City Council Meeting: February 27, 2007
Agenda Item: 8-G
To: Mayor and City Council
Subject: Public Financing of Campaigns
Staff recommends that Council review the information contained in this report and provide direction to staff.
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.
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.
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
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
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.
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 fundraising 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."
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 Contributions 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
Election # of candidates
Year included in expenditure Total
2002 06 $ 16,167.00
2004 10 $ 62,045.00
*2004 09 $ 43,878.00
2006 05 $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.
EXISTING PUBLIC FUNDING PROGRAMS
The cities of
It should be noted that at the time that
FUNDING SOURCES FOR EXISTING PROGRAMS
The majority of funding for the program in the state of
The City of
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.
On November 14, 2006, the City of
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-limit expenditures by non-participating candidates, or to respond to independent expenditures. The amount of the grants and of the matching funds are as follows:
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
in perspective the amount of funding, please note the following demographics in
the City of
Office Per Resident Per Registered Voter
Councilmember $ 1.42 $ 3.70 (per district)
Controller $ 0.27 $ 0.70 (citywide)
City Attorney $ 0.40 $ 1.05 (citywide)
Mayor $ 0.94 $ 2.47 (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 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.
OPTIONS FOR A LOCAL PUBLIC FINANCING PROGRAM STRUCTURE
Staff considered all the data provided in the preceding pages and
more specifically, the City of
Proposed Program: A full public financing program with matching
funds to be implemented in the City of
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
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 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
Office Per Resident Per Registered Voter
S.M. City Council $ 1.15 $ 1.73
these amounts, please note that, as pointed out earlier, 38% of the population
of the City of
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
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.
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 full-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 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.
· 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 (
· 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 PROCESS AND TIMELINE
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 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.
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.
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
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.
Exhibit B - Other participating Cities and States Matrix
Exhibit C - City of
Exhibit D - San Francisco Chronicle Article dated 12/19/06 -
The Way Forward for Political Reform