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SR 05-10-2016 11B City Council Report City Council Meeting: May 10, 2016 Agenda Item: 11.B To: Mayor and City Council From: Marsha Moutrie, City Attorney, City Attorney's Office Subject: Guidelines for Implementing Article XXII of the City Charter Recommended Action Staff recommends that the City Council adopt the attached resolution establishing guidelines for Implementation of Article XXII of the City Charter, commonly known as the Oaks Initiative. Executive Summary At its meeting of April 26, 2016, the City With Review and Recommendations of Best (the Report) prepared by the law firm of Hueston Hennigan LLP. Council had hired the firm to conduct an independent review of the circumstances underlying Riel v. City and of recent complaints alleging violations of Article XXII of the City Charter and to make findings and recommendations as to best practices. After hearing an oral presentation by Attorney John C. Hueston and receiving public testimony, the City Council directed staff to implement the recommendations in the Report by, among other things, preparing a resolution for adoption of guidelines for implementation of the Oaks Initiative. This staff report and the attached resolution fulfill that direction. The resolution would adopt the draft guidelines (the Draft) prepared by Hueston Hennigan with the addition of introductory information intended to enhance the utility of the guidelines and with minor changes. Attachment 1 to this report is a strikeout version of the Draft showing additions and proposed minor modifications. recommended resolution. The proposed changes to the Draft are explained in this report. They are intended to enhance clarity or to eliminate minor typographical errors or omissions in the Draft. Only one is substantive, and it was was suggested by a member of the public and approved by Council. 1 of 8 Background The circumstances underlying the Riel dispute and subsequent complaints made by residents are set forth, in detail, in the Report. The dispute was acrimonious, and the litigation it spawned was costly to the City and to individuals both financially and otherwise. In the wake of the Riel dispute, residents expressed concerns, including concerns about alleged violations of Article XXII, which prohibits an official from receiving a personal advantage from an individual or entity upon whom the official has conferred a public benefit, thereby about an alleged violation of City Charter Section 610, which precludes City Council service. In order to obtain an objective assessment and to ensure best practices going forward, the Council engaged Hueston Hennigan. Under the direction of John C. Hueston, that firm investigated by, among other things, conducting 21 interviews, reviewing relevant documents and obtaining information about other jurisdictions' best practices. On April th 20, the City received the report and immediately posted it At the Council meeting of April 26, Mr. Hueston presented the report to the Council and community and explained his findings and recommendations. Among them were these two: ative serves important anti-corruption interests in Santa Monica. To the extent that there are enforceability issues, interpretation issues, or legal infirmities with the Oaks Initiative, the law should be clarified or amended by the City Council and City of the Oaks Initiative and the City Council should pass those guidelines by In addition, to assist the City in implementing the recommendations, Hueston Hennigan supplied the Draft, as well as proposed amendments to Article XXII. Staff has reviewed the Draft and offers some minor proposed modifications, which are shown on Attachment 1 and explained in this report. The resolutions necessary to place Charter amendments on the ballot will be brought to Council in time for the November election. Discussion Legal staff concurs he Oaks Initiative serves important public purposes, that guidelines should be adopted for purposes of clarification and that the law should be amended to strengthen it by, among other , things, addressing legal concerns and thereby promoting its enforceability. These steps 2 of 8 would add Santa Monica to the list of cities (several of which are noted in the Report) that have attempted to effectuate the will of the voters by clarifying and modifying initiative measures identical or similar to Article XXII. These laws were conceived, drafted and approved for the important purpose of promoting good government. However, like many political reform initiatives, they may run afoul of constitutional constraints, including the First Amendment. (As Council and the community are well aware, the courts have interpreted First Amendment protections so broadly that they often frustrate voters attempts to achieve campaign reform and otherwise promote good government.) Thus, as described in the Report, a number of California cities have addressed potential legal issues by working to clarify, strengthen and thereby insulate their local anti-corruption laws. The proposed guidelines would serve that purpose, as would the proposed Charter amendment, which Council will consider in the coming weeks. The Draft divides the proposed guidelines into four categories: definitions, requirements of Article XXII, duties of the City, and duties of officials. This report addresses each category separately. Definitions: The Draft proposes definitions that would clarify and supplement the basic terminology of Article XXII and thereby facilitate compliance and enforcement. Public Official. That term is not clearly defined by the law, though inferences as to application may be drawn from the text. However, partly because Article XXII carries criminal sanctions, staff strongly supports clarifying the definition to ensure fair notice. would be defined to include persons making final approvals on the disposition of public benefits. This would expressly include, but not be limited to: Council members, Commission members, the City Manager and City designees. The proposed guidelines would expressly exclude those making recommendations, acting within a series of requirement approvals but not making the last approval, persons approving as to form, content, process or execution only, and hearing officers who are not City employees. Staff concurs with this approach because it is consistent with the purpose and the language of Article XXII. Staff recommends two minor changes to ensure clarity: adding City board members to the list of clarifying th Also, staff notes that the Council may wish to consider the bright line that the proposed 3 of 8 guidelines draw between those who make final approvals and those who make recommendations prohibition against self-dealing in contracts applies to those who influence decisions as well as to those who actually make them. And, as a practical reality, though Department Heads and the City Manager ultimately sign off on contracts, they may not be the persons actually deciding to whom contracts (below the Council threshold) should be let. Changing the guidelines to explicitly apply to those who actually make the determination of who should receive a public benefit may be worth considering. That approach may be more in keeping with the purpose of Article XXII than simply applying the prohibition On the other hand, limiting the prohibition to final approvals has advantages, including clarity and ease of administration; and it may better insulate Article XXII against legal challenges by narrowing its application. And, the guidelines could be revised, in the future, based on experience. Public Benefitt would modify the time period for valuation of benefits and would expressly list exclusions from the definition, and specify valuation methods . As to the time period for valuation, the language of Article XXII from Sections 2202 (a) (1) through (4), and (6) and (7) any 12 Hueston recommendation is likely proposed to facilitate administration and enforcement. And, staff agrees that it will serve that purpose. Staff simply notes that, the Draft language could result in two different beneficiaries, who received the same total amount from the City, being treated differently. Therefore, Council may wish to consider revising the language, and staff will have alternative wording available at the meeting. As to the valuation methodology included in the Draft, staff concurs that it should be included but notes one possible concern: special development approvals are proposed to be valued according to the presumed value as indicated by the applicant. concern is that this valuation method may be unreliable. However, given the very low threshold ($25,000 in value) this may not be a problem since virtually all approvals will qualify except for home repairs that, though minor, require a discretionary approval. T cover: third-party benefits, loans reasonably certain to be repaid, sponsorships, membership dues or obligations, purchases made with credit cards held by mid-level staffers and used for ongoing minor purchases, which are not aggregated under the purchasing ordinance, licenses that result in income less than $10,000, and public utility trading transactions. Staff concurs with these exclusions. They appear to cover circumstances or transactions that are unlikely to foster corruption and/or are relatively small in number or value. 4 of 8 Finally, staff notes that the strike outs to this section shown in Attachment 1 also include corrections to an apparent typographical error that omits a provision of Article XXII (which covers receipt of more than $10,000 in cash). Personal or Campaign Advantage: The definition of this term incorporates and narrows the definition in Article XXII. Specifically, the Draft excludes from the prohibition gifts that are exempted from state reporting requirements by the Fair Political Practices Commission (FPPC) regulations. Staff concurs. The Political Reform Act, which is implemented by the FPPC regulations, serves the same purposes as Article XXII: forestalling corruption and promoting public trust in government. The Draft also proposes excluding gifts from public agencies and gifts distributed by City. Staff also concurs as to these exclusions, partly because serve legitimate public purposes. The Draft would also limit the definition of campaign contributions to those made after a candidate has declared an intent to run or established an account to run. The explanation supplied in the D could encompass campaigns fo Staff also concurs with this proposal. Narrowing the prohibition is in keeping with the very substantial legal protection that the courts afford to political participation in the form of contributions. : As to this term, the Draft repeats the language of Article XXII with four additions. They would: 1. include requiring disclosure of real parties in interest; 2. exclude from the definition governmental entities and agents who do not have more than 10% equity and are not trustees, directors, partners or officers of the recipient entity; 3. include anyone who acquires a 10% equity interest or becomes a trustee, director, partner or officer of the recipient entity within 12 months of the accrual of the public benefit; and 4. exclude from the category of recipients that must be disclosed any and is itself an entity. Staff agrees with the first two additions. Staff also agrees with the third but notes that it may add significant administrative work since those doing business with the City will need to update their information as changes occur in their organizations, and this information will need to be disbursed. Finally, as to the fourth change, a resident th opposed this exclusion on April 26, and Council concurred. Staff supports this 5 of 8 decision for the reasons noted at the meeting: complexities of corporate ownership and control may facilitate obfuscation and frustrate efforts to achieve transparency. Requirements of Article XXII: The Draft includes language explaining that Article XXII does not apply to the exercise of a ministerial duty or to the award of any public benefit made because of an emergency. Staff concurs with these recommendations. Article XXII is intended to avert corruptive influences on discretionary actions not the ministerial discharge of duties established by law. And, in time of true emergency staff must often act very quickly to promote public health and safety a reality reflected in the Municipal Code provisions governing emergency purchases. The Draft also highlights that the Article XXII prohibition applies only when a public benefit is conferred and not when it is denied. As noted in the past, this distinction may be legally problematic (because denials to some may benefit others, particularly in the area of land use). But, Article XXII clearly so states, and its plain language may only be changed by the voters. Accordingly, staff also concurs with this recommendation. Duties of the City (and Applicants): This section of the Draft effectuates Section 2205 of Article XXII, applying or competing for public benefits. It also imposes disclosure obligations upon Staff suggests two minor changes to the wording of this section. The change in the title would clarify that it imposes obligations on applicants, as well as the City. The language requiring disclosure of real parties in interest is proposed to be relocated from a definition for the sake of clarity and emphasis. Duties of Public Officials: This section of the Draft helps clarify the duties of public officials. It functions as an interpretation of Section 2204 of the Charter which requires public officials to diligently monitor their own receipt of personal and campaign advanta, receipt is prohibited by Article XXII. Section 2204 also requires public officials to ies and persons who qualify as public benefit recipients under Article XXII. The Draft states that the City has assumed the responsibility for keeping track of actions conferring public benefits. And, indeed, the City has, in the past, assumed that responsibility as to the City Council. Moreover, with this clarification of the definition of , the City will assume the responsibility as to Board and Commission members and City employees who are covered by Article XXII. Implementation will probably require promulgation of an Administrative Instruction from the City Manager 6 of 8 providing express directions to City staff on compliance. And, legal staff will assist with training of Board and Commission members who . This section of the Draft also requires , who are candidates, to keep track of campaign contributions for elective offices for which they have either declared an intent to run or established an account. This language appears to narrow the obligations imposed by Article XXII, Section 2202 (c)(3), which defines a personal or campaign advantage Article XXII to situations in which the official is actually running and not merely considering a future run. As such, staff supports the proposed language. For the purpose of clarity, staff also proposes a minor modification to the language reflecting the requirement that personal or campaign advantages received in violation of the Oaks be promptly returned. Otherwise, staff concurs with the recommendations in the Draft. Next Steps Staff will distribute the guidelines as soon as they are adopted and will return to Council in the coming weeks with the resolutions necessary to place amendments to Article XXII on the November ballot. Financial Impacts and Budget Actions Adoption of the recommendations made in the report and these guidelines will have financial impacts on the budgets for the Offices of the City Clerk and City Attorney, the Finance Department, and the City Departments that staff boards and commissions which confer public benefits. The amount of those impacts is difficult to predict at this time because each office or department will need to assess staffing changes necessitated by expanding workloads. Staff anticipates that financial impacts will be addressed through the budget process and budget adjustments. 7 of 8 Prepared By: Marsha Moutrie, City Attorney Approved Forwarded to Council Attachments: A. Suggested Guidelines with Revisions B. Resolution with Guidelines 8 of 8 wĻŅĻƩĻƓĭĻʹ wĻƭƚƌǒƷźƚƓ bƚ͵ ЊЉВЎБΛ//{Μ