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1998-1: Guidance for Transfers between Campaign Committees

Friday, May 07, 1999

Re: Administrative Code §3-702(8) (b), (9); 3-704; 3-710(2) (b), (c); Campaign Finance Board Rules 1-03(a) (3), (b); 1-04(f); 1-05(f), (g); 1-07; 1-08(g) (ii); 2-06(b); 3-02(b); 5-01(m), (n), (o); 5-02(d) (2); Op. No. 1998-1

An advisory opinion has been requested by the Friends of Marty Golden, the authorized committee of a candidate participating in the New York City Campaign Finance Program for the 1997 elections ("1997 committee").1 In March 1998, Mr. Golden authorized a new committee, which has begun fund raising for the 2001 elections ("2001 committee"). The request states:

The 1997 committee has outstanding bills from the 1997 campaign. A fundraising event was held in December to reduce the debt. Unfortunately, we were not able to eliminate the debt entirely. These outstanding debts have been disclosed to the Campaign Finance Board. One of the committee's creditors, The Sandpiper Group, is owed approximately $8,500 for printing done for the committee for the general election. Sandpiper has threatened legal action if they are not paid promptly. Sandpiper has also indicated that they may accept partial payment as "good faith." In that case, they would delay litigation.

The 1997 committee "expects" to receive additional public funds payments upon the completion of the Board's post-election audit. See Campaign Finance Board Rule 5-01(m). The request seeks the Board's opinion on the following proposal:

1. The 2001 committee would lend $3,550 (the contribution limit for the 1997 elections) interest-free to the 1997 committee, payable when the 1997 committee receives its final public funds payment.

2. The 1997 committee would use the loan to make partial payment to Sandpiper.

Without commenting on the reasonableness of the 1997 committee's expectation that it will receive additional public funds payments, the determination of which remains a subject of the Board's post-election audit, the 1997 committee may proceed as it has proposed for the reasons and under the conditions outlined below.2

The "Loan" from the 2001 Committee to the 1997 Committee

The 2001 committee may lend the 1997 committee funds to pay 1997 debt. Because the "loan" is an exchange of funds between two committees authorized by the same candidate and taking part solely in his campaigns, the loan is a transfer. New York City Administrative Code §3-702(9). The amount that may be transferred is not directly limited by the 1997 contribution limit. Administrative Code §3-702(8) (b); cf. Rule 1-05(g) (post-election loans used for the previous election are subject to the contribution limit for that election). Instead, the 1997 contribution limit applies to the contributions received by the 2001 committee that underlie the transfer, and they will be aggregated with any previous contributions for the 1997 elections from the same source. See Rule 1-07(c).3

Final Public Funds Payment for 1997 Elections

Rule 1-04(f) (2) sets forth a presumption that contributions received after January 11, 1998 are for the 2001 elections, if that in fact is the next following election in which the prospective Campaign Finance Program participant will be a candidate. Because the contributions underlying the transfer were received by the 2001 committee after January 11, 1998, the amount transferred would not, in general, be added to the amount of unspent campaign funds, if any, that the 1997 committee would repay to the New York City Election Campaign Finance Fund (the "Fund"), pursuant to Administrative Code §3-710(2) (c). See Advisory Opinion No. 1992-1 (January 21, 1992) at footnote 3 (in original), as modified by Rule 1-04(f).4

The transfer from the 2001 committee would also not be a factor in determining the amount of the final public funds payment to the 1997 committee if the corresponding debt owed by the 1997 committee to the 2001 committee is documented in a satisfactory manner. Because the 1997 committee's last Campaign Finance Board disclosure statement for the 1997 elections was due on January 15, 1998, Rule 3-02(b), there is no requirement that the 1997 committee submit to the Board a periodic disclosure statement reporting the transfer and explaining the debt owed to the 2001 committee. Thus, to ensure that this bona fide debt is properly reflected in the Board's calculation of the final amount of public funds to be paid (or unspent campaign funds to be returned), the 1997 committee must submit documentation substantiating and explaining this debt together with its response to the Board's draft audit report for the 1997 election.

Repayment to the 2001 Committee

The final public funds payment to the 1997 committee can be used for the repayment to the 2001 committee only if the following conditions are met:

a. The debt to the 2001 committee must have been previously reported to the Board, as described above. Rule 5-01(o).

b. This public funds payment must be deemed to have been used for the 1997 elections debt, for which the transfer made by the 2001 committee, in effect, served as a "bridge loan," because these public funds may not be used for any other purpose, including a future election. Administrative Code §3-710(2) (c).5 This second condition will be satisfied if:

 i. The 1997 committee made a good faith effort to raise additional contributions for the 1997 elections before seeking this bridge loan; and

 ii. At the time of the bridge loan, and thereafter, the 1997 committee had demonstrated qualification for additional public funds payments, and had established and maintained compliance with all applicable Campaign Finance Program requirements, such that the delay in public funds payment was due solely to the Board's post-election administrative procedures (including audit) and not to any failure on the part of the committee in meeting its obligations under the Program.

Cf. Advisory Opinion No. 1989-42 (September 5, 1989) (use of pre-election loans in anticipation of post-election public funds payments), codified in Rule 1-05(f).

The repayment to the 2001 committee is also a transfer. This transfer may take place only after making any and all required disbursements to the Fund or the Board, as appropriate. See Rule 1-03(a) (3), (b).

Implications for the 2001 City Elections

The funds transferred from the 2001 committee to the 1997 committee will have served as a bridge loan for liabilities incurred for the 1997 election, if the 1997 committee receives and uses its final public funds payment to repay the 2001 committee. In general, the amount of this transfer would be deducted from future matchable contribution claims, if any, that the 2001 committee makes, unless the 2001 committee overcomes the presumption that claimed matchable contributions were used for the transfer. Rule 5-01(n) (1).6

Such a result, however, might unduly discourage bridge loans that could otherwise ease a campaign's difficulties in paying off debts before the final public funds payment is received. To avoid this hardship, and pursuant to the Act's general purpose of facilitating fund raising for covered elections, the Board will therefore deem this presumption to have been overcome, in the limited circumstances described in this opinion, if:

a. The 1997 committee does, in fact, receive additional public funds; and

b. The 1997 committee uses these public funds to repay the debt so as to make the 2001 committee whole.7

If the 1997 committee received no contributions subsequent to the transfer from the 2001 committee, the transfer back (from the 1997 committee to the 2001 committee) must be re-attributed to the contributions originally transferred out by the 2001 committee (otherwise the transfer is attributable to the last contributions received by the 1997 committee, in reverse chronological order). See Rule 1-07(c). For the reasons stated above, this transfer may not be attributed to the final public funds payment for the 1997 elections. The contributions returned to the 2001 committee via the transfer will be subject to the contribution limit for the 2001 elections, if Mr. Golden ultimately joins the Program for those elections. Id.


1This request was made by Jeffrey Kraus, Campaign Manager of the Friends of Marty Golden, by fax received on April 15, 1997.

2A general purpose of the New York City Campaign Finance Act is to facilitate fund raising for elections subject to Program requirements. Thus, the conclusions reached in this opinion are expressly limited to the situation presented: an exchange of funds between two political committees, each authorized by the same candidate to take part in an election subject to Program requirements.

3Under Rule 1-07(c) this transfer would be attributed to previous contributions (and other receipts) received by the 2001 committee.

4An exceptional circumstance that would lead the Board to include contributions received after January 11, 1998 in the unspent campaign funds calculation for the 1997 elections would exist when there is an apparent intent to delay campaign receipts primarily for the purpose of reducing repayments to the Fund or of increasing the amount of the final public funds payment.

5In addition, while Administrative Code §3-704(1) and Rule 1-08(g) (ii) prohibit the use of public funds for a liability incurred after the election year, the use of the final public funds payment to repay the 2001 committee is not improper per se because the Board will take into account whether a campaign had sufficient aggregate qualified campaign expenditures to account fully for use of public funds received. Administrative Code §3-710(2) (b); Rule 5-02(d) (2). Similarly, although the recipient of public funds payments may not, in general, disburse those funds to other political committees, the Board has ruled that public funds may be used to repay loans that were used to pay qualified campaign expenditures, despite the fact that the lender was an otherwise prohibited recipient pursuant to Administrative Code §3-704(2). Advisory Opinion No. 1990-3 (April 26, 1990) (footnote 2, in original).

6 As an alternative to authorizing a new committee for the 2001 elections, under current law the candidate could have used his 1997 committee for the 2001 elections. While a decision to use one committee would have altered the details of this analysis, the fundamental conclusions reached by the Board would have remained the same. See, e.g., Rules 1-07 (surplus funds), 2-06(b) (separate bank account for new election), 5-01(n) (2) (deduction from matchable contribution claims if committee pays debt in a previous election). Prior advisory opinions have underscored that comparable financial transactions on behalf of a candidate may receive equal treatment, regardless whether they occur in one or more committees. See Advisory Opinion No. 1993-2 (February 17, 1993) and Advisory Opinion No. 1997-9 (September 10,1997).

7 Otherwise, the presumption is not overcome and a deduction from matching claims for the 2001 elections is required. But even if the presumption were not overcome, it should be noted that, under Rule 5-01(n), only the total amount of otherwise valid matching claims would be reduced, not the maximum amount of public funds that a participating candidate may receive in an election.