<p><a href="https://lawoftheland.wordpress.com/ target=”_blank”>The Law of the Land Blog</a> has recently summarized a number of
California decisions regarding proximity, a conflict of interest
issue that, for some reason, seems to come up primarily in
California, due in large part, I suppose, to its 500-foot rule.<br>
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In <a
data-cke-saved-href=">the subsection of my book</a> <em>Local Government Ethics Programs</em> on proximity (in the Indefinite Benefits section), I oppose numbers such as 500 feet. My argument is that "what is important here is not the actual concrete benefit or harm, but rather how the official’s presumed expectation of benefit or harm is perceived by the public, based on the only concrete thing the public has to go on: the position the official takes on the project. If an official supports a development near her business, it is assumed that she expects to benefit from it. If she opposes the development, it is assumed that she expects it to harm her business. Since the official is presumed to know best (even if she turns out to be wrong), the assumption is that she is putting her interests ahead of the public interest."<br />
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Below are four valuable advisory opinions by the state's ethics commission, the Fair Political Practices Commission ("FPPC"), which has jurisdiction over local officials.<br />
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<strong>Exceptions to 500-Foot Rule</strong><br />
According to a March 2014 FPPC advisory letter, as described in <a href="https://lawoftheland.wordpress.com/2015/02/15/ca-fair-political-commiss…; target="”_blank”">a February 2015 Law of the Land Blog post</a>, there are exceptions to the 500-foot rule. One exception is for decisions related to repair and maintenance, in this case a creek authority's building of floodwalls, bridge alterations, and upstream detentions basins to prevent further flooding from the creek. Since these are exactly the sorts of things a creek authority would do, the exception would mean that the 500-foot rule would not apply to much of anything a creek or river authority decided.<br />
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Another exception applies to the particular situation, where a creek authority board member owned property within 500 feet of the proposed floodwall. This was not considered a conflict of interest, because the property was not located within the floodplain and the board member was not required to purchase flood insurance, even though her access to and from the arterial streets could potentially be impaired in a major flood event, which means that she would likely benefit from the floodwall, both personally and through the preservation of her property's value.<br />
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Again, I believe that the rules are being applied without any consideration of the appearance of a conflict. If a board member's property would be affected by a decision, it should not be relevant whether the decision involves a zoning change or the building of a floodwall, nor whether the property is being directly protected because it is in the floodplain or indirectly protected because of easier access to arterial streets.<br />
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<strong>Business Asset Regulation for Commercial Property</strong><br />
In <a href="http://www.fppc.ca.gov/adv/Advice%20Letters/2014/14065.pdf#search=%E2%8…; target="”_blank”">a May 2014 advisory letter,</a> the FPPC found that the 500-foot rule did not apply to condos of which a planning commissioner owned a 20% interest, because they were used for commercial purposes. With respect to more general financial interest language ("it is reasonably foreseeable that the decision will have a material financial effect on one or more of the public official’s interests"), the FPPC applies a business asset regulation (§18705.1(c)(4)) to determine the materiality of the planning commissioner's interest:</p>
<blockquote>“(A) The governmental decision will result in an increase or decrease in the business entity’s gross revenues for a fiscal year in the amount of $20,000 or more; or,<br />
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“(B) The governmental decision will result in the business entity incurring or avoiding additional expenses or reducing or eliminating existing expenses for a fiscal year in the amount of $5,000 or more; or,<br />
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“(C) The governmental decision will result in an increase or decrease in the value of the business entity’s assets or liabilities of $20,000 or more.”</blockquote>
<p>I understand the attraction of clear-line rules such as these. But there are other issues to consider. What is a planning commissioner doing owning commercial property in the city's downtown commercial district? This is asking for trouble. Also, why should a rule with language that makes it a conflict of interest where the benefit is indefinite ("reasonably foreseeable") be applied with language that requires that benefits be both definite ("will result") and substantial ($20,000 revenue a year from a property is a substantial amount). Also, what appears to be clear-line is not, because it is difficult to determine the financial effects of zoning changes or approvals of nearby properties. In any event, it doesn't matter, because where a benefit is indefinite, a commission member will be presumed to be voting in his financial interest, no matter how small he insists it is.<br />
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<strong>The One Penny Rule</strong><br />
In a residential situation, the FPPC applied the "one penny rule" in a February 2014 advisory letter, according to <a href="https://lawoftheland.wordpress.com/2015/03/08/ca-fair-political-practic…; target="”_blank”">a March 2015 Law of the Land Blog post</a>. The situation involved a council grant for a city area. The grant irequires the application of physical alternatives and policy changes in the area, where two council members owned property. The advisory letter said the “one penny rule ... provides that a governmental official’s real property is presumed to be material unless proof is provided showing that it is not reasonably foreseeable that the official would benefit a penny’s worth on the property, and in regards to an indirect involvement of an official’s property, the financial effect of a governmental decision is presumed not to be material unless it can be shown that the development could have an economic interest on (<em>sic</em>) the property, the use of the property has an economic interest to the official or if the character of the neighborhood would be affected." Since the council members seeking the advice provided no evidence about the effect of the grant on their properties, they were found to be conflicted and, therefore, unable to participate in the matter.<br />
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This is a good decision, but it isn't clear why a stricter rule was applied here, and why it wouldn't be applied whether or not an official's property was within 500 feet of land involved in a decision, without the kind of exceptions described in the above advisory letter.<br />
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<strong>A Short-Term Lease</strong><br />
In another FPPC advisory letter which<a href="https://lawoftheland.wordpress.com/2015/03/06/ca-fair-political-practic…; target="”_blank”"> the Law of the Land Blog summarized in March 2015</a>, different and very specific standards were applied to a situation where a council member had a yearlong residential lease that did not provide for an option to renew or extend the term. The City Council was considering a number of projects that were located relatively close to the Mr. Davis’s rented residence.<br />
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Here the standards were reasonable, because the council member had only a short-term lease, so that indefinite and indirect benefits and harm to the value of his lease could not occur. The standards related to materiality of the financial effect on the council member's limited interest included:</p>
<blockquote>Change in the termination date of the lease<br />
Increase or decrease of the potential rental value of the property<br />
An impact on the official’s right to sublease the property<br />
A change in the official’s actual or legally allowable use of the real property<br />
An impact on the official’s use and enjoyment of the real property<br />
Any change or impact must be reasonably foreseeable and the must apply before the termination of the lease.</blockquote>
<p>Robert Wechsler<br />
Director of Research-Retired, City Ethics<br />
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