CITY HALL — At every City Council meeting, without fail, at least one citizen will use their duly allotted two minutes of public comment to accuse one or more city officials of corruption and conflicts of interest.

As fate would have it, some of them might be right.

City Attorney Marsha Moutrie asked the City Council for direction Tuesday on how to craft a policy governing the awarding of city contracts to individuals serving on boards and commissions.

According to state law, city officials cannot be engaged in contracts with the city that they serve except in very rare cases where not even a hint of overlap exists, Moutrie told council members.

The law, referred to as Section 1090, only deals with contracts, and goes farther than the Political Reform Act, which just instructs individuals to remove themselves from votes when they have a financial stake in an issue.

In contrast, Section 1090 completely prohibits City Hall from making a contract with an interested party. If found to be in violation, the penalties include forfeiting the contract and potentially felony prosecution.

Public grants also fall under Section 1090.

In California, even the spouses of board members or commissioners would not be able to accept contracts, something made clear in 1992 when Superintendent of Schools Bill Honig was forced to resign after being convicted on a felony count of violating 1090 because his wife’s nonprofit was partially funded by the Department of Education.

The section has been broadly interpreted by California courts to cover most eventualities, including the mere possibility of getting the contract, and therefore making money, according to a write-up by the Institute for Local Government.

It was that provision that brought the matter to light in Santa Monica.

Former Planning Commissioner Gwynne Pugh, who owns the architectural firm Urban Studio, approached the City Attorney’s Office with a question: Would it be a conflict if he won a contract from City Hall to work on the planning of future development projects in Santa Monica?

Not only would it be a conflict, the office decided, it was a conflict merely to apply, despite the fact that nearly 70 other firms had also put in responses.

“It didn’t seem like a conflict of interest because applying for a position is not actually getting the position,” Pugh said.

Had he gotten the assignment, recusal or resigning would have been appropriate, Pugh said.

“Appearance of conflict is as important as real conflict,” he said. “That’s why I brought it up, but there were 70 applications for this particular position.”

The question, once raised, caused turmoil in City Hall.

Santa Monica has 25 different boards and commissions with dozens of officials, many of whom hold weighty positions in their fields of expertise and some are actively working in the city.

The City Attorney’s Office is reviewing all city contracts and grants to determine how many potential conflicts have slipped through the cracks, said City Manager Rod Gould.

“There aren’t many, but there are some,” he said.

Those that exist will be upheld, Moutrie confirmed.

“We would preserve that contract. It could never go before that commission (the individual serves on),” Moutrie said. “It will take effort on our part, but we have no choice. If not, we would have to forfeit that contract.”

The policy could not continue, she said, calling it “a bandage for a problem we have right now.”

The choice before the council members was not one of whether or not to comply, but rather what degree of stringency City Hall should use to parse out whether or not to award contracts to commissioners.

Most cities employ a blanket ban, Gould said, rather than keeping the option open for the very rare cases that comply with Section 1090.

That’s more restrictive than the law itself, but easier to apply.

In a 6-1 vote, with Terry O’Day against, council members agreed that the blanket ban may be harsh, but its the best way to protect well-intentioned citizens from potentially becoming well-intentioned felons.

“I’m for the flat ban,” said Council member Bobby Shriver. “It’s not worth putting community members at risk. It makes me so nervous.”

Nervousness aside, some fear that the complete ban will prevent well-qualified people from joining boards and commissions where they are best able to serve their community.

“If it jeopardizes the ability to get excellence, the city is worse for it,” Pugh said.

Going forward, the City Attorney’s Office will train not only public officials, but also staff in charge of dealing with contracts and grants on the ins and outs of 1090 to prevent future backpedalling.

ashley@www.smdp.com

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