BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 704  


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          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 704  
          (Gaines) - As Amended July 8, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill provides the following additional exceptions to the  
          state's conflict of interest statute:










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          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  








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            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  








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            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