COUNCILMEMBER DAVID ALVAREZ

City of San Diego
Eighth District
MEMORANDUM
DATE: March 7, 2017
TO: Council President Cole

FROM: Councilmember David Alvarez 

SUBJECT: Council Policy regarding Charter Section 225: Mandatory Disclosure of
Business Interests

 

In 1992, the San Diego City Charter was amended to add section 225 ?Mandatory Disclosure of
Business Interests? with 86% vote of the public. This section imposes a mandatory disclosure of
the name and identity of any and all persons who are involved in transacting business with the
City. Soon thereafter, a Council Policy was drafted to coincide with Charter Section 225, but was
never brought to Council for unknown reasons. In 2005, the City Attorney issued a memorandum
(attached) to the City Council?s Committee on Government Ef?ciency and Openness discussing
the possibility of a Council Policy to support Charter Section 225, but again no such policy was
approved by the City Council. The current procedure simply reports ownership in companies
receiving city contracts. The proposed policy by the City Attorney?s of?ce in 2005 establishes
thresholds of ?nancial interest that would have to be met before disclosure is required. It would
require disclosure from the following individuals:
1. Person who owns an interest representing 5% or more of the total ownership of an
entity doing business with the City if that interest was worth $10,000 or more;
2. Person that could reasonably anticipate bene?ting from the transaction in the
amount of $10,000 or more

Under this proposed language, the disclosures would be made for contracts of any type requiring
City Council approval. This policy would make the disclosure of the name and identity of

anybody directly or indirectly involved in transacting business with the city mandatory. By
establishing these thresholds Via Council Policy, the Council can ensure a more open and
transparent process when discussing issuance of city contracts. 1 request that this proposed policy
be docketed for discussion at the Rules Committee and that the Committee direct the City
Attorney to prepare the proposed language for adoption by the full City Council.

Thank you for your prompt response.

CC: City Attorney Mara Elliott

OFFICE OF

- 1200 THIRD AVENUE, SUITE 1620
THE CITY ATTORNEY SAN DIEGO, CALIFORNIA 92101-4178
CITY OF SAN DIEGO TELEPHONE (619) 236?6220

FAX (619) 236?7215

Michael J. Aguirre

CITY ATTORNEY

June 20, 2005

REPORT TO THE COMMITTEE ON
GOVERNMENT EFFICIENCY AND OPENNESS

ENFORCEMENT OF CHARTER SECTION 225

INTRODUCTION

In 1992, the San Diego City Charter [Charter] was amended to add section 225 ?Mandatory
Disclosure of Business Interests.? This section imposes a mandatory disclosure of the name and
identity of any and all persons who are involved in transacting business with the City. A failure
to fully disclose the required information shall be grounds for denial of any application or
prOpOSed transaction, and ?may result in forfeiture of any and all rights and privileges that have
been granted.? The Charter section states: 

Section 225: Mandatory Disclosure of Business Interests

No right, title or interest in the City's real or personal property, nor any right, title
or interest arising out of a contract, or lease, may be granted or bargained pursuant
to the City's general municipal powers or otherwise, nor any franchise, right on,
privilege may be granted pursuant to Section 103 or 103.1 of this Charter, unless
the person applying or bargaining therefor makes a full and complete disclosure
of the name and identity of any and all persons directly or indirectly involved in
the application or proposed transaction and the precise nature of all interests of all

persons therein.

 

Any transfer of rights, privileges or obligations arising from a franchise, right or
privilege granted under Charter Section 103 or 103.1, or any transfer of any right,
title or interest in the City's real or personal property, or any right, title or interest
arising out of a contract, or lease, which may be granted or bargained pursuant to
the City's general municipal powers or otherwise, shall also require a full and
complete disclosure as set forth above.

Failure to fully disclose all of the information enumerated above shall be grounds
for denial of any application or preposed transaction or transfer and may result in
forfeiture of any and all rights and privileges that have been granted heretofore.

REPORT TO THE COMMITTEE ON June 20, 2005
GOVERNMENT EFFICIENCY AND
OPENNESS

For purposes of this Charter section, the term "person" means any natural person,
joint venture, joint stock company, partnership, association, ?rm, club, company,
corporation, business trust, organization or entity. (Emphasis added).

According to the ballot argument, the Charter section 225 requirements arose out of concerns
by the Mayor and members of the City Council that they should be given certain information
with regard to persons proposing to transact business with the City. The measure passed with
more than 86% of voters approving the amendment. Shortly after the enactment of Charter
section 225, this Of?ce prepared a draft Council Policy to provide guidelines on implementation.
It is not clear why the policy was never formally reviewed and adopted. Nonetheless, the City
has been requiring disclosure for some contracts and real property transactions but compliance
does not appear to be standardized throughout the City.

DISCUSSION
A. Current Compliance

In response to a request made by Councilmember Frye at a City Council meeting, the City
Manager?s Of?ce, through its Council Liaison, has been providing the CityCouncil with
information regarding the ownership of companies doing business with the City before such
items of business appear on the docket. For example, a March 14, 2005 memorandum detailing 
the ownership information for various items appearing on the March 14-15, 2005, docket is
attached for your review. (See Attachment 1). When one of those items (the matter of renaming
the San Diego Sports Arena) came before the City Council at that meeting, supporting
information from the City Manager stated that the ?the naming rights entity must not be in
violation of Charter Section 225 or Council Policy 000-04.? A copy of the minutes from the
March 14, 2005 meeting re?ecting that statement is attached. (See Attachment 2).

Additionally, the Engineering and Capital Projects Department presently requires each
company seeking to contract with the City for a public works project exceeding $250,000 to
submit a pre?quali?cation questionnaire disclosing a variety of information regarding of?cers
and owners of the company. For example, in the case of corporations, the questionnaire seeks the
name, position, number of years with the corporation, ownership percentage, and taxpayer
identi?cation number for every of?cer of the company and for every person who owns at least
ten percent of the corporation?s stock. The questionnaire also requires the disclosure of every
company such persons have been associated with over the past ?ve years. If the company is a
subsidiary, parent, or holding company, then information regarding that business relationship
must be disclosed. A copy of the pre-quali?cation questionnaire is attached. (See Attachment 3).

There also is some degree of Charter section 225 compliance with regard to contracts for the
lease of City real property. Attached are excerpts from several such contracts. One contract
contains language stating that ?Pursuant to City Charter section 225, the City Manager must
review and approve every person or entity which will have a ?nancial interest in this lease.?

REPORT TO THE COMMITTEE ON June 20, 2005
GOVERNMENT EFFICIENCY AND
OPENNESS

Another contract states: ?All assignees and subleSsees will be subject [to] review by the City, in
accordance with City Charter Section 225, and shall be of good moral character with no prurient
interests.? (See Attachment 4). Our Of?ce has also been advised by the Real Estate Assets
Department that the disclosure of information required by Charter section 225 occurs when
reviewing proposals or during lease negotiations that result from the issuance of request for
proposals, and that disclosure requirements become incorporated into the contract.

The above are only examples as this Of?ce did not do a City-Wide survey of compliance with
Charter section 225. However, it appears that there is a lack of uniformity and guidance with
regard to the scope of the requirements and the methods of obtaining compliance. For this
reason, and as addressed in the following paragraphs, we recommend that the City Council adopt
a Council Policy establishing appropriate guidelines for ensuring compliance with Charter
section 225.

B. 1992 Proposed Council Policy

Shortly after Charter section 225 went into effect in 1992, our Of?ce drafted a Memorandum
of Law in response to an inquiry from the Property Department (now the Real Estate
Assets Department) with regard to how the requirements of Charter section 225 would impact
real property transactions. In the MOL, our Of?ce con?rmed that in accordance with Charter
section 225, the City Council must be given the name and identity of all persons involved in the
proposed transaction and the precise nature of all such interests. 1992 City Att?y MOL 430. (See
Attachment 5).

The MOL also identi?ed a problem with a literal interpretation of Charter section 225. ?The
above language taken literally would require the disclosure of the ?name and identity? of all the
stockholders of General Motors together with the ?precise nature of all intere'sts? of such
stockholders in any proposed contracts General Motors may desire to enter into with the City.
Obviously, it is neither practical nor desirable to interpret the Charter section to require such
information.? 1992 City Att?y MOL at 431.

At that time, our Of?ce drafted a proposed Council Policy to address concerns regarding how
much information would be required of parties transacting business with the City. That draft
Council Policy, which is a part of the attached 1992 MOL, proposes thresholds of ?nancial
interest that would have to be met before disclosure is required. For example, it would require
disclosure from a person who owns an interest representing ?ve percent or more of the total
ownership of an entity doing business with the City if that interest was worth $10,000 or more. It
would also require disclosure from any person that could reasonably anticipate bene?ting from
the transaction in the amount of $10,000 or more. Under the proposed Council Policy, the
disclosures would be made for contracts of any type requiring City Council approval;

REPORT TO THE COMMITTEE ON -4- June 20, 2005
GOVERNMENT EFFICIENCY AND
OPENNESS

It is not clear the extent to which any action or discussion took place with regard to the
language we proposed in 1992. It is clear only that it was never adopted as an of?cial Council
Policy. Nonetheless, it appears that some disclosures are being made to the City Council. To
ensure consistent compliance with Charter section 225, we recommend that the procedures be
formalized through a new Council Policy. 

CONCLUSION

Charter section 225 requires the disclosure of the name and identity of any person directly or
indirectly involved in a transaction with the City. If interpreted literally, this Charter section
would require an impractical amount of disclosure of individual interests, including information
regarding each individual shareholder in any large company that transacts business with the City.
This does not appear to be the intent of the disclosure requirements. Nonetheless, the disclosures
must be made to the extent that the City Council can determine the identity of persons that have
signi?cant interests in the business transaction. The proposed Council Policy drafted by our
Of?ce in 1992 may be an appropriate starting point for discussion of these issues. This Of?ce is
ready to assist in the drafting of such guidelines and to provide advice on the appropriate level of
disclosure after the committee?s discussion on the Charter section requirements.

Respectfully submitted, -

MICHAEL J. AGUIRRE
City Attorney


Attachments
RC-2005-15