City-Funded Redevelopment by Nearby Property Owners -- And How Not to Write Ethics Law

An article in today's Modesto Bee provides an excellent example of problems that arise when a city's redevelopment is accomplished by people who can benefit directly from it.

The five-person Riverbank, California Council has three members who own property downtown, which is going through a redevelopment phase (apparently, things like theaters, not low-cost housing).  The council members also sit on the city's Redevelopment Agency.

California law states that no one who owns property within 500 feet of property being discussed may discuss or vote on the matter (with some exceptions). And yet these council members were, according to this article, voting about properties within 500 feet of property they owned.

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City staff misinterpreted legal advice, telling council members that there is only a conflict when someone's making money out of it.  But that is not the law, only the reasoning behind the law.  In any event, if you own property near a property that is being redeveloped, its value usually goes up. It's hard to believe that the council members didn't realize this, but one of the council members openly told the Bee reporter, "I don't feel fixing up downtown would help anything I own." Would anyone who doesn't own property within 500 feet of a city-redeveloped property agree?

And so all three council members went ahead and depended on staff advice (acting on staff advice is an issue I dealt with in a recent blog entry).

At a March 24, 2008 redevelopment agency meeting, all three council members had a conflict, setting off the rule of necessity, which allows members with conflicts to participate and vote if otherwise there would not be a quorum. The three council members chose straws, and the one with the shortest straw recused herself. According to the article, if one of the two remaining members had voted against the matter before them, it would not have passed.

Should anyone with financial interest in the city's principal redevelopment area sit on the city's redevelopment agency?  This is not a matter for legal advice, this is a matter of practicality (the continuing need to recuse oneself, the quorum problem) and the appearance of impropriety (of course, everyone will think, people will vote to spend city funds on redeveloping property close to theirs).

Finally, on May 12, months after the City Attorney had told council members about the state 500-foot law, an independent attorney met with council members in a special study session. But he does not appear to have dealt with the larger problem.

There is yet another problem here. The California law on this is not only extremely complex, with exception after exception to every exception, but it appears in regulations, not in a statute. This is not the way to write ethics laws, not if you want people to follow them without hiring a lawyer.

Conflict of interest laws are a drag, but they're not red tape. The need for trust in government far outweighs all the little exceptions city governments, lobbyists, and property professionals beg for and clearly get. More than being laws, ethics rules are guidelines. Complex guidelines ensure that lawyers rather than government officials themselves make ethics decisions. A 500-foot rule (which is actually a presumption of financial interest) should have no exceptions.

Robert Wechsler
Director of Research-Retired, City Ethics