City Council Meeting: October 23, 2007

Agenda Item: 3-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 June 19, 2007, City Council meeting, Council directed staff to continue to work on an election campaign public financing system, including estimates of the cost and possible funding sources; to research existing software that provides for creating a database to access and query election campaign statement information; review the enforcement challenges and to investigate ways to enable effective enforcement of our existing contribution limits and perhaps recommend changes if appropriate. 


This report provides information on programs for public financing of electoral campaigns.  Information on campaign statement software has been provided to Council via an information report.  Information on enforcement challenges and effective enforcement of existing laws will be addressed in a separate report by the City Attorney.



On March 13, 2007, in response to Council direction, staff presented a staff report on existing laws on candidate campaign contributions and expenditures, and on independent expenditures; on public financing of election campaigns programs implemented in other cities and some states; and, on options for a local public financing program structure. 


After considering the information received above, Council directed staff to hold a community workshop to receive public input on ways to improve the electoral process.  Staff presented a report to Council on June 19, 2007, on the results of the community workshop at which time Council gave the direction that is discussed in this report.



Existing Programs in Other Cities and Some States

On March 13, 2007, staff reported that the cities of Albuquerque, New Mexico, and Portland, Oregon, and the states of Arizona, Maine and Vermont have full financing programs in place.  At the time, the City of Los Angeles had a matching funds only program but was in the process of reviewing and receiving public input for a proposed full public financing program in the near future.  Currently, the City Council of Los Angeles is still waiting for feedback from their neighborhood councils regarding how a full public financing program should be structured, i.e., how much the qualifying contributions should be, the amount of total public funding that can be provided, etc.  L.A. City staff expects to return to Council with the feedback in December of this year or in January 2008.


In addition, as reported in a July 2003 report by The Center for Governmental Studies, the following cities had some type of public financing program (primarily matching funds, as opposed to full public financing programs):  Austin, Texas; Boulder, Colorado; Cary, North Carolina; Miami-Dade County, Florida; New York City; Suffolk County, New York; Tucson, Arizona; and, Oakland, San Francisco, Long Beach and Los Angeles in California.  The populations of these cities range approximately from 400,000 in Oakland to 8,008,000 in New York City.  Boulder's population is at 94,673 and *Cary, North Carolina at 94,536.  These two cities are the most comparable in population to the City of Santa Monica.  Below is a summary of these two cities' existing matching funds only programs:


Boulder, Colorado:

-           Matching funds:  $1 public funds for $1 contribution

-           Maximum public funds:  no more than 50% spending limit ($6,437 in 2007 - spending

            limit is $12,873.00)

-           Qualifying contributions: 10% of spending limit ($1,287)

-           Funding for program from general funds

-           Spending limit is $0.15 per registered voter ($10,532)

-           $100 contribution limit per election


Staff from the City of Boulder advises that the program has not significantly changed the number of voter turn-out; that the number of election-related complaints remains about the same; and, that there have been no violations by participants of the rules and requirements of the program.


Cary, North Carolina:

-           The amount of public funding awarded to runoff candidates equals the spending limit,           minus the funds raised by the candidates (funds disbursed after the runoff election).

-           Maximum of $20,000 for citywide office.

-           Qualifying contributions required - $5,000

-           Funding from general fund

-           Spending limit of $25,000

-           $4,000 contribution limit from individuals and non-party PAC's (does not apply to      political party committees, nor to a candidate's immediate family members)


Cary, North Carolina, provided public financing during only one election season in 2000.  

In 2002, in State Board of Elections v. Jack Smith, Julie Robinson and Town of Cary, the State Court ruled that Cary did not have the authority to administer the public finance program and the candidates were required to pay back the money that had been given to them. In North Carolina a municipality must have State General Assembly approval to do anything that is not already permitted in the State's General Statutes.   Cary's ordinance was repealed thereafter.  The City of Gary has opted not to pursue public finding.


The March 13, 2007, staff report also listed information on sources of funding, the structure of the existing programs, administration, and measured success of the programs to date. In addition, in order to open discussion, the report included an option of a structure for a local program.


On June 19, 2007, Council reviewed the report on the community input received at the community workshop held on May 14, 2007.  The public input also included a proposal for a public financing program submitted by VOTE4SM, a group self-described as "a Santa Monica citizen electoral reform coalition."


Options for a Local Program for Public Financing of Election Campaigns

Staff has reviewed related information published by the Center for Governmental Studies  and has contacted many of the entities that currently have public financing programs to gather information.  After reviewing the data available, staff has prepared the following list of options for Council to consider including full financing programs as well as a matching-funds-only program with different variables.  Please note that the variables may be changed in any of the options and doing so will result in differing amounts of qualifying contributions, grant funds, matching funds, and funding sources.  



Qualifying contributions: $500 per participating candidate to be raised in $5 increments from 100 registered voters. 


Seed Money:  Up to $250 of the qualifying contributions may be used as seed money to pay for costs incurred in raising the $500 qualifying contributions.


Initial Grant:   A $25,000 initial grant will be disbursed to candidates that have qualified for the program after a final list of participating and non-participating qualified candidates is certified.


Matching Funds:  An additional $25,000 in matching funds will be disbursed to participating candidates and may be used only to respond to non-participating opposing candidates that have spent over the amount of the initial grant limit ($25,000), or to respond to independent expenditures against the candidate, and only when the original grant amount has been exhausted.


Discussion:  A $5 contribution to a potential candidate for City Council should not impose a financial hardship on the contributor or undue pressure on the recipient.  Municipal Code Section 11.04.010 requires that a candidate be nominated by not less than 100 registered voters, so receiving contributions from 100 registered voters complies with this mandate.  Council may wish to discuss if $500 in qualifying contributions from 100 registered voters is an indication of a serious candidate demonstrating he/she has a strong voter support base, and should be eligible for public financing.



Qualifying contributions: $1,000 per participating candidate to be raised in $5 or $10 increments from 100 to 200 registered voters. 


Seed Money:  Up to $500 of the qualifying contributions may be used as seed money to pay for costs associated in raising the $1,000 qualifying contributions.


Initial Grant:   The $25,000 initial grant will be disbursed to candidates that have qualified for the program after a final list of participating and non-participating qualified candidates is certified.


Matching Funds:  An additional $25,000 in matching funds will be disbursed to participating candidates and may be used only to respond to non-participating opposing candidates that have spent over the amount of the initial grant limit ($25,000), or to respond to independent expenditures in opposition to the participating candidate, and only when the original grant amount has been exhausted.


Discussion:  This option is basically the same as Option 1 except that it raises the qualifying contributions to $1,000.  This option may indicate a "stronger" public support for the candidate because of the larger contribution received, and/or because of the increased number of voters contributing to the candidate.



Qualifying contributions: $5 contributions from 1% of the registered voter population in the City.  As of November 2006, there were 57,455 registered voters.  At that time, the proposed number of contributors would have totaled 575 and the total amount of qualifying contributions would amount to $2,875.


Seed Money:  Up to $1,000 of the qualifying contributions may be used as seed money to pay for costs associated in raising the qualifying contributions.


Initial Grant:   A $40,000 initial grant will be disbursed immediately to candidates upon qualifying for the program.


Matching Funds:  Dollar-for-dollar matching funds of up to 1.5 x the initial grant will be disbursed to participating candidates.  Once the initial grant has been exhausted, matching funds are triggered by an independent expenditure in support of a participating or non-participating opposing candidate over a cumulative amount of $15,000 from all sources; or a dollar-for-dollar matching fund is triggered by any independent expenditure made in opposition to a participating candidate.  The total grant fund will be $100,000 ($40,000 initial grant plus $60,000 matching grants).

Discussion:  This is the proposal submitted by VOTE4SM, and attached as Exhibit 1.



Qualifying contributions: $2,000 per participating candidate to be raised with a minimum of $5 contributions and a maximum of $20 contributions per individual voter.  Contributions may be obtained from between 100 and 400 contributors at between $5 and $20 contributions each.  The minimum number of contributors required is the same number of registered voter signatures required by the Municipal Code to qualify as a candidate.


Seed Money:  Up to $500 of the qualifying contributions may be used as seed money to pay for costs associated in raising the $2,000 qualifying contributions.


Initial Grant:   Participating candidates will receive $40,000 in initial grant funds.  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 participating and non-participating candidates that will appear on the ballot.


Matching Funds:  Participating candidates may also receive an additional maximum amount of $40,000 that may be used only to respond to non-participating opposing candidates that have spent over the amount of the grant limit ($40,000), or to respond to independent expenditures against the participating candidate, and only when the original grant amount has been exhausted. 


Discussion:  This proposal is similar to the first three except for the amount of the qualifying contributions and the amount of the initial grant and matching funds grant.


OPTION 6 - Matching Funds Only.

Qualifying contributions: This option will not have a provision for qualifying contributions.  Instead, it will have a provision limiting the amount of campaign funds that a participating candidate may raise. 


Total Contributions Limit:  A participating candidate may be allowed to raise a maximum amount in campaign funds.  For example a maximum contribution limit of $30,000 could be set.


Individual Contribution Limit:  In recognition of a participating candidate's commitment to the program Council may wish to consider the option of raising the contribution limit for participating candidates.  For example, the existing local individual contribution limit for candidates participating in the program could be raised to one and one-half times, or twice the contribution limit for non-participating candidates.  In other words, if the local contribution limit is $250, the limit could be raised for participating candidates to $325 (1.5x) or to $500 (2x) respectively, but would remain at $250 for non-participating candidates.


Seed Money:   Since there will be no qualifying contributions required, there will be no associated costs.  For this reason, there is no provision for seed money in this option.  


Initial Grant:   There will be no initial grant as the participating candidate would use his/her own campaign contributions until the limit was exhausted.


Matching Funds:  Participating candidates would receive a maximum amount equal to the total contribution limit, dollar-for-dollar matching funds, that may be used only to respond to non-participating opposing candidates that have spent over the amount of the grant limit or to respond to independent expenditures in opposition to the participating candidates, and only when the original grant amount has been exhausted.



This matching funds only option is provided as a comparison to the above full financing options and for discussion.


The amounts in these options are provided as examples of how a local program can be structured, and any amount in any option or its structure can be changed up or down should Council wish to do so for discussion purposes.


In addition to the options listed above, in the March 13 2007, staff report staff included an option that called for qualifying contributions in the amount of $3,000, seed money of $1,000, and candidates receiving an initial grant or $50,000 plus matching grant funds in the same amount for a total grant fund of $100,000.


Cost of Funding

As mentioned in the March 13, 2007, staff report, 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 for each option would be as follows: 


OPTION 1                  OPTION 2                  OPTION 3                  OPTION 4                    OPTION 5

$600,000                   $600,000                   $1,200,000                $960,000                     $ 360,000


However, anticipating an increase of participants if a program was 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 as follows:


OPTION 1                  OPTION 2                  OPTION 3                  OPTION 4                  OPTION 5

$900,000                   $900,000                   $1,800,000                $1,440,000                $ 540,000


Selecting Amount(s) of Grant Funds

In considering which, if any option, to explore further Council should also consider the analysis of local contributions and expenditures included in the March 13, 2007, staff report, which stated:


"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


"Independent Expenditures

Election            # of candidates

Year                   included in expenditure                                    Total


2002                                       06                                            $ 16,167.00

2004                                       09                                            $ 68,938.00

*2004                                      08                                            $ 49,363.00

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."

Funding Sources

All qualifying contributions from participating candidates in a full financing program will be deposited into the public financing program account.  In the options listed above, contributions will be made only by registered voters in the jurisdiction.  However, Council may choose to provide for contributions from all residents including those not registered to vote.


Staff considered a wide array of possibilities for funding sources for the public financing of an

elections program including some suggestions listed in the Public Financing of Elections:  Where to Get the Money, by the Center for Governmental Studies.  These possibilities included but are not limited to a local tax on luxury items such as high-performance autos (hummers, race cars, SUV's), endangered species leather and fur coats and accessories, and other like items; increasing local civil or criminal fines and/or fees; communication installations in the public right of way (cell phone antennas); add an additional tax to sales of alcohol and tobacco; impose a surcharge on City bids; a ballot measure for a $1 to $5 tax per resident; ballot measure for a public campaign finance bond; a fee based on a percentage on independent expenditures; a fee imposed on PACS based on percentage of contributions received and expenditures made during the reporting cycle; a built-in fee in contribution limit for non-participating candidates (for example: if contribution limit is $250, $25 are given to the city for public financing and the committee keeps $225) charging non-participating candidates a filing fee and the cost of publishing and translating candidate statements; civil penalties for violations of the local public campaign finance law; personal voluntary contributions; a "storage" fee when returning political signs posted illegally and removed by city staff;  and of course, from the City's General Fund.


The City Attorney's office conducted some  research on the above options and advised as follows:


Imposing a new tax.  There are some things that the state won’t let a municipality tax and there are a number of state requirements about how to impose or raise a tax; but, the purpose of the tax is more important than what is being taxed.  If a tax were imposed for the purpose of publicly funding campaigns, it would be considered a special tax subject to the requirement of approval by 2/3 of the electorate voting on the tax.  In contrast, if a general tax were imposed to increase the general fund for various purposes, only a majority would be required.   


A “voters tax” or poll tax (a flat tax on all voters).   This might be possible as it would be like a parcel tax with the rate based upon the number of occupants of a parcel.  The risk is that it would be invalidated as an unconstitutional property tax.  It is not clear that any California city currently has a poll tax.


Development tax.  A viable possibility might be a development tax, which is an excise tax on the activity of development.  It could be based on the number of units, number of bedrooms or square footage of development.


Campaign contribution fee.  The option of imposing a fee on independent expenditures or PACS is legally risky, given the many First Amendment cases affording added protections to such expenditures.  The same applies to the possibility of requiring that a percentage of any campaign contribution go to the City.  It’s dicey to limit or penalize participation in the political process.


Enforcement and collection of fees.  The City can impose and increase these types of fees as well as civil penalties.  However, enforcement and collection of these fees would be a practical problem.


Bond Financing.  This type of financing is usually used for funding of capital improvements and may be an impractical solution because of the finite life of the funding (and the improvement). 


Storage fee for illegally posted signs.  The City can impose a "storage fee" to individuals retrieving political signs that were illegally posted on public property and were removed by city staff.  The revenue generated from this activity would be minimal.


Surcharge on City bids.  In California, this type of fee could only legally reflect the cost of processing the bid.  It could not reflect the value of the contract.  If the “fee” was higher than the processing cost, it would be revenue generating and would be classified as a tax under California law.


Considering the above information, it may be possible to implement one or two of suggestions but, unless the voters were to approve a tax to support a public financing program, it is unlikely that an on-going stream of revenue could be secured.  As in most of the existing local programs, the program would likely need to be financed by general funds.


Current Public Financing Efforts

Attached as Exhibit 2 is an information report to Council dated June 11, 2002.  In the report staff reviews policy and practice of election activities undertaken that could be considered a type of public financing. 


Administration of the Program

As discussed in an earlier staff report, staff proposes that should Council pursue the implementation of public financing of electoral campaigns, Council initially 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 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 program has been implemented and has gone through the first election cycle.


Ongoing Maintenance and Auditing of the Program

After the election, each participating candidate's committee should be audited to assure that funds were spent in accordance with 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.


Council may consider establishing an in-house committee made up of a representative from the City Attorney's Office, the City Clerk's Office, the City Manager's Office and the Finance department; or, Council may wish to appoint a committee made up of residents to conduct the maintenance and auditing activities of the program.


Reporting Expenditures when Incurred

At the June 19, 2007, meeting Council also expressed an interest in having a local requirement that campaign expenses be reported when they are incurred.  Council may consider directing staff to return with an ordinance establishing such a requirement.  Prior to doing so, however, a discussion should be held on what the definition is of "incurring" an expense.  The definition could be established at any of three different points or incurring an expense:  At the time services/supplies/equipment are ordered; at the time they are used; or, at the time they are paid.  In addition, discussion should include the definition of a violation of this requirement and enforcement of the violation.


In summary, Council directed staff to provide more information on public financing of electoral campaigns and funding sources.  Staff recommends that Council review the information provided and the options listed for discussion, and provide direction to staff.


Budget/Financial Impact

This is an informational report and does not yet have a budget or financial impact. 




Attachment 1             VOTE4SM Program Proposal

Attachment 2             Information Report dated June 11, 2002


Prepared by:   Maria M. Stewart, City Clerk




Forwarded to Council:







Maria M. Stewart, City Clerk

(Director, Department of Records and

Election Services)


P. Lamont Ewell

City Manager