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HomeMy WebLinkAboutStaff Report 2309-2058CITY OF PALO ALTO Policy & Services Committee Special Meeting Tuesday, February 13, 2024 7:00 PM     Agenda Item     3.City Council Referral to Discuss and Recommend City Council Procedures and Protocols on: Council Discretionary Expenditures – Consideration of the establishment of appropriate parameters for Council discretionary expenditures and whether to allocate $2,000 annually from the City Council contingency fund for each Council member to decide its purpose. Policy & Services Committee Staff Report From: Chantal Gaines, Deputy City Manager Meeting Date: February 13, 2024 Report #: 2309-2058 TITLE City Council Referral to Discuss and Recommend City Council Procedures and Protocols on: Council Discretionary Expenditures – Consideration of the establishment of appropriate parameters for Council discretionary expenditures and whether to allocate $2,000 annually from the City Council contingency fund for each Council member to decide its purpose. RECOMMENDATION Staff recommends that the Policy and Services Committee discuss the referral from the City Council related to City Council Discretionary Expenditures and make a recommendation to the City Council for inclusion in the City Council Procedures and Protocols Handbook. BACKGROUND The City Council discussed the City Council Procedures and Protocols Handbook on January 30 and March 20, 2023 and adopted the most recent version on April 24, 2023. The City Council referred a few discussion topics to the Policy and Services Committee during these discussions. The Committee made progress on these referrals and have sent recommendations to the City Council for consideration on all but one of the referrals (City Council discussion planned for February 5, 2024). Referral #7 is the remaining referral and is analyzed within this report. All referrals are listed below: 1. Procedures Section 1.1: Annual Organization of City Council. 2. Procedures Section 5.1a(4): Video Participation for Public Comment. 3. Procedures Section 8.2: Related to Enforcement and Censure. 4. Protocols Section 2.2: Refrain from Lobbying Board and Commission Members. 5. Protocols Section 2.8: The Role of Council Liaison to Boards or Commissions. 6. Protocols Section 4: International Travel. 7. Protocols Section 4.1: Miscellaneous Expenditures. Council referral for the committee to discuss the establishment of appropriate parameters for Council discretionary expenditures and whether to allocate $2,000 annually from the Council contingency fund for each Council member to decide its purpose. ANALYSIS In 2023, the City Council referred to Policy and Services discussion of “the establishment of appropriate parameters for Council discretionary expenditures and whether to allocate $2,000 annually from the Council contingency fund for each Council member to decide its purpose.” This referral includes several sub-questions: 1. As a policy matter, does the City Council wish to allocate some amount of City funds to individual Council Members to spend at their discretion, within limits defined by law and City Council policy? 2. If so, what is the appropriate amount? 3. What purpose or purposes does the City Council wish to define for these expenditures? 4. In light of the identified purpose or purposes, what procedures are appropriate. As a first step in considering these issues, this memorandum outlines the relevant state and federal law requirements that will apply to any program of this type. This memorandum does not explore the pros and cons of adopting a program to delegate spending discretion to individual City Council members. It also does not discuss in detail the various purposes that the City Council could approve for expenditures (beyond identifying purposes that are unlawful under state or federal law), except to list a few potential options for illustration and consideration if the Committee chooses: •Small grants to community organizations •Reimbursement for expenses related to official duties •Funding for community events •Discretionary dollars to allocate during the budget process There may be other permissible uses that the Committee wishes to discuss. Note that the purposes that the Committee and City Council choose may lead to additional legal implications and considerations that will need to be analyzed. For example, purchases of good or services are likely subject to procurement and/or operational limitations. Written Expenditure Policy. The City Council should adopt a comprehensive written policy that identifies permissible purposes for expending City funds, identifies impermissible expenditures and other limitations, and establishes clear procedures and documentation requirements. At a minimum, the policy should identify key legal limitations, such as the following: •City funds may not be used for personal activities •City funds may not be used for partisan political activities, including campaigning for office or supporting or opposing ballot measures or candidates •City funds may not be used to fund specific religious purposes •Expenditures must comply with laws prohibiting conflicts of interest •Expenditures must comply with limitations on “mass mailings” The City Council policy should be flexible enough to address any other legal issues that may arise, depending on the specific nature and scope of the policy implemented. The policy also should specify a review process and documentation that will be required. Review and documentation protect the City and each Council member by demonstrating compliance with legal requirements and City Council policy. Finally, note that City expenditure records are public records and are subject to disclosure on request. General Legal Restrictions. The following are state and federal law prohibitions on certain types of expenditures of public funds. Prohibition on Use of City Funds for Personal or Partisan Political Purposes. Public funds are designated exclusively for public purposes. While the definition of a public purpose is broad, there are categories of expenditure that clearly do not qualify. It is unlawful to use public resources for personal or political purposes. Cal. Govt Code § 8314. This includes using public funds for a personal purpose, such as an official’s own personal purposes or the purposes of family or friends. It also includes partisan political purposes, including the official’s own campaign activities or support or opposition to ballot measures or other political campaigns. Staff recommends that the expenditure policy integrate this prohibition and also include clear examples to highlight what constitutes personal or political use. Note that some well-intended City expenditures that do not directly and immediately benefit local residents—for example, donations to other cities in response to disasters— can generate questions about compliance with the public purpose mandate. These concerns are sometimes described as “gift of public funds.“ When these issues arise, California courts generally defer to the wisdom of city councils to determine the appropriateness and public nature of expenditures. For example, courts have accepted council findings that disaster donations support a broad community of mutual aid that benefits local residents in the long run. If the City Council wishes to authorize individual Council members to make extra-jurisdictional expenditures, it should define the scope and public purpose rationale in its written policy. Restrictions on Use of City Funds for Religious Purposes. The federal and California Constitutions prohibit use of public funds for the purpose religious practice. U.S. Const. amend 1; Cal. Const. Art. XVI, Sect. 6. Recent Supreme Court rulings, however, have held that religious institutions may (and in some cases must) be allowed access to public funds when these public funds are made available to other private organizations for the same purpose. Carson v. Makin (2022) 596 U.S. 767. City Council’s policy should identify both the restriction on the use of City funds for religious purposes and the requirement not to discriminate against religious institutions and should encourage consultation with the Attorneys Office whenever these issues arise. Avoiding Conflicts of Interest. The Political Reform Act, Cal. Govt Code §§ 81000 et seq. (the Act), prohibits City officials from directing funds in ways that could result in financial benefits to themselves, their family members, or other entities in which they have financial interests as defined by the Act. Under the Act, financial interests include real property, ownership and investment in business entities, sources of income, gifts, and personal financial holdings. Cal. Code Regs. 18700 et seq. City Council's expenditure policy should acknowledge the conflict-of-interest provisions of the Act and incorporate guidelines to ensure adherence to these legal requirements. Adhering to Mass Mailing Rules. The Political Reform Act also prohibits the use of public funds for “mass mailings.” Under the Act, a “mass mailing” is any tangible item, like a newsletter or brochure, in quantities of 200 or more, featuring an elected official and financed with public funds. These mailings may not be sent to residences, places of employment, businesses, or post office boxes. (The restriction does not apply to electronic communications.) If the City Council’s expenditure policy permits the use of City funds for distributing such materials to residents, it will be important to include a provision for staff review prior to distribution to ensure adherence to the mass mailing restriction. Additional Legal Restrictions that May Apply to Certain Types of Expenditures. Additional legal procedures or restrictions might apply, depending on the type of expenditures that the City Council authorizes. Without knowing what the City Council is interested in, we cannot yet provide a complete analysis. We do know however, that the following types of expenditures raise particular issues. Reimbursement for Expenses Related to Official Duties. State law authorizes expenditure of local funds to reimburse city council members for “actual and necessary expenses incurred in the performance of official duties.” Cal. Govt. Code § 53232.2. State law requires a written policy specifying the types of occurrences that qualify for reimbursement, and establishes other procedural requirements for reimbursement rates, documentation (receipts), and reports on uses of the funds. Govt. Code § 53232.3. Amounts paid consistent with these procedures are excluded from salary that would otherwise be subject to the maximums under state law and the Palo Alto Charter. Govt. Code § 36516(e). If the City Council decides to authorize funds to be used for reimbursement, it will be important to comply with all of the requirements of Sections 53232.2 and 53232.3, so that these funds are not counted towards salary. This is because the City Council has directed that salary be increased to the state-law limit, leaving no room for additional funds should they be classified as salary. Grants to Community Organizations or Funding for Community Events. When the City makes grants to community organizations or funds community events, staff vets recipients and uses agreement templates—appropriate to the type and size of the grant or event—to document expectations and protect the City and taxpayers in the event of unexpected negative occurrences. In the case of very small neighborhood grants, the agreements are short and relatively simple, and focused on the most important issues (e.g., non-discrimination and appropriate insurance). If the City Council is interested in authorizing individual the City Council members to make grants or fund events, consideration should be given to who will have contract authority, whether vetting and documentation will be required, and what that will look like; conversely, if none is required, the City Council should understand that there may be risks assumed by the City as a result. FISCAL/RESOURCE IMPACT The City Council contingency fund total allocation is determined each year through the budget process and this program proposes to dedicate some of those funds, thus this is not new funding. However, depending on the program parameters discussed, the staff time resources to administer the program would need to be further assessed.