Summary New York Citys strong campaign finance system is under threat from a flood of corporate cash through

independent expenditures. (IEs). While more attention has been paid to IEs at the citywide level, they are especially dangerous in the City Council, where they can more easily overwhelm all other spending by candidates, and become the majority of information available to most voters. This is becoming clear in the 2013 election cycle, especially in the case of the Jobs for NY IE created by the Real Estate Board of NY (REBNY), which has raised over $6 million in large contributions from real estate corporations that do frequent business with the City, and is now engaged in massive expenditures in City Council races, including numerous negative mailings. While IEs are legal under the Supreme Courts Citizens United decision, the City Council can take meaningful action through legislation: Close the LLC loophole (which allows corporations to exceed corporate limits) Require the disclosure of top donors on communications Require stronger language on IE communications

Background New York City has one of the strongest campaign finance programs in the country. According to the Brennan Center for Justice: New York Citys system has benefits beyond simply limiting the size of campaign contributions and expenditures [It] changes how candidates campaignin a way that betters democracy. Candidates have a much greater incentive to reach out to ordinary voters, everyday New Yorkers without deep pockets. In turn, being asked to contributeeven small amountsincreases citizen interest and participation in elections.1 By combining a small donor public matching program, voluntary campaign spending limits, contribution limits, and restrictions on donors doing business with the City (in real estate development, contracts, etc), NYC has dramatically reduced pay-to-play contributions. Unfortunately, the NYC campaign finance system is under existential threat from Independent Expenditures (IEs), which are flooding vast amounts of corporate cash into City campaigns. While IEs are taking place in citywide races as well, they are especially dangerous in the City Council. Candidates who participate in the NYC campaign matching system are limited to spending $168,000 in their elections. But this year, a PAC backed by the real estate industry is on track to spend three to five times more than what candidates are allowed to spend. In these downballot, lower-information races, where name recognition through mailings and paid canvassers matters a great deal, this is about as close to buying races as you can get.
1

Angela Migally and Susan Liss (2012), Small Donor Matching Funds: The NYC Election Experience, Brennan Center for Justice.

REBNYs Jobs for New York PAC The PAC created by REBNY (the Real Estate Board of New York), deceptively titled Jobs for New York, reveals the dangers presented by IEs, and some of the particular flaws in the current regulations:

REBNY is taking huge advantage of the LLC loophole . Under NYS law, individuals can give up to $150,000 in annual aggregate to political committees, but corporations are supposed to be capped at $5,000. However, LLCs (the form for many real estate corporations) are treated as individuals, and so can give up to $150,000. And an individual can funnel money through multiple LLCs. This is NOT true under the CFB's rules for contributions to candidates (LLC contributions are prohibited entirely), but we have not yet fixed this for IEs in local or state law. The vast majority of the $6 million that they've raised comes from real estate corporations and LLCs, most of it in large contributions of $50,000 - $100,000. Many of these are from entities that "do business" with the City (the donor limit to candidates is $2,750, but for people "doing business" with the City, just $250 in order to reduce pay-to-play). Even though Jobs for NY seeks to appear as a broader business and labor PAC, all five of their board members are REBNY officers or leaders. Pay-to-play is a clear and present danger: At the same time, wellconnected developers (who are REBNY members) are under investigation by the Moreland Commission for large political contributions to legislators and the governor just before the Legislature passed and the governor signed a law allowing 5 developments to gain special access to a 421-a property tax break worth tens of millions of dollars. According to a recent analysis by Common Cause, from 2011 to July 2013, over 70% of REBNY contributions to State Senate candidates went to districts outside of NYC in return for tax breaks and lax regulations.2

Because of the weakness in current IE disclosure rules, REBNY is able to hide whos behind their mailing to mislead voters:

None mention REBNY, or say anything real about who "Jobs for New York" is. Their use of endorser logos and pictures makes it look like a broad, pro-good-jobs, pro-affordable-housing PAC with labor and elected official support, rather than an entity entirely controlled by REBNY, and funded with large contributions from real estate LLCs. They have mailed multiple negative mail-pieces , which amount to anonymous hit-jobs on candidates who are participating in the campaign finance system. At least one Jobs for NY mailing engages in ethnically divisive practices, letting voters in a largely Puerto Rican and African-American district (with a growing immigrant population) know that the candidate

"Moreland Monday" Analysis of REBNY Contributions Raises Serious Issues for Commission to Consider, August 5, 2013

they opposed is from El Paso, TX as a clear (if subtle) reminder than he is of Mexican descent. Taking Action: New York City Council Legislative Package While IEs are permissible under the United States Supreme Courts decision in Citizens United, the City Council can take the meaningful steps to reduce the harm. Together with several of my colleagues (including some candidates running for reelection who are themselves supported by Jobs for NY), I am therefore introducing a package of legislation that will: 1. Close the LLC loophole for IEs. Under New York State election law, individuals can give up to $150,000 annually to all registered political committees. However, corporations are limited to $5,000 annually. Unfortunately, under a 1996 NYS Board of Elections opinion, LLCs are considered individuals, so a single firm can funnel $150,000 through each of it LLCs. And real estate corporations often set up an LLC for each property they own. NYCs Campaign Finance Law addresses this issue for direct contributions to candidates, by banning LLC contributions entirely. However, it is currently silent on LLC contributions to IEs. Since the Campaign Finance Act already regulates LLCs separately, we believe it would be legally permissible for the NYC law to treat LLCs as corporations, for contributions to IEs in NYC elections. There are legal challenges underway to New York States contributions limits regarding IEs. However, as long as those limits stand, New York City could close the LLC loophole. 2. Require any IE mailings and communications to list the identity of the top five donors to the political committee, so voters will know something about who's behind them. Both California and Connecticut have laws in place that require this. Connecticuts recent law, Public Act 13-180, which Governor Molloy signed into law earlier this year, also includes additional reporting requirements on transfers and payments into IE accounts, in order to prevent individuals from hiding behind corporate shells. 3. Requiring a warning on each IE mail piece: This Independent Expenditure mailing is toxic to democracy.* *Or, since that likely wont pass Constitutional muster, maybe something more like: This mailing is funded by an Independent Expenditure, paid for by [top 5 donors], and is not subject to the contribution and expenditure limits of the NYC Campaign Finance Board, which were designed to

protect NYCs elections for undue influence of money in politics. Find out more at [CFB website].