HomeMy WebLinkAboutStaff Report 11/16/2000 (23) w $ ar u � `. 47: $ a .,. 5 i rsz: 'C y 111.7 yin,
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by John W-Wrllace
•
�;ublic officials, whether elected or appointed, should perform their duties in an,impartial manner, free from
bias caused by their own financial'interests or the financial interests,of persons who,have supported them.
' -.California..Politica(Reforin Act of 1974
The words of the..Political Reform Act-"of tjr mcitz a'' ,feed, . :,. ' Le' Beginning in the summer of 1998, the
1974 sound simple enough: "No public Ott ,s, F Me-1; r ibi commission started reviewing,restrdc-
official shall make, participate in makin t ' ' , „
making ,,, �„f�� .Fh,aa , ,r t v d'��. turing and revising the conflict of inter-
or in any way attempt to use his official [f,,r`f"' z �' ` r , (a4 `'' ---,- est regulations.The two parr process
position to influence a government deci- C r* ri sk 1; r ! had rwo`goals:•
sion in which he knows or has-reason to ifrR "�.ts`ry� � �. 4) • Phase One:To testructure•the regula-
know he has a financial interest:"Yet r i a rs bons into amore user-friendly format;
those simple words have spawned mote' h i . >',`S.'"' "` " ,j "'r.� �, y•
•
ions, l tigatgion and downright f ussttr[ion > ` �� V'i ,4 k r i j'" r,is Phase Two To make major improve-
than perhaps any other aspect of the-act. dy 1 x a : JS F 'r,,."../..,.,,,+; tnents in the most complicated con-
'',,:,.t� _ t; A r, ;4114^ t flict of inte[esrregulations.
• As many government officials know, 't ,'11-i t ,',nt , '
good-faith efforts to understand',and '-t 4. t `r .a ".Dt ire,.-". The Phase One restructuring of the
� `u+ i 1 b
comply with.the complex rules can'-be! 4�s s r 'i � to ^'n4b * i, regulations was completed in'October
a-challen in and-time-consumih ' '" '' '''"r'n`' ' ` ''''s•'''1 ' `<!
challenging g, �, fi � 1998.This protect produced a simpli= •
process.That's why the Fair Political. F �. v - •i,+ i)C ,•i fled, eight-step process,to help officials
Practices Commission (FPPC) has 'n" 4`C; ^-"" 1r1ti. ,` e;K determine whether a conflict exists—
undertaken the daunting task,of rewrit- a•process that was well received by city
ing, improving andisimplifying the con- attorneys:and state and local officials.
flict ofinterest regulations implementing ""`"". '' The steps,when followed in order, can
the act in order-to make the rules easier Y, ot-gl_(,i It 1. r.t�re7I t`: to help officials assess whether they may
to read and understand. - '" have a potential conflict of interest in.
,In'I,."1.51.',lti Jilt,. t:t1111-01:Y connection with an official act.
wi I-i:th core let rules But the commission believed substantive
Fair Political Practices Commission changes were also needed. On Dec. 8,
Senior Counsel John W Wallaceiiseines C'8f1 �7f3 a enad:�t.tljlil'g -aind 2000,'the.commission completed Phase
of the FPPC s;experts on conflict of interim ( . Two aadopted clarifying and, in some
•est rules and hashelped coordiaate'the t ,llitt-i.at.+ ti14`;tity.t, p 1[.t..C - major revisionsro:keyconn
final stages of lhe:improvement and+sim
plification project of interest regulatproject - """"" """ -" - "' '" - � b
i
10 'League(otCalifoiuia Cities; www.cacitles.org,
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,/
A D V E R T I S E M E N T•
affected by the decision.Two new regu- onietesomaletemanswasia
The steps call help lations affect this step
officials assess whether, Under the act; a public official'.is: 'ETHICS
required m;identify,his;or her income
they may have a potential from, investments ih; andior business T Il�V 1� G
�7 of positions •with;any business entity that
conflict, of interest in does business or plans to do business in
v, the jurisdiction. or has done business VIDEO
connection with all within the jurisdiction during the prior
official act. two-year.period.
presented by,
Anew regulation 18230, defines:and Steve'Churchwetl,
limits "doing business-,in the jurisdic, former General Counsel
Lion" to business..contacts:with a.person to the Fair Political
_. ."who maintaihs a"physical:presence in --- -
The Conflict of Interest practices Commission
Tesf.BYOCeSS the jurisdiction:The regulation includes
:a specific,lisi of activities(that'constitute Covers 11 r topics including, .
ThePhase Two amendments affect', "business contacts." Marketingls conflicts 'of interest,,
nearly all eight steps in:the;conflict expressly:excluded. -gifts,'travel andimisuse
of interest test process. While it is of',public funds.
beyond-the scope of this article to .Another,new:regulation;l1.8232;defines -
detail,all;of these chariges, the major 'terms;used to provide an exemption Developsia simple approach
from the definition�of"income' for cer-
revisions.are discussed.. - fo-kall'public officers
min payments"from government agen- and employees.
Does It Apply to Me? cies. Regulation 182313.4,o defines'ehe
terms salary,per diem and reimburse-. Application pending,-for 1.5
Step One of the eight-step test helps meat for!:expenses. . 'hours of MCLEcredit.
individuals determine.whether they, .
are public officials who are bound''-by Are Economic Interests $29,95
the conflict-of interest rules.The fey- To order, contact
Directly Involved?
ised Regulation 18701 determines the Lhiingstoni& Mattesich
Step Four seeks to`determinewhether •--
circumstances under whieleconsultants • at X91.6) 442,1111
are,treated as public officials for he,official's economic iinterests are' or,www.lmlaw.net
conflict purposes. directly or indirectly involved in the
-
governmental
-:decision. Directly,involved
real property, for instance„is subjectito x ee '` ``- .e "`t y ate`
Identifying Potential Conflicts ngent disqualification rules.. ; A r !11l/ 3� `y�/W y1�1.23
Step Two of the eight-step process dis more tin ,t 4e._vsi ,.r
Ste T
cusses whether the public official will be - - ---- - i r d �' / akmos"
making,:parueipating in making .using ,. o; t;'' ;, ' - "r r'4 v,L t?' e ' zz,a
or attempting to use his or her official A new,re ulation, .,, fir �n ..i ,,„v-� P�`
position to influence:a governmenrdeci -. x „r '- ` ! tr �
sign. In cases;where an official deter-. 1823O; ,defines and �- rn ^n r
8��' �s�v� �r3a �>� �
mines he orshe has a conflict of interest, a' • t' wr+i'"r `r y
lim[ts doing bi�slness: Per , " i , ice�+ #
the former rule required that disqualifi- i�arrh t t $4
cation be accompanied by mandatory in the jurisdiction., tai ' tr?TI"nOOiirstmin -
disclosure of-the officials financial inter i -y f, r iq x
est. Phase Two amended.:Regulations - ,- ,,7ar 1,C ,' rc�-18702.1 and 18730 to make thardisdo Real property formerly was considered i s�tihw�,{ °�”"e-,i i Y '
sure of•financial interest permissive ,h;d a
rather than mandatory. - directl involved m a decision when that a +c a 6R v ,x42 r rr
ro er was the sub ect'of a decision h a r"
P P Y - y `5 Liif ii t ' 'r t :
k l`4:,„ rS Jw I--- u,iP ,r4avii Jf
(for example, when an official was seek t^ gorier¢+ir4ft'' fweiFLlr a, T t�alPt �;
Identifying Economic:;Interests' •tx /,`c,'urJ a„ r iuT,fla;a a ak, i
mg a permit for the property or the u nli na hlE/101 d,�rfd (fill 4. .W `4i
Step Three seeks to identi an ;' ubYlic reionin of.the ro er All other types �S I g jf,flu ffiyiY' 'FOP 71 r r' ,4
p f YP g P P ty): YP v`' � 'Oh,- 't to
official's economic interests that.could be of decisions affecting the,real property ^r al i "�" ,, •
toniinued,on page 26 ..
www.westerricity.com Western City_Apri1 2001 1 1
FPPC;;,contfaued from pelt 11
were considered.indirect involvement Under amended'Regulation 18704.2, involved if the decision involves the
(for example,when an official's'property the official's property is considered construction of or improvements to
was not the subject:of the rezoning deci- directly involved if it is within'500'feet streets, water, sewer, storm drainage
sion, but was located near the property of the'bou'ndaries (or proposed bound- - or similar facilities that serve the
that was•being rezoned). aries) of the property subjectito-the official's property.
decision:Theproperty is also directly
C,... ("\ of Cale IghC-
r�Chartrl 1Regulation187051 Revised Standards for Determining What
a�Matenal Financial Effect`on Business Enhbes° r" " + bz, P ar jf f Stet-) test ll ' �1 icily.
lt :utic;,
- }S¢e of-Bu rn"ess Gross Revenue Expenses in Assets and
l e z� a inaFiscalYear };' aFlscal'Near L'iabliti s� determine whether they
Fs..or•�tun..:e.tt.500 c.: .-.' >t. > 10,000,000 $2,500;000 $10,000,0 0 0
3I'tl �:?Li�:)li_ •4..[��Ci k \viICJ
Newyork r �> $500,000 >$200,000 ?$500000 are I?Gllii%a by Ctlt' C(i1IfilCC
f T,.Stock Exchange
•
zU Dt 111tt1'ESL itiie$.
' NASDAQ or f >$300,000 2$100,000 2$300 000'
s Amencan'stock wr —
Exchanger
000 >$5 000 >$20 000 . . What Triggers a Conflict
144:klinic. . e � .. . - ..
Step Five seeks to determine what kinds
r..relai=' r >-�;+r ar f - x A �+�,, r m. ':> a'• of financial effects are important enough
r,Chart2, Real Property Owned by the:Officlal Old Rule vs Neil Rule yf, to trigger a conflict of interest.■
{.Cr F-k f' yn is€..,•S'e+e �¢ . . ,rt p "V $ `ae'+r 3 rr� fi „S •"{$•ras01d Rul 1 00 Feet i it n' ' 2 500;Feet i;epir°And Beyond+'r jN a kx�, Regulation 8705d acontaining rev ed
Presumed Material if Presumed not to be dollar thresholds to reflect the changes in
material. $10,000 effect material unless spe- the economy since the original adoption
absent a on the;fair mar- cific circumstances of the standards-in 1988. (See Chart 1,
shown of non ketValue or• make:a$10 000
9, i ,,, at left.)The commission also adopted
l financial effect $1X000 effect effect ion the fair mar definitions for the accounting'terms used•
• - on rental value: ket value or$1,000 - in the regulation and a suggested
effect on rental value method for public officials to use in
foreseeable, and the•
effect will hat be sub determining whether a conflict is trig-
. the same gered under the regulation.
asth effect on 25'
percent of the prop-
erties within a 2,500'
foot radius otthe oter) . t v e seeks CO
IL r boundanes of the 'i;' •-
'. ' 'official's real property:. Clcaefi7l.ltle what: _.111teS
or there die not at Cr. ;
least 10 properties 01 Wanda effects
under separate own,
are important tant c:lio 2
ership within a 2,500 0
foot radius of the offs
CO triter a conflict
cials property
i'1New-Rule. Y,-_..0 t Y my �ez�w,�,�s-, C:a� ,11 LC:1•C'Sl..
i New Ruler Wrthrn 500 Feet 500 Feet and Bs and 'D+v ' S- "
I 1•G}-, S n '� h,`Zk�_..s.,z.Y-. .e uiS"..:,,.'-r.;i:1:t u_..-.z,+.;vrsWU;,4i�� ..S.wrx... .�rsa��tf' ,,i. _.. _. -. .._._
Presumed Presumed not to be material
• material absent RebUffeety.PrOcif4of special-circumstances..
Regulation 18705.2 sets the standards
a showing of used for determining the relevance of the
no financial financial effect on the real property of a
effect. public official.The entire regulation has
26 League of California Cities www.cacities.org
'Leasehold Interest Held by the.Official Old Rules vs New Rules A.J
1g^' W�axt �"f e s ">e'�, .'eZau' a.r� ytx .�? k�
been recast in the form of rebuttable pre Old Ruteus t{ r �a1, ���s�1,0 ,, ,Z � �,, „'"$ '. �"'Fe1
sumptions. In other words,:where the' gal , " � z�,, _ , �, „ " tits !At ,'r� > _,t, r'
real property in which the official has an a�..,, t The•effect as tfo a-leasehold mterestnn,reaI,property is, 1,,
material if any of the following-applies !t
interest is directly involved in,a decision p
the effect is;presumed to be material,.'or The decision will change the legally allowable'use of the .
sufficiently important tlto trigger dis uali i=a Ie'asedproperty and the lessee has a right to,sublease,r" ,
fication.Whe e•the real property is.indi ua x x▪ 3' ,t i, the property''$*- ik;x c. ? , f ,"�''r'+ mY,a' ' `.v
rectl 'involved, the effect is resumed I''
Y'� P • It is'reasonably foreseeable that the lessee will crange the',
not to be material. Both of these isle- ; ' .i • .. .•- [.! - actual use of the property asa result of„the decision
sumptions may be rebutted by evidence a s, e,
that the resum Lion is not valid. (See ,' '”` Its is'reasonably foreseeable that the`decisionlwill result
charts 2 and 3, a left and"ri ht:) s','l�l4rr}J iii a;' , rnaa channge`Intthe actual,use'ofproperty`within,300+rfeet ',
g 1",., a ;- oftthe leased property and the changed;use mil l slgnifl,
' i+: • •?i cantly,enhance or decrease"the uselor enjoyment of the
Foreseeable Effects' leased property•;C ;;'
Step Six determines whether it istreason , r,,D�r` • The decision will-Increase diAdecr`ease the amount of, w"' .
ably foreseeable that the, overnmental ,a £7 mil , w
Y g e _,. � x,;ra,4 5trent for the leased property by S250ccis Sz,f ercent ,c ,;
decision will have a material financial f whichever is greater duringlany 12 month period following_
effect on eack,economic;interest of the ' the decision or i,E -
official. No regulatory action was taken
, , The dec ision w ris l l result m,a c hange r in the'-,termination
, d�at
e
in December that directly affects this -y v t of tithe"ease` K i a f n , ,f+ a ,,,,
step, although the commis"ion is wntin ;,, , r" ,t t , w a + t br {,,
uing to workon the issues involved. r N, n t r B a r 1 a a • ?' nd °om ,r
I
t3tNe W Ri Ue s •1Within j5OO Feet, -i, t .t 500,teet.a nB"soon-a , l• e :
. . Presumed material Presumed not to be material
Presumption rebutted by This presumption may be ,
Owners of three or f2W%I 't-r. ,4'' ?t;, awllknoth ave anyyseff_ec on "rare pecific}ci cu stanc s�
�O.IQ�1C'IICI€'S may constitute '( `'" ' the following I' I regarding the decision its
,! financial effect 'and the
a significant segment , i` ▪ The termination date of, nature;of the real property,in ,
b t7 ,rh4't:! Itt ,artt i `a the lease y r - 4° , 'F x
,� „ ' 'x d`I, • y,4-+ { kr-,s ,t r i,t P whlo�hrthe pubho official has .i%
of the ublic enerall r,ot'fn;a a a I l yc w an'economi interest,'which
y • n m i.,,ez The amount of rent paid t
b the lessee f&the ?, make;it reasonably foresee °
Ill CCI'Calt] I211I•fOI1 CIO : y able that the decision will
leased real property
CiuCISIOIhS. - r , -°' r ' ' '`' �' Chan ethedle all allow ,
r `, , r, ,+ The value of the lessee s T` g g y
A , v n ,r , w av ,J
) wi ;,t ' able use of the leasedyreal
4:y , +, tip right t, st.g.are'the real <;� r s sre u`F
�yS t'� o •,c " -,giitr= , �,?property�and the lessee
r: s. 5'), , ,4 t ProPe, ,v.v z= r U 1 S:gx y,x , ham`
,! { ;:, t! . , ? '� I� � has a right to sutileasethe
The;legally'allowable use real property ,
Making Distinctions e, , or the current use of the ,
,
� l '"J rt t t`{""$t3 real propertyiby the 4r =k�,�C ange'the lessee s actual
InyStep Seven, officials.determine if the { y r'", eattl "Iess ,s:r. " io fstli,' + x,t use of the �edl property ,�' rt
reasonably foreseeable financial effect on , ,1,114, ,.r, '_,= Nr , ., j, +r _ + ti,F
1 y Substantial) enhance or
the official's economic interests can be The'use o'•en o men i'l'l ' . y . .
distinguished from the effect on the significantly decrease the
, the leased real property
lessee s use or enjoyment
public eneral] As.a result of Phase r ,E " F `b,t.; lesseea K : y p eevty
P g Y• � s , ,,} � r ,,, ,t } z x ti c of the leased real roper
Two, the "public generally," rules in � ,sda 4i �u" lzgr,A �4e e r ` 1 x, ri Sty,,, rtra a.
Regulation 1.8707 were reorganized and at }, +i ,.; Increase or decrease '�i
a new road map was.added to assist offi ,:, `.,
,�:• the`amtiunt of rent-for ,
ciais in navigating the exception the leased real property F
o r by,5+ percent during,any t
In addition,Phase Two significantly �� ` '`" e d "1 t �'
g Y i:}' s i F , r 1-12 month enod followin Y,.
�� 'yF,l•4 5 ,0`- r P ,1, s ,' J3,,,- �E a .f " iKTecw on kti t 7 i
Changed'the threshold fordetermmrng �`;�s 1 k ,= '�r� ° ;; the decision;or !,w '%eta
when enough businesses:are•similarly F . l'
affected by a decision that the"public .'Result in a change in i
the termination date of
+'l' ' 4-,t i v i t, the eas e �Af 'k i , , , i F 4 , aii 7� a q 4 ,
continued d" WF . J� d . ,,W i,,n r1.i 9` �a . ;F. K :4 ,
www.westerncity.com Western city,April 2001 2;7
n
FPPC confirmed •
generally" exception applies. Under the the"public generally" in certain rent For More Information
amended regulation, 2,000 businesses or control decisions. In addition, the These-regulatory changes tookieffect on
25 percent of all the businesses in.the regulation includes a new exception Feb. 1, 2001.Additional information is
jurisdiction or district that the official applicable to rent control decisions ;available from the commission's website-.
represents, constitute,a significant,seg- whei-e:an official's economic interests at wvnv.fppcca.gov or by calling the toll-
ment, potentially triggering the public are indirectly involved,assuming several free help line, 1-866-ASK-FPPC. E3
generally exception. other requirements are met.
A related change was made to Regu- Exceptions ALL ABOUT TOWN
lation 18707.7 (renumbered from
18707.3).The regulation now provides Finally, Step Eight reminds officials that
that for elected officials(other than everi if they have a disqualifying conflict , P•
elected state officers),an industry,trade of interest in:a governmental decision, ` commumn tr.--1 ' 3 I :{
or profession constitutes a significant they still may be able to act if-their OIHECTOa ;-1 4` h�f
segment of the "public generally" if that participation is legally required. '!PI'o..el.C1 L
industry; trade or profession constitutes Regulation 18708 was amended to co
50 percent or more of the entities in the g 1 ''' '`\'
specify the disclosures necessary to I in.®
jurisdiction of the official's agency, or •
invoke the,exception.The amended reg- '
the district the official represents. ulation also describes the manner of dis- 11'9't •
New Regulation 18707.9 codifies the closure.requtred in a variety;of situations I
commissions opinion In re Ferraro (that is co say, closedsession, open ses- .., ':
(1978) 4 FPPCOps. 62,which states sion;and outside an open or closed ses- 'I ? .'d
that owners of three or fewer properties sion of the agency). "1 know he'in the building because
his scooter is still here."
may constitute a significant segment of -
•
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Tvy511' 3r n,�x tidc? Y ¢yt ati c n 4 , aer!(1� , )I•++ x - I r.., >rl't 'ic,u Y �9
t t_ sM ; I' M ' M , BW � y The Partners of ri
e fs Irtx a ''[� - 'k+atl -' r I :::. (�� "
,`°� �. , r • �F" N 1 f , W' , ,� ...7L.,,,',.:11.!.,..t ,r,:::. T.�Ii1.E}
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`� f � u .x v5 Jeffrey Altshuler CPA y:.i,,<,',"!:91...1,..-c4:, � y Tel(949)863-3363!Faz(949)863-3350
./,1I " -` sGovernmental Services Division t ' t t
>< s, -1‘5 2"ir 909,2480899'Fax: 909 680 17291or '11' , r > ,L• ' orncESALSOINLOSANGELES,SANDIEGO PNO
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< www mcgtadrey tom ia, ' t4 j -
^ r iss.. .�_ve, "^` ," 'Le ,.._ ...._:!'. . 3_,. .. l�;::ty 1--•i,-n ..-..� :z..4. ' ..-._
•
28 League of California Cities www.cacities.org
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