Healdsburg Councilwoman Ariel Kelley Contracted with Her Own 'Nonprofit' to Administer $250k in Universal Basic Income Funds to the Latino Community - Did Anyone Get Paid Besides Kelley?
Corazon Healdsburg Founder & Consultant Ariel Kelley bypassed the City's standard request for proposal process by contracting with herself to administer $250k in funds
On September 7 2021, the City of Healdsburg’s Council decided to move forward with a Pilot Program for Universal Basic Income. Councilmember Kelley participated and voted on the proposed resolutions. The minutes stated:
Council discussion ensued on increasing funds for the proposed community response grants, homelessness services, the recycled water program and the Universal Basic Income program.
On a motion by Councilmember Hagele, seconded by Mayor Mitchell, adopted Resolution No. 103-2021, entitled “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HEALDSBURG AMENDING THE FISCAL YEAR 2021-22 BUDGET, RECOGNIZING AND APPROPRIATING FUNDS FROM THE AMERICAN RESCUE PLAN ACT OF 2021 AND REVERSING FUND TRANSFERS FROM MEASURE T TO FUND PREVIOUSLY APPROVED BUDGET ITEMS.” The motion carried on a unanimous roll call vote. (Ayes 5, Noes 0, Absent – None)
Council discussion further ensued on the UBI program, receiving a presentation on UBI, supporting community members, splitting up funding for the targeted loan forgiveness program over the two year budget,
Discussion ensued about removing the Housing Element from the proposed ARPA funds, funding the UBI program, holding a work session to discuss UBI with the community, putting together an RFP versus Corazon Healdsburg managing the program, what UBI is and how UBI supports members of the community.
On a motion by Councilmember Hagele, seconded by Mayor Mitchell, adopted Resolution No. 104-2021, entitled, “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HEALDSBURG AMENDING THE FISCAL YEAR 2021-22 BUDGET AND APPROVING THE CREATION OF A TARGETED LOAN FORGIVENESS PROGRAM,” with a friendly amendment reducing the targeted loan forgiveness program by $50,000 in fiscal year 2021-22.
On a substitute motion by Councilmember Kelley, seconded by Vice Mayor Jimenez, adopted Resolution No. 104-2021 entitled,” A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HEALDSBURG AMENDING THE FISCAL YEAR 2021-22 BUDGET AND
APPROVING THE CREATION OF A TARGETED LOAN FORGIVENESS PROGRAM,” with a friendly amendment reducing the targeted loan forgiveness program by $50,000 in fiscal year 2021-22, allocating $50,000 to a Universal Basic Income program in Fiscal Year 2021-22 and allocating $200,000 is fiscal year 2022-23 for Universal Basic Income. The motion carried on a roll call vote with Councilmember Hagele and Mayor Mitchell dissenting. (Ayes 3, Noes – Hagele and Mitchell, Absent – None)
On a motion by Councilmember Kelley, seconded by Mayor Mitchell, adopted Resolution No. 105-2021 entitled, “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HEALDSBURG RESCINDING RESOLUTION NO. 129-2020 AND REESTABLISHING THE LIST OF AUTHORIZED POSITIONS.” The motion carried on a unanimous roll call vote. (Ayes 5, Noes 0, Absent – None)
The October 4, 2021 Healdsburg City Council Meeting Minutes stated the following:
COMMUNITY ENGAGEMENT/OUTREACH: The concept of a Universal Basic Income, or Guaranteed Income, pilot program has been discussed as part of larger budget discussions at multiple City Council meetings this year. At the September 7, 2021 City Council meeting, the City Council received public input on the issue and voted to allocate $250,000 to a pilot project. Additional community engagement will be incorporated into future stages of the work.
BACKGROUND: Universal basic income (UBI) is a guaranteed payment provided on a regular basis to each program participant. It is also called guaranteed minimum income, or basic income.
The intent behind the payment is to provide enough to cover the basic costs of living and establish a level of financial security for recipients. In contrast to prescriptive public benefit programs that provide financial assistance for specific needs such as food, housing, or healthcare, guaranteed income is based in the principal that families understand best what they need and how to deploy limited resources to most effectively meet those needs.
The City Council has discussed the concept of guaranteed income as part of larger budget discussions this year and voted to appropriate $250,000, spread over the FY2021-22 and FY2022-23 budgets to support implementation of a pilot program in Healdsburg
The City has also received a proposal from Corazon Healdsburg for implementation of the program. That proposal is attached. Corazon proposes to create and administer a program wherein Corazon would provide $500 per month to 50 families for a term of 24 months. The program is proposed to be open to participants who meet each of the following criteria:
City of Healdsburg residents; and
Women who are pregnant in their first or second trimester; and
Earn no more than 50 percent of the area median household income.
The focus on pregnant women aligns with the parameters of an upcoming State of California funding opportunity. According to Corazon, “from 2018 to 2020, Healdsburg had 393 births of which 140, or 36 percent, were Medi-Cal births for Healdsburg residents. The Medi-Cal births during this time period serve as a proxy to estimate the potential pool of applicants that may be eligible to qualify for an income supplement program, which we estimate to be around 140 during this time period, or about 47 annually.”
The total program cost is estimated at $428,200 for the two-year program, leaving $178,200 to be raised from non-City sources.
DISCUSSION/ANALYSIS: Now that the City Council has appropriated the required funding, staff requests direction on whether to issue an RFP or partner with Corazon, and future community engagement. Significantly, the City does not have sufficient internal staffing resources to manage implementation without delaying several other ongoing projects. Staff thus recommends contracting with a non-profit or outside organization to raise additional funding, refine the program parameters subject to City Council approval, implement the guaranteed income pilot project, and analyze program data to assess the effectiveness.
RFP vs. Direct Contracting Staff seeks direction on whether to issue a request for proposals (RFP) to identify an outside organization to administer the program, or whether to contract directly with Corazon. Guaranteed income is a relatively new concept in California. The City of Stockton is currently running an 18-month program to support 125 households and the Y Combinator ran a small program in Oakland several years ago. Oakland is among several California cities that are now contemplating new programs.
In general, RFP’s provide an opportunity for an open recruitment for outside vendors. It is possible that issuance of an RFP could result in bid from organizations that are qualified to administer the program and were not previously known to staff but, given the relatively small number of existing programs, it seems unlikely that many organizations have experiencing administering these programs.
Alternatively, City Council could opt to not issue an RFP and instead direct staff to negotiate a contract for administration of the program with Corazon Healdsburg. A vote to forego the City’s public bidding requirements requires a 4/5 vote of the Council.
Although they have not implemented this exact type of program in the past, Corazon has the skills to implement and administer the program. Corazon is well-resourced, extremely familiar with the local community, trusted, and experienced with other direct benefit programs for low income residents.
Corazon is also adept and experienced at raising funds. One of the driving factors behind the City Council decision to appropriate funding on September 7, 2021 was to allow time to seek leveraged funds from the State or other sources. No City staff are assigned to this task, so identifying a partner organization quickly would enable Corazon to begin the fundraising process sooner, increasing the chances of launching a robustly funded pilot program.
Community Engagement The City Council previously discussed a need to better explain UBI or Guaranteed Income to the community. Regardless of whether or not an RFP is issued, staff recommends including a community engagement component in the contract with the implementing organization and requiring them to hold at least one community forum with subject matter experts. At this time, staff requests City Council feedback on this approach and other goals for involving the community.
ALTERNATIVES: Staff requests City Council direction on the issues outlined in this report. As an alternative, the City Council could direct staff to schedule a future opportunity to discuss the options in greater detail.
FISCAL IMPACT: As noted, $250,000 is approved for funding this program. Staff anticipates that the organization implementing the program will raise or provide the additional funding needed. No additional financial resources from the City are required. City funds were appropriated by the City Council as a one-time contribution to support the pilot project.
Councilmember Kelley recused herself from this item since she received income from Corazon Healdsburg in the prior twelve months and has a financial interest in the item. However, Councilmember Kelley did not find it necessary to recuse herself from the entire budgeting process leading up to the proposal’s approval.
There was Council consensus to move forward with direct contracting with Corazon Healdsburg to administer the UBI Program and include an educational piece for the community.
Government Code Section 1090 prohibits an officer, employee, or agency from participating in making government contracts in which the official or employee within the agency has a financial interest. Section 1090 applies to virtually all state and local officers, employees, and multimember bodies, whether elected or appointed, at both the state and local level.
“Making” a contract includes final approval of the agreement, as well as involvement in preliminary discussion, planning, negotiation, and solicitation of bids.
Because of the plausible conflict of interest, I reported Ms. Kelley to the Fair Political Practices Commission (FPPC) as she did not disclose that she was a Consultant to Corazon Healdsburg on her 2021 statement of economic interest.
The FPPC issued the following response to Ms. Samantha W. Zutler, Attorney, City of Healdsburg.
Dear Ms. Zutler:
This letter is in response to your request for advice on behalf of City of Healdsburg (the City) City Councilmember Ariel Kelley regarding the conflict-of-interest provisions of the Political Reform Act (the Act)1 and Section 1090. Please note that we provide advice under the Act and Section 1090 only, not under any other body of law. We are not a finder of fact when rendering advice. (In re Oglesby (1975) 1 FPPC Ops. 71.) Our advice is based solely on the facts provided.
Thus, our advice is as complete and accurate as the facts provided by the requester. If the facts relevant to your request for advice change, then you should contact us for additional advice.
We are required to forward your request regarding Section 1090 and all pertinent facts relating to the request to the Attorney General’s Office and the Sonoma County District Attorney’s Office, which we have done. (Section 1097.1(c)(3).) We did not receive a written response from either entity. (Section 1097.1(c)(4).) We are also required to advise you that, for purposes of Section 1090, the following advice “is not admissible in a criminal proceeding against any individual other than the requestor.” (See Section 1097.1(c)(5).)
QUESTIONS
1. Does Councilmember Kelley have a conflict of interest under the Act regarding any contracts entered into between the City and Corazon Healdsburg (Corazon), a local non-profit community, from which she last received compensation on June 14, 2021?
2. Does Councilmember Kelley have a conflict of interest under Section 1090 regarding any contracts entered into between the City and Corazon?
CONCLUSION
1. Yes. Under the Act, Councilmember Kelley has an interest in Corazon as a source of income and it is reasonably foreseeable that any decision involving a contract with Corazon will have a material financial effect on this interest. Accordingly, Councilmember Kelley may not take part in these decisions and she must recuse herself under the Act.
2. No. Councilmember Kelley has terminated her business relationship with Corazon and thus has no conflict of interest under Section 1090 in the City’s contract decisions involving Corazon. Accordingly, Section 1090 does not prohibit the City from entering the contract.
FACTS AS PRESENTED BY REQUESTER
Councilmember Kelley has authorized you, the City Attorney for the City of Healdsburg, to request formal advice about whether she may participate in upcoming City Council decisions regarding the City’s universal basic income (UBI) program. This program is being administered by Corazon Healdsburg (Corazon), from which Councilmember Kelley has received income in the previous twelve months.
Corazon is a local non-profit community organization. Councilmember Kelley was the CEO of Corazon before she was elected to the City Council. She last received salary from Corazon on October 23, 2020. After her employment as the Corazon CEO, she served as a consultant for Corazon. She last received consultant fees from Corazon on June 14, 2021.
On September 7, 2021, the City Council allocated funds to support a UBI program in the City, with the understanding that the City would engage an outside consultant to administer the program. The City did not solicit bids for a consultant to administer the UBI program. The City Council directed staff to negotiate a contract with Corazon without soliciting bids after staff was unable to identify other firms with the required expertise. The City Council made a governmental decision regarding whether to solicit bids for a consultant to administer the UBI program and decided not to solicit bids. Councilmember Kelley did not participate in this decision.
Without soliciting bids, the City received a proposal from Corazon to administer the program. On October 4, 2021, staff recommended to the City Council that the City negotiate directly with Corazon to administer the program. Due to councilmember Kelley’s financial interest in a contract with Corazon, she recused herself from the October 4th item.
The consultant that administers the UBI program will manage outreach, eligibility screening, and enrollment and will work with program participants to complete the full intake process that includes making a holistic assessment that centers the full range of family needs in order to match them with the services through both direct and indirect referrals. City staff will work with community partners to ensure and track that referrals are effectively executed and implemented with partners such as Alliance Medical Center and Reach for Home.
As part of the intake process, the consultant will issue the guaranteed income payments, regularly monitor and report on expenses and participate in evaluation. Income payment will be issued on a monthly basis to program participants through a 12-month pilot period. The evaluation team will work with the consultant during the design and implementation process to ensure proper evaluation measures are integrated into the programming so that data collection during and analysis after program completion can be achieved effectively. The purpose of the evaluation will be to contribute to the growing body of knowledge about guaranteed income programs that are taking root across the country.
The City Council will likely need to make several additional decisions regarding the UBI program, which could include whether to award the contract to Corazon; whether to allocate additional funds to the UBI program; what the specific details of the program will be; how long the program will continue; and whether to solicit funding from other external sources for the program.
These discussions could continue well past June 14, 2022. City staff has met with Corazon regarding program details and is presently awaiting a revised scope of work that will form the basis of a contract for services. That contract will require the City Council’s approval.
ANALYSIS
A. The Act.
Section 87100 prohibits any public official from making, participating in making, or using his or her official position to influence a governmental decision in which the official has a financial interest. A public official has a “financial interest” in a governmental decision, within the meaning of the Act, if it is reasonably foreseeable that the decision will have a material financial effect on one or more of the public official’s economic interests. (Section 87103; Regulation 18700(a).)
As a City Councilmember, Ms. Kelley is a “public official” subject to the Act’s conflict of interest provisions. (Sections 87100; Regulation 18700(c)(1).) She would also be making, participating in making, or influencing governmental decisions under the Act when taking part in the City’s decisions regarding a contract with Corazon. (See Regulations 18702.1-18702.3.)
Section 87103 sets forth the interests from which a conflict of interest may arise under the Act. The circumstances here involve the following economic interests:
Any business entity in which the public official has a direct or indirect investment worth two thousand dollars ($2,000) or more. (Section 87103(a).)
Any source of income, except gifts or loans by a commercial lending institution made in the regular course of business on terms available to the public without regard to official status, aggregating $500 or more in value provided or promised to, received by, the public official within 12 months prior to the time when the decision is made. (Section 87103(c).) Income of an individual also includes a pro rata share of any income of any business entity or trust in which the individual or spouse owns, directly, indirectly or beneficially, a 10-percent interest or greater. (Section 82030(a).)
According to the facts provided, Councilmember Kelley left employment with Corazon in 2020 but was subsequently hired as a consultant and received income as a consultant until June 14, 2021. Based on these facts, and assuming income of $500 or more in the 12 months prior to the decision, Councilmember Kelley has financial interest in her consulting business as a business entity and source of income. In addition, as a consultant, she has an interest in sources of income to her business entity, which include a source of income interest in Corazon.
1. Foreseeability and Materiality.
Foreseeability standards vary depending on whether an interest is explicitly involved in a governmental decision. An official’s financial interest is explicitly involved in a decision, and is presumed to be reasonably foreseeable, if the interest is a named party in, or the subject of, a decision before the official or the official’s agency. (Regulation 18701(a).) For a financial interest that is not explicitly involved in the decision at issue, the financial effect of the decision on an official’s interest is reasonably foreseeable if it can be recognized as a realistic possibility and more than hypothetical or theoretical. (Regulation 18701(b).)
The reasonably foreseeable financial effect of a governmental decision on an official’s financial interest in a source of income is also material if the source is a named party in, or the subject of, the decision including a claimant, applicant, respondent, or contracting party. (Regulation 18702.3(a)(1).)
2. Financial Interest in Corazon.
Here, the governmental decisions include decisions regarding Corazon’s contract with the City and the program that will be implemented by Corazon under the contract. At this time, the facts provided indicate that the City is negotiating exclusively with Corazon which is thus explicitly involved in the decisions at issue because it is the named party in, or subject of, the decisions.
Under the applicable regulations cited above, it is reasonably foreseeable that these decisions will have a material effect on Corazon. Thus, Councilmember Kelley is prohibited under the Act from taking part in decisions involving Corazon and must recuse herself from decisions under the recusal requirements set forth in Regulation 18707, which require a public identification of the interest and leaving the room for the duration of the decisions and discussions by the City Council.
In light of the conclusion that Councilmember Kelley is disqualified from the decisions due to the financial effect on her interest in Corazon, we do not further analyze the potential effect on her consulting work for Corazon. However, we note that all decisions must be analyzed on a case- by-case basis. Even to the extent the councilmember does not receive income from Corazon in the 12 months prior to the decision, Councilmember Kelley must consider the potential financial effect on all interests she may have prior to taking part in the decisions, including her interests in her consulting work for Corazon. To the extent decisions regarding Corazon occur after June 14, 2022, and may implicate the likelihood of additional work for Councilmember Kelley as a consultant, the councilmember should seek additional advice prior to taking part in decisions involving Corazon and identifying the specific decision at issue before the City.
B. Section 1090.
Section 1090 generally prohibits public officers, while acting in their official capacities, from making contracts in which they are financially interested. The prohibition applies regardless of whether the terms of the contract are fair and equitable to all parties. (Thomson v. Call (1985) 38 Cal.3d 633, 646.) Section 1090 concerns financial interests, other than remote or minimal interests, that prevent public officials from exercising absolute loyalty and undivided allegiance in furthering the best interests of their agencies. (Stigall v. Taft (1962) 58 Cal.2d 565, 569.) “[A]n official has a financial interest in a contract if he might profit from it.” (People v. Honig (1996) 48 Cal.App.4th 289, 333.) Section 1090 is intended “not only to strike at actual impropriety, but also to strike at the appearance of impropriety.” (City of Imperial Beach v. Bailey (1980) 103 Cal.App.3d 191, 197.)
Under Section 1090, Councilmember Kelley is required to complete her business relationship with Corazon before participating in the making of a contract between the City and Corazon. (See Ops.Cal.Atty.Gen. 187 (2003) (finding there would be no financial interest under Section 1090 “if the board member first terminates his business relationship with the firm”).) Because Councilmember Kelley does not currently have a business relationship with Corazon, she has no interest in Corazon’s contract with the City for purposes of Section 1090. Accordingly, while she may not take part in the decision under the Act, Section 1090 does not prohibit the City from entering the contract.
The disbursement of funds to individual UBI program recipients does not appear to be public record. Once the City has provided funding to the administrator, the funds are no longer publicly documented in detail. Form 990’s filed annually with the IRS only provide general oversight of monies disbursed by Corazon Healdsburg.
If Ms. Kelley truly provided funding to the Latino community as expressed, why did she have her Corazon Healdsburg staff sign an NDA around the same timeframe?
As a biracial woman, Ms. Kelley was privileged enough to decide my race on my behalf while berating my intelligence. My late mother is an immigrant from Rangoon, Burma. I am half Asian and half European yet Ms. Kelley decided that I was a ‘Turkish woman pretending to be Latina’.
Additionally, as an elected official, Ms. Kelley found in pertinent to attack my faith, career and gender.
As the former Executive Assistant to the Santa Rosa City Schools District, I was illegally forced out as a protected whistleblower. Ms. Kelley was one of the individuals who sent correspondence to my district requesting my termination as I examined her financial omissions and protested against racism within the City. The district has been in settlement mediation negotiations with me for the past year.
In March 2021, Ms. Kelley was the lead organizer for a ‘Stop Asian Hate' rally. As an East Indian woman, I am appalled that this racist woman was put in charge of the event. She uses communities of color as political tokens to help elevate herself further up the Democratic totem pole.
How racist is the Sonoma County Democratic Party by means of their support of Candidate Ariel Kelley? Will you be voting for the current incumbent in the November 5, 2024 General Election?
“For we were all baptized by one Spirit so as to form one body—whether Jews or Gentiles, slave or free—and we were all given the one Spirit to drink.”
-Corinthians 12:13