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    19.    
City Council Regular
Meeting Date: 11/10/2020  

SUBJECT:
AB 571 - LOCAL CAMPAIGN CONTRIBUTION LIMITS
RECOMMENDATION:
1.  Discuss and provide direction on establishing campaign contribution limits either higher or lower than the default limits of AB 571 and potential mechanisms for the administration and enforcement of the new limits, which may include, administrative, civil, or criminal penalties; and

2.  Direct staff to bring back an ordinance and/or resolution determining the preferred campaign contribution and adopting a policy for administration and enforcement of the new limits for Council approval prior to December 31, 2020.

OR 

Take no action, thereby allowing the default campaign limits set forth in Government Code Section 85301(a) to apply beginning January 1, 2021. 
BACKGROUND/ANALYSIS:
State law imposes campaign contribution limits for elections to state office. Existing state law does not impose limits on contributions to candidates for local offices, although cities and counties have the authority to adopt their own contribution limits. As of 2016, only 23 percent of cities and 28 percent of counties in the state had adopted campaign contribution limits. Of the cities that have adopted campaign contribution limits, more than 90 percent have imposed limits of $1,000 or less. In cities without local limits, a single donor may give tens to hundreds of thousands of dollars to a candidate for city council—far exceeding the amount that even state legislators can legally accept. In recent years, there have been examples of $50,000, $100,000, and even $244,000 contributions to candidates for local office from donors with business before that local government. The sponsors of AB 571 were concerned that such large campaign contributions create a serious risk of actual or perceived corruption. AB 571 was adopted in 2019 to address these concerns.

AB 571
 
Effective January 1, 2021, AB 571 establishes default campaign contribution limits for cities and counties that have not adopted their own limits.  The default limits will be set at the same level as the limit on contributions from individuals to candidates for Senate and Assembly—no more than $4,700 per person per election (to be adjusted by the Fair Political Practices Commission (FPPC) in January of each odd-numbered year according to the CPI index). AB 571 preserves the ability of cities and counties to adopt their own contribution limits (higher or lower) by resolution or ordinance. If a city already has a contribution limit in place on the effective date of the bill, those limits will remain in effect. 
 
 
If a city does not adopt a campaign finance resolution or ordinance, the default limits of  AB 571 will apply and will be enforced by the FPPC (punishable as a misdemeanor and subject to specified penalties).  A city that establishes a campaign contribution limit, or already has one in place, may adopt enforcement standards for a violation of that limit, which may include administrative, civil, or criminal penalties. The FPPC is not responsible for the administration or enforcement of a city-established campaign contribution limit.   
 
Chino Hills is among the majority of cities that do not presently limit campaign contributions in connection with local elections.  The status quo will change when AB 571 goes into effect on January 1, 2021. The Council must decide whether to take no action, thus accepting the default provisions of AB 571, or to adopt its own local ordinance or resolution. 

What Happens if the City Does Nothing?
 

If the City Council chooses to take no action, the default campaign limits set forth in Government Code Section 85301(a) will apply locally beginning on January 1, 2021. Specifically, it will be unlawful for a person to make to a candidate for elective city office, and for a candidate for elective city office to accept from a person, a contribution totaling more than $4,700 per election.  That amount is adjusted in January of every odd-numbered year to reflect any increase or decrease in the Consumer Price Index.  Those adjustments are rounded to the nearest $100.  The FPPC would remain responsible for the administration and enforcement of the default contribution limit.  Violations of the default limit would be punishable as a misdemeanor and subject to fines. 
 
Other Options for the City Council
 
The City Council may choose to adopt an ordinance or resolution establishing campaign contribution limits. These may be higher or lower than the default limits of AB 571. The City also has the option of imposing no limits on campaign contributions, which would continue the current status. If the Council establishes a limit on local campaign contributions different than the state limits, it will also need to adopt a mechanism for administration and enforcement of the new limits as the FPPC will not administer or enforce any local limits on campaign contributions (unless it imposes no limit).  Enforcement standards for a violation of a local campaign contribution limit may include administrative, civil, or criminal penalties. Because the City, and not the FPPC, would be charged with administering and enforcing a local campaign contribution limit, the City would bear all costs associated with its administration and with the investigation/prosecution of violations. These costs could be significant. Also, if the Council adopts its own limits, some of the other provisions adopted by AB 571 would not take effect as explained in the section below.

Other Provisions in AB 571

AB 571 also contains a variety of other provisions that create comprehensive state limits on campaign financing as of January 1, 2021. These provisions will apply unless a local ordinance or resolution limiting campaign contributions is in place.  
  • Contributions to Other Candidates.  Section 85305 provides that a candidate for a city office or a committee controlled by that candidate cannot make a contribution to any other candidate for an elective state, county or city office in excess of the default limit.  This section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit.  

  • Transfer of Contributions.  Section 85306 provides that a candidate for a city office may transfer campaign funds from one controlled committee to another controlled committee for elective state, county, or city office of the same candidate.  This section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit.  

  • Limitations on Loans.  Section 85307 limits loans by a candidate for city office.  The candidate cannot personally loan his or her campaign more than $100,000 even if those funds came from a commercial lending institution on terms available to the public.  Section 85307 also prohibits a candidate from charging interest on any loan the candidate makes to the candidate’s campaign. This section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit. 

  • Recalls.  Section 85315 applies to recall qualification efforts and recall elections. It authorizes a city officer to establish a committee to oppose the qualification of a recall petition and any recall election.  That officer may accept contributions without regard to the state (default) contribution limits.  It also exempts from the voluntary expenditure limits of the Political Reform Act expenditures made to oppose the qualification of a recall measure or to oppose a recall election.  However, this section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit. For that reason, it may be considered a disincentive to adopting a local ordinance or resolution establishing campaign contribution limits. 

  • Contributions after the Election.  Section 85316 allows a candidate for city office to accept contributions after the election so long as the contribution does not exceed the net debt outstanding from the election and does not exceed the contribution limit for that election.  However, this section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit.  For that reason, it may be considered a disincentive to adopting a local ordinance or resolution establishing campaign contribution limits.

  • Carry-Over of Contributions.  Section 85317 allows a candidate for city office to carry over contributions raised in connection with an election for city office to subsequent elections for the same office.  However, this section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit.  For that reason, it may be considered a disincentive to adopting a local ordinance or resolution establishing campaign contribution limits.

  • Contributions before an Election.  Section 85318 authorizes candidates for city office to establish separate campaign contribution accounts for the primary and general elections or special primary and special general elections.  This section also authorizes a candidate to raise money for a general election before the primary election, and for a special general election before a special primary election, for the same office if the candidate sets aside the contributions and uses the contributions for the general election or special general election.  If the candidate is defeated in the primary election or special primary election, or otherwise withdraws from the general election or special general election, the general election or special general election funds must be refunded to the contributors on a pro rata bass less any expenses associated with the raising and administration of the contributions.  However, this section does not apply in a jurisdiction in which the city imposes, by ordinance or resolution, a limit on contributions that is different from the default limit.  For that reason, it may be considered a disincentive to adopting a local ordinance or resolution establishing campaign contribution limits.
     
ENVIRONMENTAL (CEQA) REVIEW:
This proposed action is exempt from review under the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq., "CEQA") and CEQA Guidelines (Title 14 California Code of Regulations §§ 15000, et seq.), because it does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and, constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. Accordingly, this action does not constitute a "project" that requires environmental review (see specifically 14 CCR § 15378(b)(4-5)).
FISCAL IMPACT:
Significant fiscal impacts to the General Fund budget could apply annually to cover costs of implementation, enforcement and prosecution if the City Council adopts its own campaign contribution limits that differ from the state default limits. However, if the City Council imposed no limits, or merely takes no action and allows the default limits to be adopted, there would be no cost for enforcement.
REVIEWED BY OTHERS:
This report has been reviewed by the City Attorney.
Attachments
AB 571

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