A national model faces new challenges: the New York City campaign finance system and the 2013 elections.

• Author: Marton, Janos

Introduction: New York City as a National Model I. The Rules of the Game: The Origins of the New York City Public Matching Fund System II. Campaign Finance Jurisprudence and New York City A. Citizens United and New York City's Response B. SpeechNow. org v. F.E.C. and the Rise of Super PACs C. McComish v. Bennett and Trigger Funds D. Ognibene v. Parkey. "Pay to Play" On Trial E. McDonald Challenges New York City Contribution Limits III. The Spenders: Newcomers and Repeat Players in New York City Elections A. Self-Funding B. A New York City Super PAC C. The Education Wars D. The Long Reach of Unions and the Working Families Party E. The Real Estate Industry: Builders and Bundlers F. Citizens United, Ray Kelly, and Joe Lhota IV. Regulations, Penalties, and Loopholes A. The CFB Metes Out Meek Punishments B. More Matching Fund Misuse C. The Department of Sanitation and New York City Campaigns D. The "Doing Business" Loophole E. Regulating Political "Charities" F. The "Member-to-Member" Exception Conclusion INTRODUCTION: NEW YORK CITY AS A NATIONAL MODEL

In the aftermath of Citizens United v. Federal Election Commission (1) and other campaign finance decisions that have made the regulation of money in politics more difficult, advocates of campaign finance reform have turned to New York City as a potential model to emulate. (2) New York City's generous public matching fund system allows candidates to compete in elections without raising large sums of money, and strict contribution limits--particularly for those who do business with the City--are designed to prevent donors from having excessive influence. (3) New York City has not held major citywide elections since 2009, however, and campaign finance law has changed considerably since then.

The much-publicized Citizens United and its progeny, McComish v. Bennett (4) and SpeechNow.org v. Federal Election Commission, (5) have been accused of opening the floodgates to unprecedented campaign spending by outside groups. The 2012 presidential election featured "Super PACs," well-endowed political action committees funded by small groups of individuals. (6) These groups accounted for nearly half of all political advertisements aired during the presidential election, a substantially higher percentage than in past years. (7) As New York City proceeds towards the 2013 municipal elections, it will not only elect a new mayor for the first time since 2001, but will also replace many of its citywide office-holders, borough presidents and local council members because of term limits. (8) Given the stakes, New York City's campaign financing system will likely be tested by the infusion of significant third-party spending.

The New York City Campaign Finance Board's (CFB) reflective report on the 2009 city elections anticipated the different playing field that unlimited independent expenditures would create in 2013, observing that "[i]ndependent expenditures are of particular concern in jurisdictions with public financing programs, because those candidates who agree to limit their spending are faced by independent expenditure committees without limits." (9) Even before Citizens United, independent expenditures had increased significantly during the City's previous two election cycles. (10) Campaign finance reformers should watch to see whether such a model can survive in the post-Citizens United legal and political landscape. Given the explosion of outside spending during the 2012 Republican presidential nomination, the Scott Walker recall election in Wisconsin, and the 2012 presidential election, they have reason to be nervous. (11)

If the New York City model is to be the standard-bearer for the nation, then there are issues beyond whether it can properly withstand the influence of outside spending. Even though the public matching fund system is credited with increasing and diversifying small donor participation, special interest groups like the real estate lobby and unions play outsized roles in funding local campaigns, and are already significantly impacting the 2013 election. There are questions concerning whether candidates are sufficiently deterred from coordinating with outside parties, whether public matching funds are used properly, and whether a sophisticated campaign finance program has significantly altered the quality or even the composition of individuals holding elected office in New York City.

This Article will focus on the strengths and weaknesses of the New York City campaign finance system as it enters its first post-Citizens United election cycle. Part I of the Article recounts the origin and evolution of New York City's CFB, which has regulated elections in New York City since 1989, and discusses early developments in New York City's campaign finance law. Part II analyzes Citizens United and other significant campaign finance reform cases that have been decided since New York City's 2009 elections, with an emphasis on the decisions' potential impacts on New York City and the measures that New York City has taken in response. Part III takes a look at the major players in the 2013 election and determines whether these candidates have benefitted from the recent developments in campaign finance law. Finally, Part IV addresses whether the system is properly regulated, and to what extent its shortcomings can be remedied. If New York City is to serve as a model campaign finance reform system, advocates seeking to adopt it elsewhere should consider the strengths of the system worth emulating, the shortcomings that need correcting, and the challenges inherent to the intersection of money and politics.

1. THE RULES OF THE GAME: THE ORIGINS OF THE NEW YORK CITY PUBLIC MATCHING FUND SYSTEM (12)

   During the 1980s, New York City became embroiled in a political scandal that shook the City's ruling class. Donald Manes, the powerful Queens Borough President, was investigated by the FBI for selling Parking Violations Bureau contracts to companies in exchange for kickbacks. (13) Manes committed suicide as the charges against him mounted, but there was also sufficient evidence to charge one of his accomplices, Bronx Borough President Stanley Friedman. (14) At the same time, Brooklyn Borough President Meade Esposito resigned over charges concerning illegal influence peddling, including illegal benefits conferred upon Bronx Congressman Mario Biaggi. (15) Although Mayor Ed Koch was not accused of wrongdoing, he was politically embarrassed when officials he had appointed as a political favor to Esposito were brought down in the scandal. (16) Finally, the vehicle for the Borough Presidents' power, the Board of Estimate, was struck down in court. (17)

   The Board of Estimate had represented a unique governing structure for a large city like New York. The eight members of the Board included the five borough presidents, each of whom had one vote, along with the mayor, city council president, and comptroller, who each had two votes. (18) The Board of Estimate had enormous zoning, contracting, and budgeting powers, which meant an alliance of borough presidents could effectively control which companies had access to the City. Staten Island had as much clout on the Board as the far more populous Brooklyn. (19) The structure was challenged on the grounds that it violated the "one person, one vote" principle established in Reynolds v. Sims. The United States Supreme Court's unanimous decision declaring the Board of Estimate unconstitutional on the heels of the Manes, Friedman, and Esposito scandals gave reformers an opportunity to restructure local governance. In 1989, voters approved the largest overhaul of the City Charter since 1898, when New York became the five boroughs it is today. (20)

   The new City Charter addressed the corruption scandals of the 1980s by all but eliminating the power of borough presidents, who retained minimal zoning powers, and significantly expanding the power of the mayor and city council; the latter expanded to its present-day 51 members to increase the potential for racial diversity. The new charter also created the nebulous position of public advocate, which joined the mayor and comptroller as a citywide elected position.

   Another legislative response to the 1980s scandals was the 1988 adoption of the Campaign Finance Act. (21) The legislation created the New York City CFB, an independent and nonpartisan entity charged with generating local campaign finance laws and regulating compliance with them. (22) The CFB oversees a campaign finance system that imposes disclosure requirements and individual contribution limits on all candidates, and limitations on total contributions and spending for candidates seeking pubic matching funds. (23) Originally, "the city's primary goal for the public finance system [was] to limit the influence of money in citywide elections," a position the CFB no longer holds in light of Citizens United, discussed infra. (24)

   The public matching fund program was the centerpiece of the voluntary program. Initially, the city matched contributions at a 1:1 ratio for the first $1,000 contributed by each New York City resident. (25) Eligibility was contingent on raising a certain number of donations and donors from the district where the election was taking place, and total matching funds were capped at 50% of the total expenditure limits. (26) The eligibility requirements and cap have remained largely intact, but during the 2001, 2003, and 2005 elections, the first $250 were matched at a ratio of 4:1. (27) The 1998 law that expanded the matching ratio to 4:1 also introduced the "bonus" matching funds, which increased the ratio of matching funds for participating candidates who faced well-financed opponents who spent beyond the CFB voluntary limit. (28) During the 2009 election the ratio was changed to 6:1 for the first $175 of a contribution, and that ratio remains in effect for the 2013 election. (29)

   By lowering the amount of money that...