BILL ANALYSIS Ó SB 704 Page 1 Date of Hearing: August 19, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 704 (Gaines) - As Amended July 8, 2015 ----------------------------------------------------------------- |Policy |Elections and Redistricting |Vote:|7 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill provides the following additional exceptions to the state's conflict of interest statute: SB 704 Page 2 1)Allows a governmental entity to enter into a contract with a firm-when an owner or partner of the firm serves as an appointed member of an unelected board or commission to the governmental entity-if the owner or partner recuses himself or herself from providing any advice to the contracting agency regarding the contract between the firm and the contracting agency. 2)Allows a governmental board or body to enter into a contract with a firm that employs a member of the board or body, if the firm is a consulting engineering or architectural firm and the employee is a planner, or if the firm is a consulting planning firm and the employee is an engineer, geologist, architect, or planner. FISCAL EFFECT: Potential but likely minor increase in state costs to the extent anyone is sentenced to state prison for violation of the bill's provisions. (The penalty for violation of the conflict of interest provisions is a fine of not more than $1,000, or by imprisonment in the state prison, and by permanent disqualification from holding any office in this state.) COMMENTS: 1)Background. Section 1090 of the Government Code generally prohibits a public official or employee from making a contract in his or her official capacity in which he or she has a financial interest. In addition, a public body or board is prohibited from making a contract in which any member of the body or board has a financial interest, even if that member does not participate in the making of the contract. This prohibition, contained in Section 1090, dates back to the SB 704 Page 3 second session of the California Legislature (Chapter 136/Statutes of 1851). State law recognizes two categories of exceptions to Section 1090. One category is "remote interests". Where a government official has a "remote interest" in a contract, he or she must take three steps before the body on which he or she sits may vote on that contract. First, the official must disclose the interest to the government body. Second, the interest must be noted in the government body's official records. Finally, the official with the "remote interest" must abstain from participating in the review and approval of the contract. State law lists 16 situations that qualify as "remote interests." While the willful failure of an officer to disclose a remote interest in a contract would subject that officer to the conflict of interest penalties, the contract itself is not subject to cancelation due to the violation unless the contracting party had knowledge of the fact of the remote interest of the officer at the time the contract was executed. 2)Purpose. To the extent that design review boards, planning commissions, and similar bodies are composed of architects and other professionals who have expertise that may be relevant to the work of those boards and commissions, the broad construction of Section 1090 can create conflicts that limit the ability of those boards and commissions to perform their intended functions. In recognition of that fact, state law was previously amended to provide that the interest of an engineer, geologist, or architect employed by a consulting engineering or architectural firm is a "remote interest" under SB 704 Page 4 Section 1090, provided that the employee of the consulting firm does not serve in a primary management capacity, and is not an officer or director of the firm. This bill, sponsored by the American Institute of Architects, California Council, expands that remote interest such that it also applies to planners and to those employed by consulting planning firms. Additionally, this bill creates a new "remote interest" under Section 1090, providing that the interest of an owner or partner of a firm serving as an appointed member of an unelected board or commission of the contracting agency is a remote interest if the owner or partner recuses himself or herself from providing any advice to the contracting agency regarding the contract between the firm and the contracting agency and from all participation in reviewing a project that results from that contract. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081