Ethics Commission
City and County of San Francisco

Advice Letter – June 22, 2000 – Esther Marks – Campaign Finance Reform Ordinance (Includes City Attorney Concurrence & District Attorney’s Dissent)

June 22, 2000

Esther Marks
125 Upper Terrace
San Francisco, CA 94117

Dear Ms. Marks:

In your letter dated April 29, 2000, and in our subsequent telephone conversation, you indicated that you plan to serve as a treasurer for Supervisorial candidates in the November 2000 election. You also stated that the telephone company charges a $200-per-telephone "refundable deposit on political accounts." You requested the Ethics Commission’s advice regarding whether the deposit paid to the telephone company counts toward the candidate’s voluntary campaign spending limit of $75,000. Your request requires interpretation of the Campaign Finance Reform Ordinance ("CFRO"), San Francisco Campaign and Governmental Conduct Code, Article I, Chapter I.

Under Section C3.699-12 of the San Francisco Charter, the Ethics Commission has authority to provide two kinds of advice: written formal opinions or informal advice. Written formal opinions are available to individuals who request advice about their responsibilities under local laws. Formal opinions provide the requester immunity from subsequent administrative, civil and criminal enforcement action if the material facts are as stated in the request for advice and both the City Attorney and District Attorney concur with the Ethics Commission’s opinion. Id. Informal advice does not provide similar protection. Id. Because you seek advice regarding specific actions which you plan to take in the future, the Commission is treating your question as a request for a formal opinion.

Discussion

The CFRO encourages candidates to voluntarily limit their overall campaign spending. For example, each candidate for the Board of Supervisors is encouraged to limit his or her "qualified campaign expenditures" to $75,000 in the general election. C&GC Code § 1.130(d). The term "qualified campaign expenditure" is defined to include "[a]ny expenditure made by a candidate . . . for the purpose of influencing or attempting to influence the actions of the voters for or against the election of any candidate for City elective office." C&GC Code § 1.104(k)(1). This includes payments for campaign overhead expenses such as rental of office space and equipment, including telephones.

Although payments made by a campaign for equipment are "qualified campaign expenditures," we believe that a small payment for a refundable deposit that is in fact refunded is not such an expenditure, and should not count toward the spending limit. Nonetheless, we are reluctant to announce a broad exception for all refundable deposits because such a rule could be subject to abuse.

For this reason, we conclude that a refundable payment of $200 per telephone would not count as a qualified campaign expenditure if the deposit is paid and refunded pursuant to terms and conditions that are offered to all members of the public without regard to their official status as a candidate. The candidate bears the burden of proof of this fact. To meet this burden, the candidate must maintain documentation of the terms and conditions of the deposit. If the candidate does not meet this burden, or if the deposit is not actually refunded, the payment is a "qualified campaign expenditure" and counts toward the $75,000 spending limit.

I hope this letter is responsive to your inquiry. If you have additional questions, please contact me at (415) 554-9510.

Sincerely,

Ginny Vida
Executive Director

cc: City Attorney Louise H. Renne
District Attorney Terence Hallinan

P:\SHARED\C.F.R.O\ADVICE\marks.doc

City Attorney's Concurrence

July 7, 2000

Virginia E. Vida
Executive Director
San Francisco Ethics Commission
1390 Market Street, Suite 314
San Francisco, CA 94102

Re: Formal Advice to Esther Marks

Dear Ms. Vida:

The City Attorney concurs in your formal advice to Esther Marks concerning treatment of refundable payments for telephone equipment as "qualified campaign expenditures" under the Campaign Finance Reform Ordinance, San Francisco Campaign and Governmental Conduct Code, Article I, Chapter I, Section 1.100, et seq.

Very truly yours,

LOUISE H. RENNE

City Attorney

District Attorney's Dissent

June 22, 2000

Ginny Vida
Executive Director
San Francisco Ethics Commission
1390 Market Street, Suite 701
San Francisco, CA 94102-5302

Re: San Francisco Ethics Commission Formal Opinion to Esther Marks re refundable deposits

Dear Executive Director Vida:

We have reviewed and considered the Ethics Commission formal Opinion and the request by Esther Marks for the opinion.

We respectfully dissent.

Ms. Marks request letter to the Ethics Commission stated "[T]he telephone company requires a refundable deposit … The deposit is returned … after … service is disconnected … is this deposit exempt from the expenditure limit …?" (Marks 4/29/00 paragraph two).

The Ethics Commission response to Ms. Marks concludes that "[a] refundable deposit that is in fact refunded is not such an expenditure, and should not count toward the spending limit. Nonetheless, we are reluctant to announce a broad exception for all refundable deposits because such a rule could be subject to abuse … we conclude that a refundable payment of $200 per telephone would not count as a qualified campaign expenditure if the deposit is paid and refunded … " (Ethics Commission, Opinion to Marks, Page two).

One difficulty with the Ethics Opinion is that it does announce a broad exception and further that the conclusion about a refundable deposit is without definition or limitation as to the terminology. In addition, the Marks request does not mention a dollar amount. However, the proposed opinion refers to $200 per telephone. There is no indication as to where the sum of $200 per telephone originated.

More importantly, the Ethics Opinion: (a) will be widely circulated since it is a published opinion; (b) sets a very high minimum exemption for all refundable deposits since $200 per phone times an unknown number of phones could be an extremely large sum of money for a candidate employing a fifty telephone phone bank [$200 x 50 = $10,000]; (c) will be utilized for the position that all "refundable" deposits are exempt, even if they are not subsequently refunded; thus effectively eliminating the viability of any expenditure limits.

The fact that a candidate or committee has to maintain documentation to subsequently account appears to be of somewhat speculative value to the electorate after an election is concluded. It is our opinion that the Ethics Opinion creates a potential means of avoiding expenditure limits by a candidate or committee while simultaneously providing a basis of contending that all "expenditures" are in compliance with the limits during the course of the campaign.

The law regarding "expenditure" appears to be contrary to the Ethics Commission opinion. "Expenditure" is defined by the Fair Political Practices Commission (FPPC). "Expenditure" means payment (Govt Code §82025). The FPPC further defines the term "Expenditure" in the FPPC Regulations. "Expenditure" means any monetary or nonmonetary payment for political purposes. A payment is made for political purposes if it is (1) for the purpose of influencing or attempting to influence the action of the voters … Expenditure includes any monetary or nonmonetary payment that is used for communications which expressly advocate the nomination, election or defeat of a clearly identified candidate (Regulations of the FPPC, Title 2, Division 6, CA Admin Code §18225).

We are unaware of any "refundable deposit" exemption and such an expenditure as that identified by Ms. Marks clearly appears to be an expenditure within the definitions of the statutes and regulations.

Very truly yours,

TERENCE HALLINAN
DISTRICT ATTORNEY

By:

Thomas A. Bogott
Assistant District Attorney
415.551.9557 / fax 415.551.9504

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