Originally published October 13, 2005
In response to press reports of corruption in City Hall, Philadelphia's City Council has enacted two new ordinances designed to combat the "pay-to-play culture" described in those reports. Specifically, Councilman W. Wilson Goode, Jr. sponsored an ordinance adding Chapter 20-1000 to the Philadelphia Code. The Ordinance was adopted in December 2003 and amended effective June 9, 2005 (the "Goode Ordinance"). The Goode Ordinance imposes contribution limits on candidates and contributors to candidates for certain municipal offices. In addition to the Goode Ordinance, City Council enacted Ordinance No. 040772-A, proposed by Councilman Michael Nutter, (the "Nutter Ordinance"), which requires an amendment to the City Charter and therefore will not be effective unless and until it is approved in the November 2005 general municipal elections. The Nutter Ordinance prohibits large contributors from being eligible for non-competitively bid contracts. Assuming the Nutter Ordinance becomes law, these two ordinances will together change the way in which fundraising is conducted - both for the contributors and for the candidates for municipal office in Philadelphia.We want to make our clients aware of the new limitations imposed on campaign contributions for certain municipal offices in the City of Philadelphia and the consequences these ordinances might have on the business clients do with the city, even if the law is only unintentionally violated.
Goode Ordinance
The Goode Ordinance imposes annual limits on contributions from individuals ($2,500) and from businesses1 and political committees2 ($10,000) to a candidate for mayor, and certain other elective municipal offices ("Covered Offices"). "Aggregate contributions from political committees received by a candidate during a year in which there is not a "covered election"3 are capped at $250,000 for mayoral candidates, and less for the other Covered Offices. Because a "covered election" will take place in 2005, it appears that there is no limitation in total contributions from political committees (even though a mayoral election will not occur in 2005). The limits of the Goode Ordinance do not apply to contributions from a candidate's personal resources. A candidate for a Covered Office is confined to just one campaign committee and one checking account for his or her campaign for that office. All campaign contributions and expenditures shall be in that account. Finally, the Goode Ordinance permits any resident of the City of Philadelphia, "including the City Solicitor to bring an action . . . to enjoin any violations of, or compel compliance with, the provisions of this Chapter" and to award costs of litigation, including reasonable attorneys fees. Unlike the Nutter Ordinance, there is no provision of the Goode Ordinance that would require the aggregation of contributions made by business partners, spouses, or other related persons.
There is considerable ambiguity in the Goode Ordinance. Most notably, the Goode Ordinance does not define the word "candidate," unlike the Pennsylvania Election Code, which defines the term very broadly to include anyone who has begun to raise money, whether or not he or she has publicly declared which office he or she will seek. At the same time, the courts, interpreting the City Charter, have ruled that an individual becomes a candidate only after he or she publicly declares his or her intention to seek office or files the appropriate papers to appear on the ballot. Even under the Election Code's definition, the only candidates who are subject to the Goode Ordinance are those for municipal office. Thus, a candidate for state-level office is a "candidate" under the Election Code, but not yet subject to the contributions limits contained in the Goode Ordinance.
The City Solicitor has issued a public opinion in an effort to clarify some of these ambiguities. Specifically, the City Solicitor has taken the position that the Charter definition of "candidate" applies to the Goode Ordinance and, therefore, the contribution limits do not apply until there is an official declaration of candidacy. However, the City Solicitor has suggested that after the candidacy becomes official, the candidate may not expend monies "from contributions . . . in excess of the contribution limits imposed by the ordinance." This retroactive imposition of the limits of the Goode Ordinance does not appear to be supported by any case law but rather appears to be simply the opinion of the City Solicitor. Nonetheless, it would be prudent to abide by such limits retroactively, holding and not spending any extra funds raised above the contribution limits, at least until the Goode Ordinance is clarified by the courts, City Council or the state legislature.
It should be noted that the Goode Ordinance is subject to challenge as an impermissible municipal infringement on the field of campaign finance, which is preempted by the state legislature. Strong legal arguments could be made on either side and it remains unclear whether a court would strike down the contribution limits of the Goode Ordinance. There is also a potential constitutional challenge to the Goode Ordinance on the grounds that it limits free speech. Duane Morris continues to monitor these uncertainties and will analyze any decisions in a future Alert.
In the meantime, as a result of the Goode Ordinance, candidates and contributors should be mindful of the contribution limits and should avoid contributions in excess of $2,500 from individuals and $10,000 from businesses and political committees. Candidates should also be careful to limit their total contributions from political committees to $250,000 in years when there is no covered election.
Nutter Ordinance
Unlike the Goode Ordinance, the Nutter Ordinance is not yet law. The Nutter Ordinance has been adopted by City Council and signed by the mayor, but the required change to the Philadelphia City Charter will need to be approved by the voters in the November 2005 general election. Also, in contrast to the Goode Ordinance, the Nutter Ordinance would regulate who can do business with the City, not how much can be contributed to a particular candidate per se. In particular, the Nutter Ordinance would require additional disclosure of campaign contributions and would prohibit individuals and businesses who contribute more than a certain amount to candidates for office from being eligible to obtain city work.
The Nutter Ordinance imposes a disclosure requirement on city agencies intending to let non-competitively bid contracts, as well as on all applicants and contractors. Information to be disclosed would include any contribution (in kind or monetary) made by an applicant or a consultant; any city official who asked for a contribution and any contribution made in response thereto; and the name of any city employee who recommended a disadvantaged business enterprise to partner with the applicant, all during the preceding two-year period. Much of this information would be publicly available and would have to be updated on an ongoing basis. City agencies would also have to disclose the names of all the bidders as well as the proposed successful bidder, along with the reason for making such proposed award.
The Ordinance defines a candidate by reference to the broader Election Code definition. In other words, any individual who seeks nomination or election, including anyone who has received a contribution or made an expenditure, regardless of whether they have identified the office for which they are running, is a candidate. Contributions made after January 1, 2006, would count towards the overall limits. Non-competitively bid contracts awarded after February 1, 2006, could not be awarded to individuals or firms that have contributed more than the enumerated limits in any calendar year to an incumbent, and after January 2008 (when the new Mayor and Council members take office), such non-competitively bid contracts could not be awarded to individuals or firms that contributed more than the limits in any calendar year to a candidate.
Though the contribution limits mirror the limits set forth in the Goode Ordinance in amount, the limits under the Nutter Ordinance are much more restrictive because of the more severe attribution rules. For example, under the Goode Ordinance, an individual is permitted to contribute $2500 to a candidate for mayor at the same time that: (a) four of that individual's business partners could all do the same, or (b) the individual's company itself (provided that it is a limited liability company or a partnership and not a corporation) could make a $10,000 contribution, or (c) a political committee controlled by the company could make the $10,000 contribution, or (d) the company could hold a fundraiser at which $10,000 is raised from other individuals in small denominations. All of the above contributions are permitted under the Goode Ordinance in conjunction with the individual's $2500 contribution. However, under the Nutter Ordinance, the total of such contributions, $12,500 in each case, would all be attributed to the same business, which would therefore be barred from entering into non-competitively bid contracts with the City. It is also important to note that the term "elective City office" is not defined in the Nutter Ordinance. Instead, any contribution to any candidate or incumbent of any elective City office (from Mayor to Register of Wills and possibly Municipal Court or Common Pleas Judge) would count toward the limits of the Nutter Ordinance. As a result, contributions in excess of $10,000 to a Register of Wills candidate (raised at a fundraiser hosted by an individual) would bar the contributor from participating in any non-competitively bid contracts for the duration of the Register of Wills' tenure in that job, even if the contracts had nothing to do with the functions of the office of Register of Wills.
Given that the Nutter Ordinance restricts the contributors and not the candidates, businesses that contract with the City should limit the amount that they contribute to any particular candidate. While it has never been proper to tie contributions to non-competitively bid contracts (that is, a quid pro quo would violate bribery, honest services fraud or other existing public corruption statutes), the Nutter Ordinance would make it even clearer that a winning candidate would not be able to reward his contributors with non-competitively bid city contracts. Because of the strict attribution rules and extensive disclosure requirements, there is ample opportunity for contributors to find themselves, unwittingly, barred from non-competitively bid city work.
Footnotes
- For purposes of the Goode ordinance, a "business" is "any business partnership, sole proprietorship or other form of business organization permitted under the laws of the Commonwealth to make political contributions."
- A "political committee" is defined as "Any committee, club, association, political party or other group of persons, including the campaign committee of a candidate for office in a covered election, which receives contributions or makes expenditures for the purpose of influencing the outcome of a covered election."
- A "covered election" is defined as "every primary, general or special election for Mayor, District Attorney, City Controller, Register of Wills, Sheriff, Clerk of Quarter Sessions Court, City Commissioner and City Council." As a result of this definition, the $250,000 limit on contributions from political committees would not apply in 2005 when there are scheduled elections for District Attorney and City Comptroller and, 2007 when there are scheduled Mayoral, Councilmanic and other elections.
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