Palo Alto takes aim at state’s conflict-of-interest law

When the Palo Alto City Council met last month to consider creating an annual limit on new office development, one voice was notably missing from the discussion.

Tom DuBois, a councilman who has been a leading proponent of protecting residential neighborhoods from the effects of new development, recused himself from the conversation for reasons some colleagues found odd. His wife works at Stanford University, which owns Stanford Research Park, a sprawling network of high-tech campuses. Even though the industrial park is not subject to the proposed growth limit (which would apply only to areas around downtown, California Avenue and El Camino Real), the state Fair Political Practices Commission advised DuBois to refrain from the discussion because an office cap in other parts of the city may positively influence the research park.

DuBois’ absence proved particularly obvious when the council’s discussion devolved into a series of 4-4 votes, pitting the council’s slow-growth “residentialists” against members more accepting of new development. The item under dispute – whether the office cap should apply to parts of the city subject to the “specific area plans” – was punted to the Planning and Transportation Commission and will return to the council for more discussion in the fall.

Though the council followed the FPPC’s advice, some members appeared puzzled by it and suggested that the state’s conflict-of-interest rules be re-examined. Councilman Pat Burt in particular urged on June 22 that the city advocate for changes. After debate, the council voted to instruct the city’s lobbyists to seek legislative opportunities to make “materiality” a requirement in conflict-of-interest findings. Thus, a council member would not be disqualified from partaking in the discussion unless the policy would have a direct material effect on him or her.

For the Palo Alto council, the issue is not new. Members who have jobs at Stanford or spouses employed by the university have routinely recused themselves from discussion that may affect the university, however indirectly. Councilman Larry Klein, for instance, had to step out of the room during conversations about Stanford because his wife is a professor emeritus at the school. This included any budget considerations involving Stanford funds, and land-use issues involving Stanford and the university’s recently approved hospital facilities expansion. Former Mayor Yiaway Yeh, whose wife was a Stanford scholar, also had to leave when the council discussed anything Stanford-related.

The case of DuBois differed, however, because the proposed office cap did not explicitly include Stanford or any of its properties. Nevertheless, because bans on office development at other parts of the city could make Stanford Research Park more lucrative to potential builders, the FPPC determined the link strong enough to create a potential conflict of interest for DuBois.

In its letter, the FPPC argued that the financial effect of the office cap on Stanford “can be recognized as a realistic possibility and more than hypothetical or theoretical.” Under the Political Reform Act, the financial effect on a parcel of real property by a government action is deemed “material” whenever the decision would “cause a reasonable prudent person, using due care and consideration under the circumstances, to believe that the governmental decision was of such nature that its reasonably foreseeable effect would influence the market value of the official’s property.”

The fact that the property is Stanford’s and not DuBois’ didn’t obviate the FPPC’s determination. In fact, the FPPC stated, because Stanford would be impacted whether or not the ordinance applies to the Research Park, the conflict would exist in either scenario. Thus, “the effect on the council member’s source of income is foreseeable and material and the council member may not participate in the decision,” the FPPC ruled on April 29, in response to an inquiry from the city.

Some council members found this interpretation puzzling. Burt noted that DuBois had to recuse himself despite the fact that the office cap “specifically did not include Stanford University.” But because the law could “potentially impact some value of their property and Tom DuBois’ wife works in mechanical engineering, it is perceived that under the law there is some conflict-of-interest here.”

“There is no materiality that we can construe,” Burt said.

Figuring out whether a council member or commission has to recuse from a discussion can be tricky, particularly when there’s no clear indication that the policy would have a material effect on the official. The council has generally taken a conservative stance, with members recusing. The council’s discussion of last year’s downtown new Residential Parking Permit Program required several council members and the city manager to leave the room whenever the subject arose. In recent weeks, Vice Mayor Greg Schmid and Councilman Cory Wolbach have been leaving the room any time the council discussed the topic of “single-story overlays,” a zoning designation in which two-story homes are banned. That’s because both live in a neighborhood that is considering seeking an overlay.

When in doubt, the city has relied on advice from the FPPC. In addition to consulting the commission about DuBois’ participation in the office-cap discussion, the city made similar inquiries about council members Marc Berman, Eric Filseth, Liz Kniss and Greg Scharff, as well as City Manager James Keene. Each has an interest in property at or near downtown. The question for the city was whether the office cap’s potential economic effects on the economic interests of these officials are “reasonably foreseeable.” The commission ruled that all except DuBois can participate in the discussion of office caps.

The commission also affirmed the right of Liz Kniss, who owns a residential property near the California Avenue business district, to participate in discussions of limiting chain stores in the district (to be on the safe side, she had recused in the past). It also ruled that Berman, Keene and Scharff are allowed to participate in the council’s consideration of 429 University Ave., a mixed-use project that was challenged by a neighbor and ultimately halted by the council last month. All three own properties near the project site.

Yet in light of the FPPC’s determination that DuBois should not participate in the office-cap discussion, the council agreed on June 22 to take a closer look at existing conflict-of-interest rules and explore possible lobbying opportunities. The council voted 6-3, with Berman, Kniss and Scharff dissenting, to direct the city’s Sacramento lobbyist to investigate opportunities for adding a requirement of “material impact” to elected officials when it comes to conflict-of-interest determinations. The council also directed Stump’s office to investigate the regulatory changes happening in the field of FPPC policies and to report its findings to the council’s Policy and Services Committee.

The three members who dissented did so largely because of the proposed sequence. They argued that the city attorney and the council committee should discuss the subject further and only later give direction to the lobbyist. The majority argued that the lobbyist and the city attorney should work concurrently and collaborate, with the understanding that the council will still have a chance to vet any lobbying opportunities before actual legislation is pursued by the city.

Changing the rules won’t be easy. As the city attorney’s office knows all too well, the topic is inherently complicated and is made more so by the fact that the FPPC’s regulations are are currently in flux. The FPPC is now in the latter stages of of a multi-year project of reviewing all of these regulations and revising some, City Attorney Molly Stump said.

“They are lengthy and complex and they have been revising them in a series of phased actions,” Stump told the council on June 22. “This is a very, very complex area of law and there has been a lot of attention recently to this review.”

The June discussion wasn’t the first time that Palo Alto council struggled with state requirements about how meetings are conducted. Earlier this year, the council inadvertently ran afoul of the Brown Act when five council members found themselves on the same thread of emails pertaining to a resident’s appeal of a new home on Corina Way. After Wolbach, Filseth, Mayor Karen Holman and Tom DuBois all agreed that the item should be pulled, Schmid joined the conversation and said he also supports pulling it. Because this meant that five out of the nine council members were now privately discussing an item, the conversation violated the “serial meetings” provision of the Brown Act. After Stump flagged the violation, the city made public the email correspondence concerning the item.

Kniss suggested on June 22 that the Brown Act “serves the public so poorly.” She noted that state officials have no similar prohibitions on talking to one another behind closed doors to muster support for legislation.

“We are here tied to the Brown Act, and if you listen to anyone in the Senate or the Assembly, they will tell you that they have talked to every member there to get their bill passed,” Kniss said. “Truly, is that justice? Hardly.”

Burt, for his part, defended the Brown Act, noting that its mission is to provide a “greater transparency to the public” and foster an open democracy.”

“It’s been a hallmark to open government in California now for many decades,” Burt said. “It may from time to time need to have modifications to it, but I’m not in favor of disbanding it or any other wholesale changes to it.”