March 5, 2002
Department of the Environment
City and County of San Francisco
11 Grove Street
San Francisco, CA 94102
Dear Mr. Blumenfeld:
You requested the Ethics Commission's opinion on whether Proposition J, the Taxpayer Protection Amendment of 2000, S.F. Campaign and Governmental Conduct Code sections 3.700-3.740, applies to City officials who are involved in securing a grant for Norcal Waste Systems, Incorporated ("Norcal") from the Bay Area Air Quality Management District.
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, and if the District Attorney and City Attorney concur in the advice. Id. Informal advice does not provide similar protection. Id.
Because you seek advice regarding specific actions that the Department of the Environment ("Department") may take in the future, the Commission is treating your question as a request for a formal opinion.
You asked whether officials of the Department who applied for and will accept a grant from the Bay Area Air Quality Management District ("the District") to fund Norcal's conversion of its garbage trucks from diesel to alternative fuels exercised discretion to approve a public benefit within the meaning of Proposition J, such that they would be precluded from accepting personal or campaign advantages from Norcal in the future. In addition, you inquired whether the Board of Supervisors and the Mayor, who must approve the acceptance and expenditure of the grant, would be deemed to be exercising discretion to approve a public benefit within the meaning of Proposition J, such that they would be precluded from receiving a personal or campaign advantage from Norcal.
Whether the City officials who are involved in the process of obtaining the grant funds from the District would be subject to Proposition J's prohibition on the acceptance of a personal or campaign advantage from Norcal depends upon (1) whether the grant is a "public benefit"; and if so, (2) whether the City officials exercised discretion to approve the grant. Although the Commission concludes that a grant is a public benefit, it also concludes that because of the unique circumstances under which this grant was awarded, no City official "exercises discretion" to approve the grant within the meaning of Proposition J. Therefore, Proposition J does not prohibit the City officials who are involved in obtaining and approving the grant from accepting personal or campaign advantages from Norcal because of the grant.
1. The Parties
The Department of the Environment ("the Department") works to improve, enhance and preserve the City's environment and promote its long-term environmental well-being. The Clean Air Program of the Department works to reduce automobile emissions through programs that promote environmentally friendly vehicles. For several years, the Department has been working with Norcal to reduce the amount of pollutants emitted by its garbage trucks.
The District is a regional agency that regulates air quality in the nine Bay Area counties. It does so by developing and enforcing regulations and providing incentives, such as grant monies to control air pollution.
Norcal collects garbage in the City and, through an exclusive long-term disposal agreement between its subsidiary and the City, hauls the City's waste from Norcal's transfer station located in the southeast part of the City to the Altamont Landfill in Alameda County. Norcal operates a fleet of solid waste garbage trucks, some of which travel more than 600 miles a day, emitting significant hazardous pollutants in the City's streets and the Bay Area. While Norcal is under no legal obligation to convert its trucks from diesel fuel to less polluting alternative fuels, for the past few years, it has received the District grants through the Department to convert its trucks from diesel fuel to cleaner natural gas.
2. The Grant
You explained that the $965,000 grant from the District's Transportation Fund for Clean Air ("TFCA") is generated by a state-authorized surcharge on vehicle registration fees paid in the Bay Area. The TFCA is a pool of money set aside for public entities to use for projects that reduce motor vehicle emissions. Public agencies in the Bay Area compete for these funds.
Private companies cannot apply directly for the TFCA funds, but may join with a public agency that sponsors and implements an eligible project. To be eligible, private companies must use motor vehicles to provide an essential public service that would otherwise be provided directly by a public agency, such as garbage collection. In addition, to receive the TFCA funds, private companies must commit to operating the clean air vehicles within the jurisdiction of the District for the duration of the useful life of the vehicles. For applications that request more than $100,000 from the District, grantees must provide matching funds that equal or exceed 20 percent of the total project cost. Based on these eligibility requirements, the Department determined that only one private entity, Norcal, potentially qualified for the TFCA funds. In pre-submission discussions with the District staff who evaluated the potential emission reductions for the Norcal project, the Department learned that that the likelihood for a grant award to the Department for Norcal was high. Accordingly, the Department decided to partner with Norcal and submit an application. The grant from the District will enable Norcal to complete the conversion of the remaining diesel trucks in its fleet. As it has it the past, Norcal will provide matching funds to complete the conversion, this time in the amount of $1.4 million.
The Department has learned that the District will award the grant to the Department to fund the conversion of Norcal's trucks. You state that the Department "exercised no influence over" the District in awarding the grant to Norcal, and that the District "requires the Department to award the funds to Norcal." The Department must now decide whether to acknowledge receipt and acceptance of the grant. Both the Board of Supervisors and the Mayor must also approve the acceptance of the grant and its subsequent expenditure through an "accept and expend" resolution. You add that neither the Board of Supervisors nor the Mayor may change the recipient of the grant to any entity other than Norcal.
3. Relevant Provisions of Proposition J
A. The prohibition
The purpose of Proposition J, codified as San Francisco Campaign and Governmental Conduct Code § 3.700 et seq., is to ensure that the "use or disposition of public assets" is "arranged strictly on the merits for the benefit of the public, and irrespective of the separate personal or financial interests of involved public officials." S.F. C&GC Code, § 3.705(a). Under Proposition J, a City and County public official who "has exercised discretion to approve and who has approved or voted to approve a public benefit" may not receive a personal or campaign advantage1 from the public benefit recipient2 for a specified period of time ranging from two to six years from the date the official approves or votes to approve the public benefit. Id.,
The prohibition does not apply when the public official's approval of the public benefit is a ministerial function, or when the public official does not participate in, influence or attempt to influence the approval of the public benefit. Ethics Com. Regulation 3.715(a)-1.
B. What is a "public benefit" under Proposition J?
In general, a "public benefit" includes "a contract, benefit, or arrangement between the City and County and any individual, corporation, firm, partnership, association, or other person or entity" to provide personal services, or to sell or furnish material, supplies or equipment to the City worth more than $50,000 over a 12-month period. S.F. C&GC Code § 3.710(a); see also Ethics Com. Reg. 3.710(a)-1. A public benefit also includes a contract, benefit or arrangement between the City and any entity to "Receive cash or specie of a net value to the recipient in excess of $10,000 in any 12 month period." S.F. C&CG Code § 3.710(a)(7). The value of a public benefit is determined at the time the public official approves the public benefit. Ethics Com. Reg. 3.710(a)-1.
1. The grant is a public benefit.
The grant awards $965,000 to the City for Norcal to convert diesel trucks to trucks that use less polluting fuels. Proposition J applies only if the grant is deemed a "public benefit." Proposition J defines the term "public benefit" to include certain "contract[s], benefit[s], or arrangement[s] between the City and County and any individual, corporation, firm, partnership, association, or other person or entity." S.F. C&GC Code § 3.710(a). The only type of "contract, benefit or arrangement" that Proposition J identifies that would include a grant of funds is one to "Receive cash or specie of a net value to the recipient in excess of $10,000 in any 12-month period." Id.,
The phrase "cash or specie of a net value to the recipient of $10,000" literally refers to cash or coins totaling $10,000. The Commission, however, believes that the drafters intended to describe a contract, benefit or arrangement for funds in excess of $10,000, even if those funds are not actually paid in cash or coins. A grant for $965,000 falls within the definition of a contract or arrangement to receive funds in excess of $10,000.
You state that because "no City funds are involved" in the grant," Proposition J does not apply. The Commission respectfully disagrees. Proposition J is not limited to funds that originate with the City. Rather, Proposition J focuses on the ability of a City official to enter into a contract or arrangement with a party to receive funds. In this case, although the grant money comes from the State, the City must disburse the funds. The money cannot be disbursed without the City's participation.
Accordingly, the grant is a public benefit within the meaning of Proposition J.
2. Public officials of the City do not exercise discretion in the award of the grant.
Proposition J applies only to officials who exercise discretion to approve and who do approve a public benefit. You contend that neither the Department officials nor the Board of Supervisors and the Mayor who must approve the expenditure of the grant funds exercise discretion in this case. We agree, although for different reasons than those set forth in your letter.
As described previously, you have informed us that the only private entity with which the Department could partner to obtain the grant was Norcal. Norcal uses its fleet of trucks to provide an essential public service to the City. No other entity provides an essential public service that would have been eligible for the grant. Your staff informed us that if the Department had not been able to partner with Norcal, the Department would not have submitted an application for the funds, and the City would have lost an opportunity to acquire State funds to help reduce the amount of diesel pollutants in the air.
Once the grant is awarded to the Department, the money can be applied only to the singular purpose of converting vehicles from diesel fuel to natural gas and can be used only by Norcal. Neither the Department nor any other City official may alter the purpose of the grant or change its intended recipient to another entity.
In light of these facts, the Commission concludes that the Department did not exercise discretion to approve the grant within the meaning of Proposition J. The phrase "exercised discretion" literally means made a choice or judgment. Applied literally, however, the phrase would cover most government decision-making because almost every act, or decision not to act, involves some degree of choice or judgment. See Ham v. County of Los Angeles, 46 Cal. App. 148, 162 (1920) ("[I]t would be difficult to conceive of any official act, no matter how directly ministerial, that did not admit of some discretion in the manner of its performance, even if it involved only the driving of a nail."). For this reason, we believe that the term discretion must be interpreted in light of the policies of Proposition J.
Voters adopted Proposition J to ensure that public officials who approve public benefits do not benefit personally from those decisions. See S.F. C&GC Code § 3.705(a). Proposition J also sought to prevent the trading of favors "in the management or disposal of public assets" in a way that deprives meritorious persons of a fair opportunity to obtain public benefits and deprives the public of its use and enjoyment of public assets. Id., § 3.705(b).
In this case, the Commission does not believe the decision to take advantage of the State's offer of funds, where only one entity could help the City obtain those funds, implicates those concerns.
The Department officials did not award the grant; State officials did. Department officials had some choice or judgment in that they could have foregone applying for the grant. But the Department officials could not choose between Norcal and some other grant recipient. Moreover, the Commission does not believe that this is the type of arrangement that was at the core of the concerns that Proposition J addresses. The award of the grant to Norcal did not provide a special favor to Norcal, deprive some other meritorious person or entity of a public benefit, or undermine the public's effective use of public assets. Rather, Norcal was provided funds to make an improvement that it was not otherwise compelled to make and would not necessarily have made absent the grant. No other entity was eligible to obtain the grant funds and without the arrangement between Norcal and the Department, the City would not have access to the funds. The public was not deprived of the effective use of public assets — it was assisted in taking advantage of public assets to improve the City's air quality. For these reasons, we do not believe the department officials exercised discretion to award a public benefit within the meaning of Proposition J.3
For the same reasons that the Department officials did not exercise discretion to award a public benefit, the Commission finds that the Board of Supervisors and the Mayor who must adopt or sign an "accept and expend" resolution for the TFCA funds would not exercise discretion to award the grant. The Board and the Mayor literally exercise some discretion in that they could refuse to approve the expenditure of the grant money awarded by the State. The Commission, however, does not believe that this type of decision-making is the type of discretionary decision-making with which Proposition J was concerned.4
The Commission cautions, however, that this opinion is limited to the facts you presented; should any of the above facts differ, please contact the Commission for guidance.
I hope you find this letter responsive to your inquiry. Please do not hesitate to contact me at (415) 581-2300 if you have questions.
By: Mabel Ng
Deputy Executive Director
1 A personal or campaign advantage includes a campaign contribution, a gift or honoraria worth more than $50, and any employment for compensation. S.F. C&GC Code § 3.710(c) and Ethics Com. Regulation 3.710(c)-1.
2 A "public benefit recipient" is an individual or entity that is a party to the contract or other public benefit; or that has a direct 10 percent equity, participation, or revenue interest in that party at the time the public benefit is awarded; or that is a trustee, director, partner or officer of that party at the time the public benefit is awarded. See Ethics Com. Reg. 3.710(b)-1.
3 Our conclusion is limited to the facts of this case. We do not decide whether a department's award of a sole source contract is subject to Proposition J.
4 We do not suggest that where a City department exercised discretion over the award of a grant and the Board of Supervisors and Mayor approved the expenditure of the funds, the Board and the Mayor would not be exercising discretion to approve a grant. In this case, the Board and Mayor lack discretion for the same reasons that the department officials lacked discretion.
City Attorney's Concurrence
Virginia E. Vida
San Francisco Ethics Commission
30 Van Ness, Suite 3900
San Francisco, CA 94102
Formal Advice to Jared Blumenfeld
Dear Ms. Vida:
The City Attorney's office concurs with your formal advice to Jared Blumenfeld regarding Campaign and Governmental Conduct Code Sections § 3.700-3.740.
Very truly yours,
DENNIS J. HERRERA
District Attorney's Non-Concurrence
March 5, 2002
Deputy Executive Director
San Francisco Ethics Commission
30 Van Ness Avenue
San Francisco, CA 94102-6027
Re: San Francisco Ethics Commission Formal Opinion to Department of the Environment re NorCal
Dear Deputy Executive Director Ng:
The Ethics Commission Opinion in the above matter has been reviewed and considered. The District Attorney cannot concur at this time. Additional documentation and information has been requested for submission to the District Attorney by the San Francisco Department of the Environment.
Very truly yours,
Thomas A. Bogott
Assistant District Attorney
415.551.9557 / fax 415.551.9504