(editor’s note: this post is two years old; the most recent financial disclosures can be found here.)
The Honest Elections initiative, better known as I-122, is known for the election campaign voucher system it put in place. But there’s a hidden gem in there as well, which is now codified in Seattle Municipal Code 2.04.165.A.2:
Every elected official and every candidate for a future election shall after January 1st and before April 15th of each year file with the City Clerk a statement of financial affairs for the preceding calendar year, unless a statement for that same twelve month period has already been filed with the City Clerk. Any elected official whose term of office expires immediately after December 31st shall file the statement required to be filed by this section for the year that ended on that December 31st.
Our nine City Council members all complied with the financial disclosure requirement by the deadline (ok, Council member Johnson was five days late, but good enough for government work, and I’ll cut him some slack since he’s new to the job and it’s a new law). The City Clerk’s office doesn’t automatically post them online, but was very helpful and quick in sending them to me when I asked. And now I’m happy to share them with you.
OK, let me just say that “happy” is not really the right word for how I feel about this. “Conflicted” is much closer. On one hand, I am a true believer in the Founding Fathers’ deep distrust for government leaders and in forced transparency as a safeguard against corruption. We absolutely need to know who is giving money to our elected officials.
But I will admit that spending an evening reading the Council members’ financial disclosure forms is sort of creepy, and at times feels downright invasive. Even with confidence that my own finances are above reproach, I would be hesitant to run for public office knowing that I would have to disclose this much information. Nevertheless, they did choose to run for City Council knowing that this would likely be the law by the time they took office. And they won, and now so do we all because of the transparency this grants us. But let’s be grownups about this, throw some respect their way for giving up some of their privacy in the name of good government, and treat these disclosures with the seriousness they deserve.
If you’re looking for smoking guns, you won’t find them. You will find a lot of information about what their spouses, partners, and dependent children do, and you’ll find out that there’s about a $10 million range in net worth between the richest and the poorest of the nine City Council members. Those that have investments seem to be getting pretty good advice, as their portfolios are well diversified. And there are some mistakes in filling out the forms. But no, nothing that will get anyone kicked out of office.
Let’s start with links to the nine disclosure forms, in alphabetical order, along with their self-reported net worth:
Sally Bagshaw: $7,100,000
Tim Burgess: $5,150,000
Lorena Gonzalez: $22,000
Bruce Harrell: $10,257,000
Lisa Herbold: $225,000
Rob Johnson: $500,000
Debora Juarez: $700,000
Mike O’Brien: $1,572,573
Kshama Sawant: $270,000
Now, “net worth” can be a bit of a misleading metric, especially when it comes to real estate, since real estate prices fluctuate over time but loan amounts don’t. Someone can pour a ton of savings into a down payment on a house and have it disappear on paper when the market goes down (hopefully to have it reappear when the market recovers). It also is a poor estimate of the value of small family businesses, which several of the Council members’ spouses have. But for common liquid assets (stocks, mutual funds, etc.) it can be pretty revealing.
Here are some things I did notice while poring over the forms:
- Council member Sawant’s form looks incomplete when it comes to the information on her partner. He is listed as receiving compensation last year from Sawant’s re-election campaign, though the amount is unspecified. And that is precisely the kind of disclosure that you most want to see: when campaign funds end up being paid into the candidate’s family members’ bank accounts. It looks like an accidental omission, but one that needs to be corrected. Also, Sawant lists no investments other than her home; I’m not suggesting that’s not accurate; it’s just interesting to note in the context of her strident anti-corporate politics. Her actions back up her words.
- Council President Harrell and his wife are the high-water mark in terms of accumulated wealth. No doubt most of it comes from her Microsoft income and stock awards. They list homes in both Seattle and Bellevue, though no rental income from either. They have accumulated several retirement accounts, and substantial shares of Microsoft and Google stock.
- Council member Bagshaw lists her personal net worth at $2.4 million, those a closer reading shows that her husband has an additional $4.7 million in assets. Together they own shares of dozens of US companies, though few have significant presence in the Seattle area. The Bagshaws also have significant Google stock.
- Council member O’Brien and his wife are part-owners in two rental properties (single-family homes). She also owns two businesses: a marketing promotion company, and a fermented vegetable company that sells products to many local stores.
- Council member Herbold’s husband owns and runs a software consulting business based in North Bend.
- Council member Burgess is getting great investment advice for someone who is reasonably wealthy and holds public office: almost all of his assets are in a broadly-diversified set of mutual funds. With no concentrations in particular companies or industries (and likely several investments in companies that compete with each other) it would be hard to argue that financial interests are driving any of his decisions.
- Council member Gonzalez notes that last year she was a shareholder in the law firm that employed her. She now lists herself as a “former shareholder.” While she documents the dividend she received as a shareholder, she doesn’t list the income she received when she disposed of her share of the firm (I assume she sold it back to the other partners). The only asset she lists is the equity in her home.
- Council member Juarez notes that she has a substantial amount of assets in two investment accounts, but fails to identify the actual securities in those accounts. I’ll chalk that up as a rookie mistake, but it also needs to be corrected.
- Council member Johnson’s family net worth is almost entirely comprised of the equity in their house.
Random trivia: three Council members have mortgages with SunTrust; two have mortgages with Wells Fargo; one with PNC, one with Caliber Home Loans, and two carry no mortgage. Since several of them just got elected into office, this represents random chance and the overall consolidation of the mortgage industry more than anything else. But one benefit of consistent financial disclosures is that if there had been a pattern, suggesting perhaps that one or more mortgage companies were giving favorable terms to elected officials, it would have been in plain sight.
While there are no scandals uncovered by these financial disclosure forms, it is interesting and important for us to know that four of the nine Council members — and four of the five incumbents — are millionaires (and that the rest are not). That, along with the transparency into their business interests, help us to understand who the people are that sit on the City Council and give us useful context into their decision-making.
By the way: bonus points to the Council member that introduces an ordinance requiring the City Clerk to post the financial disclosure forms on the Web.
Update 5/25/16: the City Council’s communications office reached out to me today to clarify a few points:
- Since 1999, the Seattle Elections Code (SMC 2.04) has required all elected officials (Councilmembers, Mayor, City Attorney, and Seattle Municipal Court Judges) and candidates for those offices to file an annual report of their personal financial affairs.
- The specifics of the information requested have changed somewhat over the years (the disclosure of net worth, for example, is a new requirement based on I-122); the current regulations are in section 2.04.165 of the Seattle Municipal Code, as part of the general Campaign Disclosure regulations.
- As the agency responsible for enforcing the City’s ethics and election rules the SEEC is considered the primary contact for campaign finance documents, but the reports are filed with the City Clerk’s Office (email@example.com or 206-684-8344). Either office is happy to send them to anyone who asks.
Lorenna Gonzales campaigned as a formerly high powered, successful attorney, and she made 140k/year working for the Mayor’s Office. Yet she has 22k to her name? That suggests to me either dishonesty or financial mismanagement, both of which are troubling.
As I said in the article, “net worth” is hard to read into. It’s assets minus debt, and she has a mortgage. But she probably also had law school tuition loans, and she might be providing financial support for family members and/or making significant contributions to non-profits. So it’s interesting to note that her net worth is so low, but there are all sorts of reasonable explanations that don’t involve dishonesty or financial mismanagement.
Perhaps. She graduated from Seattle U Law eleven years ago, so her loans (if any) should be a fairly limited expense. You could be right – and you’re certainly being generous – but I have my doubts that she doesn’t have, at a minimum, multiple 401k and 457 plans from her firm and the city. It’s enough, to me, to raise questions, which goes back to your original point that the disclosures are beneficial.
Re Sawant “It looks like an accidental omission, but one that needs to be corrected. ”
I don’t think that was an accident. And it has smoking gun potential if we find she just hands all the “earnings over 40k” pledge to her domestic partner. How do we make sure this amount is filled in?
You would write to her, and to the City Attorney, demanding that she correctly disclose the amount. The City Attorney has enforcement authority for the Seattle Municipal Code.
Gonzales’ net worth statement seems a bit off to me. The only debt that she lists, other than a mortgage, is a $25K plus loan for a BMW, so it doesn’t appear that she has any outstanding student debt. She bought her apartment for 175K and, according to Zillow, it’s now worth about $315K. She’s also a shareholder in a law firm and lists the value of that as at least $25K, as well as at least $10K in a checking account. So that would put a floor of roughly $150K on her net worth. Not a huge difference, but it makes one wonder if other items (such as the previously mentioned 401(k)) are not being reported.
She might have just paid off the student loans. And “book value” for value of real estate is the price at the time of the last transaction, not the last assessed value, so it would be based on her purchase price. But certainly all good questions to ask. Yay for transparency.
Are you sure about the real estate evaluation method? Businesses have to mark up assets to current market prices. I’m too lazy to look up the rules, but it wouldn’t make much sense — someone with only real estate assets who bought a house 30 years ago for, say, $100K that is now worth $500K who refinanced for $200K and then spent that money would be considered to have a negative net worth when they really would have $200K net worth.
I would have to go double-check the exact rules for financial disclosures, but these things tend to be transaction based. Businesses depreciate some assets for tax purposes, which is in effect a transaction. But imagine if you had to claim appreciation on your house every year on your income taxes… you have to do it for property taxes, but not income taxes. Instead it gets triggered when you sell. You can voluntarily re-assess the value; you’d do that if you wanted to write off depreciation, or if capital gains rates were going up and you wanted to pay tax on the capital gains while the lower rate were still in effect.
What about Mayor Ed Murray’s financial disclosure? He’s an elected official. Where can I see his statement? At City Clerk’s website?
The two I didn’t ask for were the Mayor and the City Attorney (since I focus on the City Council). You can email firstname.lastname@example.org and request them. Definitely let me know if you find something interesting!
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