Local control ballot measures continue to prove controversial

Campaign complaints, splintered relationships add to drama
The Colorado Statesman

Opponents of proposed ballot initiatives that aim to give local governments more control over oil and gas regulation presented a campaign finance complaint before an administrative-law judge on Wednesday.

The complaint comes despite ongoing negotiations for a special session to derail the ballot proposals through a legislative solution. But those talks remain complicated, with controversy surrounding almost every aspect of the negotiations, including a recent dustup within the Colorado Association of Home Builders that resulted in top members and lobbyists resigning over the group’s support of the legislative effort.

In the meantime, opponents are preparing for the more than likely prospect of having to defend against a slew of oil and gas regulatory proposals that would be fixed to the state constitution.

The finance complaint presented by the business-oriented group Coloradans for Responsible Reform on Wednesday alleges that the nonprofit organization Coloradans for Local Control and its issue committee, Coloradans for Safe and Clean Energy, are really one in the same organization, both subject to financial disclosures.

Administrative Law Judge Matthew Norwood has 15 days to rule on the case.

Coloradans for Local Control was established as a 501(c)(4) in October 2013, but then registered the issue committee, Coloradans for Safe and Clean Energy, with the secretary of state’s office on April 15.

Coloradans for Local Control is a group backed by U.S. Rep. Jared Polis, D-Boulder, to fight for greater local control over oil and gas activities, including regulating hydraulic fracturing and increasing setbacks of wells from structures.

The issue committee, Coloradans for Safe and Clean Energy, was established to actually finance the ballot initiatives. It operates with a separate bank account.

But an attorney representing Coloradans for Responsible Reform argued on Wednesday that both organizations are required to file campaign finance reports, since they are both serving the purpose of advocating for the ballot initiatives.

The attorney pointed out that Local Control designated Safe and Clean Energy as its trade name on the same day that Safe and Clean Energy registered as an issue committee.

Proponents hope to narrow a series of nine proposals down to two initiatives that would increase setbacks of wells and authorize local control over regulations. Setbacks currently stand at 500 feet, but proponents would like to raise that to at least 1,500 feet. They are also examining asking voters to approve a constitutional environmental declaration, which also encompasses local control.

Coloradans for Safe and Clean Energy started with a contribution of $1.45 million from Coloradans for Local Control. As a 501(c)(4), Local Control does not have to disclose its donors, and it can spend unlimited amounts of so-called “dark money” on independent expenditures and electioneering communications.

It is allowed to engage in electioneering, as long as that is not its primary function. That is why to be safe, Coloradans for Local Control established the issue committee Coloradans for Safe and Clean Energy, which allows it to engage in direct electioneering. The issue committee is subject to itemized disclosures of its contributors and expenditures.

But attorney Sarah Clark, an attorney with Brownstein Hyatt Farber Schreck who represented Coloradans for Responsible Reform, said the two organizations serve the same purpose, and therefore Coloradans for Local Control should also have to file campaign finance disclosures with the secretary of state’s office revealing the “dark money.”

“The Safe and Clean Energy issue committee and Local Control are one in the same and Local Control is subject to the same disclosure and reporting requirements as the Safe and Clean Energy issue committee,” states a summary of the complaint.

“The Safe and Clean Energy issue committee’s May 5, May 19 and June 2 contribution and expenditure reports fail to comply with the disclosure and reporting requirements because they do not report Local Control’s required disclosures. For example, the May 19 report lists a $1.45 million contribution from Local Control to the Safe and Clean Energy issue committee… without disclosing who contributed the funds to Local Control (Safe and Clean Energy) in the first place,” the summary continues.

Clark went on to explain during the hearing, “When it filed a registration declaring itself to be an issue committee, then it became one, not just this bank account, the entire entity became an issue committee, and thus is required to make disclosures…

“As a 501(c)(4) organization prior to April 16th, Coloradans for Local Control enjoyed donor anonymity. There is no reporting requirements at all,” added Clark. “And so the issue here is that post-April 16th, after establishing themselves as an issue committee… they’re having it both ways. They’re allowing themselves to operate in this part of their business as a 501(c)(4), but over here in this part of their business as an issue committee, and the rules don’t allow that.”

But high-profile Democratic attorney Martha Tierney, with the firm Heizer Paul, who represented Coloradans for Local Control, said there was no evidence presented to indicate that the organization violated state law. In fact, she said the evidence only proves that the nonprofit followed the law exactly.

“The evidence that you have before you is that there was a contribution into the bank account supporting the ballot measures. You have no evidence before you of anything else,” explained Tierney.

She pointed out that the money contributed to Coloradans for Local Control was not earmarked, and therefore could have been spent in a variety of areas. For example, Coloradans for Local Control is also working on legislation for the potential special session.

Tierney cited an advisory from the secretary of state’s office from July 2000 on just this very topic: “If the organization later chooses to allocate some or all of such non-earmarked funds for campaign purposes, then it should transfer the funds into its separate campaign account and report the transfer as a contribution from the organization itself,” the secretary of state’s office advised.

“The committee is never required to report the original amount and source of such non-earmarked funds, so long as it made a reasonable, good-faith determination upon receipt that such funds were not ‘for the purpose of supporting or opposing a ballot issue or ballot question,’” the advisory continued.

Tierney repeatedly during the hearing pointed out that Coloradans for Local Control serves multiple purposes that go beyond the electioneering issue.

“It has all kinds of purposes,” she said. “It has legislative purposes, it has educational purposes, it also, through its issue committee… is supporting ballot measures, and it has complied with the law to the letter.”

Judge Norwood gave no indication of which way he was leaning, other than to say that he would likely not dismiss the case, but instead present a ruling based on the evidence.
In addition to the disclosures, Coloradans for Responsible Reform is also asking for penalties of $50 per day, as well as $20 each for every contribution and expenditure that has been made to and by Local Control, pursuant to penalties outlined by Colorado law.

Norwood asked many questions during the hearing, finally resting on the fact that the case came down to the alleged violation that Local Control did not file separate reports. At one point, he did signal that it would be a stretch to claim that Local Control was trying to hide from disclosures.

“If it’s as you say, that they’re sitting on the kitty, and they’ve received no other contributions after April 16, how is it that we have anything less than total disclosure?” Norwood asked.

Special session

As for the ballot measures themselves, talks — led by Gov. John Hickenlooper, a Democrat — continue for a possible special session that would cause Polis to drop his effort. But those talks remain troubled.

Most recently, the legislative committee of the Colorado Association of Home Builders on July 3 voted to support the proposed legislation, but not without a firestorm of drama.

The latest draft of the bill would give local governments more control over oil and gas regulation, including rules around noise and setbacks. But it limits local government’s ability to prohibit operations through moratoriums and bans by restricting the duration of the time-out to “an amount of time that is reasonably necessary to facilitate informed decision-making and planning.”

In addition to allowing governments to mandate setbacks and conduct inspections, the newest bill would also require that jurisdictions “not alter or diminish” subdivision plats, development plans or entitlement rights that surface owners currently have. That was made in an effort to garner more widespread support from such groups as homebuilders.

If the bill were passed by the legislature, then Polis and his group would have to promise not to attempt the ballot questions through 2018.

The vote by the powerful Association of Home Builders to support the draft legislation split the organization. High-profile Republican lobbyist Steve Durham and Democratic lobbyist Jeani Frickey Saito both ended their contracts with the association, citing the vote to support the legislative solution. Combined, they lobbied for the group for more than 25 years.

Just days later, six of CAHB’s board members sent a letter to the executive committee announcing their resignations, including Chairman Rob Griffin and Government Affairs Chairman Chris Elliott. Also signed onto the letter are board members Bob Peterson, Rebecca Dow, Tom Brinkman and David Tschetter.

“Historically, the Association has worked to achieve consensus and compromise on divisive issues. Compromise has always allowed us to prevent big from dominating small whether it relates to the size of a local organization or a member. This is clearly no longer the case,” the resigning board members wrote in the letter July 8.

Durham was a bit more abrasive in his resignation letter, saying Polis created this “crisis for the Colorado economy.” He alleged that certain board members “wish to help him resolve this crisis.”

“Governor Hickenlooper has chosen to appease terrorist Polis rather than stating in no uncertain terms that what he is proposing is devastating for Colorado’s economy and should be defeated,” wrote Durham.

“It became clear that the strongest motivation for the CAHB to support this legislation was an attempt by several prominent members to preserve their ‘relationship’ with the Governor,” he continued. “The motive is not good public policy.”

Amie Mayhew, former chief executive of the Association of Homebuilders, resigned her position three weeks ago; though she said her decision was not directly related to the special session. The organization is currently not fully staffed, said Mayhew. As of press time, calls to CAHB resulted in receiving a busy signal.

Rumors have been swirling that Larry Mizel, chief executive of M.D.C. Holdings Inc., along with Pat Hamill, chief executive of Oakwood Homes, have been pushing homebuilders to support the grand bargain. The two are both giants in the local homebuilding world.

Hamill has called for the compromise through his role as chairman of Colorado Concern, a group of top business executives. Mizel has been dragged into the politics of the debate stemming from his very public past support for Hickenlooper.

But Hamill said it is absurd to think that the two Republicans would push so hard to give Polis and Hickenlooper a win. He said they are in it simply to stave off a ballot drive that could lead to banning fracking with constitutional protections. A legislative solution is the better path, said Hamill, because nothing would be cemented in the state constitution.

“It’s been characterized that myself and Larry Mizel are trying to do this because we’re friends with the governor, and that could be farthest from the truth…” explained Hamill.

“There were people that were on the board, and most definitely lobbyists, that saw this as an opportunity to hurt the governor,” he continued. “I don’t think the governor comes out on this either way.

“I’m a registered Republican… our interests were state interests first and foremost and no other,” added Hamill. “This is about Colorado and we need to have people who think about what’s in the best interest of the state…”

Hamill had kind words for Durham, but he said his departure along with the board members offers an opportunity for CAHB to reinvent itself.

“This is an opportunity for the builders to take back their association and not be so partisan… do what’s in the best interest for not only the association, but ultimately what’s in the best interest for the great state of Colorado,” opined Hamill.

“We’re going to punch and we’re going to punch hard,” he added. “Some people didn’t like that. So, ha!”

Peter@coloradostatesman.com