No officer or employee of the City shall become financially interested except by testate or intestate succession, either directly or indirectly, in any contract, sale, purchase, lease or transfer of real or personal property to which the City is a party or be employed by any public service corporation regulated by or holding franchises in the City. …[A]ny contract made in contravention of this section shall be void. (Section 706)

The Council shall not appoint to a salaried position under the City government any person who is a relative by blood or marriage within the second degree of any one or more of the members of such Council and neither shall any department head or other officer having appointive power appoint any relative within such degree to any such position. (Section 707)

This provision provides that:

Use of City Property-Limited to Lawful Business of City. (Section 2.4)

No person or persons other than City officials or employees shall use any City-owned equipment, tools or paraphernalia other than for the purpose of conducting the lawful business of the City.

Use of City Property for Private Purposes by City Official, Employee, etc. (Section 2.5)

No City official, City employee or other person shall borrow, take or remove any City-owned equipment, tools or paraphernalia for private use.

Use of City Property-Loan, etc., by City Official, Employee, etc.

No City official, City employee or any other person shall lend, give or transfer possession of such City-owned equipment, tools or paraphernalia to any other City official, employee or any other person with knowledge that the same shall be used for private purposes. (Section 2.6)

There are four key areas of California State law that regulate the ethics of public officials.

State law strictly forbids elected and appointed public officials from accepting free or discounted travel from transportation companies. The penalty for a violation includes the forfeiture of office.

This prohibition, found in Government Code Section 1090, mirrors the City's Charter Provision Section 706 and applies to elected and appointed officials as well as other City staff members. It prohibits the City from entering into a contract if one of its members (i.e., a Councilmember) is financially interested in the contract. If the bar (or prohibition) applies, the agency is prohibited from entering into the contract whether or not the official with the conflict participates or not. In some limited circumstances, officials are allowed to disqualify themselves from participation and the agency may enter into the contract.

Financial interest has been defined to include employment, stock/ownership interests and membership on the board of directors of a for-profit or nonprofit corporation, among others. Violations can be charged as a felony. A person convicted of violating Section 1090 is prohibited from ever holding public office in the State.

The Political Reform Act (PRA) was adopted by the voters in 1974 and is the primary expression of the law relative to conflicts of interest (and campaign finance) in California. The Act created the Fair Political Practices Commission (FPPC), a five-member State board which administers the Act.

The Act and the regulations are complex and are continuously subjected to official interpretation. The following synopsis of key parts of the Act will be helpful in spotting issues; however, the FPPC and/or City Attorney should be consulted for further advice and clarification.

With respect to conflicts of interest, the FPPC has promulgated a regulation which establishes an eight-step analysis which assists in determining whether a public official is participating in a government decision in which they have a qualifying financial interest and whether it is reasonably foreseeable that the decision will have a material financial effect on the public official's financial interest, which is distinguishable from the effect the decision will have on the public generally.

3.4.11.3.1

If a public official has a financial interest that gives rise to a conflict of interest, one of the key determinations in the eight-step analysis is to determine whether or not the public official is "participating in" or "making" a governmental decision.

• Vote on a matter.
• Appoint a person.
• Obligate or commit his or her agency to any course of action.
• Enter into any contractual agreement on behalf of his or her agency.
• Determine not to act in certain circumstances.

• Negotiate without significant substantive review with a governmental entity or private person regarding a governmental decision.
• Advise or make recommendations to the decision-maker either directly or without significant intervening substantive review by:

  —Conducting research or an investigation which requires the exercise of judgment on the part of the official and the purpose of which is to influence governmental decisions; or

  —Preparing or presenting any report, analysis or opinion orally or in writing which requires the exercise of judgment on the part of the official and the purpose of which is to influence a governmental decision.

3.4.11.3.2

3.4.11.3.3

3.4.11.3.4

Qualifying gifts of $50 or more must be reported on an official's Statement of Economic Interest (SEI) and there is a prohibition of gifts totaling more than $340* in a calendar year from any one source. This gift limit is modified every two years to reflect changes in the Consumer Price Index. There are various exceptions that apply to whether or not a gift is a "qualifying gift." In some instances, the gift limit does not apply (e.g., wedding gifts); however, the obligation to report the gift typically does apply.

• A gift is defined as a payment or benefit provided to a public official for which a public official does not provide goods or services of equal or greater value. It can include a rebate or discount unless the rebate or discount is made through the regular course of business to members of the public.
• There are exceptions to gifts for informational material, gifts that are returned unused, gifts from relatives-close family, campaign contributions, etc.
• There are specific regulations for how gifts are valued, particularly with the value of tickets and passes and attendance at dinners and events.
• Gifts can be given to the public agency and they are not charged as gifts to an individual who may use the gift (e.g., tickets) provided the express terms of the appropriate regulation are satisfied.

The Political Reform Act contains extensive regulations on travel reimbursements; however, travel payment by one's own public agency as part of your official duties are typically exempt. Reimbursement from other entities (other than transportation companies) within California and outside of California are subject to very specific rules.

Honoraria are defined as a payment made in return for giving a speech, writing an article or attending a public or private conference, convention, meeting, social event, meal or similar gathering. Honoraria should be distinguished from campaign funds that go into that person's campaign or to a political party. Campaign funds cannot be used for personal benefit.

• Local elected officials or candidates may not accept honoraria. A local agency employee who is required to file a Statement of Economic Interest (Form 700) may not accept honoraria from any source requiring disclosure on a public official's SEI. There are approximately 12 exceptions to honoraria, including payments made for comedic, theatrical and musical performances; income from bona fide personal services in connection with teaching, practicing law, etc.; and travel, lodging and subsistence in connection with a speech, limited to the day before, day of and day after within the United States.
• The exceptions for income from personal services in connection with teaching and practicing law do not apply if the sole or predominant activity is giving speeches.

A mass mailing is defined as 200 or more identical or nearly identical pieces of mail sent at public or private expense by a public official.

• Sent at Private Expense—If sent for a political purpose, sender must place the name and address on the outside of the envelope.
• Sent at Public Expense—These mailings are subject to strict limitations. For example, the mailing may not contain the name or pictures of elected officials except as part of the standard letterhead, and within the confines of that regulation they cannot be of different size or otherwise emblazoned on the mailing. Because the rules are complex, staff should be consulted for assistance.

The FPPC can assess administrative fines and penalties for violation of the Act. The District Attorney and the State Attorney General may prosecute violators as civil or criminal matters. Violators may also be removed from office pursuant to Government Code Section 3060.

This is the judicial expression of the public policy against public officials using their official position for private benefit. An elected official bears a fiduciary duty to exercise the powers of office for the benefit of the public and is not permitted to use those powers or their office for the benefit of any private interest. This common law doctrine continues to survive the adoption of various statutory expressions of conflict law.

When participation in action or decision-making as a public official does not implicate the specific statutory criteria for conflicts of interest; however, participation still does not "look" or "feel" right, that public official has probably encountered the appearance of impropriety.

For the public to have faith and confidence that government authority will be implemented in an even-handed and ethical manner, public officials may need to step aside even though no technical conflict exists. An example is where a long-term nonfinancial affiliation exists between the public official and an applicant or the applicant is related by blood or marriage to the official. For the good of the community, members who encounter the appearance of impropriety should step aside.

If the Mayor, City Manager and City Attorney all agree that the violation or alleged violation is minor in nature, the Mayor and either the City Manager or City Attorney may contact the individual Councilmember and advise the member of the concern and seek to resolve the matter (Protocol 1).

If the Mayor, City Manager and City Attorney do not agree that the violation or alleged violation is minor (see Section 3.5.1.1) in nature, then the Mayor shall convene a special ad hoc committee of the Mayor (who will serve as Chair), Vice Mayor and most recent Mayor (the "Ethics Committee") who will meet with the City Manager and City Attorney and appropriate staff and/or witnesses to determine how the matter may proceed, be resolved or be reported to the appropriate authorities (Protocol 2).

In implementing the provisions of this section, the Ethics Committee will be authorized to conduct all inquiries and investigations as necessary to fulfill their obligation.

For purposes of Sections 3.5.1.1 and 3.5.1.2, the incident or violation is not minor if it involves the injury or potential injury to any person (e.g., physical, emotional, defamation, harassment, etc.), significant exposure to the City Treasury or the probability for a repeat occurrence.

If there is no recent former Mayor available to fill the appropriate seat(s) on the committee, the Mayor or chair will select a member of the Council to serve-selection to be based on seniority as outlined in Policy and Procedure No. A-6.