Originally published October 5, 2022
The Levine Act prohibits “officers” of any state or local government agency who have received a contribution of $250 or more from an applicant or affiliated party from voting on the applicant’s matter—whether it be a contract, a permit or other entitlement—if the officer knows or has reason to know that the participant has a financial interest in the matter. State and local elected officials and bodies—such as mayors and legislators, city councils, and boards of supervisors—have always been excluded from the Levine Act’s prohibitions, but that is about to change for local electeds.
On September 29, 2022, Governor Newsom signed SB 1439 (Glazer), a bill that extends the Levine Act’s protections against so-called “pay-to-play” decision-making to local elected officials and those appearing before them. SB 1439 could create significant and unanticipated issues for any entity with business before local elected bodies where the entity or other closely associated persons, such as their agents, employees, or any person with a financial interest in a project, have made or make campaign contributions in excess of $250 to local elected officials voting on the project within 12 months of the vote, regardless of how the local elected official votes.
Levine Act
The Levine Act was adopted in 1982, in response to reports that several members of the California Coastal Commission had solicited and received large campaign contributions from individuals with applications pending before the Commission. The Act (see California Government Code Section 84308) generally prohibits a member of a nonelected body such as a city planning commission or the Coastal Commission from voting on an item if the member receives or solicits a contribution of $250 or more within the three (3) months preceding or following the vote, if the contribution is from a party (or from an associate of the party) that would financially benefit from the vote. The member is also required to recuse themselves from participating in the body’s consideration of the item during the same time period.
SB 1439
SB 1439 amends Section 84308 to apply to members of local elected bodies, such as city council members and county supervisors and extends the covered period from three months to 12 months. If a party (or an affiliated party, such as an agent or employee) has made a campaign contribution of $250 or more within the preceding 12 months to a member of a city council, the member of the city council will be required to recuse herself or himself from voting on a matter involving a license, a contract, a permit or other entitlement if the member knows or has reason to know that the participant has a financial interest in the matter.
SB 1439 also extends from three months to 12 months the time frame after an approval during which a member (elected or unelected) is prohibited from receiving a campaign contribution from a party.
Note of Caution to Entities Doing Business With Elected Bodies
SB 1439 has serious implications for individuals, companies and other entities doing business with local elected bodies in the state. The Legal Division of the state Fair Political Practices Commission (FPPC), which has authority to interpret and enforce the Levine Act, has advised the FPPC that SB 1439’s changes, which take effect on January 1, 2023, apply retroactively. Meaning, if a company made a campaign contribution of $250 or more in 2022 to a member of a city council, that city council member will be required to recuse herself or himself from matters directly affecting the finances of the company for the 12 months following the contribution, even if that contribution has already been made and was made before SB 1439 was signed into law.
In the future, companies, individuals and other entities that intend to seek contracts, permits or licenses from local elected bodies will need to refrain from making any prohibited contributions, be on the lookout for any prohibited contributions from principals or employees who might be unaware of the rule, and ask agents and consultants about their campaign contribution history, and they should put in place a compliance process to avoid inadvertent violations. Without appropriate compliance measures, contributions made innocently to support a councilmember or county supervisor who seems to share your views may later end up preventing the official from being able to hear or vote on an item that is important to you or your business interests.
Notably, a number of California cities already have prohibitions on campaign contributions from developers and city contractors to elected city officials. These cities include Alhambra, Baldwin Park, Claremont, Costa Mesa, Culver City, Gardena, Glendale, Los Angeles, Malibu, Modesto, National City, Oakland, Oxnard, Pacific Grove, Pasadena, San Francisco, Temple City and West Covina. For example, the City of Los Angeles Charter prohibits contributions to elected city officials and candidates by any person “who bids on or submits a proposal or other response to a contract solicitation that has an anticipated value of at least $100,000 and requires approval by the City Council,” as well as major subcontractors on such bids and principals of covered entities. L.A. Charter § 470(c)(12). The prohibition also applies to citywide offices (mayor, city attorney and city controller) where the contract at issue would be approved by that office. Id.
Future Compliance
SB 1439 will go into effect on January 1, 2023. Going forward, it will be important for individuals, companies and other entities doing business with elected bodies in the state to ensure that they are complying with the law’s requirements and are monitoring their activities and the activities of their principals, employees and agents for compliance. Manatt can provide assistance with developing such compliance programs.
As referenced, the FPPC’s Legal Division has recommended that the Commission to issue an Opinion stating that “Section 84308, as amended, looks back to contributions received and proceedings conducted throughout 2022 and such application does not constitute an impermissible 'retroactive' application of a law.” This proposed Opinion was prompted by the fact that the Commission staff has “received multiple questions and requests for advice on this issue,” including from the California League of Cities. We anticipate that there will be litigation challenging the FPPC Legal Division’s opinion regardless of the interpretation put forth in any Opinion issued.