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Advisory Opinion No. 2008-7 (November 3, 2008)

SUMMARY

On November 3, 2008, Mayor Bloomberg signed Local Law No. 51 (2008), extending term limits from two terms to three for current elected officials. The Board is issuing this advisory opinion to address the impact of this legislation on two groups of candidates subject to the provisions of the Campaign Finance Act: (1) Candidates with reported activity who now will seek re-election to their incumbent offices in 2009, instead of the higher offices they anticipated seeking in 2009; and (2) Candidates with reported activity who will no longer run in 2009, but will seek office in 2013. The Board interprets the Act and Rules to permit Group 1 candidates to either “restart” the 2009 election by “freezing” the original committee and opening a new one for 2009, applying a 15 percent fundraising expenditure to the 2013 expenditure limit, or maintain the same committee for 2009 and allocate expenditures between the aborted 2009 campaign and the 2009 re-election campaign. Group 2 candidates may maintain the same committee for 2013 and apply a 15 percent rate of expenditures for funds raised prior to the 2013 election cycle towards the 2013 expenditure limit. The Board's interpretation of the relevant law, as outlined in this Opinion, attempts to make it practical for all candidates who wish to join the Program to do so, to treat both incumbents and potential challengers in 2009 and 2013 fairly, and to encourage competitive races for all offices covered by the Program.

FULL TEXT

Re: New York City Administrative Code (“Admin. Code”) §§ 3-703(1)(d), (e), (f), (g), (14), 3-705, 3-706, 3-708(11), 3-710(2)(c), 3-718, 3-719; New York City Campaign Finance Board Rules (“Rules”) 1-04(f), 1-07, 1-08(c), (o), 3-03(c)(2), 4-01; Advisory Opinion Nos. 1993-7 (July 20, 1993), 1997-6 (June 24, 1997), 2001-12 (September 20, 2001), Op. No. 2008-7.

Overview

Today, Mayor Bloomberg signed Local Law No. 51 (2008) which extends term limits for current elected officials. This unprecedented change in the electoral landscape less than one year prior to the primary elections compels the New York City Campaign Finance Board (the “Board”) to provide guidance concerning the legislation's effect on candidates subject to the provisions of the Campaign Finance Act (the “Act”).1 Given this significant change in the law, there are numerous legal and practical implications for many current and potential candidates – incumbents and challengers alike. The Board is issuing this advisory opinion (the “Opinion”) to address the impact of this legislation on two groups of candidates:

  1. Group 1: Candidates with reported activity who now will seek re-election to their incumbent offices in 2009, instead of the higher offices they anticipated seeking in 2009;
  2. Group 2: Candidates with reported activity who now will not run in 2009, but will seek office in 2013.

This Opinion is restricted in its application. It only applies to these two groups of candidates. It does not apply to those candidates who choose to continue to run for the same (or higher) office that they were planning on running for prior to the passage of this legislation. This Opinion also does not apply to those who have not had any financial activity as of the date of issuance of this Opinion. It also does not apply to candidates who otherwise would fall into Group 1 but who fail to make a timely choice of Option A or B. 2

Specifically, the Board interprets the Act and its Rules to:

  1. Allow “Group 1” candidates to choose between two options:
    1. “Restart” the 2009 election by freezing their current committee until the 2013 election cycle, and opening a new committee for the 2009 election; all expenditures incurred prior to the issuance of this Opinion, except those associated with fundraising (as defined below), will not count towards the 2009 re-election campaign or the 2013 election; or
    2. Use their current committee for the 2009 election to his/her current office; return over-the-limit contributions; all expenditures incurred will be allocated between the aborted 2009 campaign and the 2009 re-election campaign.
  2. Allow “Group 2” candidates to keep the committee that was originally established for 2009 to instead be used for a 2013 election. All expenditures incurred prior to January 12, 2010, except those associated with fundraising, will not count towards the 2013 election.

This approach falls within the Board's mandate, effectuates the law's purpose, and encourages participation in the Campaign Finance Program (the “Program”) by not penalizing candidates for changing their plans at this late date in the election cycle in light of this extraordinary legislation.3 The Board has solicited and taken into account comments from the public.4 The Board acknowledges that this Opinion cannot anticipate every possible situation that candidates affected by this change may face. Candidates with circumstances that are not covered by this Opinion are encouraged to promptly contact the Board's Candidate Services Unit for further guidance.5

INTRODUCTION

On October 23, 2008, the New York City Council passed legislation extending term limits from two terms to three for current elected officials, allowing such candidates to run for their incumbent seats in the 2009 general election. As a result of this unique circumstance, there are significant legal and practical issues, as well as issues of fairness, that the Board needs to consider in interpreting and applying the Act. The extension of term limits three years into the 2009 election cycle creates an unprecedented challenge for the Board.

As a result of this legislation, many candidates may no longer choose to run in the 2009 election or may choose to run for a different office than that for which they have been raising and spending money. The biggest challenge is that the Board's rules presume that all contributions and spending are for a candidate's next election. At this late point in the election cycle, a substantial number of candidates have received many contributions at a higher limit than will apply if they run for a “lower office.” More importantly, many candidates have spent well over the total expenditure limits for the “lower office.”

The Board's interpretation of the relevant law, as outlined in this Opinion, attempts to make it practical for all candidates who wish to join the Program to do so, to treat both incumbents and potential challengers in 2009 and 2013 fairly, and to encourage competitive races for all offices covered by the Program. The Board strongly believes that the ultimate “level playing field” is achieved through Program participation, and the approach outlined in this Opinion strives to reach this goal, to the overall benefit of all candidates and the public.

I. Group 1 Candidates:

Candidates Must Provide Proof That They Were Previously Seeking Higher Offices

The first group of candidates affected by the change in term limits, herein referred to as “Group 1,” are those candidates who had raised and spent money for a campaign for higher office but now are intending to seek their lower incumbent office. These Group 1 candidates have two options (described below).

To avail themselves of these options, these candidates must show that they were originally running for a higher office in 2009, but now that term limits have been extended, they will run for re-election. For candidates choosing Option A, this showing will allow them to overcome the presumption in the rules that contributions and spending are for the next election and to receive the favorable treatment for contributions and spending that this Opinion provides. See e.g., Rules 1-04(f) (contributions), 1-08(c) (expenditures), 7-03(c) (both); see also Advisory Opinion Nos. 1997-6 (June 24, 1997) (the “Ferrer Opinion”), 1993-7 (July 20, 1993) .6 For candidates choosing Option B, each candidate will have to overcome the presumption by demonstrating that each expenditure did not benefit his/her re-election campaign. See Ferrer Opinion.

Candidates who wish to choose Option A or B must provide a written submission to the Board of the following: (1) a prior declaration to the Board of the higher office sought; or (2) other indicia that they were seeking higher office, including but not limited, to: (a) candidate solicitation and/or receipt of contributions at a higher contribution limit, or (b) prior public statements by the candidate in the press or through publicly distributed material demonstrating an intent to run for a higher office.

Given that it is late in the election cycle, the deadline for submission of this proof is January 15, 2009.7 By this date, candidates must submit this form, attaching any relevant evidence; this same form will also require candidates to choose Option A or B.8 By setting an early deadline the Board hopes to ensure a reasonably level playing field for candidates and their opponents. This deadline also provides clarity for the public and candidates, avoids additional disclosure deadlines which apply beginning the year of the election, and provides a bright line for Board administration and audit.

The filing of this form does not obligate the candidate to run for the “lower” or any office. However, if the candidate does not ultimately run for the lower office this Opinion does not apply. Such candidates are encouraged to seek further guidance.

A. Option A: Restart the 2009 Election Campaign

Group 1 candidates may choose to “restart” the 2009 election by “freezing” their original committees, and opening a new committee for their 2009 re-election campaign. The original committee must remain “frozen” until January 12, 2010, the beginning of the 2013 election cycle. The candidate would start the 2009 election with no funds and no expenditures except as provided below. Option A optimizes the goal of ensuring Program participation in both the 2009 and 2013 elections.

Candidates will be allowed to make only ministerial transactions, such as bank fees, from these “frozen” committees.9 All outstanding debts for services or goods incurred prior to the issuance of this Opinion must be settled before a candidate “freezes” his/her committee.10 Candidates who wish to preserve previously raised matchable claims for the 2013 election must choose Option A.

  1. Reporting Requirements

    Candidates will be required to file disclosure statements for both the “frozen” 2009 committee and new 2009 committee, if applicable, on January 15, 2009 (covering the period through January 11, 2009). Thereafter, the “frozen” 2009 committee will file semi-annual disclosure statements with the Board of Elections (“BOE”), until the first disclosure statement for the 2013 election cycle.11 The new 2009 committee will file with both the Board and the BOE as required for any 2009 committee.
  2. Contributions

    Candidates may keep contributions made prior to the issuance of this Opinion in the original 2009 “frozen” committee. These contributions in the “frozen” committee would be eligible for matching funds for a 2013 election. See Rule 1-07(a). Contributors may make contributions to the new 2009 committee up to the applicable limit for the 2009 election for the office the candidate is now seeking,12 even if such contributors have already contributed to the “frozen” committee. The “Doing Business Law” 13 now in effect will apply to all contributions.
  3. Expenditures

    Most expenditures by the original 2009 committee prior to issuance of this Opinion will not be applied to the new 2009 re-election committee; nor will they be applied to the future 2013 election14 (except as detailed below). Expenditures made by the original 2009 committee between November 3, 2008 (the date of the issuance of this Opinion and the effective date of Local Law No. 51)15 and the “freezing” of this committee will count towards the 2009 expenditure limit. 16 See Admin. Code § 3-706(2).

Notwithstanding this, certain costs associated with funds raised by the committee for the aborted 2009 election will count against the candidate's spending limit for the 2013 election. Under this option, candidates are freezing the original 2009 committee, and thus, will be using the funds raised for the aborted election campaign for a 2013 election. Since the candidate clearly will “receive[]” the benefit of the funds raised in 2013, the cost of raising those funds must count towards the 2013 spending limit. See Admin. Code § 3-706(1), (2); Rule 1-08(b); cf. Admin. Code § 3-703(14)(b); Rule 3-03(c)(2) (requiring an allocation of cost for transfers). In order to ensure as fair and efficient a process as possible, the Board will calculate the fundraising expenditure by assessing a 15 percent flat rate17 of the total amount of funds on hand in the candidate's frozen committee on January 11, 2009.18 If the 15 percent allowance is greater than the campaign's total spending before the issuance of this Opinion, only the lower total amount will apply.19

If the committee for the 2009 re-election campaign wishes to use any goods (e.g., computers, office equipment, furniture, supplies, lists) that were originally purchased by the committee for the aborted 2009 campaign, the new committee must purchase the goods from the original committee. The goods must be purchased at the same prices that were paid by the committee for the aborted 2009 election, and such purchases will count towards the candidate's spending limit for his/her 2009 re-election campaign. Admin. Code § 3-706(1), (2); Rule 1-08(b). Such purchases must be made prior to the deadline for “freezing” the original committee, January 15, 2009.

Candidates who choose Option A, but fail to actually “freeze” their committees (i.e. continue to engage in committee activity) lose the ability to take advantage of any benefits provided by Option A.

B. Option B: Maintain Current Committee for 2009 Election

Group 1 candidates may choose to continue to use their current 2009 committees.20

  1. Reporting Requirements

    Candidates will continue to report activity in the same manner as previously.
  2. Contributions

    All candidates must abide by the contribution limit for the 2009 office s/he is seeking.21 Admin. Code § 3-703(1)(f). If a contribution exceeds the legal contribution limit for the incumbent office sought, the over-the-limit portion must be returned to the contributor. The deadline for returning over-the-limit portions of contributions is June 10, 2009, the Program certification deadline.22 Contributions returned by this date will not be subject to findings of violation by the Board. Funds in the committee which comply with applicable contribution limits and other rules will be eligible to be matched with public funds for the 2009 election. Admin. Code §§ 3-703, 3-705.
  3. Expenditures

    Expenditures will be reviewed on a case-by-case basis. The Board rules presume that expenditures are for the next election. Rules 1-08(c), 7-03(c). Expenditures made by a candidate who subsequently abandons his/her campaign for a higher office and seeks re-election to a lower office are “presumptively subject to the [lower office] spending limit,” with certain exceptions. Ferrer Opinion. 23

The Board's presumption functions as the starting point for determining which, if any, of a candidate's expenditures are not subject to the spending limit for the lower office. Id. Expenditures will not count towards the 2009 election to the candidate's current office if the candidate can overcome this presumption by demonstrating that such expenses were actually used for the aborted 2009 campaign, with no or minimal benefit to the candidate's 2009 re-election campaign. Apportionment of expenditures will be based on the standards applied in the Ferrer Opinion. Candidates who choose Option B will face a heavy burden in demonstrating that the spending they have already incurred should not count towards their re-election campaigns. See Ferrer Opinion24; see also Advisory Opinion No. 1993-7 (July 20, 1993). Therefore, when deciding whether to choose Option B, a candidate should consider that most expenditures incurred by the original 2009 committee for the higher office will likely apply to the new 2009 re-election campaign.

Once a candidate files the requisite form indicating s/he would like to pursue Option B,25 which must be submitted to the Board by January 15, 2009, the Board will immediately begin the process of apportioning expenditures based on the Ferrer Opinion. The Board will complete this analysis by the May 15, 2009 filing date and inform the candidate of the total amount of expenditures that will apply to the spending limit for the 2009 election.

II. Group 2 Candidates

The other group of candidates affected by this legislation and covered by this Opinion are those candidates who have been running an active 2009 campaign, but now choose to delay running until 2013. In order to qualify as a member of this group, a candidate must have activity reported or required to be reported on the January 15, 2009 disclosure statement. These candidates may use the same committee that was originally intended for a 2009 election for the 2013 election. This committee can remain active.26

  1. Reporting Requirements

    The committee must file the January 15, 2009 disclosure statement to report activity during the period of July 12, 2008 – January 11, 2009. It must also continue to file any additional mandatory disclosure statements until the committee files a termination of candidacy form with the Board.27 To receive the benefits of this Opinion, a candidate must file a termination of candidacy form by June 10, 2009, the certification date. Thereafter, the committee will report only to the BOE until the first Board disclosure statement of the 2013 election cycle, in which the committee will report all activity from the start of the committee's existence.28
  2. Contributions

    The 2013 contribution limit applies to the 2013 election; a contributor can only contribute to the committee within the legal limits. Funds in the committee will be eligible for public matching for a 2013 election.
  3. Expenditures

    Except for expenditures associated with fundraising, committee expenditures made for the aborted 2009 election will not count towards the 2013 expenditure limit.29 Only expenditures made from January 12, 2010 onwards will count towards the 2013 election cycle. See Admin. Code § 3-706(1), (2); Rule 1-08(c). Since candidates will be using the funds previously raised for the aborted election campaign for the 2013 election, costs associated with raising those funds incurred by the committee for the aborted 2009 election will count against the candidate's spending limit for the 2013 election. See Admin. Code § 3-706(2). Again, in order to ensure as fair and efficient a process as possible, the Board will calculate the fundraising allocation by assessing a 15 percent flat rate of the total amount of funds in the committee on January 11, 2010.30 If the 15 percent allowance is greater than the campaign's total spending before the issuance of this Opinion, only the lower total amount will apply.

CONCLUSION

Given the unique circumstances presented by the legislation extending term limits, the Board has issued a plan that provides a legal, practical, and fair course of action.31 The Board's conclusions, resting on its interpretation of the Campaign Finance Act, are supported by the Board's power to take actions “necessary and proper to carry out the purposes of [the Act].” Admin. Code § 3-708(11); see Advisory Opinion No. 2001-12 (September 20, 2001). In the face of this significant legislative change, the Board's plan addresses the practical implications of the term limits extension, while maintaining the integrity and purpose of the Program and the law.

NEW YORK CITY
CAMPAIGN FINANCE BOARD

1 All candidates running for one of the five covered offices—mayor, comptroller, public advocate, borough president, city council member—are subject to the Act's contribution limits, ban on certain contributions, and reporting requirements. See Admin. Code §§ 3-703, 3-718, 3-719.

2 This Opinion also does not apply to candidates in future elections who never sought office in 2009 or did not have any reported committee activity in the 2009 election cycle; nor does it permanently alter how the Board normally administers the Program and conducts Board business.

3 Local Law No. 51 (2008). In the event that Local Law No. 51 does not survive litigation challenges or fails to obtain the requisite federal pre-clearance, the Board will re-evaluate the application of this Opinion. See Voting Rights Act of 1965, § 5, 42 U.S.C. § 1973c (requiring pre-clearance for any attempt to change “any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting” in any “covered jurisdiction”).

4 On October 14, 2008, the Board issued a press statement seeking comments from the public on how to address these issues. On October 17, 2008, the Board released an outline of its proposal and requested further comment from the public. On October 23, 2008, the Board issued a press statement seeking comments from the public until October 28, 2008, and informing the public of the Board's intention to issue an advisory opinion addressing these issues on November 3, 2008.

5 The Board will release a plain language document that explains this Opinion and gives detailed guidance to candidates on how to implement the advice herein for their campaigns. This guidance document will be available on the Board's website at www.nyccfb.info and will be sent via e-mail from the Board to all candidates and their treasurers.

6 For campaigns choosing Option A, which requires them to re-start their 2009 campaigns with no funds and no expenditures, the Board interprets that funds expended prior to the passage of Local Law No. 51 were for the election for higher office. Such expenditures, except those associated with raising funds, will provide no or minimal benefit to these candidates' 2013 election.

7 The filing of this form on this date coincides with the filing of the mandatory disclosure statement that is also to be filed with the Board on January 15, 2009. If a candidate does not make this showing and file this form by January 15, 2009, then the candidate cannot take advantage of Option A or B.

8 This form will be available on the Board's website at www.nyccfb.info and will be sent via e-mail from the Board to all candidates and their treasurers.

9 Any payments for bookkeeping services and preparation of applicable disclosure statements for the “frozen” committee can be made by the new 2009 committee for the “lower” office and will count towards the applicable 2009 expenditure limit. See Admin. Code § 3-706(1), (2); Rule 1-08(b). These expenditures, however, are not related to the 2009 campaign and thus will be deducted when calculating the 2009 unspent campaign funds. See Admin. Code § 3-710(2)(c); Rule 1-02 (definition of “unspent campaign funds”).

10 If a candidate fails to do so, then payment of such debts can be made by the new 2009 committee for the “lower” office and will count towards the applicable 2009 expenditure limit. See Admin. Code § 3-706(1), (2).

11 The Board's C-SMART software allows candidates to file these statements with both the City and State BOE.

12 See Admin. Code § 3-703(1)(f).

13 See Admin. Code §§ 3-702(18), 3-703 (1-a), (1-b); Rule 4-01(n).

14 There is no spending limit for the 2013 election cycle that ordinarily would apply to spending made before 2010. See Admin. Code § 3-706(1), (2).

15 In order to avoid potential unfairness, the Board, in the course of its normal audit functions, will evaluate expenditures incurred between October 17, 2008 (the date the Board issued its Opinion guidance document) and November 3, 2008 to determine if these expenditures, due to their amount and nature, should be allocated to the 2009 election for “lower office.”

16 Payments made by the original 2009 committee to settle outstanding debts incurred by that committee prior to the issuance of this Opinion will not count towards the 2009 spending limit provided that the campaign can adequately document the date these debts were incurred.

17 The Board acknowledges that 15 percent might not be a perfect replica of any particular candidate's actual spending on fundraising.  15 percent is a reasonable approximation of the standard fee charged by professional fundraisers. In the interests of clarity and certainty for candidates and the Board's audit process, the Board uses this allocation.

18 All candidates are subject to ongoing auditing of their campaign finances. See Admin. Code §§ 3-703(1)(d), (g), 3-710(1); Rules 4-01, 4-05. During this audit process, the Board will evaluate expenditures, including the amount of funds in the committee on January 11, 2009, for compliance with this Opinion to ensure full enforcement of the Campaign Finance Act.

19 For the 2013 elections there are three applicable spending limits—the limit for the three years prior to the year of the election (the “out-year limit”), the primary limit, and the general election limit. See Admin. Code § 3-706(1), (2); Rule 1-08(b). The fundraising allowance will count towards the out-year limit.

20 Based on a review of the actual disclosures to date, it is the Board's belief that few candidates can choose Option B and still participate in the Program.

21 The contribution limits apply to all candidates for a covered office even if they choose not to participate in the Program.

22 The refund of any over-the-limit portion of a contribution must be made by bank or certified check. Rule 1-04(c)(1). This Opinion does not address the deadlines for returning contributions which are subject to the “doing business” limits.

23 The Ferrer Opinion apportioned expenditures between Fernando Ferrer's 1997 abandoned mayoral campaign and his Bronx borough presidential campaign. The Board found that most expenditures incurred for the abandoned mayoral campaign applied towards the Bronx borough presidential campaign. The noted exceptions included spending for polls and research for higher office, salaries for the higher office campaign staff, cost of campaign offices and equipment outside of the lower office geographical area, and costs of announcements, literature and events for the higher office, as long as the candidate was able to demonstrate there was no benefit or even ancillary benefit to the campaign for lower office. See Ferrer Opinion.

24 Costs that were attributed to the lower office expenditure limit in the Ferrer Opinion include all fundraising costs, most contributions to other candidates and political organizations, any staff salaries, offices and equipment which provided a benefit to the campaign for lower office, and a proportional allocation of costs for public events and communications for the higher office. See Ferrer Opinion.

25 This form will be available on the Board's website at www.nyccfb.info and will be sent via e-mail from the Board to all candidates and their treasurers.

26 Note that many of the assumptions outlined in Section II do not apply if this committee is used in an intervening election, e.g., an election for state office. The methodology outlined in Section II also does not apply to any special elections the candidate may run in in the 2009 or 2013 election cycles.

27 Disclosure statements are due on March 15, 2009 and May 15, 2009; if the candidate does not file a termination form prior to the start of these disclosure periods, s/he must file that statement. The termination of candidacy form will be available on the Board's website at www.nyccfb.info and will be sent via e-mail from the Board to all candidates and their treasurers.

28 Campaigns may use the Board's C-SMART software to make their filings with the City and State BOEs. The Board's Candidate Services Unit is available to assist candidates.

29 See supra n.14.

30 See supra n.18.

31 This Opinion cannot anticipate every possible situation that candidates affected by this change may face. The Board strongly encourages candidates with circumstances that are not covered by this Opinion to promptly contact the Board's Candidate Services Unit for further guidance.