Los Angeles Ethics Commissioners Fail To Understand Their Powers And Duties Under The City Charter And Thereby Inadvertently (??) Set The Stage For Exempting Nearly All 501(c)(3) Tax Exempt Organizations In Los Angeles From The Municipal Lobbying Ordinance

It seems like forever now, although it’s only been two years, that the Los Angeles Ethics Commission has been discussing proposed changes to the Municipal Lobbying Ordinance (MLO). At this point I just don’t have it in me to summarize the discussion any more, although you can find links to most of my posts on the subject in this post on the penultimate phase of the matter.

At the Commission’s meeting on Tuesday, which you can watch in its entirety right here (or here on Archive.Org if you prefer), there were only two matters left to settle. One was the issue of detailed reporting of contacts between lobbyists and City Officials. I hope to write on what happened with that later on. The other, and the subject of today’s post, had to do with exemptions from the MLO for 501(c)(3) nonprofits. You can watch the whole discussion beginning here. These organizations enjoy some exemptions now by virtue of LAMC §48.03(E,F). You can read the statute for yourself, but essentially it exempts 501(c)(3)s1 which have “… the purpose of representing the interests of indigent persons and whose primary purpose is to provide direct services to those persons…”

As they are wont to do, the staff, in the persons of Director of Policy Arman Tarzi and Mark Low, head of the lobbying program, provided the Commission with a detailed set of recommendations. There were four different options given that had to do with nonprofits, which you can read in the proposal. Of these, three were developed by staff and the fourth2 was provided by nonprofits and proposed to exempt all nonprofits, no matter what they do, which have gross annual receipts of under $2.5 Million.

Never content to leave well enough alone, these hyperorganized nonprofits presented the Commission with a so-called “Option 5,” which they circulated at the meeting. This option proposed to modify LAMC §48.03(E) to exempt from the MLO:

E. Any organization exempt from federal taxation pursuant to Section 501(c)(3) of the Internal Revenue Code that:
1. Provides assistance, such as food, clothing, shelter, child care, health, legal, vocational, relief, educational, and other similar assistance to disadvantaged people for free or at a significantly below-market rate; OR
2. Has gross receipts of less than $2.5 million.
This exemption also applies to the organization’s employees and board members while engaged in official duties. This exemption does not apply when an organization is seeking funding, property, or a permit from the City on its own behalf.

In his staff recommendation Tarzi attempted to provide some context for a gross-receipts-based exemption. He found a 2014 report that listed median annual revenues for various types of nonprofits in California thus:

Type of Nonprofit Median annual revenue
Arts, Culture, and Humanities $88,000
Education, Higher $3,167,000
Education, Other $85,000
Environment $112,000
Hospitals $82,883,000
Health, Other $208,000
Human Services $150,000
International $120,000
Mutual, Public, and Societal Benefit $90,000

From this data it looks like an exemption based on a revenue cap of $2.5 Million would exempt most nonprofits from having to comply with the MLO, no matter what their purpose was.3 The most important point, though, is that this modification was proposed by the nonprofit community without any research into which or how many nonprofits would be exempted. And also the Ethics Commission staff had no idea how many nonprofits would be exempted by this policy. For context, note that evidently San Francisco has a revenue-based exemption of $200,000 per year, less than a tenth of what the Los Angeles nonprofits proposed.

However, one can’t really blame these nonprofits. This is what constituents do and what they’re meant to do. They propose policy to officials that’s in their best interests. It’s up to the officials to winnow through competing proposals and craft compromises which are in everyone’s best interests or, if that’s not politically possible, at least in the most best interests of the most constituents, or some such quasi-utilitarian formulation.

But sadly, that’s not what happened on Tuesday. The story of what went so badly wrong is a little intricate, so please bear with me. It’s worth attending to, though, because the result is that our Ethics Commissioners, through a complex combination of carelessness, inattention, and bad action, have made it pretty likely that in the future almost all 501(c)(3) nonprofits will be exempt from registering as lobbying entities with the City of Los Angeles, and this is a very bad thing for everyone who cares about transparency. Really cares, I might add, and not just pretends to care, like Serena Oberstein, who’s not only the Vice President of the Ethics Commission but, also, a liar.

For background, note that at Tuesday’s meeting only three Commissioners were present and voting on the proposed MLO revisions: Melinda Murray, Serena Oberstein, and Andrea Ordin. Jessica Levinson was absent for some reason that I didn’t hear and Araceli Campos recused herself for some reason that I don’t know. According to the City Charter at §700(g): “Three members shall constitute a quorum, and the concurring vote of at least three members shall be required to take any action.” Thus they had enough members to do business, but unanimity was required to take action. This situation gave each member present extraordinary power, power not usually enjoyed by these Commissioners, that is, the power to unilaterally veto any action of the Commission.

After a lot of public comment and discussion, the nonprofit exemption turned out to be the only remaining site of contention. First, Serena Oberstein, who’s not only a liar but is also basically a freaking double agent for local nonprofits, declared unequivocally her support for a $2.5 million cap on registration. You can watch her pathetic stammering mendacious performance right here. What she said was:

I would suggest that we adopt, you know, both parts of the language, you know, one, having the gross receipts of less than 2.5 million, and
[some other bullshit that doesn’t even freaking matter at this point.]


And at some point Melinda Murray, who’s mostly famous on the Ethics Commission for giggling a lot when she hasn’t read what she’s voting on, also declared her support for the nonprofit-generated Option 5. As usual, her comments were so insubstantial and devoid of content that I’m not even bothering to link to or transcribe them.

This left Commissioner Andrea Ordin, famous for her thoughtfulness, integrity, caution, and diligence,4 as the last obstacle between the City of Los Angeles and likely ethical disaster.5 And Commissioner Ordin really was inquisitive. For instance, watch her here asking Arman Tarzi about the likely effect of this clause:

If gross receipts of less than 2.5 million … we have a report here about a median revenue, so you really don’t know how far the other fifty percent would go up or down…

And watch again, a few minutes later:

I don’t have any real sense from those how many actually, except for the very largest of our nonprofits, would actually be at the 2.5.

Interestingly, at this point Executive Director6 Heather Holt made it clear that not only did no one know how many nonprofits would be exempted by adopting this policy, but that it wasn’t actually possible to find out easily:

Mr. Tarzi put on a valiant effort to try to find more detailed information but it was not readily available.

And in the face of this, Andrea Ordin was ready to express even more explicit doubts about the proposal and, at this point, even seemed to have talked herself around her inchoate objections:

I just wonder if we are missing something if we go as high as 2.5 million, but we have the ability to work things out even again if we feel that things are not being handled appropriately. I know we want to reach unanimity, and I do not object to 2.5 million.

Obviously this last sentence got Serena Oberstein, that dirty little coward,7 all quiverly-wiverly!: “So are we ready to vote?!” Commissioner Ordin had more questions, though, which is entirely commendable, and the discussion went on for another fifteen minutes. The most important bit of her comment there, though, so take good notice of it because it will come up again, is her statement that “… we have the ability to work things out even again if we feel that things are not being handled appropriately.”

A little later on, Commissioner Ordin is still deliberating, and make no mistake, this is a good thing for her to be doing. She’s worried that she doesn’t know how many nonprofits would be affected by this 2.5 million revenue exemption, and proposes that they should emulate the City of San Francisco in exempting nonprofits under $200,000 instead:

Well, I think I have a little bit better sense of … I don’t have the overall numbers, and I think that the comment as to not knowing those numbers is not insignificant. Certainly, I realize now also that it is important to have the definitions, because there are organizations that are 501(c)s that clearly have gross receipts of much more than 2.5 million, I started thinking of Union Rescue or Red Cross or others like that. So clearly you must have the fact that it is assistance
[?] for those definitions. So clearly we need both of those. I do still think, and maybe we could compromise somewhat on the 2.5 million, and reduce it. San Francisco uses two hundred thousand, so there’s [unintelligible] If we reduced it somewhat, maybe down to just even two hundred thousand, and be able to have agreement?

So at this point, Ordin, evidently seeing that it’s not reasonable to recommend a law without actually knowing what effect it’s going to have,8 wants to emulate the City of San Francisco and use a $200,000 cutoff. I ordinarily think it’s just prima facie a bad idea to copy San Francisco in anything but (a) I’m gaining a huge amount of respect for them not only in regard to their extremely functional CPRA system but also with respect to their whole take on municipal ethics and (b) when making laws it’s often a good idea to copy other jurisdictions because if they’ve had a law for a while and it’s still in force the unintended consequences are more likely to be dealable-with than not.

Anyway, Ordin’s perfectly prudent suggestion that our fair City could do worse than copying San Francisco here was shot down by a perfectly idiotically cringeworthy comment from Commissioner Melinda Murray, as usual, not worth transcribing, but if you want to marvel at the depths to which …9 Anyway, you can watch her comment here and judge for yourself. The entirety of her argument can be summarized thus: “I’m a member of a nonprofit with a budget of $200,000 so therefore you’re wrong.”

Then you can watch Serena Oberstein weighing in with some nonsense probably texted to her during the meeting by her buddy Shyaam, also not worth transcribing, which can be summarized as “blah blah blah 2.5 million had some reasoning behind it, but 2 million also has reasoning behind it so why don’t we compromise at 2 million?!?!”

And now we’re at the endgame. First Andrea Ordin gives in on 2 million and then the most unkindest cut of all, watch Commissioner Ordin consoling herself with a fatal error:

We’ll continue to monitor this. Obviously it goes even further up to the City Council and if there’s more information brought forward at that time if it needs to be dropped further.

Then Serena Oberstein, who’s turning out to be about as much of a disciple of Satan as Ms. Kerry Freaking Morrison herself is, and that’s saying a lot, friends,10 calls for a vote and the dirty deal is done.

OK, here’s where we’re at so far, and we are actually almost finished with the story, so congratulations on making it to this point! Various nonprofits proposed that the Ethics Commission recommend to City Council that all 501(c)(3)s that have gross annual revenues of less than $2.5 million be exempt from registering as lobbying entities under the Municipal Lobbying Ordinance. During the hearing it became clear that no one knew how many nonprofits this includes.

Serena Oberstein, who essentially has no integrity and is the willing slave of local 501(c)(3)s, pushed this hard and eventually talked Andrea Ordin around by offering to lower the cap to $2 million. Ordin, who had the power to unilaterally veto the motion because only three commissioners were present, consoled herself with the thought that the proposal still had to be approved by City Council, so that it could still be altered if it were found to be badly wrong. Then the Commission voted to approve this recommendation and send it up to Council.

Now, ordinarily the City Council is the supreme authority in the City of Los Angeles. Just take a look at §240 of the Charter:

All legislative power of the City except as otherwise provided in the Charter is vested in the Council and shall be exercised by ordinance, subject to the power of veto or approval by the Mayor as set forth in the Charter. … Except as otherwise specifically provided in the Charter, the Council shall have full power to pass ordinances upon any subject of municipal concern.

The Council has “…full power to pass ordinances upon any subject of municipal concern,” which is a lot of power, but there’s one little limiting clause in the section that’s supremely important in the context of the Ethics Commission. Did you spot it? It’s the bit that says “[e]xcept as otherwise specifically provided in the Charter.”

And if we look at the Charter sections which lay out the powers and duties of the Ethics Commission, to be found in Article VII. In particular, the process of recommending changes to the Municipal Lobbying Ordinance and the other municipal laws that the Ethics Commission has jurisdiction over, is to be found in §702(f), which states:

[The City Ethics Commission has the power and the duty] to make recommendations to the Mayor and the Council concerning campaign finance reform, lobbying, governmental ethics and conflicts of interest and to report to the Council every three years concerning the effectiveness of these laws;

And by §703, which states at subsection (a) that:

The commission may adopt, amend and rescind rules and regulations, subject to Council approval without modification, to carry out the purposes and provisions of the Charter and ordinances of the City relating to campaign finance, conflicts of interest, lobbying, and governmental ethics and to govern procedures of the commission.

And there’s the limitation on the Council’s power “…as otherwise specifically provided in the Charter.” It’s where the Commission’s adoption and/or amendment of rules and/or regulations are “… subject to Council approval without modification …” And of course, a little thought will convince one that it really must be this way. If the City Council were allowed to modify the Commission’s proposals, you can imagine what a bullshit hash they’d make of the Ethics laws in no time at all. These laws were imposed on them by initiative in order to shine a minimal amount of light on the shady activities mostly of Councilmembers themselves. They don’t like these laws. If they could modify them at will they’d make them toothless immediately.11

The point is, though, that once the Ethics Commission passes a recommendation on up to the Council, it cannot be modified by the Council. So Commissioner Ordin’s self-soothing12 notion that this $2 Million dollar exemption for 501(c)(3)s can be changed at the Council level is completely misguided. It can’t happen. The proposal is going to Council with that part in it, and they can vote the whole package up or down, but that figure isn’t changing.

That is, it’s not changing until the Commission makes another recommendation and sends it up to Council. Given that the present set of recommendations took two years to hammer out, that’s not happening any time soon. Thus, if the Council passes this set of recommendations, the City of Los Angeles can look forward to years, at least two and probably many more, of 501(c)(3)s being essentially exempt from any kind of disclosure whatsoever.

This is going to be bad indeed, even just with the 501(c)(3)s we have now. Once the for-profit lobbying firms get with the program and start forming purpose-built nonprofits to push their clients’ agendas, and don’t think it can’t be done with a bunch of clever lawyers, we may lose all disclosure altogether. It’s a really horrific prospect, it can’t be fixed, and it only got adopted by the Ethics Commission, I’m pretty sure, because Andrea Ordin didn’t understand that it’s not possible to change the recommendations once the Ethics Commission approves them. We are in for some dark, dark times, friends.

Postscript

Now, as far as what happens with this proposal once City Council gets it, I’m not exactly sure. As we’ve seen previously, sometimes an Ethics Commission has managed to send recommendations up to Council only to have them killed off in Committee by being left off the agenda by Eric Garcetti at the behest of a bunch of his Satan-worshipping girlfriends.13 However, the other part of Charter §703, that is subsection (b), makes me think this is no longer possible:

Within 60 days after a rule or regulation is adopted by the commission, the Council shall hold a public hearing concerning the matter and act to approve or disapprove the rule or regulation in the form approved by the commission by ordinance. If the Council fails to disapprove within the 60 day period, the rule or regulation shall be presented to the Mayor for approval or veto, and to the Council for override of the Mayor’s veto. If approved by the Mayor, or the Mayor fails to act, or approved by the Council on override of the Mayor’s veto, the rule or regulation shall have the force of law. Violation of the rule or regulation shall be subject to those penalties and remedies as may be provided.

Does this not seem to say that Council has 60 days either to approve or disapprove of the recommendations, and only if they explicitly disapprove, that is, by voting on a motion to disapprove, does it not go to the Mayor. If the Mayor doesn’t also explicitly disapprove, then it appears that the recommendations become law. There’s very little chance that the City Council is going to explicitly vote against this kind of stuff, although their arrogance certainly appears to be unbounded, so I guess it’s not impossible, which means, if this is the right reading, the recommendations are almost certain to become law.

As an aside, I haven’t yet been able to determine when this bit was added to the charter. It seems that it must not have been in force in 2010 when Garcetti and the bad BIDdies killed off a pending proposal through inaction. If it was in force then either the City failed to follow its own laws or I’m misunderstanding something essential. It wouldn’t be the first time for either of those things. As always, if you understand this matter and want to explain it to me, please get in touch.


Image of the littlest Ethics Commissioner, Araceli Campos, is ©2017 MichaelKohlhaas.Org, and is a highly transformaticalized redubbing of this lil pupper right here.

  1. And their employees.
  2. Which is number three in the staff report.
  3. There’s no way to guess at the standard deviations by category from this data, or even to know if the gross annual revenues of nonprofits are normally distributed, but if they are, there are essentially zero outside of universities and hospitals that have gross revenues over $2.5 million. This is probably better evidence for the non-normal distribution than anything else.
  4. This is one of the rare nonsarcastic statements ever to appear on this blog. As such it’s worthy of every last smidgeon of your probably already waning attention.
  5. I originally meant to describe this as her standing between a bunch of clamorous slavering cannibalistic nonprofits and putative Commissioner Serena Oberstein, quivering with anticipation at being able to feed them the weird meat, carved from the tortured and bleeding body politic of the City of Angeles, for which they were a-hungering, but my editor convinced me to save that simile for a more appropriate occasion. I believe her words were something along the lines of “Why don’t you save that simile for never? Never seems like a way more appropriate time to use it than now or any other time prior to never.”
  6. And to-be-revered hero of the City of Los Angeles! Who has, you may recall, tried valiantly to save our lovely City from its own deeply perverse, real-estate-intoxicated, ethical instincts on on this occasion and also that occasion, and no doubt on many other occasions that I don’t know about yet.
  7. Editor to me: Is it really appropriate to be comparing her to Robert Ford at this point? Isn’t that introducing needless moral-slash-metaphorical complexities for no damned reason whatsoever? Me to editor: Yeah, maybe, but once you tell me I can’t compare nonprofits to a gang of slavering zombies, you’ve essentially exhausted all your social capital for one post, so just shut it, hon! (She’s from Baltimore, so it’s OK to call her “hon.”)
  8. Her remark that “… the comment as to not knowing those numbers is not insignificant.” refers to my comment to the effect that it’s really bad policy to make laws if you don’t know what they’re going to do. I never ever comment at these things mostly, but this was so egregious I couldn’t remain silent. If you must watch, you can watch here.
  9. [Editor’s note: STOP IT!] [Author’s note: Freaking FINE! Why don’t you go back to your damn knitting and stop reading over my shoulder?] [Author’s second note: When it comes to knitting, my editor is a lot like Madame Defarge but with BIDs and their enablers instead of the freaking French aristocracy, not that there’s that much of a difference.]
  10. Oh, friends! Do I ever have an entertaining story to tell you all about Kerry Morrison and Satanic Discipleship! But it’s going to have to wait for another day because, as entertaining as it is and as rough a beast as ever it was, its hour has not yet come round at last.
  11. I don’t know how it is that a law can limit the action of the City Council in this manner given that the City Council is the supreme legislative authority. My informed guess is that it’s possible because the law was put into the Charter via initiative, and actually initiative is more supreme even than the Council. Or maybe it’s just that the Council isn’t allowed to modify the Charter all willy-nilly, like Congress isn’t allowed to modify the Constitution? That makes an equal amount of sense, because one can imagine how the City Council would eviscerate any checks on its power given the chance to do so. If you understand this matter please get in touch. I’ll buy you dinner or bribe you in some other mutually agreeable manner and you can explain it to me, if you want.
  12. I’m guessing.
  13. In particular, Kerry Morrison, Carol Schatz, and Russ Brown.
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