News

Unfair political practices alleged over landlord-tax mailer

East Palo Alto Measure O would tax landlords with five or more units 1.5 percent on gross receipts

A mailer by a mysterious campaign committee against a landlord business-license tax in East Palo Alto has prompted a member of a residents' group to file a sworn complaint about illegal activities with the California Fair Political Practices Commission on Nov. 2.

The complaint filed by Midge Dorn, a member of Residents for an Affordable and Just EPA for Measures J, O, P, alleges that the entity calling itself "E. Palo Alto Concerned Citizen" violated state law when it sent a "No on Measure O" mailing to numerous voters.

The mailing, which went out on or around Oct. 26, opposes Measure O, which would impose a 1.5 percent sales tax on the gross receipts of property owners who lease five or more residential units in the city. Anyone leasing fewer than five units and nonprofit operators of affordable housing, Section 8 units, or below market rate units with deed restrictions are exempt.

The measure was hotly contested by landlords when the East Palo Alto City Council was considering putting the measure on the ballot.

California's Political Reform Act, passed by voters in 1974 to increase transparency, regulates campaign finance, lobbying activity and conflicts of interest, including candidates' financial disclosures. The law requires candidates and political committees to add disclaimers on campaign advertisements identifying the person or entity who paid for or authorized the ad. Advertisements are defined as mass mailings, blast emails, paid telephone calls, radio and television ads, billboards, yard signs and electronic media ads, according to the Fair Political Practices Commission, which enforces the act.

The "No on Measure O" mailing violates California law in at least five instances, Dorn wrote in her complaint. Committees must include their name, street address and city on the outside of each piece of mail.

The recent mailing does not disclose the name of the committee making an independent expenditure; it does not include the basic disclaimer "paid for by ... " and the committee's address; it violates law requiring use of specific legible type size and fonts; and it does not include sponsor-identifying information nor does it identify the measure the committee opposes, Dorn noted.

The only information on the mailing in the return address is "E. Palo Alto Concerned Citizen" and "E. Palo Alto, Ca."

Under the act, "committees" include a candidate’s campaign committee, a political action committee, a political party committee, a major donor, and a person or entity making independent expenditures on candidates or ballot measures. A person or organization qualifies as a committee if they receive contributions for political purposes of $2,000 or more per year; if they make independent expenditures on California candidates or ballot measures of $1,000 or more annually; or if they make contributions to California candidates or ballot measures of $10,000 or more per year.

"Alternatively, a person or entity qualifies as a Recipient Committee if they receive contributions of $2,000 or more per year for political purposes, including committees formed to support or oppose candidates or ballot measures," Dorn noted.

"If Citizen spent its own money on the mailing, it almost certainly qualifies as an Independent Expenditure Committee. If Citizen received contributions to produce and send the mailing, it almost certainly qualifies as a Recipient Committee. Either way, Citizen is a ballot measure committee subject to the disclosure requirements for campaign advertising," she wrote.

The mailing likely cost more than $2,000 for production and postage because it was sent to thousands of voters. At least some of the mailers contained two stamps, doubling the postage costs, Dorn alleged.

Dorn said the mailer is "riddled with misinformation and lies about Measure O." It tells voters not to support the measure because it would create rent increases to pay for the tax, which landlords would pass on to tenants, and the city would use the taxes to evict people. It also accuses the city of using the money for trips and other uses not related to housing.

But Measure O specifically states that the tax can't be passed on to tenants. The money collected is for affordable housing, displacement prevention and emergency housing, and it would also fund for law enforcement.

Court Skinner, an East Palo Alto planning commissioner, said he received one of the mailers.

"The mailer's failure to properly identify the source of the information only compounds the misleading messages in this hit piece," he said in a joint statement with Dorn and others.

Dorn added, "We find anonymous and dishonest mailers to be a violation of basic integrity."

Jay Wierenga, communications manager for the Fair Political Practices Commission, said the commission can't regulate the messages in mailers, which are protected as free speech even if they aren't accurate. But committees are supposed to have an FPPC identification number. The registration for a committee in a local measure should be filed with the City Clerk's Office.

Terrie Gillen, deputy city clerk for East Palo Alto, said she has received only one filing: The pro-Measure O group Residents for an Affordable and Just EPA for Measures J, O, P, but nothing from the East Palo Alto Citizen group.

Each violation of the Political Reform Act is subject to an administrative fine of up to $5,000, according to the Fair Political Practices Commission website. Some advertising-disclaimer violations can be fined up to three times the amount of the advertisement. Violations of ballot measure disclaimers are considered more serious because mailers that support candidates are generally thought to come from the candidate, but there is no way to know who is behind a ballot measure, according to the website.

Wierenga said that although the alleged mailer violation occurred with just days before the election, that would not prevent an investigation by the Commission's enforcement division. During the June primary his office received complaints regarding yard signs that lacked proper disclosures very close to the primary date.

The enforcement division didn't require the persons involved to take the signs down, but as part of a negotiated settlement the violators published a press release before the primary stating the name of the group behind the signs and that they had agreed to pay a fine for violating the state law. The proposed settlement was to be voted on by the commission at its next meeting.

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Comments

6 people like this
Posted by Dan
a resident of Midtown
on Nov 2, 2016 at 10:42 pm

This sounds like a measure divorced from reality. A tax on "gross receipts" means that even if someone were just breaking even on their rentals they would pay a tax. Any tax should only be based upon net receipts. Then the statement that it prevents landlords from passing increased costs onto tenants is just nonsense ... increase cost of operating a business and some businesses go under (decreasing supply => increasing prices) and prices need to go up (in part through good actors being forced out and replaced by bad actors willing to squeeze harder to make up for the increased costs). Someone would pay for this tax , and it certainly wouldn't just be landlords. Another example of well-meaning measures that will test the law of unintended consequences. Recent article lamenting lack of basic economics understanding on the part of those pushing this type of law:

Web Link

from the measure:
"Measure O does not apply to any units during the first 10 years after a certificate of occupancy is issued."

great incentive to replace older more affordable rentals with new construction, luxury units. win/win ... not subject to this tax, likely not subject to rent control and much higher rents.


Like this comment
Posted by Hmmm
a resident of East Palo Alto
on Nov 3, 2016 at 5:37 pm

I hope that all of these measures pass, and that the party responsible for the complain is found and dealt with accordingly.


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