Secret Money to Start Free-Flowing Into Charlotte, N.C., Mayor's Race
By Steve Harrison and Jim Morrill
For supporters of Democratic mayoral candidate Joel Ford -- or opponents of Mayor Jennifer Roberts -- the sales pitch was clear.
Donate to a new "social welfare" organization called Queen City Leadership, the group said in an email solicitation, and you can make "unlimited" personal or corporate contributions. The "confidential" donations are reported only to the Internal Revenue Service and "not for public review."
In a first for a Charlotte mayoral election, at least two independent, tax-exempt "social welfare" groups plan to influence the mayor's race -- while allowing donors to give as much as they want without the public knowing.
It's another signal that after a year that put the city and Roberts in the national spotlight, this year's mayoral race could see record spending. She faces Ford, a state senator, and Mayor Pro Tem Vi Lyles in the Democratic primary.
Queen City Leadership, which supports Ford, told prospective donors it plans to use TV, direct mail and digital advertising to tell voters "about the stark differences between the candidates for Mayor." The group plans to spend money early, "before the candidates can use their limited resources."
Another group, Forward Charlotte, was created in late 2016 for "citizens who are committed to restoring our city's identity and crafting a vision for her promising future." It's led by a Republican strategist, Mark Knoop.
On its website, the group does not mention Republican mayoral candidate Kenny Smith by name, but it has released a web video calling on voters to "elect new leaders." The video shows Roberts speaking to reporters while a narrator says politicians have played "cynical games in the halls of power."
Supporters of the two organizations said the local business community wants a voice in the race, and is worried it won't be heard over national and state liberal groups like the Washington, D.C.-based Human Rights Campaign and Equality NC, two gay rights groups.
The IRS has said the 501(c)(4)s are "social welfare organizations," which the federal government says is to "further the common good and general welfare of the people of the community."
The groups can engage in political activities though that can't be their primary purpose.
The tax-exempt 501(c)(4) groups are named for the federal tax code that sanctions them. They began proliferating nationwide after the U.S. Supreme Court's 2010 Citizens United decision, which allowed unlimited spending by corporations and labor unions in elections.
For donors, the benefit is that someone is not bound by N.C. fundraising limits, which are now $5,200 per person, per election. In addition, donations to the tax-exempt groups are private and are only disclosed to the Internal Revenue Service.
In past elections, a developer with a project before the city would have a maximum political donation of $5,200 that would be public. With a social welfare organization, the same developer could donate $50,000 -- with no one knowing.
Candidates are not supposed to coordinate with the organizations, but in theory a candidate could know informally who has donated to a group that supports them.
"The c(4)s are just mystery land for voters," said Bob Hall of Democracy North Carolina, which advocates for more transparency in elections and in state and local government. "They aren't supposed to coordinate with the candidate, but a candidate could be at their fundraiser. It's unbelievable."
In the past, numerous political action committees called super PACs have been involved in local elections, and still are today. For instance, the N.C. Property Rights Fund has already sent mailers for Ford. Those organizations have no fundraising limits, but they have to disclose their donors.
Political consultant Michael Halle, who worked on Democrat Anthony Foxx's 2011 mayoral reelection campaign, said he hasn't heard of social welfare groups working in Charlotte mayor races before.
He said there is only one reason to have such an organization instead of a traditional political action committee -- anonymity.
"If someone wants to get around the funding cap you can easily get around the cap (with an independent political action committee)," he said. "The (social welfare organization) is to prevent donors from being disclosed.
"If you are worth $30 million and it's easy to stroke a $50,000 check, then it's much easier to write it than to try to get 10 friends together and to beg for their money. This gives you the opportunity to write that check."
'Most money spent'
Knoop, who leads Forward Charlotte, wouldn't say how much his group hopes to raise. But he said if Roberts wins the primary, a general election between her and Smith would shatter records for raising money in a Charlotte mayor's race. In the 2009 election, Republican John Lassiter and Foxx raised more than $1 million combined.
"What's safe to say is that there will be more money spent than ever has been in a Charlotte mayoral race," he said.
Roberts' opponents expect her to receive financial support from groups like the Washington D.C.-based Human Rights Campaign, which supported her opposition to HB2. But there are no 501(c)(4) groups currently aligned with Roberts' campaign.
Roberts was in Dallas this week for the Charlotte Chamber's annual inter-city visit and couldn't be reached. Her campaign manager Sam Spencer said Roberts will have more donations from Charlotteans than any other candidate.
"Outside special interests with ties to the Republican leadership in Raleigh are trying to buy the mayor's office, taking it out of the hands of Charlotte voters," Spencer said. "Joel Ford has given Charlotte a clear choice between a candidate who sides with Republicans in Raleigh, and Jennifer Roberts, a mayor who fights for Charlotte by creating jobs, helping our youth, and fighting for our values."
Ford said in an interview that he has had no contact with Queen City Leadership, the group supporting him.
"They make their own determination as to who they will support or who they won't support," he said.
He said Roberts has significant support from outside Charlotte, pointing to groups like the Human Rights Campaign. He said "people are tired" of outside groups being involved in local politics.
Queen City Leadership, however, asks that people send donations to a Raleigh address that's home to Kohn Associates, a PR and fundraising group, and the leader of the organization, Neil Kammerman, is a Raleigh-based political consultant.
Ford said the issue of who had the first outside support is a "chicken or the egg" debate.
Lyles has been endorsed by Democracy for America, a PAC founded by former Democratic National Committee chair Howard Dean. She said the group plans to help her reach voters.
"I am the person with the most experience at the local level in this race," she said. "The connection to people is what's going to make the difference."
Smith said he's not affiliated with Forward Charlotte.
When asked why groups like Forward Charlotte are now getting involved in the Charlotte election, Smith said he believed local business people are concerned that "the HRC and national interests are driving and pushing local legislation."
A fine line
The social welfare organizations must walk a fine line between advertising about general issues like crime or the economy versus throwing their specific support for a candidate.
They can openly engage in political activities, but raising money for a candidate or running a commercial on their behalf must be their secondary mission, the IRS has said. That's been interpreted as being less than half of their expenditures.
Joe Padilla of the Real Estate Building Industry Coalition in Charlotte was planning to host Queen City Leadership next week for a fundraiser.
Padilla told the Observer the group is "not specifically supporting Joel Ford." He said "they are highlighting the need for pro-business leadership in the Mayor's office."
But in an email to REBIC members, Padilla invited them "to hear from a team of campaign consultants working on an independent expenditure effort to engage in the 2017 Charlotte Mayoral election in support of Joel Ford."
And Queen City Leadership itself says it's "supporting Joel Ford for Mayor."
The REBIC fundraiser has been postponed.
Kammerman, who leads Queen City Leadership, worked on Roberts' 2015 campaign, but has since broken ranks with her. He said Queen City Leadership was formed three months ago.
"Politics is not our primary activity," he said. "We are dedicated to making Charlotte a better place to live, work and raise a family."
But the memo to donors only mentions a political focus. When asked by the Observer what the group has been doing that's not related to politics, Kammerman wouldn't say.
"I can't answer that now," he said. "I would like to talk about it more, and I will."
Kammerman has also launched Citizens for a Better Charlotte, another PAC that's supporting Ford. Citizens for a Better Charlotte must disclose its donors.
"We are concerned about the direction Charlotte has taken in the past year and a half and how much bad press has been around the city," he said. "It's been a real embarrassment."
In 2016, the Federal Elections Commission deadlocked in a 3-3 vote about investigating the social welfare group Carolina Rising, which spent nearly $5 million -- almost its entire budget -- on ads for Republican Thom Tillis in his 2014 Senate race.
The N.C. Democratic Party said Carolina Rising blatantly and brazenly made politics its primary mission, even though the group was supposed to be a social welfare organization.
Knoop's group, Forward Charlotte, recently released a web video titled, "Lights."
It said the city's lights have begun to dim because of "politicians playing cynical games in the halls of power." As the narrator reads that line, video of Roberts appears. The ad also mentions that violent crime is increasing, and calls on voters to elect "new leaders" though it doesn't mention Smith by name or have his photo in the ad.
Knoop said Forward Charlotte plans to remain active after the election.
(c)2017 The Charlotte Observer (Charlotte, N.C.)