Posted 6-15-99
MEMORANDUM June 11, 1999
To: Members of the City Ethics Commission From: Rebecca Ávila, Executive Director Justine Block, Policy Analyst
Secession advocates in the San Fernando Valley ("Valley") have successfully initiated a government study and procedure for detaching from the City of Los Angeles ("City) and incorporating a new, independent city in the Valley. Not far behind is another secessionist group in the San Pedro-Wilmington area, which has just finished its signature-gathering, petition stage. These secession proposals, which could reach voters by the 2002 election, would affect residents throughout the City. The push for secession involves an expensive, lengthy process that would drastically change the political landscape and physical boundaries of Los Angeles. Yet, the public currently knows very little about the sources financing the groups advocating or opposing secession.
The purpose of this memorandum is to
1) provide background information regarding the secession process,
2) explain why state campaign disclosure laws do not yet cover the groups involved in the
secession debate and,
3) discuss options for providing the public with information about the financial sources
behind efforts to support or oppose secession.
In 1963, the Knox-Nisbet Act (formerly Government Code (54773, et seq.) established a system of local agency formation commissions in order to encourage the orderly formation of local governmental agencies.(1) One of the commissions is the Los Angeles County Local Government Formation Commission ("LAFCO"). (2) LAFCO consists of nine commissioners, including: Chair Thomas E. Jackson, Hal Bernson, Yvonne Brathwaite Burke, Larry Connelly, James Digiuseppe, Henri F. Pellissier, Beatrice Proo, William Wentworth, and Zev Yaroslavsky. Larry Calemine is the Executive Officer.
`LAFCO is empowered to review and approve or disapprove proposals concerning the formation of cities and other changes in jurisdiction or organization of local governmental agencies. (Cal. Gov. Code (56375(a)). LAFCO is also authorized to conduct studies of existing governmental agencies in an effort to improve the efficiency of urban services. (Cal. Gov. Code (56378).
LAFCO is currently considering a proposal requested by groups in the Valley that seek to secede from the City. The secession process, called a "special reorganization," involves a study by LAFCO to determine the feasibility of the Valley detaching from Los Angeles and incorporating its own city. Determining the feasibility of boundary changes for a large and densely populated city is a complex task. (3) More typical boundary changes by LAFCO involve cities seeking to annex pockets of unincorporated land. This is the first time an area has proposed detaching from an already incorporated city under LAFCO laws. Ultimately, LAFCO will decide whether or not to approve a final, special reorganization plan for the Valley, based on the feasibility study and proposals submitted by "Applicants" for special reorganization and by the City of Los Angeles. If LAFCO approves a special reorganization plan, the County Board of Supervisors will ultimately place the plan on the ballot for voters to consider in a citywide election.
On March 15, 1999, a petition for "special reorganization" of the Valley was certified by LAFCO. The petition proposes that LAFCO "study and approve for a vote of the public the question of forming a new, independent city within the San Fernando Valley." (See "Petition," Attachment A) The petition was certified after the County Registrar's Office determined that it included valid signatures of 25% of the registered voters residing within the Valley. (See "Certificate of Sufficiency of Registered Voter Petition," Attachment B). [not web published]
On April 14, 1999, LAFCO received an "Application to Initiate Proceeding for Change of Organization/Reorganization/Special Reorganization." (See "Special Reorganization," Attachment C). The "Applicants" for special reorganization have identified themselves as Jeff Brain, Carlos Ferreyra, Marie Harris, John M. Walker and the "Valley Study Foundation, Inc." Valley Voters Organized Toward Empowerment ("Valley VOTE"), an organization chaired by Richard Close, was not listed as an applicant but was publicly behind the petition-drive for special reorganization, and is currently raising funds in order to hire attorneys and government consultants.(4) Another organization not listed in the application was Citizens Information Concerning a Valleywide Independent City Foundation ("CIVIC"), a non-profit foundation created by David Fleming and Bert Boeckmann.(5) CIVIC's stated purpose is to fund the gathering of information related to the secession debate, not to advocate for or against secession.
Certification of the petition and receipt of the application for special reorganization initiated a seven-step procedure by LAFCO. (See "LAFCO Procedure Concerning the Valley Secession," Attachment D). The applicants recently completed the first step of the process when they submitted to LAFCO a request for data from the City of Los Angeles. (See "Initial Identification of Needs for Data Collection," Attachment E).
The next step is for LAFCO to request the information it needs from the City to complete the feasibility study. This process will require Los Angeles to provide extensive data about the City's assets, liabilities, revenues, expenditures, etc. Due to the size of Los Angeles' budget, estimates of the costs of the feasibility study range from $1.6 to $2.8 million. Usually, applicants pay for a LAFCO study. However, since the costs of this study are unusually high, various proposals are being considered for the state, county, and city governments to pay some or all of the costs.
After the City submits data for the study, the applicants submit a Proposal for Special Reorganization to LAFCO. The City then submits a response and a separate proposal. The next step is a decision by LAFCO whether to approve a final, special reorganization plan. Lastly, if such a plan is approved, the County Board of Supervisors places the special reorganization plan on the ballot.
Under state law, persons incur obligations to report fundraising and spending activities if they qualify as a "committee." Persons qualify as a "committee" if they receive contributions or make independent expenditures of $1,000 or more in a calendar year, or make contributions totaling $10,000 or more in a calendar year to or at the behest of candidates or other committees. (Cal. Gov. Code (82013)
Committees are obligated to report "contributions" received or made if the payments are made for a "political purpose." (Cal. Gov. Code (82015, 82025). A payment is made for a "political purpose" if it is intended to influence the actions of the voters for or against the qualification or passage of any "measure." (C.C.R. (18225)
The Political Reform Act ("PRA") defines "measure" as follows:
Measure means any constitutional amendment or other proposition which is submitted to a popular vote at an election by action of a legislative body, or which is submitted or intended to be submitted to a popular vote at an election by initiative, referendum or recall procedure whether or not it qualifies for the ballot. (Cal. Gov. Code ( 82043).
The Fair Political Practices Commission ("FPPC"), consistently held in In Re Fontana, (1976) 2 FPPC Ops. 25 (See "Fontana Opinion," Attachment F), and in subsequent advice letters, that a group's obligation to report expenditures begins "when the proposal becomes a measure." With regard to incorporation matters, the matter does not become a measure until the Board of Supervisors places the proposal on the ballot. (Fontana Opinion at 4).
A key distinction between a special reorganization proposal (which is not yet considered a "measure"), and "initiatives, referendum, or recall procedures" (which are considered "measures"), is that a petition for special reorganization does not go directly from petition certification to the voters at an election. The certification of the petition and application for special reorganization initiated LAFCO's seven-step procedure, and if LAFCO approves a final plan, it would eventually proceed to the Board of Supervisors who would place it on the ballot.(6) In contrast, initiatives, referenda, and recalls may be placed directly on the ballot after the requisite number of signatures are gathered in the petition stage. (Fontana Opinion at 3)
A stated purpose of the PRA is to regulate disclosure of receipt and expenditures in "election campaigns" so that voters may be "fully informed and improper practices may be inhibited." (Cal. Gov. Code (81002). Since there are several stages to the LAFCO process between the signature gathering for petitions and a proposal being placed on the ballot before the voters, the FPPC staff has stated that the fundraising and spending activities made in connection with the proposal thus far are not considered attempts to influence the voters at an election.(7)
Although groups raising and spending funds in support or opposition to the proposal do not need to file reports with the FPPC until the proposal is placed on the ballot, previous contributions and expenditures may be "recaptured" on the first campaign report. (Martini Advice Letter, No. A-93-378). After the proposal is placed on the ballot, a committee may need to report "contributions received and expenditures made in anticipation of the measure being placed on the ballot even if such contributions and expenditures were made before the Board of Supervisors actually placed the proposal on the ballot." (Fontana Opinion, footnote 5) (emphasis added). In applying Fontana, FPPC advice letters have stated that contributions received and expenditures made for the purpose of influencing citizens to vote for or against the measure (before the plan became a measure) shall be "recaptured" in the initial campaign report after the plan became a measure. (Martini, supra; Roberts Advice Letter, A-98-125; and Hicks Advice Letter, No. I-98-007) (emphasis added).
An expenditure is "intended to influence" the voters if the expenditure is used in a communication, such as an advertising campaign, that "expressly advocates the qualification or passage of a ballot measure." (Pessner Advice Letter, No. A-78-080 and Hicks, supra). For example, payments made to conduct a survey may become reportable expenditures if the subsequent use of the survey results would constitute an expenditure. (Winkler Advice Letter, No. A-86-035).
However, according to FPPC formal advice, funds "received and spent by a proponent in gathering petitions to submit to LAFCO are not reportable."(Martini Advice Letter, No. A-93-378). The FPPC did not give an explicit reason for this interpretation of the PRA and Fontana Opinion. One explanation is that funds spent during the signature-gathering stage for a LAFCO proposal, which does not go directly to the voters, is not considered an attempt to influence the voters, and thereby not yet considered an election activity covered by the PRA.
In the Roberts Advice Letter, No. A-98-125, the FPPC directly addressed the issue of whether a committee that raised money for a LAFCO feasibility study for incorporation of Rancho Cordova was required to report these fundraising activities. The FPPC determined that because the committee was raising all of its money to pay for the study, and not attempting to "influence a vote or an election," the contributions received would not become reportable when the incorporation proposal went on the ballot.
Here, the Valley groups as well as opposing groups, may be obligated to report expenditures connected to the LAFCO process if they use the study or other LAFCO documents to influence the voters -- specifically to make a communication to expressly advocate the passage or defeat of a special reorganization plan once it is on the ballot.
The FPPC has applied the recapturing method differently for contributions than for expenditures. Informally, the FPPC has advised that contributions received to influence voters about the LAFCO process prior to the proposal reaching the ballot may become reportable as a lump sum on the committee's first campaign statement if there were any contributions left when the proposal becomes a measure. If a group that was raising money during the LAFCO process forms a committee when the proposal is placed on the ballot, the committee would report the balance of funds remaining as a lump-sum contribution made from the group to the committee. Therefore, the names of individual contributors who gave money prior to the proposal being placed on the ballot would never be revealed through the recapturing method.
As noted above, the LAFCO process may take years before a special reorganization plan is placed on the ballot and, therefore, under current disclosure laws, groups that are raising and spending money now on the process may not reveal these activities until the 2002 election. Once the measure is on the ballot, moreover, only funds spent to influence the actions of the voters will be required to be reported leaving undisclosed the potentially large amounts of money spent to initiate the process and to influence the special reorganization plan. This situation is an anomaly considering the otherwise comprehensive disclosure requirements of the Political Reform Act (PRA).
Robert Stern, Executive Director of the Center for Governmental Studies and one of the drafters of the Political Reform Act, states that the LAFCO process and the organization of groups to propel that process was simply not contemplated at the time the state law was enacted. While the City and/or state legislature could enact regulations to address the LAFCO process now, it is important to note that no law would apply retroactively. In light of the complexity of the LAFCO process, the time and public resources it will involve, and the secession efforts underway in other parts of the City, however, the Commission may wish to consider the following issues.
Argument For - The secession process involves fundamental issues of governance, has long-term consequences, and will require the expenditure of numerous public resources. The public has a right to information about who is raising and spending money to initiate and influence that process just as it currently has that information about local candidates, ballot measure committees and independent expenditure committees.
Argument Against - Current disclosure laws will provide information about who is raising and spending money to influence voters at the point there is a special reorganization plan on the ballot. Until that time, additional disclosure requirements simply impose another regulatory scheme on top of an already complex process that may not result in a measure being placed before the voters.
Should the Commission decide to recommend additional disclosure requirements, it makes sense to apply the standards and process currently in place for providing information to the public about other political committees. For example, once an individual, organization, or group of persons raises $1,000 or more it qualifies as a "committee." Thereafter it is required to report information about its contributors and expenditures according to an established schedule - semi-annually in off-election years. If an individual decides not to seek contributions from any other source but instead spends $1,000 or more in personal funds in support or opposition to a ballot measure or candidate, the individual becomes an independent expenditure committee and also must file disclosure reports.
With regard to the secession process, the City could adopt an ordinance requiring an organization to publicly disclose contributions and expenditures when it raises or spends
[$ X] either as a committee or in independent expenditures in connection with the circulation of petitions to initiate the special reorganization process within the City of Los Angeles. Several other issues arise in connection with this option including: what amount triggers the disclosure process; what level of contributions must be disclosed; and would these reports no longer be required once the state ballot measure requirements kick in.
Alternatively, another approach would be to consider expenditures made to influence the LAFCO process, once that process has been initiated, as more akin to lobbying expenditures. Under this approach since LAFCO is not a City agency, it or the state legislature would have to enact a disclosure program to provide the public with information about who is raising and spending money to influence the development of the special reorganization plan. Once a plan is put before the voters, the disclosure requirements of the Political Reform Act would then apply.
1 There are currently 57 local agency formation commissions in California working with nearly 4,000 governmental agencies in 57 counties, over 500 cities, and more than 3,000 special districts. ("What is LAFCO?" http://calafco.org/lafco.htm, 5/18/99)
2 Currently LAFCO receives funding from the City, which pays approximately 26% of LAFCO's operating budget, and the County of Los Angeles, which pays the balance.
3 Los Angeles is 470 square miles and the second most populous city in the United States. ("City of Los Angeles Economic and Demographic Information," http://www.lacity.org/cao/econdemo.htm 1999).
4 "Financing Study Debated," Los Angeles Times, 3/17/99.
5 Valley VOTE Newsletter, 4/1/99.
6 According to LAFCO staff, it is most likely that the plan would appear on the 2002 ballot.
7 In the League of Women Voters v. Countrywide Crim. Justice Coordination Com., (1988) 203 Cal. App. 3d 529, 558, the court held that "prior to and through the drafting stage of a proposed initiative, and even through the identification of a willing proponent, the action is not taken to attempt to influence voters either to qualify or to pass an initiative measure, [because] there is as yet nothing to proceed to those stages." Since election activities are regulated by the PRA where the audience is the electorate, not where the activities are directed only at potentially interested private citizens, there is not an attempt to persuade or influence any vote. (Id., quoting Miller v. Miller, 1978, 87 Cal. App. 3d at 768; See also Yes on Measure A v. City of Lake Forest (1997) 60 Cal. App. 4th 620, where the fourth appellate district held that a city's pre-election challenge to a ballot measure is not an attempt to influence the electorate because the audience is not the "electorate" per se).