Light rail, dark money: A conflict between election law and guidance is part of bigger transparency issues

VIRGINIA BEACH — It may be months before Virginia Beach citizens have any sense how much money light rail advocates spent to influence their votes on Election Day – and the sources of that money may never be made public.

Light Rail Now, which operated “educational” campaigns seeking yes votes under different names, is a 501(c)(4) nonprofit organization. It did not form a referendum committee or disclose donors this year, though it did so in 2012, when light rail was last on the ballot here.

It didn’t have to in 2016, according to the state, which in April sent the group an opinion saying so.

On Tuesday, Nov. 8, the advisory ballot failed for proponents of light rail. Virginia Beach voters overwhelmingly said no to the use of local funds to extend The Tide from Newtown Station to Town Center. Many on the city council have said they will listen to voters, and the state this past week took steps, among other things, to cancel funding that had been set aside for the project.

But the divisive campaign and how light rail advocates operated in it may have another impact because it represents a very local example of wider issues about transparency — disclosing the money behind political speech. 

That Virginia election law and other state guidance seemingly are contradictory means this could happen again in a local or state ballot initiative. And, across the U.S., certain nonprofit organizations can persuade the electorate while keeping the source of their money secret.

Nonprofit 501(c)(4) “social welfare” organizations can be a vehicle of choice for political issue advocacy and some advertising efforts, according to media reports and an organization that tracks the influence of money on American politics. The practice has grown, in part, because it can shield donors.

Light Rail Now, Inc., which has not always been clear about its role in some appeals to voters, has declined to name donors. To be clear: the group is operating within the realm of the state elections department opinion, and it is allowed to avoid disclosure. The opinion reflects current campaign finance law.

At The Independent News previously reported, state guidance says the opposite, but that guidance, which remained online throughout the campaign, could be in error. Effectively, those who support light rail extension or might benefit from it could have donated to the organization without the public being aware of their involvement. Voters simply do not know.

Operating as Virginia Beach Connex, Light Rail Now presented itself online as “a group of civic-minded citizens of Virginia Beach.” Martha McClees, the executive director of Light Rail Now, has said efforts run under the Virginia Beach Connex and Mission Transport VB names are educational arms of Light Rail Now. It wasn’t always clear at the Virginia Beach Connex website and in some materials distributed on social media, generally Facebook.

Some materials produced under the Virginia Beach Connex name identify Light Rail Now as the source, but some digital videos and print products, including a widely-distributed map showing possible rail lines, did not. An application to film filed with Hampton Roads Transit listed the organization as Virginia Beach Connex when it should have said Light Rail Now. One local businessperson lists his board membership with Virginia Beach Connex on his LinkedIn profile. McClees has said Virginia Beach Connex is not its own organization.

Mission Transport VB recently released the final videos in a series on social media. The videos do not identify Light Rail Now.

There are some different requirements for advertising in a referendum campaign compared to a contest between political candidates. There has been no suggestion Light Rail Now acted improperly. The issue is that voters don’t know who is speaking to them without disclosure.

The use of nonprofits to influence elections has grown increasingly prevalent in recent years. At times, this prevents the public from knowing who pays to influence them, according to an advocate for campaign finance transparency.

The nonprofits can but do not always disclose donors. Nonprofits that spend for political purposes but do not disclose the source of their funds are using what is called “dark money.”

The term applies to politically active nonprofits that do not disclose donors or “super” political action committees that accept funds from politically-active nonprofits that do not disclose donors, according to the Center for Responsive Politics, a nonpartisan organization that researches the effects of spending on government and elections.

Nonprofit spending, including by 501(c)(4) “social welfare” organizations, has grown especially in federal elections, according to the center. There are examples of nonprofits pouring money into state and local races and referenda outside of Virginia Beach. A recent report by The Bangor Daily News said nonprofits were behind significant amounts of funding in ballot initiatives this year in Maine.

“These organizations can receive unlimited corporate, individual, or union contributions that they do not have to make public, and though their political activity is supposed to be limited, the IRS – which has jurisdiction over these groups – by and large has done little to enforce those limits,” according to the center.

Spending by such groups grew from less than $5.2 million in 2006 to more than $300 million during the 2012 federal cycle, the center found, reviewing federal-level spending.

 “We see an array of groups that are active in, for example, policy or ballot issues,” said Robert Maguire, a political nonprofit investigator at the center, in a telephone interview. He discussed nonprofit advocacy in general, though he could not directly address the specifics of nonprofit spending in Virginia Beach.

“The main issue is voters have a right to know,” he said. “We have disclosure rules for a reason. Voters have a right to know who is speaking to them. … It would help to know if that group is funded by a genuine grass-roots organization or a group with a stake.”

He also said rules related to ballot issues such as the light rail referendum are less clear than advocacy for specific candidates.

State Sen. Bill DeSteph, R-Virginia Beach, citing a September report by The Independent News about Light Rail Now, sought an opinion from state Attorney General Mark Herring to determine whether Virginia Beach Connex was operating like a political action committee. The Independent News reported on why Light Rail Now did not organize a referendum committee, which is different from a PAC. 

DeSteph sent his letter 13 days before the election, and Herring’s office responded on Monday, Nov. 7, declining to offer an opinion. 

Timothy Oksman, opinions counsel for the office, wrote that the attorney general needed additional facts facts to render an opinion. Oksman phrased the matter in terms of a referendum committee.

In an interview that day — one day before the light rail referendum vote took place here — DeSteph said it’s the sort of response Herring provides when he does not want to render an opinion. 

Still, DeSteph said his office would try to provide more information for the attorney general, and he said the General Assembly potentially might look at issues with the election law.

“We can certainly tweak it,” DeSteph, who serves on the privileges and elections committee, said. “What I’m hoping is we can go back to get additional detail and get the attorney general to do his job.”

What remains unclear is when clarity will come, which means nonprofit organizations could avoid forming committees and disclosing donors and spending in future referendum votes based upon the exisiting opinion that some areas of the law apparently do not apply to 501(c)(4)s. 

Since Light Rail Now does not need to file campaign financial disclosure reports, the potential cost of some of its advertising efforts are known only because the federal government requires broadcast media organizations to report agreements to provide political advertising, including for issue advertising. 

The Virginian-Pilot reported Light Rail Now planned to spend more than $100,000 on television and cable advertising. [The Independent News saw a higher number in FCC records, but, as noted in that report, agreements can be changed or cancelled.]

The records are available for public inspection at the FCC website via publicfiles.fcc.gov. The records can be difficult to find, but they are listed by outlet.

The advertising sum does not reflect other advertising and communication efforts Light Rail Now has sponsored this year. And they do not show the sources of the money that helps the group pay for its outreach.

The political action committee No Light Rail Virginia Beach, formed by City Treasurer John Atkinson, was the organization that got the question about using local funds to extend the Tide from Newtown Station to Town Center on the November ballot. As the name suggests, the PAC opposed paying for the extension of the Tide. 

As a PAC, the group is required to disclose its donors and spending in reports made available online for public inspection.

Through the end of September, No Light Rail Virginia Beach had spent about $36,000 and had slightly more than $5,000 on hand, according to its campaign disclosure reports. 

Its expenditures have included advertisements in this newspaper, among other publications such as The Virginian-Pilot and The Virginia Beach Sun, and some radio advertising.

Those sums can be reviewed by members of the public via cfreports.sbe.virginia.gov. Voters can also see the names of many of the donors who made it possible for No Light Rail Virginia Beach to persuade voters because Virginia’s law — in this particular circumstance, at least — seeks transparency.

© 2016 Pungo Publishing Co., LLC