Philly ADA

On January 10, 2009, DeWitt Brown, on behalf of the Southeastern Pennsylvania Chapter of Americans for Democratic Action, will provide written testimony to the Mayor's Task Force on Ethics and Campaign Finance Reform. As Mr. Brown states in his testimony "The ADA believes ethics reforms are worthless unless such reforms address the issue of nonprofits."

Philadelphia's non-profits have legitimate and important purposes that easily justify government grants and private sector donations. However, the ADA believes two issues merit the attention of the Mayor's Task Force. First, the City must provide oversight of the myriad of nonprofits and community development corporations that receive funding from the City. Second, the City must police the practice of using nonprofits as a method to circumvent campaign finance limits. Mr. Brown will elaborate on both issues in his testimony to the Mayor's Task Force.

The full text of the testimony appears below the jump.

Written Testimony of DeWitt Brown, incoming Chairman of the Southeastern Pennsylvania Chapter of Americans for Democratic Action,
Addressed to the Mayor’s Task Force On Ethics And Campaign Finance Reform
January 10, 2009

Ladies and Gentlemen of the Mayor’s Task Force On Ethics And Campaign Finance Reform, thank you for allowing me to present testimony on this very important subject. My name is DeWitt Brown. I am the incoming chair of the Southeastern Pennsylvania Chapter of Americans for Democratic Action. We are an organization committed to the principles of good government and sustainable planning. The ADA believes ethics reforms are worthless unless such reforms address the issue of nonprofits.

Philadelphia's non-profits have legitimate and important purposes that easily justify government grants and private sector donations. However, we have identified two issues that we believe merit the attention of the Mayor's Task Force.
First, the City must provide oversight of the myriad of nonprofits and community development corporations that receive funding from the City.

Second, the City must police the practice of using nonprofits as a method to circumvent campaign finance limits.
Local nonprofits and community development corporations are often the recipients tax payer funds. With no system of oversight in place, taxpayers have no method of determining what such funds are being used for, let alone whether such funds are spent effectively. Without any method of peering into the finances of the myriad of nonprofit organizations operating in Philadelphia, such questions are unanswerable.

The problem is not limited to grants received directly from the City. For example, under the City's the CDC Tax Credit Program, local businesses provide a $100,000 payment to a local community development corporation in lieu of paying an equivalent portion of its taxes to the City. Anecdotal evidence suggests that that little, if any, of this money ever goes into economic development. Instead, such funds are consumed entirely by staff salaries. These arrangements are particularly problematic where the recipient of such funds is used as a warehouse for the cadre of "volunteers" that make up the core of candidate's campaign staff.

As demonstrated by the Nutter Administration's attempt to audit Philadelphia Safe and Sound, oversight over nonprofits and community development corporations is needed. The City should take this opportunity to make structural changes to the manner in which the City interacts with nonprofits that either directly or indirectly receive money from City taxpayers. As a condition of receiving public funds, the City should require each group to provide an annual financial statement to the City. Such reports should be made public in a central clearinghouse maintained on the City’s website to allow the opportunity to determine whether such funds are being spent properly.

Increased oversight would also help to address the second issue we would like the Mayor's Task Force to consider. As demonstrated by Vince Fumo's alleged use of Citizens Alliance and the Independence Seaport Museum, the lack of oversight over nonprofits permits politicians to use nonprofits to circumvent election contribution limits and ethics laws. While campaign finance laws limit the amount a person may contribute to a specific candidate, such limits do not apply to a nonprofit with which a candidate may be associated.

Frustrated by campaign finance laws that limit potential contributions, a contributor may give an unlimited amount to a nonprofit with which a candidate is associated. Hypothetically speaking, the nonprofit can then use that money to hire the candidate's former campaign manager and then next time the election comes around, that person will take a "leave of absence" from the nonprofit to work on the candidate's re-election campaign.

Alternatively, a developer may want to receive zoning approval for a variance to build a Center City hotel/condo project. Gift rules prevent the developer from offering city officials vacations to the developer's vacation home in Hilton Head or a few trips to Barclay Prime. However, the developer, could simply give $100,000 to an official's favorite nonprofit with the understanding that that nonprofit will hire the city official as a paid consultant once she resigns from her position. Alternatively, the nonprofit could just use the "donation" to hire the official's spouse as its new executive director.

In summary, we believe that any reforms should address two areas:
(1) Oversight of nonprofits and community development corporations that receive City and State funds; and
(2) Donations campaign contributors may make to nonprofits with which a candidate is associated.

Many of Philadelphia's nonprofits perform valuable services. However, as demonstrated by Vince Fumo's use of Citizens Alliance and the Street Administration's failure to provide oversight of Philadelphia Safe and Sound, the area is currently rife with abuse. We believe that good government reforms are worthless if they have no jurisdiction over nonprofits.

On behalf of myself and the membership of Americans for Democratic Action, I sincerely thank you very for taking the time to consider these issues.