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0 DATE: March 4, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Benjamin L. Stock, City Attorney
DEPARTMENT: Communications/City Clerk
SUBJECT: CONSIDERATION OF ORDINANCE ADDING A NEW CHAPTER
2.60 TO THE FOSTER CITY MUNICIPAL CODE TO ESTABLISH
LOCAL CAMPAIGN CONTRIBUTION LIMITS
RECOMMENDATION
It is recommended that the City Council introduce by title only and waive further reading of an Ordinance Adding a New Chapter 2.60, “Campaign Contribution Limits for Elective City Offices” to Title 2, “Administration and Personnel” to the Foster City Municipal Code to Establish Campaign Contribution Limits.
EXECUTIVE SUMMARY
The Political Reform Act governs campaign contributions and expenditures and imposes limits on financial contributions. This law provides transparency to the public on who is contributing to candidate campaigns, how much is being contributed, and how funds are being used.
State law imposes limits on contributors for local and state candidates and defaults the limits for cities that do not have their own established limits. Assembly Bill 571 allows cities to adopt an ordinance that establishes their own contribution limits if they do not wish to default to the state limits.
Foster City currently does not have an ordinance regarding campaign contribution limits and defaults to the state limits.
4 8
0 On November 20, 2023 the Council discussed the various contribution limits and gave direction to staff to prepare an ordinance that established a campaign contribution limit but the Council did not wish to proceed with establishing a voluntary campaign expenditure limit. Staff has prepared the attached draft ordinance for Council’s consideration.
BACKGROUND/ANALYSIS
Campaign financing is regulated by the Political Reform Act of 1974 (the Act) which is overseen by the California Fair Political Practices Commission (FPPC). An aspect of the Act imposes campaign finance limits on candidates, limits contribution amounts from individuals and organizations, and requires candidates to file campaign statements that disclose all contributions received and expenditures made.
In 2021, through AB 571 - Mandatory Campaign Contribution Limits, state contribution limits automatically applied to cities that do not have a local campaign contribution ordinance and are updated biennially for inflation. This bill also allows cities to impose their own contribution limits if they do not wish to default to the state limits. If cities impose their own limits, the FPPC will not regulate campaign limits or enforce penalties.
When defaulting to the state limits, the FPPC regulates the administration and enforcement of penalties by a complaint basis. According to the FPPC website, the 2023-2024 state limits for local candidates, per election, is $5,500 for individual and organization contributors.
At the July 17, 2023 Regular Council meeting, Mayor Jon Froomin requested to agendize a discussion regarding campaign finance limits. Staff researched which local cities in San Mateo County have enacted campaign contribution limits and which default to the state limits.
As indicated above, at the November 20, 2023 the Council discussed this issue and by a vote of 4-0 (with Councilmember Hindi absent) directed staff as follows:
1. Create a draft ordinance that includes a detailed enforcement policy to be presented at a future Council meeting;
2. Establish the same contribution limit for individuals and organizations/businesses (with exact numbers to be agreed upon once the draft ordinance is presented);
3. Research varying contribution limits for Foster City residents and non-residents and City based businesses and non-City based businesses; and
4. Proceed without establishing voluntary expenditure limits.
It should also be noted that there is no reporting mechanism for individual contributions for candidates who do not have a campaign committee and file reports through the Form 460. Candidates who plan to raise or spend less than $2,000 do not have a campaign committee, and would file a Form 470. Foster City would need to determine a 4 8
0 process regarding campaign contributions without a campaign committee. The City of Burlingame only reviews/enforces contribution limits for campaign committees, and the City of San Mateo noted they followed an “honor system” for candidates who did not maintain campaign committees.
Legal Constraints
The right to participate in democracy through political contributions is protected by the First Amendment and because contribution limitations necessarily infringe on the contributor's ability to engage in free communication and association, they impinge on First Amendment freedoms1. However, the U.S. Supreme Court has determined that a state’s interest in eliminating actual corruption and the appearance of impropriety associated with large contributions may justify the burdens placed on First Amendment rights if the state demonstrates a sufficiently important interest and employs means "closely drawn" to avoid unnecessary abridgement of associational freedoms.2 Courts have recognized that preventing corruption or the appearance of corruption, and circumvention of otherwise valid campaign finance regulations as important governmental interests that would support a restriction on campaign contributions.3 The U.S. Supreme Court has narrowed the scope of what justifies restriction of campaign contributions to "'quid pro quo' corruption or its appearance." (i.e., dollars for political favors)4 Campaign regulations that impose restrictions distinguishing among different speakers, including out-of-state contributors, have been found to not met the “quid pro quo” standard. For example, a recent Ninth Circuit decision found that the State of Alaska’s regulation of nonresident campaign contributions did not target quid pro quo corruption or its appearance or its appearance and that even if it did, the limit was not sufficiently tailored to serve that interest.5
Given the foregoing legal constraints, the draft Ordinance does not distinguish between resident/nonresident campaign contributions nor does it distinguish between City based businesses and non-City based businesses.
Draft Ordinance
Based on Council’s direction, staff has prepared the attached draft Ordinance that would add a new Chapter 2.60, “Campaign Contribution Limits for Elective City Offices” within Title 2 of the City’s Municipal Code.
Findings and Definitions
1 Citizens United v Federal Election Comm'n (2010) 558 US 310, 130 S Ct 876; Buckley v Valeo (1976) 424 US 1, 19, 96 S Ct 612, superseded by statute as stated in McConnell v Federal Election Comm'n (2003) 540 US 93, 124 S Ct 619, which was overruled by Citizens United, 558 US 310. 2 Buckley, 424 US at p. 25.
3 Buckley, 424 US at pp. 26-29.
4 McCutcheon v Federal Election Comm'n (2014) 572 US 185, 192, 134 S Ct 1434, 1442. 5 Thompson v. Hebdon (2021) 7 F.4th 811, 824.
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0 The draft Ordinance would include findings that provide the bases for the Ordinance, including among other reasons, the preservation of the political process and preventing corruption or the appearance of corruption in the electoral process is a matter of the highest public interest and is necessary to promote public confidence. The draft Ordinance also includes a number of definitions, including the definition of individual and organization, as follows:
“Individual.” A natural person and shall not include a partnership, corporation, association, firm, business entity, committee, club, or other organization. “Organization.” A partnership, corporation, association, firm, business entity, committee, club, union, or company.
Campaign Contribution Limits
Currently, the City defaults to the State of California’s campaign contribution limit. The 2023-2024 Contribution Limits are $5,500 for a Person (individual, business entity, committee/PAC), $5,500 for a Small Contributor Committee and $5,500 for a Political Party.
The draft Ordinance would provide different campaign contribution limits than the State.
As directed by the Council the draft Ordinance would set the same contribution limit for both individuals and organizations. The Council will need to discuss and set the limit that is appropriate for the City of Foster City before introduction of the draft Ordinance.
The campaign contribution limit would not apply to a candidate’s contribution to his own campaign and would not limit any loans from a candidate to their own candidate committee.
As discussed at the November 20th meeting, 6 cities in San Mateo County have established their own contribution limits, varying by individual and organizational contribution, outlined below.
City Individual Contribution
Limit
Organization Contribution
Limit
San Mateo $500 $1,000
Belmont $500 $500
Redwood City $1,000 $1,000
Burlingame $350 $350
East Palo Alto6 $500 $500
Half Moon Bay $250 $500
Enforcement
6 The City of East Palo Alto elects its Council at large. 4 8
0 If the City of Foster City establishes its own contribution limits, the FPPC will not enforce the requirements. The City will be responsible for the enforcement of limits and any applicable penalties. However, as discussed above, since there is no reporting requirement for individual contributions for candidates who do not have a campaign committee and file reports through the Form 460 there would be no existing way to determine contributions.
The draft Ordinance provides that the City Clerk or their designee will be the “Enforcement Authority,” in consultation with the City Attorney. If the Enforcement Authority identifies a contribution that exceeds the allowable maximum contribution amount, the Enforcement Authority will send notice to the candidate or candidate committee to given them a reasonable opportunity to correct the statements (if an error exists) or otherwise correcting the violation by returning any donation amount that exceeds the allowable maximum donation amount. Any notice may be appealed to the City Council pursuant to section 1.04.110 of the Municipal Code.
The proposed Ordinance provides that violations of Chapter 2.60 are designated as misdemeanors and subject to a fine of $500 for each violation. The draft Ordinance also identifies other penalty options, including issuance of administrative citations or initiation of a suit in a court of competent jurisdiction to seek an injunction or other appropriate relief. Finally, the proposed Ordinance provides that a resident of the City who believes that a violation has occurred may institute an action at law or equity for injunctive relief and to compel compliance with the provisions of Chapter 2.60.
It is important to note that the Enforcement Authority would not be conducting any proactive investigation nor would the Enforcement Authority be investigating any third party complaints that may be made to the Enforcement Authority regarding inaccuracy of the statements.
If passed to a second reading and adopted, the draft Ordinance would go into effect thirty days after adoption.
California Environmental Quality Act
This item is not subject to review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as this is not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment.
FISCAL IMPACT
If adopted, the new provisions in Chapter 2.60 would require significant staff time from both the City Clerk’s Office and City Attorney at a time when traditionally the Clerk’s Office is focused on other critical election issues. It would be difficult to estimate the 4 8
0 amount of staff time needed to conduct campaign contribution limit enforcement, as much of it depends on the number of campaign committees, number of complaints that are filed, and time it takes to resolve a complaint. The City Clerk estimates that there would likely be an additional 10 hours of staff time that will need to be devoted to reviewing candidate statements and sending notices for potential violations per filing period. This includes the review of forms, candidate notification of enforcement, follow up on complaints, and the additional review of amended forms. The City Clerk would also likely need to consult with the City Attorney’s Office much more frequently to ensure that enforcement is appropriate, which will result in additional costs to the City.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
City Council Operations and Improved Community Engagement
ATTACHMENTS
Attachment 1 – Ordinance