EDITOR'S NOTE: This is the second of two stories on
NEWPORT BEACH — If voters here approve Measure V, they would not only modernize the city's charter, but also repeal an obscure law that limits the amount of funds the City Council may give to the Chamber of Commerce.
Past and present chamber board members shepherded this 55-year-old restriction onto the ballot. Through their positions on the city's Charter Update Commission, the chamber leaders avoided the voter initiative process, which would require a petition.
The way it landed on the charter ballot measure appears to show the influence of some Chamber of Commerce officials. Four current or past members of the chamber's board of directors, including three of its chairmen, sat on the seven-member Charter Update Commission.
Community activists have protested their connections, and have questioned if public dollars would ultimately be funneled to the chamber's political advocacy.
The funding limit caps at $2,400 the amount the City Council may give to the business group each year.
Commissioners say the limit unfairly restricts the chamber, and that they were transparent about their ties to the organization when they advised the city about charter reforms.
"This is not to give more money to the chamber," said Commissioner Rush Hill, who is running for City Council. "This is for the chamber to be treated like any other nonprofit in the community."
"Some people would like to make this a political issue," he added.
The City Council had appointed seven prominent citizens in December — including Hill and former state Sen. Marian Bergeson — to study a specific list of issues with the charter and to recommend changes for voters to decide.
The list covered a variety of issues, from redistricting guidelines to rules on oil drilling.
While charged with a defined scope, the commission also had the ability to request that the City Council add to its issues. At least two proposals other than the chamber's went before the commission, including one introduced by a community association, but they did not receive a motion for a vote.
At least one commissioner questioned the chamber proposal, but the chamber directors advocated for the idea, and the City Council ultimately voted to include it in Measure V, according to meeting minutes.
The chamber limit was the only law the commissioners asked the council add to the ballot measure.
"We did so on the recommendation of the blue ribbon citizen's commission," said Councilman Mike Henn, who was the City Council's liaison to the charter reform commission. "We put a lot of weight behind the Charter Update Commission."
Because the City Council bundled the charter ordinance into Measure V, voters cannot decide on that rule alone. It is part of an up-or-down measure with 12 actions intended to reform the city's charter, which is effectively its constitution.
According to commission meeting minutes, the chamber idea was first introduced by one of the commissioners, Paul Watkins, who at that time was the chairman of the chamber board.
Watkins referred to the funding limit as a "charter amendment" in a letter to the commission, but it is actually a city ordinance and is not part of the charter, according to City Atty. David Hunt.
In an interview this week, Hill, who was on the chamber board, said that he thought the ordinance was part of the charter.
"If it wasn't in the charter," Hill said, "why was that even brought before us? Why would we even look at it?"
Hill said he would have recommended that voters repeal the law anyway, even though it is not in the charter.
Bergeson, who chaired the charter commission, said the members assessed the charter provision on its merits and didn't favor the chamber's interests.
"The commission in all regards was very objective in deliberating," she said. "I don't think it would have had any different resolution if it had come from a complete outsider."
Ultimately, the reason the chamber introduced the ordinance in this forum is because it was adopted by a vote of the people, so it would have to be repealed by a vote of the people.
VOTERS APPROVED RESTRICTION
In 1955, some Newport Beach residents were concerned that the City Council was able to give the Chamber of Commerce unrestricted amounts of money. Led by a community activist, the group obtained enough signatures to bring two initiatives to the ballot that would limit the funding to either $2,400 per year or $25,000 per year, according to newspaper accounts.
Voters chose the $2,400 limit by a margin of 13%.
They also defeated a measure that would have given the City Council discretion over funds to the chamber — as would Measure V, if it passes.
When asked about why a restriction was implemented in 1955, Charter Update commissioners and members of the city's staff said that they did not know.
"We're talking about 55 years ago. Who knows what little nuance was going in voters' minds to approve that?" City Manager Dave Kiff said.
"The real discussion was if it makes sense now," Hunt added.
VICTIM OF DISCRIMINATION?
Commissioners and city officials say the Chamber of Commerce should be treated like any other nonprofit, making it eligible for grants and other benefits that many of the helping organizations in town receive.
"It seems to me to be unfair discrimination," Henn said. "The Chamber of Commerce's purpose is to promote the betterment of Newport Beach. I don't view that as a narrow interest."
The mission of the chamber is "to promote economic opportunity through business and community leadership and to enhance the social and civic environment of Newport Beach," according to its website. It also says, "first and foremost, we serve as the voice of business in Newport Beach."
The council can award grants, at its discretion, to "worthy projects or programs which the council deems beneficial to Newport Beach's quality of life," according to city law.
For instance, it has given $100,000 per year to the Newport Beach Film Festival for the past three years, and has another $100,000 allocated for it this year. It also supports the Susan G. Komen Foundation, which hosts an annual Race for the Cure, and the Newport Beach Restaurant Assn.
Two of the largest events that the chamber produces — the Christmas Boat Parade and the Taste of Newport — already receive some support from the city. In 2009 the city waived more than $55,000 in costs incurred by police officers controlling crowds and traffic, Fire Department inspections and various permit fees.
Previous years' fees were waived as well, city records show.
Kiff said that the City Council approved the fee waivers some years, but the city staff granted waivers mistakenly in other years. The city has instituted new procedures to track and approve such requests, he said, but it would not seek a repayment from community groups for past errors.
"It's our mistake, and not theirs," Kiff said, "and they shouldn't be punished."
Fee waivers do not violate the existing restriction on chamber funding, said Hunt, because "the ordinance is for direct contributions."
Besides, the city costs are well worth it, Watkins said.
"Compare that with the media exposure and the millions of visitors that come to the city," he said.
To analyze funding requests from community groups, the City Council in May created the Special Events Advisory Committee. It consists of seven members who evaluate applications for funds greater than $20,000. They consider the amount of an event's proceeds that go to charity, for example. Its recommendations to the City Council are non-binding.
This new committee was on Hill's mind when he suggested eliminating the funding limit for the chamber, he said.
There was now a process to evaluate all requests, and it should be able to look at all nonprofit community groups, including the chamber, he argued.
"I didn't look at it as a chamber issue," Hill said. "I was surprised that it kept being pegged to the chamber. To me it was a bigger topic that we were discussing."
ETHICAL AND LEGAL ISSUES
Apparently eliminating the funding cap for the chamber was a narrow enough topic to prompt Watkins to ask city staff if he and the others should recuse themselves. The acting City Atty. Leonie Mulvihill advised that "it is up to the individual commissioners to decide whether they may have a personal conflict of interest," according to commission minutes.
Only Richard Luehrs, the chamber CEO who is paid directly by the organization, abstained from the vote to recommend that the council add the ordinance to the ballot.
He did argue for its inclusion, according to minutes.
The others voted yes: Watkins, the chairman of the chamber; Hill, who was a sitting member of the chamber board and past chairman; and Dennis O'Neil, who was a past member and chairman of the board. Commissioners Bergeson and Karen Rhyne also voted yes. Larry Tucker was absent.
"If you know these individuals," said Kiff, "they're people that have dedicated most of their lives to community service in Newport Beach. I know that's the lens through which they are looking."
While members of advisory bodies, such as the charter commission, can only make recommendations, they are held to the same conflicts-of-interest standards as decision-making officials like City Council members, according to Roman Porter, executive director of the state Fair Political Practices Commission.
That standard is "personal economic interests," Porter said.
In this case, none of the chamber board members would personally or directly benefit from advantages granted to the chambers by Measure V.
Whether there should be a higher standard for ethical conduct is another question, said JoAnne Speers, the executive director of the Institute for Local Government, a
She pointed out that commissioners may have interests aside from the city's general welfare.
"The voters need to ask themselves whether there is a conflict between the two roles," she said.
The Charter Update commissioners said they fully disclosed their ties to the chamber and the City Council's approval process was transparent.
"I'm very comfortable with the open process that was used," Hill said.
POLITICAL FUNDING A CONCERN
Another legal issue that commissioners vetted was the chamber's association with a political action committee, and the chance of public funds being used for political activity. State law prohibits public funds being used for political purposes.
The Newport Beach chamber, like many others, supports pro-business candidates and propositions through its political action committee. Called the Business and Community Political Action Committee, or BACPAC, it has donated $1,000 each to the campaigns of council candidates Hill and Councilwoman Leslie Daigle this year. In 2006 it spent more than $22,000 to try to defeat Greenlight II, a slow-growth initiative.
Commissioner Tucker expressed concern about the BACPAC relationship, according to minutes. The other members convinced him that it wasn't a problem, and he agreed to support the repeal.
Activists warn that if the funding cap is lifted, public dollars could be comingled with BACPAC funds.
"My biggest concern is that they city will be able to give them anything they want, and the council can fund their own candidates without being identified," said West Newport activist Bob Rush, who provided the Daily Pilot with documents he obtained through public records requests. He made a presentation to the City Council about this matter at the Oct. 19 meeting.
BACPAC contributions and membership dues are kept in two separate accounts, said Luehrs. The chamber's nonprofit status restricts it from contributing to political candidates.
Besides IRS rules, public funds would be protected, Hunt said, because the city could request that the chamber provide documentation. He researched the topic and talked with officials from the Chamber of Commerce.
"They were able to give us assurances that their funds were not mixed," Hunt said.
But there is no way for the public to see if the funds are indeed kept separate; the chamber does not itemize the contributors to BACPAC on its reporting forms. Instead, it lists all funds coming directly from the Chamber of Commerce. Luehrs says BACPAC follows FPPC reporting guidelines.
The two accounts have never been comingled, Luehrs said.