Tom Butt
  E-Mail Forum – 2015  
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  No conflict on Rent Control
July 10, 2015

Despite all the amateur and uninformed legal opinions from ACCE, Tenants Together, and Jo-Ellen Pozner, an assistant professor at the UC Berkeley Haas School of Business, who should know better, and from a Contra Costa Times reporter looking for a story where none exists, the FPPC has long since opined on this very issue and reached a decision that supports me.

In FPPC decision in In re Ferraro (1978) 4 FPPC 62, the Commission concluded that the councilmen (landlords) did not have a disqualifying conflict to vote or participate in a proposed rent control ordinance, because they reasoned that owners of three or fewer rental units would not be affected by rent control decisions in a manner distinguishable from the effect upon a significant segment of the public generally. 

After that decision, the FPPC adopted regulation 18707.9 to codify that decision.

Fast-forward to recent FPPC amendments.  FPPC deleted that section 18707.9 – due to intent to essentially broaden the exception.  In an April 6, 2015 memo to the FPPC Chair and Commissioners, FPPC counsel noted that they were recommending deleting 18707.9 to replace it with “a broader exception that applies equally to all interests in business entities or real properties that meet the new test.  Proposed regulation 18703c(3) provides that the cumulative effect on multiple interests is a unique effect only if the effect is substantially greater than the effect on a single interest.  Under this new standard, multiple interests will no longer result in automatic disqualification.  Therefore, the special rule for multiple rental units is no longer necessary; requiring officials with multiple rental units to meet the significant segment thresholds applied to other decisions.”  (It further notes that because it is unlikely that a residential lessee would act to enrich his or her landlord, there is a special rule allowing officials to take part in decisions that affect all renters of residential property in their jurisdiction when the decision will only effect interests related to the official’s leasehold interest in his or her residence.)

FPPC Section 18703 (Public Generally) was just amended, June 2015.  It states that “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.”  It then states that “A unique effect on a public official’s financial interest includes a disproportionate effect on:

(1) The development potential or use of the official’s real property or on the income producing potential of the official’s real property or business entity.

(2) An official’s business entity or real property resulting from the proximity of a project that is the subject of a decision.

(3) An official’s interests in business entities or real properties resulting from the cumulative effect of the official’s multiple interests in similar entities or properties that is substantially greater than the effect on a single interest.”

Given that the intent of this change in regulation was to broaden the exception, it seems that I, owning only three rental residential units, one of which is exempt under Costa-Hawkins, am more than okay under the new rule.

Tom Butt
Richmond: Mayor's properties prompt calls to sit out vote on rent control
By Karina Ioffee
Posted:   07/10/2015 01:30:55 PM PDT1 Comment | Updated:   less than a minute ago
RICHMOND -- As Richmond hashes out whether to pass rent control or at least create a rent mediation board to consider unreasonable rent increases -- a battle that has stretched out for months -- a new wrinkle has surfaced: Should the mayor, a landlord with multiple properties, recuse himself from the impending decision?
It depends on whom you ask.

The advocacy group Alliance of Californians for Community Empowerment that has regularly organized tenants to show up at city council meetings with signs pushing for rent control, says yes. So does Tenants Together, a tenants' rights group based in San Francisco that has also spoken at Richmond meetings.
Mayor Tom Butt has refused to acquiesce to the demands, saying his interest is indistinguishable from hundreds of other property owners in the city and therefore does not constitute a conflict of interest. Butt owns one single-family rental home, one duplex, six commercial units in Point Richmond and is a partner at Baltic Development Associates, a commercial real estate company. None of his properties would be subject to rent control, which exempts single-family homes and all commercial properties.

"You either have a conflict or you don't and state law is pretty clear about it," Butt said, adding that he has recused himself a number of times in the past over land use decisions in which he had a direct stake. "There are something like 24,000 rental units in the city and I have interest in three of them."

Butt may be facing some heat over the issue, but he's not the only Richmond council member who has faced criticism over properties he owns. Nat Bates had recently told this newspaper that his name is on various Richmond properties managed by his children for which he does not collect rent. And, like Butt, Bates has declined calls to sit out the upcoming vote to implement either rent control or a rent mediation board.

"I don't feel that I should have to be sitting this out any more than that the renters on the council," Bates said, alluding to Councilwoman Gayle McLaughlin, who is a renter. "I can be fair and see both sides of the issue."
According to the California Fair Political Practices Commission, a public official can't vote on an item or take part in a decision (including discussions leading up to any decision) that would affect their personal financial interests, unless their interest is mostly indistinguishable from that of the general public. The agency does not publicly comment on individual cases, but investigates complaints of alleged violations.

Jo-Ellen Pozner, an assistant professor at the UC Berkeley Haas School of Business who studies corporate governance and ethics, said Butt should recuse himself, regardless of whether or not he is required to by law.

"People behave in accordance with the social group they identify with and being a landlord is a salient part of this identity," Pozner said. "It would be difficult for someone who identifies as a landlord not to identify with other landlords ... You want to be above even the suspicion of bias."

But Joshua Genser, a Richmond attorney and commercial property owner, said the mayor should be able to participate in the debate, regardless of what he owns.

"We want our elected representatives to have actual interests in what goes on," Genser. "If ownership of rental property were a conflict of interest that would disqualify a legislator from voting on a law that involved rental property, then we should also disqualify anyone who lives in rental property."

Dean Preston, executive director of Tenants Together and an attorney, said politicians in other Bay Area cities tackling rent control, such as Lafayette Councilman Mark Mitchell who owns a rental property in the town, have recently recused themselves from voting on the issue.

"When you're the industry that would be regulated by a law, it looks bad if you are also voting on that law," Preston said. "Mayor Butt is the self-appointed leader in the opposition to rent control. He's blogging constantly, he criticizes opponents in emails and on social media, and has really taken the lead on the opposition."

The Richmond City Council is expected to discuss the issue at its July 21 meeting.

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