Ethics Commission
City and County of San Francisco

Advice Letter – November 5, 2001 – James R. Sutton, Esq. – Campaign Consultant Ordinance

November 5, 2001

James R. Sutton

Nielsen, Merksamer, Parrinello, Mueller & Naylor, LLP

591 Redwood Highway #4000

Mill Valley, CA 94941-3039

Dear Mr. Sutton:

You requested the Ethics Commission's interpretation of the San Francisco Regulation of Campaign Consultants Ordinance ("Ordinance"), San Francisco Campaign and Governmental Conduct Code § 1.500 et seq.

The Ethics Commission provides two kinds of advice: written formal opinions or informal advice. S.F. Charter § C3.699-12. Written formal opinions are available to individuals who request advice about their responsibilities under local laws. Formal opinions provide the requester immunity from subsequent enforcement action if the material facts are as stated in the request for advice. Id. Informal advice does not provide similar protection. Id.

Because your request seeks advice regarding hypothetical facts and does not describe a specific situation involving your responsibilities or those of your clients, the Commission is treating your question as a request for informal advice.

Questions

You asked the Commission to consider the following questions:

1. Must payments for expenses which a campaign consultant's personnel incur in order to perform their work for the campaign committee, such as parking and mileage for meetings with committee representatives, copying and postage for delivering plans or budgets, food and beverages provided at committee meetings, etc., be disclosed on a campaign consultant's reports?

2. Must payments for money paid by a campaign consultant to its client's vendors, such as printers, mail houses and other vendors, be disclosed on a campaign consultant's reports?

Short Answers

1. Campaign consultants must report as economic consideration payments that they receive to reimburse them for expenses they incur in providing campaign consulting services.

2. Campaign consultants are not required to report as economic consideration reimbursements for money they paid to their clients' vendors for expenses incurred by their clients.

Background

You are a law firm that represents entities that file campaign consultant reports. You also represent campaign committees that are listed as clients on those reports. You asked the Ethics Commission to clarify "the scope of payments which Campaign Consultants must disclose as `reimbursement for expenses' under San Francisco Campaign and Governmental Conduct Code section 1.505."

You indicate that the invoices that campaign consultants send to their campaign committee clients request several different types of payments, including (1) fees for their services; (2) commission which the campaign consultant has earned for producing campaign literature; (3) reimbursement for expenses which the campaign consultant has incurred in connection with providing services to the campaign committee; and (4) reimbursement for payments to "subvendors" who have provided goods and services to the campaign committee.

You agree that campaign consultants must disclose the fees and commissions they receive from campaign committees as "consideration for their work." You ask, however, whether payments received under categories 3 and 4 above must be disclosed as economic consideration.

Discussion

1. The Regulation of Campaign Consultants Ordinance

To assist the public in making informed decisions and to protect confidence in the electoral and governmental processes, the voters of San Francisco adopted the Regulation of Campaign Consultant Ordinance in 1997. The Ordinance imposes reasonable registration and disclosure requirements on campaign consultants. S.F. C&GC Code § 1.500 et seq.

Campaign consultants are persons or entities, including subcontractors, that receive or are promised economic consideration equaling $1,000 or more in a calendar year for campaign consulting services. Id., § 1.505(a).

"Economic consideration" means "any payments, fees, commissions, reimbursements for expenses, gift, or anything else of value." Id., § 1.505(f).

Under the Ordinance, it is unlawful for any campaign consultant to provide, or accept economic consideration for providing, campaign consulting services without first registering with the Ethics Commission and complying with the reporting requirements. Id., § 1.510.

2. Campaign consultants must report payments that reimburse them for expenses they incur in providing campaign consulting services.

You explain that payments in the third category involve "expenses which the Campaign Consultant's personnel incur in order to do their work for the committee, such as parking and mileage for meetings with committee representatives, copying and postage for delivering plans or budgets, food and beverages provided at committee meetings, etc." You state, "these are `personal' expenses relating directly to the services performed for the client by the firm; they tend to be relatively small in comparison to the fees and commissions earned by the Campaign Consultant." You add that these expenses do not "count toward the firm's net income for tax purposes."

The expenses that you itemized are the costs of doing business. They are part and parcel of the ordinary business expenses that campaign consultants must incur in order to provide campaign consulting services to their clients. If campaign consultants receive payments to reimburse these expenses, they are receiving economic consideration, as that term is defined in the Ordinance. Thus, the campaign consultants must report such reimbursements as economic consideration promised and/or received on their campaign consultant disclosure reports. Whether the campaign consultants net out such payments against their expenses is of no consequence in determining whether such payments must be reported on the campaign consultant reports.

3. Campaign consultants are not required to report reimbursements for money they paid to vendors on behalf of their clients.

You state that the fourth category "does not involve `expenses,' but rather represents money from the campaign committee to vendors other than the Campaign Consultant, which is `passed through' the Campaign Consultant's account." You explain, "Because of the short turn-around time for preparing certain campaign materials, and because of the long time sometimes necessary to have the campaign committee's treasurer write and deliver checks, Campaign Consultants are often compelled to pay printers, mail houses and other vendors directly, rather than waiting for the campaign committee to send a check directly to those vendors."

Under the circumstances you described, it does not appear that campaign consultants are receiving economic consideration when they are reimbursed for money they paid to vendors on their clients' behalf. The vendors provide goods and services to the campaign consultants' clients, not to the campaign consultants. The costs and expenses incurred for such goods and services are those of the clients, not the campaign consultants. By cutting checks to the vendors during the busy campaign season, the campaign consultants advance money to accommodate the vendors and enable their clients' campaign activities to proceed. When the campaign consultants are reimbursed for these advances, they are not being paid for expenses that they themselves incurred. Nor are they receiving a payment, gift or anything else of value in exchange for providing campaign consulting services. Thus, they are not receiving economic consideration. Accordingly, they are not required to report these reimbursements as economic consideration on their reports.

I hope you find this letter responsive to your inquiry. Please call me at (415) 581-2300 if you have questions, or require additional advice.

Sincerely,

Ginny Vida

Executive Director

By: Mabel Ng

Deputy Executive Director

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