Date: May 22, 1998
To: Campaign Consultant Workshop Participants
From: Ginny Vida
Re: Questions Raised at the Campaign Consultant Workshop on May 15, 1998
At the Ethics Commission Workshop for prospective Campaign Consultant Filers held May 15, 1998, a number of questions were raised regarding the application of the Campaign Consultant Ordinance ("Ordinance"). The questions, as well as the staff's responses to those questions, follow.
1. The Ordinance requires that at registration a campaign consultant report the amount of economic consideration "promised by or received from a client" during the previous three-month period. Quarterly reports also require that a consultant report economic consideration "promised by or received from " a client during the three-month reporting period. If a consultant enters into a contract with a client in the amount of $50,000, for work to be performed over the course of a four-month period, does the campaign consultant report that the client has "promised" $50,000 during the three-month reporting period in which the contract is entered into, or does the consultant report only the amount promised for work that will be performed during the three-month period?
The Ordinance requires that at registration a campaign consultant must report for each client "the total economic consideration promised by or received from the client in exchange for the provision of campaign consulting services during the preceding three months, provided that the total is $500 or more." For quarterly reports a similar report must be made of "the total economic consideration promised by or received from the client during the reporting period for campaign consulting services, provided that the total is $500 or more." The Ordinance does not define the term "promised." The term "economic consideration" is defined as "any payments, fees, commissions, reimbursements for expenses, gifts, or anything else of value." § 16.541(f).
The intent of the reporting provisions is to require reporting of the economic consideration exchanged for campaign consulting services, whether or not that economic consideration has actually been received. This broad reporting obligation is intended to inform the public about the campaign-related financial arrangements, including unpaid debts, between campaign consultants and their clients. The staff concludes that these purposes would be best served by requiring that the full amount of the promise made during the three-month reporting period should be reported, regardless of whether the promise covers services that will be provided during another reporting period. If the contract is later altered, the actual amount received will be indicated on later reports.
2. If a contract involves a promise to pay expenses, but the amount of expenses is unknown, how is that promise reported? Does the campaign consultant also have to report the expenses at the time they are incurred? At the time the expenses are paid?
A contract involving a promise to pay expenses in exchange for consulting services is a promise to provide "economic consideration" in exchange for consulting services. See § 16.541 (defining economic consideration to include reimbursement of expenses or anything else of value). To determine how much to report, the consultant should make a reasonable good faith estimate of the fair market value of anticipated expenses.
In addition to reporting the promise to pay expenses, the campaign consultant must also report when the payment of expenses is actually received. A payment of expenses could be received at a number of different points in time. For example, if the client, pursuant to the agreement to pay expenses, incurs the expenses in the client's name for work performed or to be performed by the consultant, the payment has been received by the consultant at the time the expenses are incurred by the client. At that point, the consultant has received something of value.
Another example of when a payment is actually received by the consultant is when the client, pursuant to the agreement to pay for expenses, actually reimburses the consultant for expenses incurred by the consultant. The payment would not be received at the time the campaign consultant incurs the expenses.
3. If a vendor donates goods or services, what value does the campaign consultant report for the goods or services?
The donor should report the fair market value of the goods or services donated. If the fair market value cannot readily be ascertained because of the unique character of the goods or services, a reasonable good faith estimate of the value should be made, taking into account such factors as the cost to the donor and the price of similar goods or services.
4. Is a judge or a candidate for county central committee a local officeholder or candidate within the meaning of the ordinance?
Judges and County Central Committee members are not local officeholders or candidates within the meaning of the Ordinance. The Ordinance defines local office as "the following elective offices in the City and County of San Francisco: Mayor, Board of Supervisors, City Attorney, District Attorney, Treasurer, Sheriff, Assessor, Public Defender, Board of Education of the San Francisco Unified School District, and governing Board of the San Francisco Community College District." § 16.541(i). Neither judges nor members of the County Central Committee are covered by this definition.
A candidate is defined as a person seeking election or nomination to a local office, a local officeholder seeking election to any elective office, or a local officeholder who is the subject of a recall election. § 16.541(e). Because judges and members of the County Central Committee do not hold local office within the meaning of the Ordinance, they are not covered by the definition of candidate.
5. May a campaign consultant, to facilitate the entry of filing data, create its own forms for registration if those forms are approved by the Ethics Commission?
At least for the initial filing under the Ordinance, the Ethics Commission staff is not prepared to review forms individual filers create to determine whether use of those forms is acceptable. After some initial experience with the Ordinance, the staff will revisit this question to determine the feasibility of allowing campaign consultants to use their own forms. The Ethics Commission staff also is exploring options to provide for on-line or electronic filing of these reports.
6. If a campaign consultant subcontracts with an individual or entity that independently qualifies as a campaign consultant, and the subcontractor does not comply with the Ordinance, is the first campaign consultant jointly and severally liable for the subcontractor's violations of the Ordinance?
The Ordinance does not generally provide that one campaign consultant may be held liable for the acts of another consultant. See § 16.545(c)(discussing penalties). However, Section 16.545(d) provides that any person or entity who "knowingly or negligently . . . causes any other person to violate Section 16.542 may be liable in a civil action brought by the City Attorney for an amount up to $5000 per violation, or three times the amount not properly reported, whichever is greater." Under this section, a campaign consultant could be liable for causing another campaign consultant to violate the Ordinance.
7. If a client pays a campaign consultant less than $500 for campaign consulting services, must the campaign consultant file an authorization form for that client?
Yes. Even though campaign consultants are required to report only the economic consideration promised or received from the client if the total is $500 or more, the Ordinance requires that a campaign consultant report the name of any client to whom the campaign consultant provided campaign consulting services during the preceding three months.
§ 16.543(a)(6) and § 16.545(d). For this reason, campaign consultants must still file an authorization form for clients who pay or promise to pay filers less than $500. A client authorization statement must be filed before providing any services to any client and before receiving any economic consideration from the client, and in any event no later than 15 days after being retained to provide campaign consulting services to the client. § 16.543(d).
8. Who is required to register with the Tax Collector under the Business Tax Ordinance, San Francisco Municipal Code, Part III, § 1001, et seq.?
A business tax registration certificate must be obtained annually and displayed on the business premises by every person engaged in business within the City and County, regardless of whether the person is subject to the business tax. S.F.Muni. Code § 1003. The term "business" is defined as "all activities engaged in or caused to be engaged in within this City and County with the object of gain, benefit or advantage whether direct or indirect, to the taxpayer or to another or to others, but shall not include the services rendered by an employee to his or her employer or a casual or isolated transaction." Id., § 1002.1. Questions about whether a particular business is required to register should be directed to the Tax Collector.
I hope this letter is responsive to the questions raised at the meeting. If you have further questions or need additional information, please feel free to contact Commission staff at (415) 554-9510.
cc: Members, Ethics Commission
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