United States: Political Spending And Pay-To-Play Ballot Measure Goes Before San Francisco Voters This Fall

Last Updated: September 11 2019
Article by Benjamin P. Keane and Michael Pfeifer

This fall, voters in the consolidated City and County of San Francisco will be faced with an opportunity to weigh in via referendum on whether to intensify the municipality's already-stringent pay-to-play and campaign finance laws for certain limited liability companies, partnerships and persons with financial interests before city government. The ballot measure, known jointly as Proposition F and the "Sunlight on Dark Money Initiative", was qualified by the San Francisco Board of Supervisors earlier this summer and recently certified for placement as a ballot question on the November ballot by San Francisco's City Elections Department, City Attorney and Controller.

From a pay-to-play perspective, Proposition F asks voters to sign-off on the addition of supplemental provisions designed to fill perceived loopholes in the already comprehensive municipal regulatory framework governing contributions by current and prospective contractors and vendors. Currently, San Francisco law prohibits corporations from donating directly to city candidates, and restricts city contractors and associated parties from contributing to elected officials with decision-making authority over relevant contracts. If passed, Proposition F would expand the list of entities prohibited from making direct contributions to candidates to include limited liability companies and limited liability partnerships. The measure would also authorize the City to restrict contributions to candidates for Supervisor, Mayor, and City Attorney (as well as to the current holders of such offices) from organizational and individual contractors with financial interests in city land-use approval matters valued at $5 million or more. Under these limitations, newly restricted individuals would be prohibited from making donations to covered officials during the period of time between the initial request or application concerning a municipal land-use matter and for a period running 12 months following the municipality's final decision.

In addition to these added pay-to-play elements, Proposition F asks voters to embrace new "sunlight" disclosure requirements for political advertisements purchased by independent expenditure committees (IECs) – the municipal version of Super PACs in San Francisco. Under the Initiative, all IECs that purchase an advertisement in San Francisco in support of or opposition to any candidate for a city elected office or any city ballot measure would be required to name the top three contributors donating more than $5,000 to the committee and disclose the amount contributed. In the event that a contributor is another IEC, a similar disclosure would be required to name the other committee's top two contributors who donated at least $5,000 and the amount each contributed.

Given what appears to be broad support for Proposal F among the current members of the San Francisco Board of Supervisors and the city electorate's predisposition toward political transparency initiatives through the years, it is anticipated that the proposal will pass later this November. This is particularly the case given that Proposal F seeks more measured action vis-a-vis the San Francisco business community than the aggressive Anti-Corruption and Accountability Ordinance (ACAO) this blog previously covered at length last year.

Measured or not, however, the message to the regulated community from San Francisco's elected officials remains clear – doing business with or involving government in the Bay area comes with strings and restrictions on political engagement. As such, businesses in San Francisco should take care to monitor the results of Proposition F this fall and ensure that their internal compliance frameworks are updated accordingly to ensure adherence by their senior employees and representatives. Failure of an internal compliance program to make personnel aware of these new pay-to-play restrictions could leave an organization open to the cancellation of contracts and/or monetary penalties based on inadvertent political engagement or giving. We here at Pay to Play Law Blog will continue to monitor the results of the Proposition this fall and offer commentary on any additional updates in the San Francisco regulatory landscape moving forward.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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