TESTIMONY OF ANTHONY W. CROWELL,
SPECIAL COUNSEL TO THE MAYOR,
BEFORE THE NEW YORK CITY CAMPAIGN FINANCE BOARD
JANUARY 31, 2005
Good morning Chairman Schwarz and members of the Board.
My name is Anthony Crowell, and I am Special Counsel to Mayor Michael R.
Bloomberg. Thank you for the opportunity to testify today on the Board’s
new efforts to implement the Charter amendment passed by City voters in 1998.
As you know, that amendment requires candidates in the campaign finance program
to disclose contributions from individuals and entities “doing business”
with the City, and it directs the Board to further regulate or prohibit such
contributions as it sees fit. The Bloomberg Administration is pleased
that the Board has convened a hearing to receive public comment on how those
rules should be shaped.
In my testimony today, I will provide an update on the
Administration’s efforts to improve access to information about those who
do business with the City. In addition, I will discuss a modest proposal
that, we believe, takes an important first step toward implementing the 1998
Charter mandate and greatly enhances our ability to fully implement it for
the 2009 elections.
Two months ago, I testified before the City Council on behalf of a bill submitted
by the Bloomberg Administration to effectuate the 1998 Charter mandate.
Thus far, however, the Council has not expressed an interest in moving forward.
The importance of this Charter mandate, as I explained in my Council testimony,
bears some repeating. The primary reason that the campaign finance
program was adopted 15 years ago was to reduce corruption and diminish the
sway that special interests hold over candidates and elected officials who
seek campaign contributions from them. Yet today, the City’s matching
funds program enhances the value of contributions from special interests
by matching them at a $4-to-$1 rate.
New Yorkers might reasonably ask why they should have to pay $1,000 every
time a lobbyist or a developer donates $250. Is subsidizing contributions
from lobbyists consistent with the intent of the program? No, it is
an unintended consequence that undermines the program and leaves the taxpayer
footing the bill.
Since candidates receive generous public subsidies, New Yorkers might also
reasonably ask why such candidates are permitted to receive large contributions
from individuals and entities that have business before them, such as executives
of telecommunications companies who are seeking lucrative contract terms;
or real estate developers who are seeking land use approval; or private equity
executives who seek a share of the City’s $85 billion pension system.
And each time these sources give big contributions, the taxpayers are forced
to kick in $1,000.
New Yorkers might reasonably ask: Don’t these contributions present a potential
conflict of interest for elected officials? Don’t they create at least
the possibility for inappropriate influence? Undoubtedly, these are
exactly the kinds of questions that led voters to pass the referendum in
1998.
When those who do business with the City make campaign contributions to gain
access and influence, it is called “pay-to-play.” At a minimum, this
practice can create the appearance of impropriety. And beneath those
appearances lies a potential to corrupt government decisions.
Campaign finance reform advocates have long held that campaign contributions
from those with pending governmental interests can create the appearance
of – and potential for – impropriety. And increasingly, New York City
lobbyists and contributors are complaining of a “squeeze” that is “getting
out of hand.” (See New York Post, 5/23/04, attached.)
Real estate developer Bruce Ratner stopped contributing
to candidates because of these pressures, which he spoke about in a book
on campaign finance reform called Selling Out, by Mark Green:
When you do business with the city, you get solicited by everyone from U.S.
Senators down to members of the City Council. There was an anxiety
that, if we didn’t give, we might not be able to get a meeting, that it might
hurt our development efforts, hurt our access. There was a sense that
if you contributed, you were a friend. You knew your competitors were
doing it, and so when someone would call, it was hard to say no. For
businesses that do a lot of business with the city, it was expected…I didn’t
want to be a person on the outs, nor could my business afford to be a person
on the outs given how much business we do with government…It was very unpleasant.
I didn’t enjoy it. It’s very difficult to ask people to give to someone
that they may not believe in, and very few people want to contribute the
amounts that were being requested. I would much rather ask people to
give to a charity that I’m involved with.
When Ratner quit making campaign contributions after the 1997 elections,
his colleagues in the industry were amazed. Ratner said, “When I stopped
[contributing], people said I was crazy: ‘You’re going to get yourself killed.
It’s a mistake. You’re going to regret this.’”
Prior to the S.E.C.’s adoption of its G-37 rule, the securities industry
felt the same pressures as those who have business dealings with New York
City government. Robert Lamb, a professor at New York University’s
Stern School of Business, said, “It was like an ante in a poker game where,
in order to play, different firms felt like they needed to make some kind
of contribution. If you didn’t give, you wouldn’t sit at the table.”
Ending pay-to-play in New York City’s local government will protect those
who do business with the City from feeling pressured to give. It will
protect elected officials from feeling pressured to act in the favor of contributors
doing business with the City – and from accusations that they did so.
And, it will protect taxpayers from being forced to kick in $1,000 every
time a special interest makes a large contribution. It will also go
a long way toward bolstering public confidence in elected officials and government.
The wisdom of New York City’s voters has been confirmed by recent campaign
finance scandals in New Jersey and Connecticut. Last fall, then-Governor
McGreevey, freed from the need to raise campaign contributions, issued an
executive order prohibiting government contractors from making campaign contributions.
In a statement that accompanied his Executive Order, Governor McGreevey explained
the urgent need for action:
Today, the relationship between political fundraising and government operations
has become corrosive and cancerous. Legitimate lines of behavior are
blurred, ethical ambiguities are the norm and the need to sustain an all
consuming fundraising effort has become almost as important as the function
of government itself…The wall, the separation, between politics and government,
between campaign finance and government operations, between state interest
and personal interests has disintegrated…Today it has become increasingly
challenging to distinguish between the world of political fundraising and
government and between what we do and why we do it. It has become a
self-sustaining system with no beginning and no end.
McGreevey closed by challenging his fellow elected officials: “To my colleagues
in government, I know that this may cause consternation and anger.
Change can be uncomfortable. The goal is to liberate those who seek
to serve to do so unfettered by these possible conflicts and it will reassure
the people we serve that we do so honestly and decently.”
The City of New York does not have the same legal authority granted to the
State Executive of New Jersey. The outcome in a recent case in the
New Jersey federal courts confirms the wisdom of New York City’s approach
to the pay-to-play issue, which seeks to regulate candidates, not contributors.
Deviating from that approach, as some have suggested, would not only pose
legal hurdles, but it would be contrary to the plain language of the Charter
amendment adopted by the voters. For these reasons, the Campaign Finance
Board’s decision to move ahead with the implementation of the 1998 referendum
is the correct course of action.
At the City Council hearing last November, I discussed our initial legislative
proposal, Intro. 467. As I am sure you are familiar with the bill,
I will not spend time discussing its details, but I would like to quickly
summarize it: The bill is modeled on the G-37 concept. It would prohibit
candidates in the program from accepting contributions from those who do
business with the City, with an important exception: Contributors with business
before the City could still give up to $250 to any candidate for whom they
are eligible to vote, but these contributions would not be matched with public
dollars. This ensures that even those who have business with the City
may financially support candidates who seek to represent them.
The current law requires candidates in the Campaign Finance Program to ask
contributors for numerous pieces of information, including information about
their workplace. Our proposal simply takes this disclosure a step further,
by requiring candidates to ask contributors whether they have had business
dealings with the City within the last twelve months. The definition
of the term “business dealings” includes contractors, lobbyists, pension
investors, developers who seek land use approval, and firms who seek franchises
and concessions. This definition, as with all proposed legislation,
requires fine-tuning to ensure that it is not overly broad. For instance,
homeowners who seek approvals from the Department of Buildings should not
be covered by the law. The Administration is anxious to work
with the Board, and willing members of the Council, to arrive at an appropriate
definition.
Our proposal also provides for exemptions. All entities with contracts
valued at under $100,000, and all contractors who went through a sealed competitive
bidding process, would be exempt from the law. We believe that these
exemptions, coupled with the G-37 model, set a reasonable definition of “doing
business.” We look forward to hearing others suggest possible parameters
and to arriving at an appropriate definition.
Now, as promised, let me provide both an update on the Administration’s efforts
to make information about those who “do business” more readily available,
and offer a modest proposal for a first step that will begin to implement
the Charter mandate and improve our ability to implement it fully for the
2009 elections.
First, an update: Since the Council’s November hearing,
the Bloomberg Administration and the Department of Information Technology
and Telecommunications (DoITT) have had a number of constructive meetings
with Campaign Finance Board staff. Together, we have wrestled with
the challenges that this issue presents, and a new spirit of determination
has been infused into the process. CFB staff has helped DoITT understand
the agency’s technical needs and concerns, and a dialogue has taken shape
that, we believe, will lead New York City to be – once again – a national
pioneer in government ethics.
As a result of these meetings, DoITT is working to create a Web-enabled interface
that will provide the CFB – and every member of the public – with access
to the City’s VENDEX system, which houses every City contract with a value
of more than $100,000. The on-line information will include the names
of each company’s principals, and it will include a search function that
will allow users to look-up individual principals and companies. This
database will go a long way toward meeting the CFB’s request for a searchable
data warehouse – and we expect to have it up and running in April.
In addition, by that time or sooner, we expect to put the City Clerk’s list
of registered lobbyists on-line, and we are beginning discussions with other
agencies, including the Department of City Planning, to determine how we
might be able to effectively capture the universe of individuals and entities
with which each does business.
Making VENDEX and the City Clerk’s data on registered lobbyists – as well
as other possible data sets – fully compatible with the CFB’s own database
systems is major project that will require significant technical collaboration,
significant resources, and a significantly longer period of time. Developing
this more comprehensive system is a longer-term project that this Administration
is committed to, but which cannot be completed for use in the 2005 elections.
Still, the problem of pay-to-play cries out for urgent action. In order
to avoid waiting until 2009 before implementing a vital reform that the voters
passed in 1998 – and in order to improve our ability to create the comprehensive
database that the CFB seeks – the Bloomberg Administration has a modest proposal
that, we hope, will receive support from the Board.
Beginning with the May 16 disclosure statement, at which time the CFB and
the public should have access via the Web to VENDEX and the City Clerk’s
lobbying data, candidates in the campaign finance program would be required
to make a good faith effort to disclose – as the Charter amendment requires
– which of their contributors do business with the City. I want to
emphasize that, in deference to the CFB’s enforcement concerns, the Administration
is not suggesting that acceptance of such contributions be restricted for
this election cycle. Nor is the Administration suggesting that failure
to disclose such contributions result in automatic penalties. This
proposal is merely an extension of the current rules which require candidates
to make a good faith effort to obtain each contributor’s employer information.
Currently, each contributor fills out a contribution card. We propose
that the contribution card include a question asking whether the contributor
does business with the City; if so, the contributor would be asked to provide
some basic information about the nature of their business. The Administration
is anxious to provide any assistance necessary to the CFB in crafting such
a question.
Not only would this first step go a long way toward achieving
the disclosure that the voters mandated, it would – by identifying contributors
who do business with the City – provide invaluable assistance to the City
in its efforts to create the comprehensive database that the CFB seeks.
If the CFB were to allow 2005 to go by without requiring candidates to seek
and disclose information on contributors who do business with the City, it
would be a missed opportunity that would hinder both our understanding of
the universe of affected contributors and our efforts to construct a database
in a way that makes sense for all involved.
Over its 15 years, the Board’s mantra has been that reform must be viewed
as an evolutionary process, a work in progress. Our modest proposal
is in keeping with that mantra. We must not let the perfect be the
enemy of the good. Let’s demonstrate our own good faith to the voters
of New York City by taking a first step toward implementing the referendum
that they approved more than six years ago. And we can do it by requiring
candidates to make a good faith effort to abide by that referendum’s minimum
requirements.
Thank you, and I would be happy to take questions.
###