January 1, 1900

by Paul J. Josephson and Lauren E. Bucksner

With the recent launch of New Jersey’s website tracking political contributions by public contractors, the focus on so-called “pay to play” practices has never been sharper. Over one hundred municipalities and counties have jumped aboard the pay to play bandwagon, one-upping state law by adopting their own restrictions and penalties for contributors who seek public contracts. The predictable result: a baffling assortment of state and local pay to play enactments. Chaos has resulted from the pursuit of this feel good approach to politics. Local pay to play’s lack of uniformity, coupled with severe economic penalties, has led to a marked decline in overall political contributions by citizens and corporations, and amplified the clout of unions, which are unconstrained by these laws. The inevitable chilling of political speech resulting from fear of violating the cumbersome and voluminous regulations will undoubtedly worsen if more local governments enact their own restrictions on business and redevelopment entities.

Since 2005, New Jersey municipalities, counties and their agencies have been vested with the authority to adopt their own local pay to play policies with respect to public contracts. We have comprehensively surveyed the various local pay to play ordinances throughout the state, highlighting the areas in which various restrictions contrast with one another. Thus far, over one hundred and thirty pay to play ordinances have been enacted; approximately eighteen of those ordinances specifically restrict entities seeking redevelopment contracts and their professionals. Although some local entities have used the Center for Civic Responsibility’s (CCR) Model Ordinance as a template document, most towns have modified their ordinances to reflect local political tastes. The need for uniform and predictable provisions has been disregarded, leaving New Jersey speckled with inconsistencies and would-be contributors befuddled.

While local policies must not contradict state requirements, many local ordinances cover additional businesses and impose additional disclosure requirements well beyond those proscribed by the state. Local pay to play often regulates business entities that are not necessarily restricted by state pay to play laws. This includes redevelopers and professionals serving redevelopers, an area municipalities have not specifically been authorized to regulate.

Moreover, locally enacted requirements usually affect a broader range of businesses and contracts than the state rules. Pursuant to the state’s pay to play law, applicable in all 566 municipalities and 21 counties, only businesses who seek or perform “non fair and openly bid” municipal contracts for municipalities valued in excess of $17,500 are restricted from giving to municipal officials and their political parties. But many of these local ordinances restrict contributions and require disclosure of contributions by any entity seeking a new contract in excess of $17,500, even if the contract is awarded pursuant to a “fair and open process”. Businesses and their owners must be aware of applicable local pay to play policies, as ignorance can lead to especially harsh financial sanctions including contract termination and debarment.

Likewise, the types and amounts of contributions prohibited by these local enactments vary widely. Every local pay to play ordinance details specifically what types of contributions are prohibited, to whom a contribution may or may not be made, the permissible amount of contributions, and for what time period the restriction lasts. Some municipalities allow vendors and their owners to contribute up to $300, while others allow only $250 or less still. Some outright prohibit any contribution whatsoever, in clear violation of constitutional safeguards that allow for at least some symbolic, if de minimis, contribution as a demonstration of political support for a candidate or party.

Don’t Try This At Home

Attempting to comply with local pay to play laws on your own can leave you and even your attorney feeling trapped in a web of impenetrable restrictions, disclosure requirements, and penalties. If you take an unintentional wrong turn, violations may or may not be curable. All is not lost however, and you need not retire from the crucial act of participating in politics simply because you wish to do business with government. At Hill Wallack LLP, we recognize the importance of your participation and are poised to help. But with the wildly inconsistent local rules now in place, there is no onesize- fits-all approach. With our vast knowledge of all pay to play rules, we can advise you on your particular circumstances and help you avoid pay to play problems.

Paul P. Josephson is partner-incharge of the firm’s Regulatory and Government Affairs Practice Group and former member of the New Jersey Executive Commission on Ethical Standards. He has counseled public and private companies, and political candidates and committees, on legal compliance, government ethics and campaign finance issues for over fifteen years.

Lauren E. Bucksner is an associate in the firm’s General Litigation and Regulatory & Government Affairs Practice Groups.