CITY OF SIGNAL HILL SUBJECT: ORDINANCE INTRODUCTION AMENDMENT TO SHMC 2.90 ELECTIONS AND CAMPAIGN FINANCE ORDINANCE POLITICAL ACTION COMMITTEES

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1 CITY OF SIGNAL HILL 2175 Cherry Avenue Signal Hill, CA TO: FROM: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL KENNETH C. FARFSING CITY MANAGER SUBJECT: ORDINANCE INTRODUCTION AMENDMENT TO SHMC 2.90 ELECTIONS AND CAMPAIGN FINANCE ORDINANCE POLITICAL ACTION COMMITTEES Summary: On June 4, 2013, City Council directed the City Attorney to draft an ordinance amending SHMC 2.90 to require that political action committees and independent expenditure committees report their financial supporters prior to municipal elections. The ordinance is now presented for council consideration and first reading. Recommendation: Waive further reading and introduce the ordinance entitled: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, AMENDING CHAPTER 2.90 OF THE SIGNAL HILL MUNICIPAL CODE, ELECTIONS AND CAMPAIGN CONTRIBUTIONS TO DISCLOSE INDEPENDENT EXPENDITURES BY OUTSIDE PARTIES Fiscal Impact: None. Background: On June 4, 2013, City Council directed the City Attorney to draft an ordinance amendment that would require the disclosure of financial supporters of general purpose and independent expenditure committees. Currently, independent expenditure reporting requirements in SHMC 2.90 apply only to candidates for city offices, their

2 Page 2 of 5 controlled committees, committees formed or existing primarily to support or oppose the candidacy of a candidate for city office, to city general purpose committees, and to other committees active only within the city. The current ordinance as written was significantly amended in 1993 to improve transparency and accountability regarding campaign contributions, and again in 2010 to amend Section , Definitions and , Accountability. Disclosure laws allow the public to obtain vital information about the source and use of campaign funds, and allows the public to determine the credibility of the advertisement if it knows the source of the advertisement. Signal Hill has a proud tradition of requiring reports of financial supporters of candidates. SHMC 2.90 is designed to shine the public spotlight on improper campaign influence, real or potential, exercised by campaign contributors over elected officials. The ordinance imposes campaign contribution limits, requires campaign contribution checking accounts, and a series of accountability measures. These measures include the timely filing of campaign contribution statements to allow voters and candidates to understand who is supporting whom. The ordinance as written did not anticipate the undue influence by outside organizations that attempt to influence local voters. Despite disclosure rules, it is possible to spend money without voters knowing the identities of donors before elections. This allows funds raised by PACs to be spent in the final days of the election and ballots cast before any reports are due. However, even with campaign contribution limits, many individuals and groups may increase their involvement in political campaigns with independent spending (aka electioneering communication). The city wants to ensure the public's right to know which interests are funding political campaigns. Full disclosure allows voters to make informed decisions prior to casting their ballots. This ordinance amendment would require individuals and entities making expenditures on behalf of a candidate or ballot measure to file timely disclosure reports showing amounts paid and the candidates and/or ballot measures supported and/or opposed. A General Purpose Committee (also referred to as a Political Action Committees or PAC) is a type of recipient committee/organization (an individual or group that receives contributions totaling $1,000 or more during a calendar year) whose principal activity is supporting or opposing a variety of candidates or measures voted on in different elections or jurisdictions. These committees raise money from other sources in order to make political expenditures. PACs have become more common in recent years as many cities have adopted campaign contribution limits. There are thousands of PACs registered nationwide, consisting of corporations, unions, and other interest groups. A significant amount of money is funneled annually through PACs to support candidates and initiatives. All general purpose committees must declare the jurisdiction in which the committee will make its expenditures. An independent expenditure committee is an individual or entity (e.g., corporation, firm, business, or proprietorship) that makes one or more independent expenditures totaling $1,000 or more in a calendar year. Independent expenditure committees do not receive contributions for the purpose of making expenditures supporting or opposing California

3 Page 3 of 5 candidates or ballot measures. An independent expenditure is a payment for a communication (e.g., advertisement, mailing, and/or phone blast) that expressly advocates the election or defeat of a clearly identified candidate or the qualification, passage, or defeat of a clearly identified ballot measure, and the communication is not coordinated with or made at the behest of the affected candidate or committee. These expenditures must be made completely "independent" of the candidate; no coordination can take place between the candidates or their campaigns and the entity that makes the independent expenditure. Independent expenditure committees terminate at the end of each calendar year. In both the 2011 and 2013 Signal Hill General Municipal elections, significant expenditures were made in mass mailings opposing Signal Hill s incumbent candidates. The groups involved were the Coalition for Clean Affordable Water and the Los Angeles League of Conservation Voters. These groups have identification numbers designated by the California Secretary of State and reporting requirements to the Los Angeles County Registrar-Recorder/County Clerk. In 2013, three mailers were sent in the three weeks prior to the election (two of the mailers were sent one week prior to the election and immediately after the last council meeting prior to the election). Due to the State s reporting requirements and the fact that the reports are filed with the county, this gave no reasonable opportunity for the public to understand the individuals or groups and their motivations in making these allegations, much less to debate the truthfulness of the information in the flyers. Many Signal Hill voters expressed their displeasure with these mailings, the timing of the mailings, and their lack of accessibility to see from whom and when the funding for these mailings originated. A code amendment requiring that independent expenditure reports be filed with the city clerk will allow residents to have immediate access to this information prior to voting. Analysis: Several California cities with local campaign finance laws have sections that pertain to the reporting of independent expenditures to the city clerk and candidates. The Fair Political Practices Commission has over 150 local campaign finance ordinances on their website. Staff reviewed these ordinances to get the best of the best for the Signal Hill ordinance. The ordinances typically require that the PAC file notices with the City Clerk. These notices include the following information: Each candidate or measure supported or opposed by the expenditure The amount spent to support or oppose each candidate or measure Whether the candidate or measure was supported or opposed The date and amount of each expenditure A description of the type of communication for which the expenditure was made The name and address of the person making the expenditure The name and address of the payee Language stating that the expenditure was not made at the behest of any candidate or ballot measure proponent who benefited from the expenditure. Disclaimer stating that the expenditure was not authorized by the candidate being supported or opposed.

4 Page 4 of 5 Policy issues discussed by Council on June 4 include: Enforcement any violation of this ordinance will be enforced by the City Attorney pursuant to SHMC Any violation of the Political Reform Act is enforced by the Fair Political Practices Commission. Online filing an initial inquiry into online paperless filing is approximately $5,000 annually for software and support. The Amendment adds two new definitions, Express Advocacy and Independent Expenditure. Express Advocacy means communications that advocate support or opposition of a clearly identified candidate or ballot measure. A communication expressly advocates support or opposition when it uses words such as vote for, elect, support, cast your ballot, vote against, defeat, reject, sign petitions for, or the communication, taken as a whole, unambiguously urges a particular result in an election. Independent Expenditure means any expenditure or donation of anything of value, including the gratuitous rendition of services having a value of five hundred dollars ($500.00) or greater, made by any person in connection with a communication which expressly advocates or opposes the nomination, election, defeat, or recall of a candidate(s) for city office, city measure(s), or otherwise unambiguously urges a particular result in a city election. An Independent Expenditure is made on the date the payment is made, services are rendered, or consideration, if any, is received, whichever is earlier, and is not made at the behest of the affected candidate or committee. The city cannot limit independent expenditure amounts. The Supreme Court long ago ruled that independent expenditures cannot be limited because any limitation would pose an unconstitutional burden on free speech under the First Amendment. This code Amendment requires disclosure of Independent Expenditures made by persons or organizations not running for office or proposing an initiative. Specifically, any person, organization, not-for-profit or political action committee that makes an Independent Expenditure of five hundred dollars ($500.00) or more in support of or in opposition to any measure or candidate, or group of measures or candidates, in the forty (40) days preceding an election in which the measure or candidate, or group of measures or candidates, appears on the ballot, shall notify the City Clerk within twentyfour (24) hours of making the expenditure. The notice must contain the following: Each candidate or measure supported or opposed by the expenditure; The amount spent to support or oppose each candidate or measure; Whether the candidate or measure was supported or opposed; The date and amount of each expenditure; A description of the type of communication for which the expenditure was made; The name and address of the person making the expenditure; and The name and address of the payee.

5 Page 5 of 5 The City Clerk must post a copy of the notice to the City s website within two (2) business days after receiving the notice. The person must also provide to the City Clerk three copies of the communication funded by the expenditure. Payments by an organization for its regularly published newsletter or periodical, if the circulation is limited to the organization s members, employees, shareholders, other affiliated individuals and those who request or purchase the publication, shall not be required to be reported. The Amendment requires additional language be added to broadcast or mass mailing advertisements that expressly advocates the election or defeat of any candidate. For those advertisements, the responsible committee shall include on the advertisement the names of the two persons making the largest cumulative contributions to the committee making the independent expenditure. The Amendment requires the disclosure of Independent Expenditure amounts made to provide content on a candidate or ballot measure by: Providing content for posting on a web site or a web log ( blog ), whether one s own or another s; Providing content for or posting on a social media platform or service; Providing video content for posting online. Approval of this ordinance would increase disclosure for independent expenditures made in support or opposition to candidates or ballot measures; and would require independent expenditure reports be filed subject to the new requirements in SHMC 2.90.