Transparent Government or One-Way Mirror?

​New Reporting Requirements for Developers, Lobbyists and Permit Expediters

Last month, Supervisor Chiu reintroduced legislation that would dramatically expand reporting mandates for lobbyists, permit expediters, and developers to report contacts with City officials and, in some cases, their donations to charitable organizations.  The legislation will be considered at the Board of Supervisors Audit & Oversight Committee on June 10.

Developer Disclosures

The most far-reaching and novel aspect of the legislation would require developers to disclose certain contributions to nonprofit organizations.  According to the ordinance, these new rules are necessary to “protect public confidence in the fairness and impartiality of…land use decisions.”

The requirements would apply to developers of “major projects,” i.e., any project with a construction cost over $1 million that needs a project specific EIR, or which relies on a previously certified EIR.  This latter category includes projects in Redevelopment areas, along with projects that receive a community plan exemption. This means the lion’s share of developers with projects in the Eastern Neighborhoods, Market-Octavia, West SoMa, Central SoMa, and Transit Center will be required to report certain charitable contributions.  The term “developer” is broadly defined to include “all constituent individuals or entities that have decision-making authority” over a project.

The reporting requirements would apply to cumulative donations of $5,000 or more to a nonprofit organization that has lobbied the City, i.e., “attempted to influence” any “legislative or administrative action.”  Donations are reportable for a period beginning one year before an environmental application is filed up to one year after a project is approved.

There are a number of problems with the legislation as written. First, it is overbroad. Donations to any nonprofit that attempted to influence any City legislative or administrative action – even actions wholly unrelated to a developer’s project – must be reported. Second, there is a mismatch between developer’s obligations and those of nonprofits, which enjoy a broad exemption from requirements to report lobbying activities.

Lastly, the ordinance may in fact dissuade developers from proactively building legitimate relationships with nonprofits while failing to shine a light on problematic ones.  This is because a reportable donation only includes a “gift of money, property, goods or services.”  It does not, however, include settlement agreements, where a nonprofit does not receive a “gift” but instead receives funds as compensation in exchange for giving up its rights to oppose or appeal a project.  

Perhaps the best way to illustrate is by example.  Developer A makes a $5,000 contribution to the San Francisco AIDS Foundation six months before filing an environmental application for a project.  Three years later, Developer A receives Planning Commission approval for the project, triggering the reporting requirement.  Developer A is not aware that the AIDS Foundation has contracts with the City and lobbies the City on public health matters and budgets.  Developer A has violated the ordinance and could be liable for a $5,000 fine.

Developer B has a project at the Planning Commission and has received word that a politically connected nonprofit will turn out in force to oppose it.  Developer B is informed that the nonprofit will sign a settlement and support the project in exchange for a $1 per year lease on office space in the building for a ten-year term.  Developer B and the nonprofit sign the agreement, worth $350,000 for the nonprofit over the life of the lease.  Neither the developer nor the nonprofit is required to report anything to the City.

Permit Expediters and Lobbyists

Lobbyists have been required to report contacts with City officials for some time. Supervisor Chiu’s ordinance would expand the universe of lobbyists dramatically.  At present, a lobbyist is someone who is promised or receives more than $3,000 in a calendar month for lobbying.  Lobbyists must register with the Ethics Commission and report contacts with public officials each month. Under the proposed definition, the definition of a lobbyist would be expanded to include any person:

  • Who has more than five contacts with supervisors, commissioners, department heads and other specified public officials  (“public official”) during a calendar month; or
  • Who makes one or more contacts in a calendar month with a public official on behalf of any person who pays the individual or individual’s employer.

A person lobbying on behalf of a business in which he owns a 20 percent share is not a lobbyist.  The practical effect of these changes is to require many business people who have limited contact with City officials to register and report their contacts to the Ethics Commission each month.  Failure to report lobbying activities could result in fines up to $5,000 per violation.  Clients and employers of lobbyists could be held jointly and severally liable for violations.

Though the ordinance would apply broadly to private sector employees, it will maintain broad exemptions for many groups that play an outsized role in shaping policy and budgets in City Hall.  For example, communications on behalf of a labor union representing City employees regarding collective bargaining agreements are exempt, as are communications by representatives of nonprofit organizations on behalf of their organization.  

Permit Consultants

Under the proposed legislation, permit consultants would also be required to register with the Ethics Commission and report their permit consulting services each month.  A permit consultant would include anyone who receives or is promised compensation to provide permit consulting services, excepting only contractors, architects or engineers of record for a project.  Permit consulting services include “any contact with the Department of Building Inspection, the Entertainment Commission, the Planning Department or the Department of Public Works to help a permit applicant obtain a permit.”  

The upshot is that any employee of a development firm that sends one email to a DBI plan-checker would be required to pay a registration fee and report contact to the Ethics Commission.  Attorneys, historic preservation consultants, and other professionals working to secure permits for a project would also qualify as permit consultants and be subject to stringent reporting requirements. However, professionals engaged by opponents to object to permits would not be required to register or report their activities.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.