By Ted Nolting, Kroger Gardis & Regas LLP
A city of Fort Wayne “pay-to-play” ordinance causing widespread apprehension to government contractors across the state was recently ruled unenforceable by an Allen County judge. The ordinance, adopted in early 2018 over the mayor’s veto, purported to address perceived ethical issues in the award of city contracts by prohibiting the city from entering into contracts, entering into negotiations with, or accepting bids from a “business entity” that exceeded $2,000 in campaign contributions to local offices (apportioned in any manner). In addition, it prevented any existing “business entity” with a city contract from exceeding the $2,000 campaign contribution limit. “Business entities” were defined to include individuals, all types of companies, the officers of those companies, the owners of companies (with at least a 7.5% ownership), and spouses of any of the foregoing. The ordinance additionally banned “excess” contributions to any Political Action Committees.
On September 24, 2018, upon request from Accelerate Indiana Municipalities, Attorney General Curtis Hill issued Official Opinion 2018-7 regarding the validity of the ordinance. Observing that Indiana courts repeatedly find “local ordinances impermissibly intrude on state regulatory systems where they prohibit conduct authorized by the state,” Hill noted that the State had enacted numerous statutes regulating elections and political conduct, as well as public purchasing, and there was no authority for a local unit to regulate such conduct. Accordingly, Hill determined that the ordinance violated the Home Rule Act and imposed restrictions on speech that likely violated the First Amendment.
On April 26, 2019, Kyle Witwer Witwer, the owner of Witwer Construction, a well-known general contractor in Fort Wayne, filed a complaint and motion for an injunction against enforcement of the ordinance, arguing, among other things, that (1) the ordinance violated the Home Rule Act, (2) the ordinance was preempted by state law, (3) the ordinance unconstitutionally violated Witwer’s First Amendment rights. After briefings and a hearing, Allen Superior Judge Jennifer L. DeGroote agreed with Witwer and granted an injunction permanently blocking the enforcement of the ordinance, finding that the ordinance impermissibly violated the Home Rule Act and was preempted by the State’s regulation of campaign finance law.
Fort Wayne City officials have not yet determined whether to appeal the ruling, or whether they will attempt to amend the ordinance to bring it into compliance with State law. Other municipalities considering similar ordinances will likely refrain from introducing legislation until the matter has been decided by the courts. However, given the strength of Indiana’s Home Rule Act and the reluctance of Indiana courts to allow any regulation into areas already occupied by state regulation, it seems unlikely that any regulation of political contributions at the local level will be upheld.