AG slaps down heart of Tempe dark money measure

The Arizona Attorney General’s Office ripped the heart out of a Tempe ordinance aimed at cracking down on anonymous spending in city elections.

Technically, the Attorney General’s Office found that a measure approved by Tempe voters in 2018 doesn’t violate state law, which aims to preempt such local ordinances. But the office included a monumental caveat: It would be illegal for Tempe to use its ordinance to force nonprofit organizations to disclose their funders, which was the entire point of the ordinance in the first place.

The measure approved by 91 percent of the city’s voters in 2018 amended Tempe’s city charter to require any entity that spends more than $1,000 in a municipal election to disclose the “original source” of the money. The ordinance was intended to target anonymous campaign spending widely known as “dark money.” That kind of spending is usually done through 501(c)(4) nonprofit organizations that don’t have to disclose the sources of their funding under federal tax law.

Two months after Tempe voters overwhelmingly approved the change, the Legislature passed a law barring cities and other political subdivisions of the state from requiring federal tax-exempt organizations from identifying the sources of financial contributions. The law, sponsored by Sen. Vince Leach, R-Tucson, was a direct response to Tempe’s anti-dark money measure.

Leach asked the Attorney General’s Office in March to review the Tempe law.

Evan Daniels, the chief counsel for the attorney general’s Government Accountability Unit, wrote in his findings on Thursday that the Tempe ordinance technically doesn’t violate state law, at least not on its face. Daniels noted that Tempe passed its ordinance before Gov. Doug Ducey signed the state preemption law. And the ordinance doesn’t specifically mention nonprofit organizations, Daniels wrote.

But if the city attempts to enforce its disclosure law against nonprofits, it would violate the state preemption law, Daniels cautioned. Tempe voters authorized the city to establish an enforcement system for the law.

“[A]ny future conflicts that may arise between what the City Council adopts and state law will be due to the City Council’s official action, not because the City charter mandates a conflict with state law,” Daniels wrote.

That likely dooms Tempe’s efforts to force disclosure of dark money. Most anonymous campaign spending is by nonprofits, with money sometimes passing through several entities until it reaches the group that spends in an election. As long as their primary purpose isn’t to influence elections, 501(c)(4) nonprofits are allowed to spend freely on campaigns, and federal law shields them from disclosing where they receive their money.

For example, Arizona Public Service, the state’s largest utility, recently acknowledged that it provided millions of dollars to two nonprofit groups that aided its favored candidates in the 2014 election. APS had long been suspected as the source of the money, but there was no legal requirement for the nonprofit groups that the utility funded to disclose that information.

Tempe Vice Mayor Lauren Kuby, a leading advocate of the dark money disclosure law, told The Arizona Republic that the attorney general’s opinion was still a win for the city because the disclosure law also targets independent expenditure committees that are often formed by entities corporations and unions.

And Kuby declared victory on Twitter, writing, “A win is a win is a win — especially in Arizona!”

But Kory Langhofer, a Republican election law attorney, said any dark money disclosure law that doesn’t apply to nonprofit organizations is completely toothless.

“I can’t think of a single client who would have been affected by that in the entire time I’ve been practicing election law,” Langhofer said. “It’s all gums.”

Kuby did not respond to messages from the Mirror.

Daniels’s findings may have implications for a similar law approved by Phoenix voters in November.

Phoenix’s dark money measure has not gone into effect because Ducey has not yet signed it, which is a technical requirement for changes to any city’s charter, and it’s unclear whether he’ll do so. While the governor signed off on the Tempe ordinance, voters approved that before the state passed its preemption law. Phoenix voters didn’t approve their city’s disclosure law until after the state preemption law was in effect.

In a March letter to Attorney General Mark Brnovich, Ducey asked that his office determine the legality of Phoenix’s ordinance while it probed the Tempe law. The Attorney General’s Office didn’t directly answer the governor’s question. Brunn Roysden, division chief counsel for the attorney general’s appeals and constitutional litigation division, simply provided the Ducey administration with a copy of Daniels’s report, “which we hope will assist you in advising the Governor on Phoenix’s pending charter amendment.”

Though the attorney general effectively gutted Tempe’s law, the opinion was a win for the city in one way.

Leach sought his review under a 2016 state law allowing legislators to trigger a review by the attorney general of any local law to determine whether it violates state law or the Arizona Constitution. If the attorney general finds that a local government entity is in violation of state law, and if the Arizona Supreme Court agrees with that conclusion, the city or county loses 10 percent of its state funding until the issue is resolved.

Under Daniels’s opinion, Tempe’s state funding isn’t in jeopardy, at least not unless it runs afoul of state law by trying enforce disclosure requirements against nonprofits.