Election Finance Ordinance Invites Abuse, Panel Says : Wealthy Aided by City’s Tough Rules; Overall Spending Ceiling Is Suggested

San Diego has the toughest local campaign finance ordinance in the nation, but the law has failed to curtail the spiraling costs of running for office and, in fact, invites “creative fund-raising alternatives” that circumvent its intent, a new statewide study concludes.

In a 523-page report examining political contribution laws in 18 cities and counties throughout the state, the California Commission on Campaign Financing described San Diego’s 16-year-old law as “the most stringent campaign reporting ordinance anywhere.”

Even so, the ordinance has loopholes that should be closed, and its very severity--in particular, a relatively low $250 limit on donations and a ban on corporate contributions--has spawned new problems to replace the ones that the law corrected, the blue-ribbon commission concluded.

Unfair Advantage for Wealthy

The tough restrictions on the amounts and sources of campaign donations have given an unfair advantage to wealthy candidates who are able to underwrite their own races, the report said. The law’s other undesirable byproducts include increased spending by so-called “independent expenditure” committees that work on candidates’ behalf but are not directly linked to them and “organized giving,” in which multiple employees of a single company contribute to a candidate or proposition campaign--a growing practice that undermines the prohibition on corporate donations.

To rectify those shortcomings, the commission recommends that the city consider, among other steps, the adoption of overall campaign spending ceilings and provisions intended to discourage wealthy candidates from spending their own money.

The 25-member commission’s somewhat ambivalent attitude about the San Diego campaign ordinance’s impact is perhaps best captured by the contradictory phraseology used to describe the local measure and the panel’s own recommendations. Although the chapter in the report dealing with San Diego is titled “San Diego: Toughest Campaign Financing Ordinance in the Nation,” the commission’s news release outlining its findings is headlined: “San Diego’s Campaign Finance Law Should be Strengthened.”

“In San Diego, the severity of the law, without other compensating features, has produced problems,” explained Tracy Westen, the commission’s executive director. “Contribution limits will work when mixed with other provisions. But standing alone, they cause difficulties.”

In large measure, those difficulties are attributable to political fund-raisers’ ingenuity in finding ways to generate ever-increasing amounts of campaign money while staying within the letter, if not the spirit, of the law. As Mark Nelson, executive director of the San Diego Taxpayers Assn., noted in the report: “Campaign finance laws are like a dam. Water will always find a way around it.”

Expensive Campaigns

Although envisioned both as a method of reducing political contributors’ influence and lowering campaign costs, San Diego’s $250 limit on individual donations has accomplished neither goal, the report concludes. The increase in campaign costs consistently outpaced inflation, making $250,000-plus council races routine by the mid-1980s.

“Contribution limits by themselves don’t automatically reduce spending--they just make candidates work harder to raise the money,” Westen said. Indeed, the need to solicit contributions in relatively small increments simply means that candidates must devote more time to fund raising and try to attract donations from greater numbers of people.

With their path to large donations blocked by the formidable $250-per-election barrier, political fund-raisers have devised other “creative . . . alternatives” to fill campaign coffers, the report emphasized.

One favorite tactic has been dubbed “organized giving,” a practice in which numerous employees of a single company contribute--often simultaneously--to a candidate. Frequently, employee donation checks are gathered at a workplace fund-raiser, then bundled together and delivered to the candidate’s headquarters.

So long as the employees are not reimbursed--and there are frequent questions on that point, with some speculating that indirect reimbursements are hidden in expense accounts--the coordinated individual donations are perfectly legal under San Diego’s ordinance. The practice, however, clearly contradicts the intent of the law.

“Each contribution may be limited in individual importance, but a coordinated bundle of employee contributions can provide the impact of a large corporate gift,” the report said. “ ‘Organized giving’ tends to undermine the objective of San Diego’s ordinance because employers rather than individual employees get the credit.”

Illustrating how the practice has become commonplace, the report pointed out that the employees of eight major businesses--among them, SDG&E;, development companies, law firms and banks--contributed nearly $130,000 to council members from 1983 to 1985. In the 1984 mayoral race, Mayor Roger Hedgecock received $7,250 from 23 employees of the Herzog Contracting Co., which then was involved in a controversial trash-to-energy project, while his opponent, Dick Carlson, received 32 contributions from officials of Arcwel Corp., a shipbuilding company.

As a result of such patterns in campaign giving, San Diego’s ordinance has done little to “eliminate the appearance of excessive contributor influence,” according to the report. That is particularly true in regard to the development industry, which has long been one of the major donors to local races and, consequently, is often accused of exercising undue influence at City Hall.

Under another fund-raising artifice, candidates can legally accept checks for more than $250 if the funds are intended not only for the current campaign, but also to help pay off debts from a past race and for a future election. For example, using that tactic--which former City Councilman Bill Cleator is credited with pioneering in 1985--a couple could contribute $3,000, with the money representing the maximum $250 individual donation for both the primary and general election in three separate campaigns.

The strict contribution limits, combined with some candidates’ efforts to avoid criticism by limiting the amount of “development money” that they accept, has prompted wealthy candidates to increasingly rely on their own funds, the report noted.

Candidates’ willingness to bankroll their own campaigns, a trend not anticipated when the local ordinance was approved in 1973, causes San Diego’s campaign finance breakdown to differ markedly from that of the other cities examined. In San Diego, 25% of all contributions to local races come from the candidates themselves, contrasted with an average of only 5% in other cities and counties. Among challengers, there is an even greater tendency to self-finance campaigns, with 33% of their expenditures consisting of their own money.

In recent elections, six-figure loans from wealthy candidates to their campaigns have become a fixture in San Diego politics. In her unsuccessful 1983 mayoral campaign, Maureen O’Connor spent nearly $560,000 of her own money, and, two years later, Abbe Wolfsheimer spent $229,000 of hers in winning the 1st District council race. Two years ago, college professor Bob Filner and lawyer Michael Aguirre spent a combined $436,000 in personal money in the 8th District campaign won by Filner.

Although candidates often are criticized for devoting most of their time and money to TV and radio ads, to the detriment of door-to-door politicking and personal contact with voters, the report praises the manner in which local candidates allocate campaign resources.

Thirty-second ads and mailers may, indeed, be rather impersonal appeals for votes. But they represent contact with voters, and substantially more of that interaction between candidate and the public occurs in San Diego than elsewhere, the report said. In San Diego, 53% of all campaign money is spent on voter contact, contrasted with only 33% in other large jurisdictions, where most money goes to overhead costs, such as personnel, consulting fees and headquarters costs.

Other flaws or problems identified in the report include:

* San Diego election officials’ failure to enforce a $250, 30-day credit limit designed to prohibit indirect contributions to candidates. In the absence of strict enforcement, it is not uncommon for San Diego political consultants to extend tens of thousands of dollars in credit to the candidates whose campaigns they manage via advance payments for media ads and other costs.

* The growth of “independent expenditures,” in which individuals or groups can spend unlimited amounts on behalf of candidates or causes, so long as the expenditures are not coordinated with the candidates. In the 1986 mayoral race, for example, Hotel del Coronado owner Larry Lawrence spent more than $25,000 for a mailer supporting O’Connor. The year before, Councilman Ed Struiksma, who faced only token opposition in his own reelection campaign, spent more than $100,000 on radio ads supporting Wolfsheimer and unsuccessful council candidate Jeanette Roache.

* Candidates’ continued reliance on established donors--again, primarily in development-related businesses--rather than drawing financial support from a wider range of individuals from more diverse backgrounds. “The ordinance has not broadened the base or type of contributor,” the report said.

To alleviate those problems, the commission recommended that San Diego consider establishing overall campaign expenditure ceilings, amending its ordinance to discourage wealthy candidates from spending their own money and limiting donations to independent expenditure committees.

A major potential drawback to an expenditure ceiling, however, is that it would require public financing--an unlikely scenario, given the city’s severe budget constraints. Absent public financing of campaigns, however, an overall spending ceiling could be legally challenged on the grounds that it violates free speech guarantees as reflected in campaign donations.

To equalize competition for candidates facing wealthy opponents, the commission suggested that San Diego consider adopting a Sacramento law aimed at minimizing the political impact of candidates’ personal financial inequities. In Sacramento, if a candidate makes a large donation to his own campaign, his opponents are permitted to raise an equal amount without regard to individual limits. The effectiveness of that approach, however, has been severely impaired by a recently approved statewide ballot initiative capping individual donations at $1,000--only $750 higher than the San Diego limit.

Similarly, when independent expenditures made on behalf of a candidate surpass $10,000, the $250 limit on individual donations could be lifted to help candidates defend themselves against large outside expenditures, the report recommended.

Noting that the city attorney’s office has been criticized for perceived laxity in enforcement of the ordinance, the report points out that both the county Grand Jury and a task force that reviewed San Diego’s election laws in the mid-1980s recommended that enforcement be shifted to the district attorney’s office.

The district attorney, who enforces the law in county elections, initially had jurisdiction over city races as well. However, after five years, the district attorney’s office, complaining that the administrative burden was too great, persuaded the City Council to transfer enforcement powers to the city attorney’s office.

“Elections and campaign fund raising in San Diego already possess many positive characteristics,” the report concluded. “Without expenditure ceilings, however, the toughest local law in the country will, in all likelihood, fail to affect existing trends toward higher-spending campaigns, increased participation by wealthy candidates and attempts to evade the city’s low contribution limits.”