THE POLITICAL REFORM ACT PHASE I

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1 INTRODUCTION THE POLITICAL REFORM ACT CONFLICT OF INTEREST IMPROVEMENT PROJECT In May, 1998, the FPPC initiated the Conflict of Interest Regulation Improvement Project. Phase I was completed in early 1999 and implemented the reorganization of the regulations into a more user-friendly format without substantive change. Phase I also christened the 8-Step Plan for analyzing conflict questions. On December 8, 2000, the Commission concluded Phase II with the adoption of eighteen revised regulations. The regulations have been approved by the Office of Administrative Law and became effective February 1, The governor also signed AB 974, described below. LEGISLATIVE CHANGES: AB 974 Dollar Thresholds Adjusted for Economic Interests A legislative change has adjusted the thresholds for when an official has an economic interest, as follows: (1) business entity from $1,000 to $2,000; (2) real property from $1,000 to $2,000; and (3) a source of income from $250 to $500 or more in the twelve (12) months prior to the decision. (Government Code Section 87103). This same measure (AB 974) amended Govt. C. Section which defines what is considered the appropriate use of campaign funds. The definition of substantial personal benefit has been increased from $100 to $200 [Section 89511(a)(3)]. PHASE I Phase I of the regulations produced two primary results. First, it promulgated what is known as the eight step approach to analyzing a conflict of interest. The aim of this approach was to simplify the analysis so that when a public official or a city attorney requires oral or written advice from the FPPC, they could better frame the question for which they were seeking assistance. For example, if at any step of the eight step process the answer is no, there is probably not a conflict. Alternatively, if you go through the analysis and get stuck on the key step, step number six, the FPPC will be able to respond more quickly to an inquiry. The second product of the Phase I improvements was to reorganize the regulations so that they related directly with the eight step approach. Specifically, there was an effort to make the numbering of sections consistent and predictable. For example, if you re examining whether a financial interest of the public official qualifies as an economic interest (step 3 of the analysis), you will note that business entities are described under and interests in real property are described under section When you go down to review which materiality standard applies you will note that for business entities the materiality standard is also.1 and then materiality standards for real property is.2, etc

2 IS THERE A CONFLICT: 8 STEP APPROACH 1. Is a public official involved? 2. Is the public official participating in the making of (or influencing) the governmental decision? 3. Does the official have a statutorily defined economic interest? 4. Is the economic interest directly or indirectly involved? 5. Materiality Standard? 6. Is it reasonably foreseeable that the decision will have a material effect on the official s economic interest? 7. Will the decision s effect on the officials economic interest differ from the effect on the public generally? 8. Legally Required Participation - 2 -

3 STEP 1 IS A PUBLIC OFFICIAL INVOLVED? - PERSONS COVERED Elected officials All boards and commissions with decision making authority Members of advisory boards, commission, and committees, etc., if the entity s recommendations are routinely followed track record Some consultants - if they exercise delegated power or authority STEP 2 MAKING OR PARTICIPATING IN A DECISION Voting on a matter Appointing a person to a position Making a determination not to act Negotiating Influencing Advice, Research Exceptions Ministerial, secretarial or clerical Representing his/her personal interest at a public hearing or before a public agency Limitation - applies only when it affects the official s personal interest (i.e., real property or business owned by the official or immediate family) Participation by the official relative to his/her compensation or contract with the agency...appearing before the agency If the official has a financial interest, the official is prohibited from: in any way attempting to use his or her official position to influence a governmental decision Contacts with agency personnel or other attempts to influence on behalf of an official s business entity, client or customers are prohibited General contractors Attorneys - 3 -

4 Architects and engineers Contacts with other agencies by using your official position/stationery Exceptions: Personal interest Speaking to the media and general public Specific written and oral architectural presentations (CCR, Title 2, (b)(2-5) STEP 3 ECONOMIC INTERESTS COVERED 1. Business Entities ( ) 2. Interests in real property ( ) 3. Sources of income ( ) 4. Donors of gifts, their agents and intermediaries ( ) 5. Personal Finances ( ) Economic Interests - What Qualifies? -Employee A. Business Entities -Investor -Officer/Director -Owner A direct or indirect interest of $2000 or more [Govt. C ; 87103(a)] Corporations, partnerships, sole proprietorships or other enterprises operated for profit Does not include bank accounts, investments in mutual funds, etc. Limited partners may have an investment in the general partner and partnership itself; not in other limited partners Parent/subsidiary corporations Indirect - owned by spouse, dependent child; a trust where official is beneficiary - investments held by business entity where official, spouse or dependent has a 10% interest or greater If Fortune 500/NYSE stock investment < $25,000, apply Indirect Rules B. Interests in real property Your home, rental property or other real estate - 4 -

5 Any direct or indirect interest - $2000 or more [Govt. C ; 87103(b)] Equity, option, lease ownership, mortgage Deed of trust Located in or within 2 miles of the geographical boundaries C. Sources of Income and Gifts (1) Income $500 in the 12 months preceding the decision [Govt. C (c)] Salary, wages, gifts, certain loans, proceeds from sales (regardless of profit) and certain monetary and non-monetary benefits Exclusions: campaign contributions, government salaries, certain payments from nonprofits, inheritances, interest on deposits, dividends, income (other than gifts) from entity outside of jurisdiction which did not do business within jurisdiction in the past 2 years and no plans to do so D. Sources of income and gifts (2) Gifts From anywhere - inside or outside the jurisdiction $50 or more - disclose on annual statement $320 - gift limit in effect from January 1, 2001 until December 31, 2002 (aggregate in 12 calendar months) Disclosure Aggregate from one source Based on calendar year Disqualification Largely gone now - but disclosure may result from exempt gifts and because you go back 12 months preceding the decision not calendar months! - 5 -

6 STEP 4 IS THE INTEREST DIRECTLY OR INDIRECTLY INVOLVED? Direct Involvement The officials economic interest is the subject of the decision or, in the case of real property, is so close to the subject of the decision that it can be considered directly involved (materiality standard; Step 5). Indirect Involvement The economic interest is not the subject of the decision, but may be affected by the decision. Determining Involvement: Business Entities; Sources of Income, Sources of Gifts [ (a)] If the person or business initiates or is a named party in the proceeding Real Property [ (a)] The decision involves a zoning, rezoning, annexation, sale, lease, issuance of a permit, etc. or the property is within 500 feet of the subject property or the decision involves construction of, or improvements to, streets water, sewer, storm drainage or similar facilities, and the real property will receive new or improved services (not including repairs, replacement, or maintenance of existing services). Personal Finances [ (a)] On the public official, spouse, dependent child STEP 5 WHAT IS THE MATERIALITY STANDARD? A. BUSINESS ENTITIES [ (a)] 1. Directly Involved Small Entities materiality presumed Fortune 500 and NYSE Companies material if investment is more than $25,000; if less, apply indirect materiality standards The official is an officer, director, partner, trustee, employee, manager 2. Indirectly Involved [ (b)] FORTUNE 500, NYSE, NASDAQ, AMEX (or qualifying but not listed), AND OTHERS dollar thresholds (c)

7 B. REAL PROPERTY Within 500 feet (Directly Involved) Effect is presumed material. $1.00 effect requires DQ More than 500 feet (Indirectly Involved) Effect is presumed not to be material. Leasehold Interests Month to Month Tenancies Exempt Within 500 feet of subject property effect is presumed to be material unless there is no effect on the termination date of the lease; the amount of rent paid by, the value of sublease rights; the legally allowable use or the current use of the real property by the lessee; or the use or enjoyment of the leased real property. Beyond 500 feet, presumed not to be material unless the decision changes the legally allowable or actual use of the real property; substantially enhances or significantly decreases the lessee s use or enjoyment; increases or decreases the amount of rent for by 5 percent during any 12- month period; or will result in a change in the termination date of the lease. C. SOURCES OF INCOME [ ] SOURCES OF GIFTS [ ] D. NONPROFIT AND GOVERNMENTAL ENTITIES [ (b)(2)] Criteria is similar to that for for-profit corporations and based on size E. INDIVIDUALS DQ if effect on individual is $250 (Personal Financial Effect) STEP 6 FORESEEABILITY Disqualification required if the effects of a decision are reasonably foreseeable under all of the circumstances at the time the decision is made Foreseeable - need not be direct or certain; reasonable possibility that effect will occur NOT merely conceivable - 7 -

8 KEY TO STEP 6 Use the materiality standard to frame the crucial question: Is it reasonably foreseeable (substantially likely) that the materiality standard will be met as a result of the governmental decision? YES? Conflict, unless Public Generally applies. NO? No conflict. STEP 7 PUBLIC GENERALLY EXCEPTION [18707] You have a conflict however, the decision has the same effect on you as on the public generally, and therefore, you may be able to participate Here, you have a financial interest and the governmental decision will have a foreseeable material effect on that interest, BUT, the decision will affect the public official s financial interest in substantially the same manner as the general public, the official can participate ( 87103; Regulation ). STEP 8 LEGALLY REQUIRED PARTICIPATION RULE OF NECESSITY A narrow exception - under limited circumstances and because of the necessity for the government to continue to function, the official may proceed despite the conflict Not for convenience; not to break a tie; not when matter can be continued; only when there is no reasonable alternative to making the decision; only when city attorney says ok! Call the FPPC first! - 8 -

9 CONFLICT IMPROVEMENT PROJECT: PHASE II The following is a synopsis of key statutory and regulatory changes. The statutory changes (e.g., $1000 to $2000) became effective January 1, 2001; the regulatory changes became effective February 1. The changes are discussed relative to their place in the 8- step analysis. STEP ONE: IS THE INDIVIDUAL A PUBLIC OFFICIAL? Definition of Public Official; Consultants These changes coordinate various references in the regulations to public officials and adds committee to the definition of public official to clarify that, in addition to boards and commissions, that advisory committee members may be considered public officials if they have decision-making authority [18701(a)(1)]. The Commission also added language to clarify the application of this term to consultants. With regard to consultants, the section now reads: (Projects O and P; Regs ) (a) For purposes of Government Code Section 82048, which defines public official, and Government Code Section 82019, which defines designated employee, the following definitions apply: (2) (B) Serves in a staff capacity with the agency and in that capacity participates in making a governmental decision as defined in Regulation or performs the same or substantially all the same duties for the agency that would otherwise be performed by an individual holding a position specified in the agency s Conflict of Interest Code under Government Code Section STEP TWO: IS THE OFFICIAL MAKING OR PARTICIPATING IN MAKING A GOVERNMENTAL DECISION? Announcement of Disqualification Prior to February 1, 2001, FPPC written advice letters required that an official publicly declare that they were not participating in the governmental decision because of a conflict of interest and to identify the economic interest with some specificity. The new rule makes this disclosure permissive. It further provides: (1) that a disqualified official is prohibited from attending a closed session; and (2) may not obtain closed session materials; and (3) if a disqualified official remains on the dais, their presence may not be counted for purposes of achieving (or maintaining) a quorum

10 The new regulation will not affect an individual agency s authority (by local rule) to require a disqualified official to leave the dais and/or the meeting room upon disqualification. (Project M; Regs and 18730). Comment: This is an issue which will bear watching. First off, it can create confusion because local procedural rules such as a council policy and procedure may require the member to announce the disqualification and/or leave the dais. Secondly, conflicts which arise under Government Code Section 1090 often require an announcement for the purposes of making a record and/or disqualification. Finally, this issue can be problematic should the local rules not require the member to leave the dais because the city attorney will never know whether or not the member who has a conflict is conflicting out and merely remaining on the dais. At what level is the official trying to influence a governmental decision (Step 2)? When the councilmember or other official passes a note to a fellow councilmember do we need to know the content of the note? Are facial inflections part of influencing governmental decision? May the conflicted councilmember ask a question? It was clear from discussions at the Commission level and as part of the Interested Persons meetings that having the FPPC draft a regulation to govern the various situations was probably not the best path. This was primarily because the draft regulation was a page and a half long and posed more questions than it resolved. The following is an excerpt from the policy and procedure manual which guides the Mountain View City Council and subordinate boards and commissions: Conflicting Out Any Councilmember who is disqualified from voting because of a conflict or potential conflict of interest shall inform the Council of the conflict or potential conflict prior to the consideration of the item. After a member so advises the Council he/she shall exit the Council meeting room prior to consideration of the item. This provision is broad enough to apply to all situations (PRA and Section 1090) and applies not only to meetings in the Council Chambers, but to any room where the Council (or other boards) may meet. STEP THREE: WHAT ARE THE OFFICIAL S ECONOMIC INTERESTS? Personal Financial Effects Rule - In 1985 the legislature amended section to expressly provide that an official has a financial interest in a decision that has a reasonably foreseeable material financial effect on the official, whether or not the decision may have a foreseeable material financial effect on one of the economic interests separately enumerated in the statute at subdivisions (a) through (e). This change is often referred to as the hip pocket rule and was aimed at closing a perceived loophole, e.g., where the decision may have a financial effect on the public official, but may not be related to one of the economic interests enumerated in the statute (i.e., real property, business entity, source of income, etc.)

11 In Project E, the Commission amended Regulation to expressly characterize a public official s personal finances as an economic interest which is to be analyzed in the same manner as other economic interests identified in section This amendment clarifies, but does not change the Commission s existing interpretation of section Secondly, the Commission also reaffirmed its 1995 decision to disregard the personal financial effects caused by a governmental decision which effects the official s investment in the business entity or other interest in real property. In other words, if the official s investment in either (1) a business entity; or (2) real property is at issue, you do not need to analyze the effect under Reg The logic behind this is that the higher materiality threshold which apply to investment interests of the public official (i.e., real property or source of income) should not be swallowed up in every case by the $250 materiality threshold applied to personal financial effects. Finally, Project E relocated current Regulation to Regulation so that the exception to the application of the personal financial effects rule would be located where the materiality standard for that rule is given. This renumbering did not change existing law or advice. Government Salary Exception Section 82030(b)(2) of the Act excludes from the statutory definition of income certain payments to an official from state, local, or federal government agencies. Since the Commission first explained the operation (and limits) of this provision in In Re Moore (1977) 3 FPPC Ops. 33, the government salary exception has generated frequent questions from the regulated community, and numerous advice letters. The Commission adopted a new regulation, to codify prior responses to the most commonly asked questions about the government salary exception. This definitional regulation does not purport to resolve all the problems in this area, but it does provide guidance on the most commonly encountered issues and eliminates some inconsistent advice provided over the past decade 1. The Commission also reaffirmed the utility of current Regulation 18705(c)(1), a special rule providing that an official has a conflict of interest in employment decisions unique to his or her spouse even if the financial effect of the decision would otherwise be disregarded under the government salary exception. The Commission relocated this to Regulation , where rules applicable to personal financial effects are consolidated. (Project F) 1 These amendments require the recision of numerous advice letters: These include the Battersby Advice Letter, No. A ; Rodriques Advice Letter, No. I ; Lanning Advice Letter, No. I ; Carrillo Advice Letter, No. I ; Williams Advice Letter, No. I ; Galstan Advice Letter, No. I , Morita Advice Letter, No. I ; Campbell Advice Letter, No. I ; Fiscaro Advice Letter, No. A ; Hall Advice Letter, No. A ; Hanna Advice Letter, No. A ; Underwood Advice Letter, No. A ; Koski Advice Letter, No. I ; Bidou Advice Letter, No. A ; and Owen Advice Letter, No. A

12 Because there are instances in which a government agency is a source of income to a public official notwithstanding the government salary exception, the Commission decided that a materiality standard should be expressly defined for governmental sources of income. This would apply, for example, where an official receives a payment under a contract from a governmental entity, which is not considered salary. To effect this, Commission amended Regulation (b)(2) which prescribed materiality standards for non-profit entities to now include governmental agencies that are sources of income. The decision ratifies Commission staff s advice in cases when a governmental entity must be regarded as a potentially disqualifying source of income. (Project G). Doing Business In the Jurisdiction The phrase doing business in the jurisdiction is used in sections 82030, 82034, and which define income, investment, and business positions, respectively. The Act itself does not define the term, however, the Commission, in In Re Baty (1979) 5 FPPC Ops. 10, concluded that the entity is doing business in the jurisdiction if the entity has business contacts within the jurisdiction, and that the regular distribution, manufacturing and sales activity in the jurisdiction would constitute doing business in the jurisdiction. Newly proposed Regulation codifies this opinion. The new regulation therefore provides a better definition of when an entity is doing business in the jurisdiction. There was a staff proposal to include even minimum contacts by the business in the jurisdiction via websites, etc. The Commission limited the term business contacts to those entities who maintain a physical presence in the jurisdiction. Additionally, the Commission included a list of activities which constitute business contacts ; marketing was expressly excluded from the list. (Project N; Reg ). STEP FOUR: ARE THE OFFICIAL S ECONOMIC INTERESTS DIRECTLY OR INDIRECTLY INVOLVED IN THE DECISION? Project D which relocated two provisions formerly located in Regulation (b) and Project E which may clarify and change Regulation are more fully discussed under Step 5 and Step 3, respectively, in this paper. STEP FIVE: WILL THE FINANCIAL EFFECT OF THE DECISION ON THE OFFICIAL S ECONOMIC INTEREST BE MATERIAL WHAT STANDARD APPLIES? Material Financial Effect on a Business Entity This revision reduced the number of categories for business entities from seven to five and greatly increased the dollar thresholds for determining materiality. For a Fortune 500 company, a decision will be material if its effect on the entity s (1) gross revenues in a fiscal year is $10M or more; (2) expenses increase by $2.5M or more; or assets or liabilities by $10M or more (previously these figures were $1M, $250K and $1M, respectively). There are similar changes for investments listed on the New York Stock Exchange, and a separate category for NASDAQ or AMEX. Many of the adjustments to the threshold dollar amounts are

13 essentially tenfold increases. The dollar thresholds applicable to the various categories is shown on an informational chart attached behind the new regulations. Exception: The exception for a large directly involved company has been retained and the threshold increased [Section (b)(2)]. This applies to allow a public official to avoid application of the one penny rule for directly involved business entities. If the public official s investment is worth $25,000 or less and the entity is a Fortune 500 company or meets the criteria for listing on NYSE, the official may apply the indirect standards for determining materiality. The former standard was $10,000. (Project A; Reg ). Note the wording of this regulation: If the business entity is listed on the Fortune 500, or the materiality standards in subdivision (c)(2) of this regulation if the business entity is listed, or meets the financial criteria for listing, on the NYSE. What this means is that a large company listed on the NASDAQ may meet the criteria for listing on the NYSE and therefore this exception which avoids the one penny rule and directs you to go through the indirect analysis (the effect of the decision on revenues, expenses or assets) could apply. This concept is also important because the regulations make clear that in order to pick the materiality standard for your business entity, you are to evaluate the highest threshold criteria that could be applied to a company. For example, if your company is traded across the counter, but is of sufficient size to qualify for the NASDAQ listing (although not listed on NASDAQ) you can apply the NASDAQ materiality standards. Likewise with a NASDAQ or AMEX company you can apply the NYSE/Fortune 500 standards [and thus the exception of (b)(2)] if the company qualified for listing on the NYSE. This is an added level of complexity that may or may not be worth the battle, however, if you need to do this research, you can go to the following websites for guidance: NYSE: FORTUNE 500: fortune.com NASDAQ: AMEX: The information available on the above websites is significant, but not instructive nor helpful. If you are trying to do this analysis at the last minute you will probably not be able to conclude with any degree of certainty whether or not a company is eligible for listing on the higher exchange and therefore may have to apply the lower standard. There are many websites which will give you access to financial information about companies such as annual revenues and market capitalization. You can typically access this information on the homepage of Netscape Navigator or Microsoft Explorer, however, you might try one of the more finely tuned websites such as Stockpoint.com

14 Additional Changes The Commission approved descriptive definitions for the accounting terms used in the regulation. The descriptive definitions expressly defer to Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAAS). The Commission also approved a definition of asset that provides that collateral (such as real property) that secures a loan made by a business is not an asset of the business unless foreclosure proceedings have been initiated. However, the promise to repay the loan is an asset of the business. Finally, the Commission approved a methodology for public officials to use in determining materiality. The proposed language provides that officials may rely on the most recent independently audited financial statements of the business entity in question, so long as the statements have characteristics that ensure their accuracy. (Reg ). We re not quite sure what the last phrase means; I suppose if they are printed in crayon or numbers are whited-out, be suspect. Real Property Changes the regulations for determining when an economic interest in real property is materially affected by a governmental decision. The change eliminates the 2500 foot circle and the 300 foot circle is increased to 500 feet. A real property interest within 500 feet of a proposed governmental decision is considered directly involved thus, the one penny rule applies for determining materiality. Outside of 500 feet, the property is considered to be indirectly involved and the effect of the decision is presumed not to be material, however, a conflict could still arise if the proposed governmental decision would have some other unique (and thus material ) effect on the property (i.e., loss of privacy, view, increase in noise or traffic). (Project D; Regs , ). The sum and substance of all this is that the $10,000 materiality standard is gone; so are the appraisals. Some FPPC staff members and former staff members have reservations that this will open Pandora s Box in terms of possible conflicts, however, the Commission determined that the existing approach (2 circles/appraisals) was unworkable and resulted in many officials, particularly elected officials, not participating when there was no clear conflict and thus no violation of the Act. Finally, the enforcement division advised the Commission that in the ten-plus years since the standard had been in use, the Commission had never prosecuted a violation under the standard, nor did they believe they ever could

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17 STEP SIX: IS THE MATERIAL FINANCIAL EFFECT OF THE DECISION ON THE OFFICIAL S ECONOMIC INTERESTS REASONABLY FORESEEABLE? Project C, Foreseeability, has been deferred to the current regulatory cycle (2001). The FPPC is currently holding Interested Persons meetings on the foreseeability standards. STEP SEVEN: WILL THE REASONABLY FORESEEABLE AND MATERIAL FINANCIAL EFFECT ON THE OFFICIAL S ECONOMIC INTERESTS BE INDISTINGUISHABLE FROM THE EFFECT ON THE PUBLIC GENERALLY? Public Generally Exception In Projects I, J and K, one organizational change and several significant substantive changes were made to the Public Generally Exception. Organizationally, the Commission approved separation of Regulation into two regulations. The current rule will become Regulation Existing Regulation 18707(a) will become Regulation 18707, adding a road map that sets forth several steps that may be followed by a public official to determine if he or she may participate. The Commission decided to codify In Re: Ferraro and In Re: Overstreet, two opinions, when read together provide that the owners of three or fewer parcels are a significant segment of the public generally and that rent control decisions affect the segment in a substantially similar manner. Over the objections of tenant groups from several major cities, the Commission adopted a new exception [ (b)], that would allow landlords of larger residential rental properties to participate in rent control decisions if several factors are met. One of the key factors is that their ownership of residential rental property must be the only economic interest at issue and the exception would not apply if they have any additional economic interests at issue (i.e., contracts from managing rental property). This is a significant change. Heretofore, councilmembers who were tenants were typically able to vote on rent control measures by virtue of the public generally exception; landlords/owners were not. The owner of residential rental property will however, be prohibited from participating if his/her units were directly involved, for example, if the owner applied for a separate rent increase. This new exception also clarifies that the regulation does not restrict the application of the general exception or other special circumstance regulations. For example, if the predominant industries exception applies independently, a public official can still participate in a decision if the requirements of this new exception are not met. The regulation also adds cross-references to regulations that define when an economic interest is directly involved or directly materially effected by a governmental decision. The new regulatory scheme ties the definition of significant segment to the nature of the economic interests of the official at issue. For example, if the economic interest is real property, you must qualify for the exemption by meeting the 10% of property owners test rather than 10% of households or 5,000 people or 10% of the population. The reasoning for this approach was that the second part of the test was that the significant segment group must be affected in substantially the same manner and in this example, only real property owners could be affected in that same manner. (Reg )

18 Consistent with this, the term households is deleted from Regulation 18707(b) since the term could include non-property owners and this would not be helpful in assessing whether the exception applies to a real property interest. The Commission approved regulatory language rejecting staff s prior advice that an official s economic interest within 300 feet of a proposed decision (now 500 feet) would be considered to be affected in substantially the same manner as other properties only if the significant segment (10% of the jurisdiction s property owners) were within 300 feet of the decision. The Commission found it impossible to imagine that 10% of the property would fit within the 300 foot circle. A new regulation defines a significant segment for decisions that affect a federal, state, or local governmental entity in which the public official has an economic interest. [ (b)(1)(D)]. Public Generally Industry Trade or Profession The Commission retained the requirement that more than a single industry, trade or profession be affected to constitute a significant segment, however, altered the current 50% threshold by reducing it to a 25% threshold and added a numerical threshold of 2,000 businesses in an official s jurisdiction or district. The Commission declined to include not-for-profit entities in the subsection applicable to business interests. There is currently no regulation that applies directly to non-profit entities in this context. The Commission amended existing Regulation (renumbered ) to define predominant business, trade or profession as a business trade or profession that constitutes 50% of the businesses in official s jurisdiction and deleted the term elected in that regulation to broaden its application to local non-elected officials. (Reg ). Small Jurisdictions There is an additional exception provided for small jurisdictions (pop. of 25,000 or less). Minor revisions were made to the regulation to reflect the measurement increase from 300 feet to 500 feet, decided under Project D. (Reg ). Water, Irrigation and Other Special Districts The Commission also established special rules relating to the similarity of the effect with respect to governing boards of water, irrigation, and similar districts. Members of such districts who are large land owners are given greater voting power based on the benefits and burdens of having such ownership interests. The Commission approved changes to delete the term significant segment throughout the regulation in order to avoid confusion caused by the current references (Reg , to be renumbered to )

19 STEP EIGHT: IS THE OFFICIAL LEGALLY REQUIRED TO PARTICIPATE IN THE DECISION? Legally Required Participation This regulation has been clarified and reorganized in an effort to provide a road map after the decision in Kunec v. Brea Redevelopment Agency (1997). The Commission approved language that specifies how the public official is to describe the economic interest that gives rise to the conflict and how the disclosures are made as part of the record in both open sessions and closed sessions. The regulation also defines quorum as the minimum number of members required to conduct business. When the vote of a super majority is required to adopt an item, the quorum is the minimum number of members needed in that instance. (Project Q; Reg )