Ethics Commission
City and County of San Francisco

Minutes – February 29, 2016

Minutes of the Special Meeting of
The San Francisco Ethics Commission
February 29, 2016
Room 400 City Hall
1 Dr. Carlton B. Goodlett Place
San Francisco, CA 94102

1. Call to order and roll call.

Chairperson Renne called the meeting to order at 5:30 PM.

COMMISSION MEMBERS PRESENT: Paul Renne, Chairperson; Brett Andrews, Vice-Chairperson; Beverly Hayon, Commissioner; Ben Hur, Commissioner; and Peter Keane, Commissioner.

STAFF PRESENT: LeeAnn Pelham, Executive Director; Shaista Shaikh, Assistant Deputy Executive Director; Garrett Chatfield, Investigator/Legal Analyst.

OFFICE OF THE CITY ATTORNEY: Andrew Shen, Deputy City Attorney (DCA).

OTHERS PRESENT: Sebastian Conn; Bridget Mahoney; Trevor Martin; Kiran Parmar; Jasmine Conrad; Larry Bush; Marc Solomon; Bob Planthold; David Pilpel; Tim Colen; Jodi Schwartz; Ken Tray; Gen Fujioka; Ian Lewis; Deepa Varma; Sara Shortt; Debbi Lerman; Lauren Kahn; Kevine Boggess; Rachel Richman; Robert van Ravenswaay; Jessica Lehman; Bruce Wolfe; Peter Cohen; Jonathan Mintzer; Anita Mayo; John St. Clair; Elena Schmid; and other unidentified members of the public.

MATERIALS DISTRIBUTED:
– Copy of slide presentation by Advocacy, Lobbyist and Governmental Relations class and summary handout from University of San Francisco Masters of Public Affairs candidates.
– Memorandum from the Executive Director to the Members of the Ethics Commission, dated February 24, 2016, re: Proposed Revised Draft Implementing Regulations for Prop. C, and attachments.
– Memorandum from the Executive Director to the Members of the Ethics Commission, dated February 24, 2016, re: Whistleblower Protection Ordinance Recommendations, and attachments.
– Executive Director’s Report for the meeting of February 29, 2016;
– Draft minutes of the January 25, 2016, Ethics Commission Regular Meeting;

2. Public comment on matters appearing or not appearing on the agenda.

Derek Kerr stated that in January the Commission expressed its position to submit an increased budget rather than the cuts that the Mayor requested. He stated the Ethics Commission should consider a Charter amendment to remove its funding from the budget process, which would increase its independence from the City officers that the Commission regulates.

The following written summary was provided by the speaker, Derek Kerr, MD, the content of which is neither generated by, nor subject to approval or verification of accuracy by, the Ethics Commission:

This January, 4 of you resisted the Mayor’s directive to cut your budget by 3% over 2 years. Amazingly, your funding depends on the City Hall folks you are supposed to monitor. That inhibits your independence. If you bite too sharply into City Corruption, your funds can be yanked. Your budget is your leash. Your being appointed by elected officials provides enough control..[sic]

Compare your funding with the Controller’s City Services Auditor program. It too was placed on the ballot by the Board and approved by voters. But its funding is a guaranteed 0.2% of the total City budget, making it fiscally independent from City Hall. As the City’s Ethics Auditor, why isn’t your budget set like the City Services Auditor’s? Consider a Charter Amendment to liberate this Commission. Ask for an automatic fraction of the City budget, instead of groveling for an allowance annually.

3. Presentation and discussion and discussion of University of San Francisco Masters of Public Affairs Candidates’ Recommendations to Improve the Transparency of the SF Ethics Commission’s Website.

Sebastian Conn introduced the presentation to the Commission. He was joined in succession by Bridget Mahoney, Trevor Martin, Kiran Parmar, and Jasmine Conrad, who each presented a section of the presentation.

Chair Renne thanked the students for the presentation and their suggestions on improving the Ethics Commission’s lobbyist data.

Vice-Chair Andrews, Commissioner Hayon, Commissioner Hur, and Commissioner Keane all thanked the students for their work.

Responding to a question from Commissioner Hur, Kiran Parmar stated that the students did not engage with Ethics Commission staff while researching and making their findings.

Public Comment:
Larry Bush stated that it is exciting to see new people get involved in government transparency. He stated that the Ethics Commission should also regulate unpaid lobbyist positions at lobbyist firms.

Marc Solomon stated that implementing some of the student’s proposals would be difficult. He stated that the Ethics Commission lost control of its lobbyist data system when it was outsourced to Netfile. He stated an independent tech advisor should look at how to improve the filing system.

An unidentified speaker congratulated the students and stated that San Francisco voters demand transparency. She stated that due to Vice-Chair Andrews’ position at a non-profit entity, he should recuse himself while voting on the proposed Regulations to Prop C.

Bob Planthold stated that the students should consider sitting on the Civil Grand Jury. He stated that he was impressed with the recommendations. He stated that donations to non-profit entities by lobbyists should by disclosed. He stated that he concurred with the statements made by Derek Kerr.

David Pilpel stated that he disagreed with speaker Marc Solomon and that the Ethics Commission has greater control of the lobbyist filing system with Netfile.

An unidentified speaker stated that she is disappointed that the proposed Whistleblower retaliation Regulations do not cover non-employees or contractors. She stated that she has been unable to find the Form 700 of a manager of a shelter that contracts with the City.

Tim Colen stated that he is the Executive Director of the Housing Action Coalition and that he is concerned about the proposed Prop C Regulations. He stated that the proposed reporting requirements are burdensome for small organizations.

4. Discussion and possible action on revised draft Regulations for implementation of Proposition C, which imposes new registration and reporting requirements on expenditure lobbyists.

Chair Renne introduced the item.

Vice-Chair Andrews stated that he recently reviewed his comments from the Commission’s June 29, 2015, meeting regarding putting Prop C. on the November 2015 ballot. He stated that at that time he expressed his concerns regarding how small non-profits may be impacted by the legislation. He stated that he is the Executive Director for Positive Resource. He stated that the decisions he makes as an Ethics Commissioner are his alone and independent of his or any associated organization. He stated that he will vote his conscious as he did when he voted to put Prop. C on the ballot.

Executive Director Pelham stated that staff received public comment on the Regulations since the last meeting on this item. She stated that staff attempted to balance the competing interests and hoped to provide the Commission a starting point on considering the Regulations to implement Prop C.

Executive Director Pelham introduced proposed Regulation 2.105-5.

Commission Hur stated that he is concerned that proposed Regulation 2.105-5(a) does not address how an organization must treat a payment for a report or some other research that was conducted prior to any decision to use that information for the purposes of expenditure lobbying.

Executive Director Pelham stated that the language of “incurred” was included to capture expenditures that were made for another purpose at the time, but that were later used for expenditure lobbying.

After discussion, the Commission proposed that Regulation 2.105-5(a) should read: “A person ‘makes payments’ for an activity to solicit, request, or urge other persons to communicate directly with an officer of the City and County in order to influence a matter of local legislative or administrative action, at the time the activity takes place.”

Commission Hur stated that for proposed Regulation 2.105-5(b), the phrase “a single matter” should be deleted. He stated that if the Commission goes with staff’s recommendation to not include staff time as a payment, then external payments made for any and all matters should count toward the $2,500 registration threshold.

Chair Renne stated that there was public opposition to limiting the spending to a single matter, in that an organization may try to get around reporting by claiming each step in a process is a single matter.

Executive Director Pelham stated that staff’s intention was that a single matter would relate to a matter of legislation or administrative act in its entirety. She stated that staff would consider all the steps toward a matter as a “single” matter.

Commissioner Keane stated that the language of Prop C. anticipated that there would not be a direct one to one relationship of the payment to the matter, and that it would include all spending on any matter to count toward the $2,500 registration threshold. He stated that the phrase “a single matter” should be removed.

After discussion, the Commission proposed that Regulation 2.105-5(b) should read: “For the purposes of qualifying as an Expenditure Lobbyist, a person must make payments totaling $2,500 or more in a calendar month for activities to solicit, request, or urge other persons to communicate directly with officers of the City and County in order to influence local legislative or administrative action.”

Commissioner Hur stated that for proposed Regulation 2.105-5(b)(i), a 12-month look back is too long and that it should be reduced to six months.

Chair Renne stated that there should be no time limit.

After discussion, the Commission proposed that Regulation 2.105-5(b)(i) should read: “Any payment made for these activities will count towards the $2,500 threshold if within 6 months of the payment, the services or work product paid for are cited, incorporated, or quoted in any communication urging other persons to lobby officers of the City and County on local legislative or administrative action.”

The Commissioner’s had no comments on proposed Regulation 2.105-5(c).

Regarding proposed Regulation 2.105-5(d), Commissioner Hur stated that when Prop. C was drafted and put to the voters, there was no indication that the $2,500 registration threshold would include salary payments to an organization’s internal staff. He stated that the legislation contemplated the $2,500 included only external payments made to urge others to lobby the City. He stated that requiring an organization to track its staff time is onerous.

Chair Renne stated that he agreed with Commissioner Hur’s concern as it relates to non-profit entities, but stated that exempting salary payments would allow large organization to never register if all of their activities are done by internal staff.

Commissioner Keane agreed with Chair Renne and further stated that he would reject both of staff’s proposal to either exempt staff time in its entirety or at 50% of time. He stated that all staff time should be counted toward the registration and reporting amounts.

Vice-Chair Andrews agreed with Commissioner Hur and stated that the internal staff time should be exempt.

After discussion, the Commission proposed that Regulation 2.105-5(d) should read: “Salary paid by an employer to an employee for activities to solicit, request, or urge other persons to communicate directly with an officer of the City and County in order to influence a matter of local legislative or administrative action shall not constitute a payment toward the $2,500 qualifying threshold.”

Public Comment:
Bob Planthold stated that the text of Prop C. does not allow for an exclusion of payments for staff time. He stated that all staff time should count, because even allowing for a partial exemption permits organizations to divide up staff time such that they would never be required to register.

Larry Bush stated that that campaign committees are required to report accrued expenses, and that approach could work with expenditure lobbyists. He stated that Whole Foods is currently conducting a poll designed to influence the permitting process which could be a reportable expense if used later for expenditure lobbying.

David Pilpel suggested language for the Regulations. He stated that “charitable project” is not defined. He stated that salary payments should be counted toward the registration threshold.

An unidentified speaker stated that 501(c)(3) organizations are referred to as charitable organizations. He stated that an IRS Form 990EZ only gets filed if an organization’s budget is less than $500,000, and that could be a marker to determine when fees are waived.

Jodi Schwartz stated that she is the Executive Director for Lyric Center for LGBTQQ Youth and that the proposed Regulation to include staff time is too burdensome.

Ken Tray stated that his organization represents teachers and speech pathologists and that every staff person who lobbies is a teacher. He stated that his organization is transparent.

Ian Lewis from the Hotel and Restaurant union stated that its members are low income. He stated that his organization is not equipped to track staff time.

Deepa Varma from the Tenant’s Union stated that money in politics is a problem, but what Prop C. does is hurt non-profits, not big business. She stated that PG&E is not here because they don’t have staff that does work like non-profits. She stated that this legislation is like spraying DDT to kill astro turf but kills the grass roots instead.

An unidentified speaker stated that she works with a Chinese grass roots organization to help fight wage theft and that they encourage workers to petition the Board of Supervisors to effect change. She stated that counting staff time would be crippling.

Sara Shortt stated that she is supportive or stopping the influence of money in politics, but that no one who voted for Prop C. thought it would be so harsh on non-profits. She stated that her organization helps tenants go to public meetings to petition for their rights, and staff time is spent to facilitate that. She stated that she would need to hire legal counsel to determine how to comply if staff time is included.

Debbie Lerman stated that she is from the Human Services Network and that she supports that draft language that Peter Cohen will submit. She stated that she objects to removing the relation to a single matter and counting staff time.

Lauren Kahn stated she is from Health Right 360 which provides mental health services to low income and homeless persons. She stated she supports that draft language from Peter Cohen.

Kevine Boggess stated he is from Coleman Advocates. He stated that San Francisco is not a good place for schools if you are not white. He stated that the proposed Regulations create barriers to the work his organization does.

Rachel Richman state she is from IFPTE Local 21 and that she is opposed to counting staff time. She stated that if a large corporation tries to mobilize persons to petition government, there will be external payments that would require those business to register and report.

Robert van Ravenswaay stated that the Commission should remove tying the payments to a single matter because it is not supported by the ordinance. He stated that the Commission should review the Regulations after entities start reporting and it starts to determine where there are problems.

Jessica Lehman stated that her organization assists low income persons by providing direct services. She stated that her organization helps its clients address public officials at public hearings including on policy issues. She stated that by requiring the tracking of staff time, it could discourage her organization from doing this kind of outreach work.

Bruce Wolfe stated that he supports the proposed Regulations, but non-profits are not in the business of lobbying. He stated that including the cost of past reports toward the monetary threshold could be problematic as it is unclear how to account for that research if used multiple times. He stated if the work was commissioned with no intent to influence legislation, it should be exempt.

The Commission took a recess from 8:05 PM to 8:15 PM.

Peter Cohen submitted copies of proposed Regulations for the Commission’s consideration. He stated that the payments made should be related to a single matter and that the look back should only be three months. He stated that staff time should not be counted toward the monetary threshold. He stated that the irony of Prop C. was that it was intended to regulate big companies such as Airbnb and the Koch brothers, but it is instead capturing small non-profit community based organizations. He stated that it is notable that none of these large companies are in attendance at this meeting.

Jonathan Mintzer from the Sutton Law Firm stated that he is concerned from a compliance standpoint on the implementation date of this law. He stated that no Regulations have been in place since the law’s effective date of February 1, 2016, and there has been no guidance regarding compliance. He stated that the Ethics Commission is not permitted to treat large companies differently from small non-profits. He stated that the law has to be uniformly applied, it is just a matter of where the Commission is willing to draw that line.

Anita Mayo from Pillsbury Winthrop Shaw and Pittman stated that a payment should be considered “made” when the communication is sent. She stated that the 12-month time-frame is too long and should be three months. She stated that based on the history or Prop C. internal salary time should not be counted toward the monetary threshold.

Gen Fujioka stated that the Prop C. ballot argument did not contain information that internal staff time would count toward the monetary threshold. He stated that reporting staff time could raise HR issues for his organization by disclosing an employee’s rate of pay.

Marc Solomon stated that the concerns by non-profits are not valid. He stated that non-profits are not combating the influence of large companies. He stated that the non-profits could not stop Airbnb in the Mission District. He stated that non-profits are private entities that are unaccountable.

Commissioner Keane stated that under the First Amendment, the Commission cannot treat entities differently based on the work of the organization, as that would be content discrimination, which is prohibited.

Motion 160229-01 (Hur/Keane): Moved, seconded, and passed (5-0) that the Commission adopt Regulation 2.105-5 as amended by the Commission.

Executive Director Pelham introduced proposed Regulation 2.105-6.

Commissioner Hur stated that staff’s recommended definition of “member” is too narrow and that the Commission should adopt the language submitted by Peter Cohen.

Executive Director Pelham stated that Mr. Cohen’s language is the same language that staff originally proposed at the prior meeting, which the Commission rejected. She stated that staff re-drafted the definition to make the nexus to the organization narrower.

Chair Renne stated that the concern at the last meeting was that including the language “or any other person who takes affirmative steps to receive an organization’s communications” allowed organizations to claim anyone who signs up for a service as a “member.”

Public Comment:
Larry Bush stated that he once hit “like” on a Facebook page and won a cruise. He stated that becoming a “member” under these Regulations should require more than hitting “like.” He stated that the relationship should be narrow such as having a say in the organization’s policies.

Bruce Wolfe stated that a broad definition is a slippery slope. He stated that it is common that tech companies automatically subscribe you to receive communications when you request a service or purchase a product.

Peter Cohen stated that he agreed with staff’s earlier version that had the language “or any other person who takes affirmative steps to receive an organization’s communications.”

Debbie Lerman stated that the definition of “member” as it currently reads excludes low income individuals who do not pay dues. She stated that communications to members is exempt under the ordinance and if a communication primarily goes to members while incidentally reaching non-members it should still be exempt.

John St. Clair stated that as the newsletter exemption now reads in applies to reporting and not to registration.

Motion 160229-02 (Hur/Keane): Moved, seconded, and passed (5-0) that the Commission adopt Regulation 2.105-6 as follows: “‘Member’ means an employee or shareholder of an organization, a person who pays dues or fees to an organization or any other person who affirmatively requests to regularly receive an organization’s communications.”

Executive Director Pelham introduced proposed Regulation 2.105-10. She explained that expenditure lobbyists must continue to file reports until they cease activities and affirmatively terminate their registration.

Commissioner Hur stated that the Commission should include a de minimis amount so that organizations do not have to continue filing when they are spending below a certain amount.

Executive Director Pelham stated that the law requires both registration and monthly reporting, with that expectation that reports will be filed until there is a formal termination. She stated that the law requires the reporting of the total amount spent on expenditure lobbying and an itemized breakdown for each payment of $1,000. She stated that the reporting requirements are different than the registration threshold of $2,500.

Public Comment:
Gen Fujioka stated that the ordinance does not address how to terminate and the Commission has some latitude with the termination requirements.

Debbie Lerman stated that the law requires monthly reporting while registered even if there is no activity. She stated that the Regulations should allow an organization to terminate if it is not spending $2,500 in a month.

Peter Cohen stated that in an organization is not spending $2,500 in a given month, it should not be required to file a report.

Executive Pelham reiterated the difference in the law between the registration requirements and the monthly reporting requirements.

Larry Bush stated that there is no difference between lobbyists filing a monthly report with no activity than with campaign committees who file no activity reports.

Anita Mayo stated that this issue is a function of how the law was drafted. She stated that the Commission should have followed state law that only requires reports to be filed when the spending trigger is hit.

An unidentified speaker stated that the termination requirement is the same as for contact lobbyists.

Motion 160229-03 (Keane/Andrews): Moved, seconded, and passed (5-0) that the Commission adopt Regulation 2.105-10 as follows:
(a) For registration, Expenditure Lobbyists shall use SFEC Form 2110A.
(b) For monthly reports, Expenditure Lobbyists shall use SFEC Form 2110B.
(i) As used in Sec 2.110(c)(2)(B) and (C) payments are “made” on the date the activity to solicit, request or urge other persons to communicate directly with officers of the City and County in order to influence local legislative or administrative action occurs.
(ii) For purposes of disclosing campaign contributions, reportable contributions include contributions that would be required to be disclosed under SFEC Regulation 2.110-4.
(iii) Salary paid to an employee of an Expenditure Lobbyist shall not constitute a payment for the purpose of reporting.
(c) Registered Expenditure Lobbyists must continue to file monthly reports until they cease all expenditure lobbying activity and affirmatively terminate their registration.

Executive Director Pelham introduced Regulation 2.110-11 regarding the waiver of fees for entities with 501(c)(3) and 501(c)(4) tax status.

Commissioner Hur stated that the fee waiver for 501(c)(3) entities is too broad and it should be limited to those 501(c)(3)’s that also file an IRS Form 990. He stated that there should be no fee waiver for any 501(c)(4).

Public Comment:
Debbie Lerman stated that the waiver should be extended to projects of a fiscal sponsor when the project itself does not file a tax return but the fiscal sponsor is a 501(c)(3).

Larry Bush stated that projects of fiscal sponsors are an example of dark money in San Francisco. He stated that the spending of the projects is unaccountable.

Peter Cohen stated that the Commission should define the circumstances required to terminate a registration.

Elena Schmid stated that a fiscal sponsor is usually the 501(c)(3) organization and does the administrative work for the projects under its umbrella.

Motion 160229-04 (Hur/Keane): Moved, seconded, and passed (4-1, Andrews abstaining) that the Commission adopt Regulation 2.105-11 as follows: “The Ethics Commission shall waive the $500 registration fee and the $500 annual re-registration fee for 501(c)(3) nonprofit organizations that file or reasonably intend to file an IRS Form 990-EZ or IRS Form 990-N or otherwise demonstrate that their annual budget is $500,000 or less.”

5. Discussion and possible action on draft Regulations interpreting the terms used in the City’s Whistleblower Protection Ordinance, Article IV, Chapter 1 of the Campaign and Governmental Conduct Code.

Chair Renne requested that this item be continued until the next Commission meeting.

Motion 160229-05 (Keane/Andrews): Moved, seconded, and passed (5-0) that the Commission continue the discussion on draft Regulations to the Whistleblower Protection Ordinance.

Public Comment:
Larry Bush stated that he appreciated the work on these Regulations by Commissioner Hur.

Bruce Wolfe thanked Commissioner Hur for his work on the Commission’s Sunshine Ordinance Enforcement Regulations.

6. Discussion and possible on items for future meetings.

Commissioner Hur thanked the Commission, staff, and the public for allowing him to serve on the Commission.

7. Discussion of Executive Director’s Report.

Executive Director Pelham stated that she applied for the City’s departmental Senior Fellows program. She stated that the Fellows will be announced in April 2016 and are scheduled to begin their year-long projects in September. She also stated that she submitted the approved budget on-time to the Mayor’s Office.

8. Discussion and possible action on draft minutes for the Commission’s January 25, 2016, regular meeting.

Chair Renne and Commissioner Hur stated that one of the motions did not accurately reflect what occurred at the January meeting.

Executive Director Pelham stated that she would have staff review the audio and re-submit the minutes for approval at the next Commission meeting.

9. Adjournment.

Motion 160229-06 (Keane/Hur): Moved, seconded, and passed (5-0) that the Commission adjourn.

The Commission adjourned the meeting at 10:15 PM.

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