantial burden on protected speech
(i.e., barring expenditures). The Ordinance does not merely restrict contributions.
Similar to the ordinance in Lincoln Club, the San Francisco ordinance also restricts
expenditures by barring an independent expenditure committee from making
independent expenditures over the limits if the source of the committee's money is
membership contributions that exceed the ordinance's prescribed maximum: Also
similar to the ordinance at issue in Lincoln Club, here, the contribution limitations burden
protected speech and associational freedoms by requiring dramatic changes in
organizational structure ... . " Slip: Op. p.3.
Thus, Irvine's, San Jose's, Oakland's and San Francisco's limitations on the
participation of independent committees. have all been successfully challenged in recent
years even though their ordinances- were drafted as limits on contributions, not
expenditures. Overall, this body of case law, means that: municipal limits on
contributions by individuals to candidates and their controlled committees are
constitutional so long as .the dollar limit is high enough to ensure participation and
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opportunities to run against incumbents. However, regulation of contributions and
expenditures by uncontrolled or independent committees is highly problematic.
Discussion
Santa Monica Municipal Code Section 11.04.050(a) establishes the City's contribution
limit. It provides: "No person shall make to any candidate for office or to the controlled
committee of such candidate or to any committee which supports or opposes such
candidate, a contribution or contributions totaling more than two hundred fifty dollars for
each election in which the candidate was on, is on, or is likely to be on the ballot or in
which the candidate sought or seeks write-in votes."
Contributions by Corporations and Other Entities
At present, the code defines the term "person" broadly to include all types of
organizations, including corporations. At the hearing last fall, community members
expressed concern about corporate participation in the local election process.
Accordingly, staff recommends that the Council. consider prohibiting contributions by
business entities.. Council could also consider adopting the San Diego prohibition
against any entity (other than a natural person) contribufing to a candidate. Language
could be included in the proposed ordinance at the meeting if Council wants to make
any such change now. However, Staff does not recommend it at this time. because it
would be a significant substantive change in existing law, and this year's election is
relatively close.
The Dollar Limit
Legal staff has previously recommended that the Council consider raising the $250
contribution limit in order to comply with the case law invalidating low limits. The. $250
limit was established in 1992 and is not indexed. Council has previously indicated
concerns about this recommendation. As detailed above, a survey of other City's
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ordinances shows that Santa Monica's is not uniquely low. However, the cost of
elections in Santa Monica may be usually high relative to the City's population.
to view of these considerations, staff suggests that Council amend the ordinance to
strengthen the statement of purpose and findings. The attached proposed ordinance
includes modifications intended to buttress existing law by explaining the City's interest
in maintaining the low contribution limit and other existing provisions of local law.
Long term, legal staff suggests that the Council consider indexing or increasing the
limits. Council might also wish to consider moving to a system similar to San Jose's,
Beverly Hill's and other cities with variable contribution limits and voluntary expenditure
limits.
Regulatinp Independent Participation
After the decisions in Lincoln Club and San Jose cases, legal staff recommended
rethinking the language making the contribution limit applicable to "any committee
which supports or opposes" a candidate. Since then, the similar decisions on San
Francisco's and Oakland's laws have exacerbated staffs concerns. Therefore, at
minimum and for the present, staff proposes language which would clarify and hopefully
strengthen the existing limitation on contributions to independent committees and
insulate it against legal challenge by specifying that it is not intended to operate as a
limit on independent expenditures or to interfere with associational rights. That
language is included in the attached proposed ordinance.
Later, as the case law develops and affords more guidance, Council could consider
other options. These might include moving to a system of voluntary expenditure limits,
which increases the contribution limit for other candidates when another candidate or
independent committee spends excessive amounts. This might help reduce any unfair
impacts of independent expenditures.
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Financial Impacts & Budget Actions
Adoption of the proposed ordinance would have no fiscal impact upon the City.
Recommendation
Staff recommends that the Council approve the attached ordinance with modifications
or as presented and supply direction to staff as to future efforts.
Prepared by:
Marsha Jones Moutrie, City Attorney
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Approved: Forwarded to Council:
f: \ atty\m u n i\I aws\ mj m\ C a m p a i g n C o n t ri b u t i o n s 0 rd
City Council Meeting: June 24, 2008 Santa Monica, California
ORDINANCE NUMBER (CCS)
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SANTA MONICA AMENDING MUNICIPAL CODE PROVISIONS REGULATING
CAMPAIGN CONTRIBUTIONS AND SUGGESTIONS REGARDING POSSIBLE
FUTURE MODIFICATIONS
WHEREAS, Santa Monica is a relatively small city with a strong sense of
community and robust tradition of resident participation in local government; and
WHEREAS, in recent elections, very wealthy entities and interests have
threatened to dominate local elections through very large, last minute contributions and
expenditures; and
WHEREAS, local law limits contributions and does not limit expenditures, but
recent court decisions blur the line between the two, particularly with regard to
independent committees; and
WHEREAS, the City- is committed to both respecting constitutional rights of
individuals and minimizing the risk that local elections will be dominated by wealthy
special interests; and
WHEREAS, the City Council wishes to clarify its intent to respect rights of
association and free speech and to regulate contributions to the full extent allowed by
law.
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NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES HERESY ORDAlN AS FOLLOWS:
SECTION 1. Santa Monica Municipal Code Section 11.04.030 is hereby
amended to read as follows:
11.04.030 Findings and purpose.
(a) Monetary contributions to political campaigns
are a legitimate form of participation in the American political
process, but the financial strength of certain individuals or
organizations should not permit them to exercise a
disproportionate or controlling influence on the election of
candidates.
(b) The rapidly increasing costs of political
campaigns have forced many candidates to raise larger and
larger percentages of money from interest groups with a
specific financial stake in matters before City governmental
bodies. This has caused the public perception that votes are
being improperly influenced by monetary contributions. This
perception is undermining the credibility and integrity of the
governmental process.
(c) Officeholders are responding to high campaign
costs by raising ever-increasing amounts of money. This
fundraising distracts public officeholders from important
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public matters and encourages contributions which may
have the appearance of a corrupfing influence
(d) High campaign costs h°~~° +~~L ~h°,~m
discourag+r~e scommunity members from running for
public offlCesinc~, ,_•,?!~=, ± ~~~°~~ +.~ !wr~° cM,^;puig^
set~tr}bEiter~= because newcomers to the political. process
met may lack access to the financial resources necessary
to wage effective campaigns.
(e) Limiting campaign contributions helps ensure
equal opportunities for all candidates, promotes diversity
among candidates and strengthens the community's trust
that their government is representative.
(f) Limiting contributions to candidates and
committees, to the full extent allowed by law, helps promote
participation in government and trust that the democratic
process is not subverted by affluent special interest groups.
(q) Powerful special interests in Santa Monica
have, in past elections, sought to use their wealth to
dominate election results.
(h) Santa Monica can best preserve it's sense of
community, safeguard its local democracy and effectuate its .
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commitment to fair public process by limiting all campaign
contributions.
(ei) By enacting this Chapter, the City Council
seeks: to ensure that individuals and interest groups in our
society have a fair and equal opportunity to participate in the
elective and governmental processes; to reduce the
influence of large contributors with a specific financial stake
ih matters before City governmental bodies; to 1ir~titcurtail
overall expenditures in campaigns; to reduce the excessive
fundraising advantage of incumbents and thus encourage
competition for elective office; to improve the disclosure of
contribution sources in reasonable and effective ways; and
to help restore public trust in governmental and electoral
institutions. (Prior code § 11201; added by Ord. No.
163000S § 1, adopted 6/9/92)
SECTION 2. Santa Monica Municipal Code. Section 11.04.050 is hereby
amended to read as follows:
11.04.050 Limitations on contributions from
persons..
(a) No person shall make to any candidate for
office or to the controlled committee of such a candidate or
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to any committee which supports or opposes such
candidate, a contribution or contributions totaling more than
two hundred fifty dollars for each election in which the
candidate was on, is on, or is likely to be on the ballot or in
which the candidate sought or seeks write-in votes.
(b) No candidate for office or the controlled
committee of such a candidate or any committee which
supports or opposes such candidate shall accept from any
person a contribution or contributions totaling more than two
hundred fifty dollars for each election. (Prior code § 11203;
added by Ord. No. 1630CCS § 1, adopted 6/9/92)
(c) This section shall not be interpreted or applied
to violate the right of association or the right to express
views through expenditures. Rather, it is intended to be and
shall be applied solely as a limit on campaign contributions
to individuals and committees.
SECTION 3. Any provision of the Santa Monica Municipal Code or appendices
thereto inconsistent with the provisions of this Ordinance, to the extent of such
inconsistencies and no further, is hereby repealed or modified to that extent necessary
to effect the provisions of this Ordinance..
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SECTION 4. If any section, subsection, sentence, clause, or phrase. of #his'
Ordinance is for any reason held to be invalid or unconstitutional by a decision of any
court of competent jurisdiction, such decision shall not affect the validity of the
remaining portions of this Ordinance. The City Council hereby declares that it would
have passed this Ordinance and each and every section, subsection, sentence, clause,
or phrase. not declared invalid or unconstitutional without regard to whether any portion
of the ordinance would be subsequently declared invalid or unconstitutional.
SECTION 5. The Mayor shall sign and the City Clerk shall attest to the passage
of this Ordinance. The City Clerk shall cause the same to be published once in the
official newspaper within 15 days after its adoption. This Ordinance shall become
effective 30 days from its adoption.
APPROVED AS TO FORM:
M SHA ES M UTRIE
Cit ~ttor
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