Tips for Complying with the FPPC’s Revised “500 Foot Rule” Addressing When Public Officials Have a Conflict of Interest in Decisions Potentially Affecting Their Real Property

August 29, 2019

As local government officials and attorneys are no doubt aware, the Fair Political Practices Commission (FPPC) has once again changed its rule regarding property-related conflicts of interest. On January 17, 2019, the FPPC amended Regulation 18702.2, which governs whether public officials have a conflict of interest in governmental decisions potentially affecting their real property. Recent advice letters from the FPPC provide useful insights as to how this new rule will be applied.

As background, the Political Reform Act prohibits officials from participating in governmental decisions in which they have a disqualifying interest. If a public official knows or has reason to know that a governmental decision will have a reasonably foreseeable, material effect on his or her financial interests, the official must recuse himself or herself from participation in that decision. The recent amendments to Regulation 18702.2 set out the materiality standards for a decision’s reasonably foreseeable effect on an official’s real property interest.

Of particular interest is Regulation 18702.2(a)(7). Although this rule is commonly referred to as the “500 foot rule,” it also has important implications beyond that distance. The rule now provides that a decision’s reasonably foreseeable effect on an official’s real property interest is material if it “[i]nvolves property located 500 feet or less from the property line of the parcel unless there is clear and convincing evidence that the decision will not have any measurable impact on the official’s property.” Conversely, the amended regulations assume that a governmental decision is not material if it involves property located 1,000 feet or more from the official’s property unless there is clear and convincing evidence to the contrary.

For decisions impacting property between 500 and 1,000 feet from an official’s real property, a decision’s effect on an official’s real property interest is material if the decision would change the parcel’s market value, development potential, income producing potential, highest and best use, or character by substantially altering traffic levels, intensity of use, parking, view, privacy, noise levels, or air quality. (Regulation 18702.2(a)(8).)

The FPPC did not explicitly define the “clear and convincing evidence” standard critical to determining when officials may participate in decisions involving property within 500 feet of their property. Some insight can be gleaned, however, from the advice letters the FPPC has issued under the new regulations. The letters repeatedly emphasize that the “clear and convincing” standard can only be met through use of plentiful factual evidence. (See, e.g., A-19-007, p. 6 (April 5, 2019); A-19-018 (March 15, 2019).) For officials with property within 500 feet of the property at issue in the governmental decision, the FPPC has considered evidence related to visual impacts, sound, intensity of use, traffic, parking, and changes in market value. For instance, the FPPC found clear and convincing evidence to rebut the presumption of a material effect on property with respect to a proposed trail route where the nearby land was already used for public recreational purposes; and the trail would not be visible from the official’s house; was separated from the residence by a creek, several houses, and a street; and would not result in noise impacts. (A-19-109 (June 14, 2019).)The presumption of materiality may also be rebutted with factual evidence showing that the decision’s impact on the property will be nominal, inconsequential, or insignificant—such as adding a single trash can to a street corner on an official’s block, A-19-082 (May 30, 2019), or removing tamarind trees on district property outside the official’s gated community, A-19-086 (June 14, 2019).

In contrast, the FPPC determined that the presumption of material effects on property within 500 feet had not been rebutted in situations where there was evidence of increased intensity of use, traffic, noise, and changed market value of the official’s property. (A-19-002 (Feb. 19, 2019) (reopening a community theater within 500 feet of official’s nonconforming property would have material impact on official’s real property interest); A-19-079 (May 20, 2019) (building new condos within 500 feet of official’s residence would have material impact on official’s real property interest).) It appears, then, that the FPPC considers many of the same factors under the 500-foot clear and convincing evidence standard as it does for properties between 500 and 1,000 feet away. (See Regulation 18702.2(a)(8); see also A-19-077 (June 14, 2019) (building of new commercial redevelopment would be material to official’s residence between 500 and 1,000 feet away because it would impact parking, intensity of use, and market value); A-19-118 (June 26, 2019) (repurposing old winery building would be material to official’s property between 500 and 1,000 feet away because it would impact traffic, parking, and intensity of use).) In evaluating whether there is clear and convincing evidence to rebut a presumption of materiality, an official would be wise to focus on these factors, regardless of how far away his or her property may be from the property that is the subject of the governmental decision. If the answer is not clear, it may also be helpful to seek advice from the FPPC. Note that, to date, the FPPC has not issued an advice letter in which it found clear and convincing evidence of materiality for a decision affecting land more than 1,000 feet from an official’s property.

Even where the 500-foot rule presumption is not rebutted or where there is evidence of materiality for an official’s property between 500 and 1,000 feet, officials may still be able to participate in the governmental decision under the “public generally” exception. Per Regulation 18703(a), “[a] governmental decision’s financial effect on a public official’s financial interest is indistinguishable from its effect on the public generally if the official establishes that a significant segment of the public is affected and the effect on his or her financial interest is not unique compared to the effect on the significant segment.” A significant segment means at least 25% of the business entities, real property, or individuals within the official’s jurisdiction. (Regulation 18703(b).) For example, the FPPC advised that council members with residences and a mayor with a real estate business within 500 feet of a redevelopment corridor could participate in related decisions because the redevelopment would impact thousands of residential properties and businesses. (A-19-081, p. 5 (June 26, 2019).) Similarly, a council member whose personal residence would be materially impacted by a redevelopment project was nevertheless allowed to participate in decisions concerning that project because the massive project in a relatively small city meant that more than 25% of residential properties would be impacted. (A-19-032, pp. 8-9 (April 15, 2019).)

In sum, navigating these new changes and avoiding potential conflicts can be challenging for local government officials and attorneys. Here are a few recommendations to make that process easier:

Create conflict maps for all officials subject to the Political Reform Act. Mapping concentric circles around an official’s real property interests (including residences and business/investment holdings) showing the relevant radii (500’, 500’ to 1,000’, and beyond 1,000’) will allow the official to quickly identify potential conflicts as they arise.
Consider getting an appraisal or some other type of expert report. Though appraisals are not determinative on conflict of interest issues, id. at p. 6, they can help an official gather the type of factual evidence needed to evaluate how to comply with the FPPC’s rules and are generally “considered a good-faith effort by a public official to assess the financial effect of a decision on his or her real property.” (Id.) An appraisal orequivalent evaluation should be conducted by a disinterested and qualified real estate professional who has an accurate understanding of the pertinent facts, circumstances, and Commission regulations. (Id.) An appraisal can be used in conjunction with, or instead of, seeking a formal FPPC advice letter. Nonetheless, the FPPC has found that the “clear and convincing evidence” standard has been met without an appraisal. (See,e.g, A-19-109; A-19-082; A-19-086.)
Consult with agency counsel. Agency counsel (e.g., the city attorney) can help officials identify and evaluate complex FPPC rules and may even help officials obtain formal advice from the FPPC. Government officials should be aware, however, that agency counsel advice will necessarily be given from the agency perspective because the agency as a whole is the client. A city attorney’s overarching concern will therefore be to protect the quality of the decision-making process.

For more information, contact SMW attorney Tori Gibbons.

This article is intended for information purposes only and is not legal advice. This article is not intended to be a source of solicitation. This article is intended, but is not promised or guaranteed, to be correct, complete, and up-to-date. This article does not constitute a guarantee, warranty, or prediction regarding the outcome of any legal matter. Readers should not act on the information provided in this article without seeking professional legal counsel.