BILL ANALYSIS Ó
AB 527
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ASSEMBLY THIRD READING
AB 527 (Roger Hernández)
As Amended
May 17, 2011
Majority vote
LOCAL GOVERNMENT 5-0 APPROPRIATIONS 12-1
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|Ayes:|Alejo, Bradford, Campos, |Ayes:|Fuentes, Blumenfield, |
| |Davis, Hueso | |Bradford, |
| | | |Charles Calderon, Campos, |
| | | |Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, |
| | | |Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Norby |
| | | | |
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SUMMARY : Prohibits state, county, district, judicial district,
and city officers or employees from authorizing 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,
project, plan, permit, or conveyance, if any member of the body
or board is financially interested in the transaction by virtue
of independent contracting by the individual or nongovernmental
entity receiving either public funds or an entitlement.
Specifically, this bill :
1)Declares a city officer or employee for purposes of these
provisions includes elected and appointed officials of the
governing body and any subordinate board or commission, a city
attorney, a city manager, and a department head and does not
include an individual in a nonsupervisory or nonmanagerial
position who is directed by a department head.
2)Requires an officer who discloses his or her interest in a
contract involving the body or board in order to be deemed not
interested in that contract to disclose that interest at a
public meeting of that body or board and requires counsel or
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another legal advisor of the body or board to identify a
statutory basis for classifying the interest as remote at a
public meeting
of the body or board.
3)Requires a member of a body or board that is financially
interested in the expenditure of public funds or the approval
of a project, plan, permit, or conveyance of land to be
punished with a fine of not more than $1,000 or by
imprisonment in state prison, and to be forever disqualified
from holding any office in this state.
4)Declares these provisions to be a statewide concern and
applicable to charter cities and charter counties.
EXISTING LAW :
1)Prohibits, under conflict of interest provisions, members of
the Legislature, as well as 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 a
member.
2)Requires a government officer to not be deemed to be
interested in a contract entered into by a body or board of
which the officer is a member if the officer has only a
"remote interest," as defined, in the contract before the
body. Requires, however, the remote interest be disclosed to
the body or board which the officer is a member and noted in
its official records, and thereafter that the body or board
authorizes, approves, or ratifies the contract in good faith
by a vote of its membership, without counting the vote or
votes of the officer or member with the remote interest.
3)Enumerates the circumstances that would lead to characterizing
an interest as remote.
4)Requires anyone who violates any conflict of interest
provision to be punished with a fine of not more than $1,000
or by imprisonment in the state prison, and to be forever
disqualified from holding any office in this state
5)Prohibits, under the Political Reform Act of 1974 (PRA), any
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public official at any level of state or local government from
making, participating in making, or in any way attempting to
use his or her official position to influence a governmental
decision in which he or she knows or has reason to know he or
she has a financial interest.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, unknown, likely negligible, nonreimbursable local law
enforcement costs.
COMMENTS : Under existing law, conflict of interest provisions
generally prohibit a government official, in his or her official
capacity, from participating in the making of any contract in
which the official has a financial interest. At the same time,
however, existing law provides a number of exemptions to this
general rule where the member's interest is deemed sufficiently
"remote" and is properly disclosed and noted in the official
record. These exemptions generally reflect the fact that
officials who serve on various public entities may occasionally
have associations with private entities with whom the public
entity may wish to contract. Rather than impose a complete ban
on such contracts - which might severely limit the public
agencies contracting options - existing law attempts to create
safeguards that will eliminate any potential conflicts of
interest.
The PRA was approved by the voters in 1974 to regulate and
require disclosure of campaign contributions and expenditures,
candidates' and office holders' income, conflicts of interest,
and lobbying activities. Among its provisions is the
requirement no public official, including officials at any level
of local government, from using his or her official position to
influence a governmental decision in which he or she knows or
has to reason know he or she has a financial interest.
The PRA defines a financial interest as existing if it is
reasonably foreseeable the decision will have a material
financial effect, distinguishable from the effect on the general
public, on the official or a member of his or her immediate
family. It further specifies a financial interest exists if the
decision has a material effect on any business entity or real
property in which the public official has a direct or indirect
investment worth $2,000 or more; any source of income, other
than gifts or loans, aggregating $500 or more provided to (or
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received by, or promised to) the public official within 12
months prior to the time of the decision; a donor of gifts
aggregating $250 or more to the public official within the 12
months prior to the time of the decision; or, any business
entity in which the public official is a director, officer,
partner, trustee, employee, or holds any position of management.
Any person who knowingly or willfully violates a provision of
the PRA is guilty of a misdemeanor, faces a monetary penalty,
and is barred from being a candidate for any elective office or
act as a lobbyist for four years following the date of
conviction.
According to the author, this bill helps restore the public's
faith in government by ensuring those who are given
decision-making powers do so in an ethical way. The author
points to recent examples of where local governments approved
the expenditure of public funds to persons or entities that had
financially interested relationships with members of the
legislative bodies of the local government or its employees.
The author singles out the corruption charges for the City of
Bell's City Manager Robert Rizzo, whose partner in a
horse-racing venture was eventually awarded $10.4 million in
business contracts from the city. And, in the City of
Whittier, Councilmember Bob Henderson was investigated in 2010
for violating state conflict-of-interest laws when he voted to
approve the city's lease with Matrix Oil Company so that they
could drill into oil fields after Mr. Henderson received
royalties from the company for the mineral rights to his house.
Mr. Rizzo's case of misappropriation was eventually dismissed,
and Mr. Henderson was cleared of violating conflict-of-interest
laws because current law did not prohibit their actions. The
author says this bill would remedy these situations, especially
at a time when the public's approval rating for elected
officials is at an all-time low.
This bill would prevent a body or board of the state, a county,
a district, or a judicial district from approving an expenditure
of public funds or approving or recommending approval of any
project, plan, permit, or conveyance of land if any member of
the body or board is financially interested. It would not be
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enough that the individual member of the body or board recuses
himself or herself from participating in the decision. The
entire body or board would be prohibited from engaging in any
expenditure of public funds or from approving a project, plan,
permit, or conveyance of land. The Legislature may wish to
consider whether this ban would create unnecessary gridlock on
all levels of government in the state.
Also, this bill would require the state's, county's, district's,
judicial district's, and city's legal counsel to identify a
statutory basis for classifying a financial interest as remote
at a public meeting of the body or board. This new requirement
under conflict of interest provisions would seemingly appear to
hold legal counsel liable for the financial interest of the
officer. For instance, if legal counsel did not adequately
identify the financial interest, legal counsel would face a
penalty of prison time, a fine of not more than $1,000, and
lifetime banishment from holding public office. Legal counsel
already is regulated by the California State Bar for malpractice
and ethics violations so the Legislature may wish to consider
whether it is necessary to add a new layer of liability to these
attorneys.
Support arguments: Supporters might say not allowing a
governing body to approve any contract where one of the members
of the governing body has a declared financial interest in the
contract provides accountability.
Opposition arguments: Opposition, Association of California
School Administrators, say
this bill will slow down the operations of school districts and
require them to expend more money by forcing school districts to
pay for additional attorneys fees.
Analysis Prepared by : Jennifer Klein Baldwin / L. GOV. /
(916) 319-3958
FN: 0000661
AB 527
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