Editor's note: This story has been updated.
An Allen County judge has enjoined Fort Wayne from enforcing an ordinance designed to curb “pay-to-play” arrangements that allegedly led to city contracts for businesses that contribute to local candidates’ campaigns.
Allen Superior Judge Jennifer L. DeGroote on Tuesday blocked the enforcement of a local ordinance that prohibited “business entities” from bidding for city contracts for “professional services” if, within one year of the date of a city contract, they made contributions in excess of $2,000 to candidates or local officials responsible for awarding the contract. The prohibition also applied to the spouses and children living in the home of an individual qualifying as a business entity, any individual who owns at least a 10 percent share in the business entity and any subsidiaries directly controlled by the entity.
“Professional services” are defined in the ordinance as accounting, architectural, legal and engineering services.
The ordinance was passed in 2017 and amended in 2018 and was enacted both times over the veto of Fort Wayne Mayor Tom Henry. But local resident Kyle Witwer, owner of Witwer Construction, Inc., and his wife Kimberly sued the city in April, alleging enforcement of Ordinance S-57-18 would violate their free speech and equal protection rights.
“Kyle, Kim and Witwer desire both to contribute to candidates to municipal office in accordance with the limitations established by the legislature and regulated through the Indiana Election Commission and also participate in the city’s bid process for professional services,” Fort Wayne attorney Mark GiaQuinta of Haller & Colvin wrote in the complaint. “... As a result of the penalties included in the Ordinance, the Witwers are reluctant to donate to candidates in the 2019 city elections in the amounts they might otherwise for fear that their combined contributions will render Kyle’s business ineligible to bid for city professional service contracts.”
Speaking with Indiana Lawyer on Wednesday, GiaQuinta said the impetus for the ordinance was the upcoming 2019 mayoral race. The idea, he said, was to create what some viewed as a more even playing field between incumbent Democrat Mayor Tom Henry and his challengers.
Similarly, in the Tuesday order issuing a permanent injunction, DeGroote said the Fort Wayne City Council “was concerned there is a perception among the public that individuals and businesses are conferring or promising to confer property in the form of campaign contributions upon public officials and candidates for office with the intent to control the awarding of professional service contracts. Council also determined that a need exists to maintain public confidence in the awarding of public contracts.”
But GiaQuinta said there were also politics at work in the passage of the ordinance. For example, Republican Councilman Dr. John Crawford acknowledged during the hearings on the ordinance that there was no indication that any purveyor of professional services had received their work in Fort Wayne because of their political contributions. Additionally, GiaQuinta said the council passed an ordinance in 2012 "to ensure that those receiving contracts were qualified, and to ensure that they were awarded the contracts based on their qualifications and not on political contributions."
According to Democratic Councilman Geoff Paddock, those circumstances made the ordinance a solution in search of a problem. Even so, GiaQuinta says he thinks the council moved forward with the ordinance for political reasons -- Henry is a Democrat, while most of the council members are Republicans.
While DeGroote said the pay-to-play concerns underscoring the ordinance were "legitimate," the ordinance was still unlawful. She determined the local law violated various provisions of the Home Rule Act, including Indiana Code sections 36-1-3-8(a)(12) and (7), by attempting to regulate campaign finance and contributions — areas of law already governed by state statute.
Specifically, DeGroote said the Indiana Election Commission is statutorily vested with the administration of Indiana election laws, including campaign finance and contribution laws. “The only additional authority that has been extended by statute,” she wrote, “is that county election boards have been expressly granted powers and authority over campaign finance filings and the powers to investigate violations of campaign finance laws.”
The judge noted the ordinance relies on I.C. 3-9-2-4(7), which limits corporations and labor organizations from making more than $2,000 a year in campaign contributions. But the Fort Wayne ordinance impermissibly expands on that statute by including individuals, firms, proprietorships corporations, limited liability companies, professional corporations, partnerships “or any other organization or association,” she said. Additionally, the ordinance extends to family/household members and in-kind contributions.
Similarly, GiaQuinta told IL the ordinance was "unwieldy, overly broad and nonsensical." He noted that contributions to a school board campaign that exceed the $2,000 limit could disqualify a contractor from bidding for unrelated city work.
“The City of Fort Wayne attempted to address legitimate concerns regarding quid pro quo exchanges or pay to play arrangements that tie contracts for professional services to contributions made to elected government officials who have authority to influence the awards of such businesses,” DeGroote wrote. “However, the Court finds that efforts by Fort Wayne, as well-intentioned as they may be, to address such practices in the 2018 Ordinance is not permitted under current Indiana law as no such authority has been extended to municipalities.”
GiaQuinta celebrated DeGroote's ruling as recognizing that the ordinance penalized lawful political donations.
"You're penalizing a legal contribution, and the fine, if you will, is the loss of business which could reach hundreds of thousands of dollars," he said. "Make no mistake about it: this is an extremely serious, very serious fine, and it ought to be treated as such."
In addition to statute, DeGroote cited to Indiana appellate court precedent to support her ruling, specifically the decision in Indianapolis v. Fields, 506 N.E.2d 1128 (Ind. Ct. App. 1987).
However, the judge did determine the ordinance does not violate I.C. 36-1-3-8(a)(8), another section of the Home Rule Act, because it imposes civil, not criminal penalties, including disqualification from future city contracts. The ordinance also does not violate Indiana’s bribery or ghost employment statutes, she said.
Indiana Attorney General Curtis Hill reached a similar conclusion on the validity of the ordinance when he weighed in last September with Official Opinion 2018-7, issued at the request of Accelerate Indiana Municipalities. Hill said former Attorney General Greg Zoeller addressed a similar ordinance in 2011 and likewise concluded municipalities could not regulate conduct, including campaign finance and contributions, already regulated under state law.
“The City still lacks the authority today that it lacked in 2011,” Hill wrote. “Simply put, as indicated in 2011, Fort Wayne lacks the authority to legislate in a subject matter area preempted by the State, and particularly where the proposed legislation directly conflicts with the State’s proper and authorized legislative and executive activity.”
“… In addition,” Hill continued, “the Ordinance imposes restrictions on political speech that likely violate the First Amendment by limiting the contributions on the part of those desiring to do business with public entities.”
Attorneys from Taft Stettinius & Hollister, Kroger Gardis & Regas, and Ice Miller likewise found the ordinance would violate the Home Rule Act. Each law firm submitted an analysis of the ordinance to city attorney Carol Helton in November and December 2017. Those analyses were attached to the complaint as exhibits.
Attorneys for Fort Wayne both in Allen and Marion counties did not respond to a request for comment on the ruling.
The case in Allen Superior Court 3 is Kyle Witwer and Kimberly Suzanne Witwer v. City of Fort Wayne, 02D03-1904-MI-318.