Follow the Money

Why does Gavin Newsom need a backer like the California Urban Issues Project?

I can't imagine that the California Urban Issues Project's not on defensible legal ground -- it's run out of the office of Jim Sutton, a skilled political attorney versed in the ways of campaign finance. Sutton's described in news accounts as the Newsom for Mayor campaign attorney, the Newsom for Mayor treasurer, and the treasurer for Newsom's mayoral transition team. But keeping the names of the financial backers of the project secret doesn't seem to square with the form of democracy in which citizens make informed choices between competing political messages based on a transparent understanding of where each message comes from.

I called Nathan Nayman, director of the business lobbying group Committee on Jobs -- by his own account a director of the California Urban Issues Project, and according to public filings, the president of the same outfit -- for his personal take.

"It's a grass-roots organization including businesspeople, people that represent the restaurant industry and the real estate industry," Nayman said helpfully, before segueing into a defense of the group's apolitical, nonprofit status. "They wanted to raise awareness on issues that affected quality of life. The first thing that it focused on was to pass Care Not Cash. It's been around for over a year now. It kind of comes together on key issues. It's not always meeting, not always active. The intent is to communicate directly with residents through TV spots and through the Internet; through banner ads. Now we're focusing on the [city] budget."

I asked him who the organization's financial backers are.

"It's a wide range of folks funding it. I'd rather not tell you because I don't need to," Nayman said.

"But in the interests of transparency, could you tell me anyway?" I asked.

"Ah, no," Nayman said.

"That doesn't sound very democratic," I said.

"It's not necessary. It's not necessary to know the folks who are funding it. That's not what the issue is. The story is the message, not who funds it," Nayman explained.

"Well, could you at least tell me who the other board members are?" I asked.

"No, I'd rather not. That's not important here. It's not about who's on the board. It's not about who's paying for it. The story is about how we're trying to create information for people who don't get information regularly," Nayman said. "We did the same thing for Care Not Cash, and we did the same thing with the aggressive panhandling ordinance. There's not a problem with it. Nobody's hiding anything."

"Then why don't you tell me who the top five funders are and who the directors are?" I asked.

"I would rather not," Nayman said.

"But you just told me you're not hiding anything," I said.

"We're not. Everything is being recorded according to the law," Nayman said.

"Then why won't you tell me who the top five funders are and who the directors are?" I said.

"Because we don't have to," Nayman said.

"But couldn't you just tell me in the spirit of transparency and openness?" I said.

"Everything is being recorded according to the law," Nayman said.

"That's a non sequitur, Nathan," I said.

"Well, that's all you're going to get from me," he concluded.


As unimportant as Nayman believes it is for the public to know who's financing the nonprofit group that behaves as the mayor's own political action committee, there are people out there who think it's inappropriate for secretive public-benefit nonprofits to be allowed to operate in this way.

In May, by way of example, the consumer group Foundation for Taxpayer and Consumer Rights asked the IRS to reconsider the tax-exempt status of a nonprofit set up to benefit Gov. Arnold Schwarzenegger, saying the entity violates federal tax law by helping the governor raise money, lobby, and conduct polls, without disclosing its sources of funding. Like the Newsom-boosting California Urban Issues Project, Schwarzenegger's California Recovery Team was organized as a social-welfare entity exempt from paying taxes under section 501(c)(4) of the federal tax code.

In its IRS complaint against Schwarzenegger's group, the foundation argued that it is illegal to use that designation for groups whose primary mission is political.

"The promotion of social welfare," the group's complaint said, "does not include partisan political activity, because such activity promotes the interests of one political faction rather than the common good of the community as a whole."

I'm sure it could be argued that financing automated phone calls and door hangers that lambaste mayoral candidate Matt Gonzalez benefits the community as a whole. And from a certain, narrow point of view, running TV commercials lampooning Newsom's opponents on the Board of Supervisors in advance of board elections promotes our common welfare.

But there's a more convincing argument to be made, and it is, simply, this: The California Urban Issues Project should register as the political action committee it obviously is, so voters will be able to follow the money that affects the government that they, after all, own.

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