BILL NUMBER: AB 527 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 17, 2011
AMENDED IN ASSEMBLY APRIL 14, 2011
INTRODUCED BY Assembly Member Roger Hernández
FEBRUARY 15, 2011
An act to amend Sections 1090 and 1091 of , and to add
Section 1096.5 to, the Government Code, relating to public
officials.
LEGISLATIVE COUNSEL'S DIGEST
AB 527, as amended, Roger Hernández. Public officials: financial
interests.
Existing law prohibits Members of the Legislature, and state,
county, district, judicial district, and city officers or employees
from being financially interested in any contract made by them in
their official capacity, or by any body or board of which they are
members. Existing law defines what is a remote interest in a contract
that does not present a prohibited conflict of interest under these
provisions. Existing law authorizes a body or board to make a
contract that involves a remote interest of a member of the body if,
among other things, the remote interest is disclosed to the body or
board and noted in its official records, and thereafter the body or
board authorizes, approves, or ratifies the contract in good faith by
a vote of its membership sufficient for the purpose without counting
the vote or votes of the officer or member with the remote interest.
Violation of these provisions is a crime.
This bill would additionally require that the remote interest be
disclosed at a public meeting of that body or board and would require
the counsel or other legal advisor of the body or board to identify
a statutory basis for classifying the interest as a remote interest.
By increasing the scope of actions that constitute a crime, this bill
would impose a state-mandated local program.
This bill would also prohibit the specified officers or employees
from authorizing the expenditure of public funds, as specified, if
any member of the body or board is financially interested in the
person or entity that receives the expended funds.
This bill would also prohibit a body or board of a city
or county an officer or employee, as defined, of the
state, a county, district, judicial district or city, or any city
officer or employee from authorizing the expenditure of
public funds, and from approving any project, plan, permit, or
conveyance of land in which a member of that body is financially
interested , as defined, unless specified conditions are
met, including disclosing the financial interest at a public meeting
of that body or board, requiring the financially interested member to
abstain from voting on the item, and requiring the body or board to
approve the item by a vote of its membership sufficient for the
purpose without the vote or votes of the member with the remote
interest . The bill would make a violation of these
provisions a crime, thereby imposing a state-mandated local program.
The bill would also make findings and declarations relating to the
application of its provisions to charter cities and charter
counties.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1090 of the Government Code is amended to read:
1090. (a) Members of the Legislature,
state, county, district, judicial district, and city officers or
employees shall not be financially interested in any contract made by
them in their official capacity, or by any body or board of which
they are members. Nor shall any state, county, district,
judicial district, and city officers or employees authorize the
expenditure of public funds, regardless of whether a contract is made
in furtherance of the expenditure, if any member of the body or
board is financially interested in the person or entity that receives
the expenditure. Nor shall state, county, district,
judicial district, and city officers or employees be purchasers at
any sale or vendors at any purchase made by them in their official
capacity.
As used in this article, "district" means any agency of the state
formed pursuant to general law or special act, for the local
performance of governmental or proprietary functions within limited
boundaries.
(b) (1) A state, county, district, judicial district, and city
officer or employee shall not authorize the expenditure of public
funds, or approve or recommend approval of any project, plan, permit,
or conveyance of land, regardless of whether a contract is made in
furtherance of the expenditure or project, plan, permit, or
conveyance, if any member of the body or board of any state, county,
district, judicial district or city, or any city officer or employee
is financially interested in the transaction by virtue of independent
contracting by the individual or nongovernmental entity receiving
either public funds or an entitlement. Any individual with a
financial interest in the expenditure of public funds or approval of
any project, plan, permit, or conveyance of land, is in violation of
this section and shall be punishable in the manner provided in
Section 1097.
(2) For purposes of this subdivision, a city officer or employee
shall include elected and appointed officials of the governing body
and any subordinate board or commission, a city attorney, a city
manager, and a department head. This subdivision shall not apply to
an individual in a nonsupervisory or nonmanagerial position who is
directed by a department head.
SEC. 2. Section 1091 of the Government Code is amended to read:
1091. (a) An officer shall not be deemed to be interested in a
contract entered into by a body or board of which the officer is a
member within the meaning of this article if the officer has only a
remote interest in the contract, if the fact of that interest is
disclosed to the body or board of which the officer is a member and
noted in its official records at a public meeting of that body or
board, and the counsel or other legal adviser of the body or board
has identified a statutory basis for classifying the interest as
remote at a public meeting of the body or board, and thereafter the
body or board authorizes, approves, or ratifies the contract in good
faith by a vote of its membership sufficient for the purpose without
counting the vote or votes of the officer or member with the remote
interest.
(b) As used in this article, "remote interest" means any of the
following:
(1) That of an officer or employee of a nonprofit entity exempt
from taxation pursuant to Section 501(c)(3) of the Internal Revenue
Code (26 U.S.C. Sec. 501(c)(3)) or a nonprofit corporation, except as
provided in paragraph (8) of subdivision (a) of Section 1091.5.
(2) That of an employee or agent of the contracting party, if the
contracting party has 10 or more other employees and if the officer
was an employee or agent of that contracting party for at least three
years prior to the officer initially accepting his or her office and
the officer owns less than 3 percent of the shares of stock of the
contracting party; and the employee or agent is not an officer or
director of the contracting party and did not directly participate in
formulating the bid of the contracting party.
For purposes of this paragraph, time of employment with the
contracting party by the officer shall be counted in computing the
three-year period specified in this paragraph even though the
contracting party has been converted from one form of business
organization to a different form of business organization within
three years of the initial taking of office by the officer. Time of
employment in that case shall be counted only if, after the transfer
or change in organization, the real or ultimate ownership of the
contracting party is the same or substantially similar to that which
existed before the transfer or change in organization. For purposes
of this paragraph, stockholders, bondholders, partners, or other
persons holding an interest in the contracting party are regarded as
having the "real or ultimate ownership" of the contracting party.
(3) That of an employee or agent of the contracting party, if all
of the following conditions are met:
(A) The agency of which the person is an officer is a local public
agency located in a county with a population of less than 4,000,000.
(B) The contract is competitively bid and is not for personal
services.
(C) The employee or agent is not in a primary management capacity
with the contracting party, is not an officer or director of the
contracting party, and holds no ownership interest in the contracting
party.
(D) The contracting party has 10 or more other employees.
(E) The employee or agent did not directly participate in
formulating the bid of the contracting party.
(F) The contracting party is the lowest responsible bidder.
(4) That of a parent in the earnings of his or her minor child for
personal services.
(5) That of a landlord or tenant of the contracting party.
(6) That of an attorney of the contracting party or that of an
owner, officer, employee, or agent of a firm that renders, or has
rendered, service to the contracting party in the capacity of
stockbroker, insurance agent, insurance broker, real estate agent, or
real estate broker, if these individuals have not received and will
not receive remuneration, consideration, or a commission as a result
of the contract and if these individuals have an ownership interest
of 10 percent or more in the law practice or firm, stock brokerage
firm, insurance firm, or real estate firm.
(7) That of a member of a nonprofit corporation formed under the
Food and Agricultural Code or a nonprofit corporation formed under
the Corporations Code for the sole purpose of engaging in the
merchandising of agricultural products or the supplying of water.
(8) That of a supplier of goods or services when those goods or
services have been supplied to the contracting party by the officer
for at least five years prior to his or her election or appointment
to office.
(9) That of a person subject to the provisions of Section 1090 in
any contract or agreement entered into pursuant to the provisions of
the California Land Conservation Act of 1965.
(10) Except as provided in subdivision (b) of Section 1091.5, that
of a director of, or a person having an ownership interest of, 10
percent or more in a bank, bank holding company, or savings and loan
association with which a party to the contract has a relationship of
borrower or depositor, debtor or creditor.
(11) That of an engineer, geologist, or architect employed by a
consulting engineering or architectural firm. This paragraph applies
only to an employee of a consulting firm who does not serve in a
primary management capacity, and does not apply to an officer or
director of a consulting firm.
(12) That of an elected officer otherwise subject to Section 1090,
in any housing assistance payment contract entered into pursuant to
Section 8 of the United States Housing Act of 1937 (42 U.S.C. Sec.
1437f) as amended, provided that the housing assistance payment
contract was in existence before Section 1090 became applicable to
the officer and will be renewed or extended only as to the existing
tenant, or, in a jurisdiction in which the rental vacancy rate is
less than 5 percent, as to new tenants in a unit previously under a
Section 8 contract. This section applies to any person who became a
public official on or after November 1, 1986.
(13) That of a person receiving salary, per diem, or reimbursement
for expenses from a government entity.
(14) That of a person owning less than 3 percent of the shares of
a contracting party that is a for-profit corporation, provided that
the ownership of the shares derived from the person's employment with
that corporation.
(15) That of a party to litigation involving the body or board of
which the officer is a member in connection with an agreement in
which all of the following apply:
(A) The agreement is entered into as part of a settlement of
litigation in which the body or board is represented by legal
counsel.
(B) After a review of the merits of the agreement and other
relevant facts and circumstances, a court of competent jurisdiction
finds that the agreement serves the public interest.
(C) The interested member has recused himself or herself from all
participation, direct or indirect, in the making of the agreement on
behalf of the body or board.
(16) That of a person who is an officer or employee of an
investor-owned utility that is regulated by the Public Utilities
Commission with respect to a contract between the investor-owned
utility and a state, county, district, judicial district, or city
body or board of which the person is a member, if the contract
requires the investor-owned utility to provide energy efficiency
rebates or other type of program to encourage energy efficiency that
benefits the public when all of the following apply:
(A) The contract is funded by utility consumers pursuant to
regulations of the Public Utilities Commission.
(B) The contract provides no individual benefit to the person that
is not also provided to the public, and the investor-owned utility
receives no direct financial profit from the contract.
(C) The person has recused himself or herself from all
participation in making the contract on behalf of the state, county,
district, judicial district, or city body or board of which he or she
is a member.
(D) The contract implements a program authorized by the Public
Utilities Commission.
(c) This section is not applicable to any officer interested in a
contract who influences or attempts to influence another member of
the body or board of which he or she is a member to enter into the
contract.
(d) The willful failure of an officer to disclose the fact of his
or her interest in a contract pursuant to this section is punishable
as provided in Section 1097. That violation does not void the
contract unless the contracting party had knowledge of the fact of
the remote interest of the officer at the time the contract was
executed.
SEC. 3. Section 1096.5 is added to the
Government Code, to read:
1096.5. (a) No body or board of a city or county, including, but
not limited to, a planning commission, shall approve any project,
plan, permit, or conveyance of land in which any member of that body
is financially interested unless the fact of that interest is
disclosed to the body or board by the financially interested member
at a public meeting of that body or board, the financially interested
member abstains from voting on the project, plan, permit, or
conveyance of land, and thereafter the body or board approves the
project, plan, permit, or conveyance of land in good faith by a vote
of its membership sufficient for the purpose without counting the
vote or votes of the member with the remote interest.
(b) For purposes of this section, a member of a body or board
shall be financially interested if the approval of the project, plan,
permit, or conveyance will have a reasonably foreseeable financial
effect on the member, on the real property owned or leased by the
member, or on a business entity in which the member is an employee,
agent, contractor, or consultant of the business entity.
(c) Any project, plan, permit, or conveyance approved in violation
of this section shall be void.
(d) A member of a body or board that is financially interested in
the approval of the project, plan, permit, or conveyance of land,
that votes to approve the project, plan, permit, or conveyance of
land is punishable by a fine of not more than one thousand dollars
($1,000), by imprisonment in the state prison, or by both fine and
imprisonment and is forever disqualified from holding any office in
this state.
SEC. 4. SEC. 3. The Legislature
hereby finds and declares that the ethical integrity and stability of
local government agencies in this state, including charter cities,
has a direct impact on the long-term well-being of all residents of
this state. The likelihood of businesses locating to, or staying in,
the state is affected by the perception of a functioning,
transparent, and practical governmental structure in the local
governmental bodies in the state. Therefore, the Legislature finds
and declares that to ensure the statewide integrity of local
governments, including the prohibition against financially interested
transactions, is an issue of statewide concern and not a municipal
affair, as that term is used in Section 5 of Article XI of the
California Constitution. Therefore, this act shall apply to every
city and county in this state, including a charter city, charter
county, and charter city and county.
SEC. 5. SEC. 4. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.