CEO 15-14—December 16, 2015
CONFLICT OF INTEREST
COUNTY EMPLOYEE ALSO LANDLORD CONTRACTING WITH
COUNTY PURSUANT TO H.U.D. PROGRAM
To: Ms. Erin Hartigan, Assistant County Attorney (Lake County)
Under the circumstances presented, a prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, if a county employee acting as a landlord enters into a contract with the county pursuant to the H.U.D. Section 8 Housing Assistance Payments Program while simultaneously serving on a county committee reviewing the eligibility of Section 8 participants. A conflict also would be created under Section 112.313(3), Florida Statutes, if the employee enters into the contract because the employee would be accepting payment for providing realty or a service to the employee’s political subdivision. Referenced are CEO 09-1, CEO 04-6, CEO 98-1, CEO 97-15, CEO 95-27, CEO 93-31, CEO 91-56, CEO 82-75, and CEO 77-88.
Would a prohibited conflict of interest be created under Section 112.313(3) or Section 112.313(7)(a), Florida Statutes, were a county employee, acting as a private landlord, to enter into a contract with the county to provide housing to Section 8 tenants in exchange for receiving monthly housing assistance payments from the county?
Your question is answered in the affirmative.
By letter of inquiry and additional written information supplied to our staff, you state that a County employee serves in the County’s Community Services Department. You relate that the Community Services Department has four Divisions (Administration, Housing and Community Development, Transit, and Health and Human Services), and that the employee works in the Administration Division as a Senior Financial Coordinator. You state that in that capacity the employee provides accounting and clerical services to the other Divisions within the Department, including preparing and maintaining the Department’s annual budget.
You relate that the employee also has responsibilities concerning the County’s participation in the Section 8 rental voucher program. While you state the employee has no influence over which tenants will be awarded vouchers under the program, the employee does compile a monthly report containing information on the number of vouchers that the County has issued and the total expenditures that the County has made under the program. In addition, you indicate the employee serves on a committee which conducts hearings on whether a Section 8 tenant’s involvement in the program should be terminated for reasons such as violating the program’s rules.
Furthermore, you state the employee, in a private capacity, has set up a limited liability company, for which the employee is the sole officer. You relate that through the company, the employee purchases and leases real property in the County. Given the employee’s involvement with the County’s administration of the Section 8 program, you inquire on the employee’s behalf whether it will be a violation of any provision of the Code of Ethics for the employee’s company to rent property to Section 8 tenants within the County, thereby participating as a landlord in the County’s Section 8 program. To answer this question, it is necessary to first understand the purpose and implementation of the Section 8 program.
According to the information that you provided, including material taken from the website of the U.S. Department of Housing and Urban Development (HUD), the Section 8 program allows low-income families, the elderly, and the disabled to receive a federal subsidy to assist them in obtaining safe and sanitary housing. An individual receives funding by first applying to a local Public Housing Authority (PHA) for Section 8 assistance. If the applicant meets eligibility criteria, the PHA will enter into a contractual agreement with the applicant’s landlord—called a Housing Assistance Payments contract (HAP contract)—whereby the PHA agrees to make monthly housing assistance payments on the applicant’s behalf in exchange for the landlord’s guarantee to provide suitable housing. 1 The PHA then uses Section 8 funds received from HUD to pay a portion of the applicant’s rent.
You state that the County has voluntarily chosen to serve as a PHA under the Section 8 program. Accordingly, you relate that HUD disburses a certain amount of Section 8 funds to the County and permits the County—acting as a PHA—to issue a certain number of vouchers. You state the County reports its use of Section 8 funds to HUD on a monthly basis and, if it is using less funds than HUD budgeted for a particular month, it returns any unused funds to HUD. 2
You relate that Lake County has entrusted the Housing and Community Development Division of the Community Service Department with implementing the Section 8 program. You state the Division’s Manager signs HAP contracts with various landlords on behalf of Lake County. You emphasize that although the employee also works for the Community Service Department, the employee is employed by the Administration Division, not the Housing and Community Development Division. As previously described, the employee’s responsibilities regarding the Section 8 program extend only to preparing a monthly report containing data on the number/amount of vouchers issued by the County and serving on a committee which conducts hearings concerning the eligibility of program participants. Given this context, it appears the provisions relevant to your inquiry are Sections 112.313(7)(a), Florida Statutes, and Section 112.313(3), Florida Statutes.
Turning first to Section 112.313(7)(a), this statute provides:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he or she is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his or her private interest and the performance of his or her public duties or that would impede the full and faithful discharge of his or her public duties.
The first part of the statute prohibits a public employee from being employed by, or having a contractual relationship with, a business entity (e.g., an LLC) being regulated by, or conducting business with, the employee’s agency. Therefore, as a threshold matter, we must determine the County employee’s “agency.”
The term “agency,” as defined in Section 112.312(2), Florida Statutes, means:
any state, regional, county, local, or municipal government entity of this state, whether executive, judicial, or legislative; any department, division, bureau, commission, authority, or political subdivision of this state herein; or any public school, community college, or state university; or any special district as defined in s. 189.012.
We have found that the Legislature intended this term to encompass the lowest departmental unit within which an employee’s influence might reasonably be considered to extend. See CEO 98-1, CEO 91-56, and CEO 82-75, Question 1. Accordingly, we have determined that when a particular local department has different divisions, it is the divisions themselves—rather than the entire department—which should be considered the employee’s agency. For example, in CEO 95-27, we found the “agency” of employees assigned to the fire rescue operations division of a county public safety department to be the fire rescue operations division. See also CEO 93-31. Applying that reasoning here, we find the County employee’s “agency” to be the Administration Division of the County’s Community Services Department.
Given this, we do not find that a prohibited conflict will be created under the first part of Section 112.313(7)(a) if the employee’s company rents property to Section 8 tenants, thereby participating in the County’s Section 8 program. We are aware that such an arrangement would require the employee’s company to enter into a HAP contract with Lake County. However, as described above, the contract would be signed on behalf of Lake County by the Director of the Housing and Community Development Division of the Community Services Department. Because the employee’s agency is the Administration Division—not the Housing and Community Development Division—such an arrangement would not place the employee’s company in business with or under the regulation of the employee’s agency. 3
The second part of Section 112.313(7)(a), prohibits the employee from having any employment or contractual relationship that will create a continuing or frequently recurring conflict between the employee’s private interests and the performance of the employee’s public duties or that would impede the full and faithful discharge of the employee’s public duties. A conflict of interest is defined in Section 112.312(8) as “a situation in which regard for a private interest tends to lead to disregard of a public duty or interest.” From what you indicate, the employee has two public duties which concern the Section 8 program.
First, the employee prepares monthly reports containing the number of vouchers issued by the County and the total disbursements that the County has made. 4 Because this report appears to simply relay data—and requires no discretionary act on the part of the employee which could benefit the employee or a potential Section 8 tenant—we find the fact that the employee may be renting to Section 8 tenants will not compromise or affect the employee’s ability to perform this responsibility.
Second, the employee serves, as a County employee, on the committee which determines whether a tenant’s participation in the program should be terminated, such as for violating program rules. Were the employee to begin renting to Section 8 tenants, the employee’s ability to adequately perform this responsibility could be affected, as the employee could be asked to determine the eligibility of the employee’s current or prospective Section 8 tenants. For this reason, it appears that if the employee rents to Section 8 tenants while serving on the committee, the employee will be in violation of the second part of Section 112.313(7)(a). 5
Turning next to Section 112.313(3), this provision states in part:
DOING BUSINESS WITH ONE’S AGENCY.--No employee of an agency acting in his or her official capacity as a purchasing agent, or public officer acting in his or her official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his or her own agency from any business entity of which the officer or employee or the officer’s or employee’s spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or the officer’s or employee’s spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to the officer’s or employee’s own agency, if he or she is a state officer or employee, or to any political subdivision or any agency thereof, if he or she is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator’s place of business or when such offices are on property wholly or partially owned by the legislator. This subsection shall not affect or be construed to prohibit contracts entered into prior to:
(a) October 1, 1975.
(b) Qualification for elective office.
(c) Appointment to public office.
(d) Beginning public employment.
Section 112.313(3) is implicated when a public employee acting in a private capacity rents, leases, or sells realty, goods, or services to the employee’s political subdivision or to any “agency” of that political subdivision. 6 An individual is considered to be “acting in a private capacity” when a business for which he or she serves as an officer, director, proprietor, or holds a material interest (5% or greater) rents, leases, or sells to his or her political subdivision. See CEO 09-1. Here, the employee is the sole officer for the employee’s LLC, and apparently owns substantial equity in it. Therefore, the question becomes whether a HAP contract between the employee’s company and the County will mean the employee is renting, leasing, or selling a realty, goods, or services to the County, as prohibited by the statute.
We find that the employee will be acting in a private capacity to provide services and realty to the County inasmuch as the employee’s company will be assisting the County in fulfilling certain obligations as a PHA, in exchange for pay from the County. In particular, the company will be providing property to be used in the Section 8 program, as well as an assurance that it will maintain the property at a certain level of safety and quality. Consequently, if the employee’s company enters into a HAP contract with the County, a prohibited conflict will be created under Section 112.313(3), as the employee will be providing realty (housing) and services to the County in the employee’s private capacity in exchange for remuneration. 7
In short, as detailed above, we find that a prohibited conflict would be created under Sections 112.313(7)(a), and 112.313(3) if the employee’s company enters into a HAP agreement with the County. We note that this opinion does not prohibit the employee’s company from purchasing or renting property within Lake County that is not currently occupied by a Section 8 tenant. Nor does it prohibit the employee’s company from purchasing property within the County that is currently occupied by a Section 8 tenant, so long as no contract is signed with the County and no Section 8 payments are received. 8
Your question is answered accordingly.
ORDERED by the State of Florida Commission on Ethics meeting in public session on December 11, 2015, and RENDERED this 16th day of December, 2015.
Stanley M. Weston, Chair
You relate the landlord also agrees not to raise the rent during the initial lease term, to incorporate certain terms required by HUD into the lease contract, and to maintain the housing unit in accordance with certain housing quality standards, including making repairs within the period specified by the PHA. You state the PHA can take legal action against the landlord if these conditions are violated.
You state that HUD retains these unused funds as a “buffer” for months when the County may exceed it authorized budget authority.
This situation is distinguishable from CEO 77-88 in which a Lee County Commissioner sought to rent property to participants in the Section 8 Program. In that scenario, we determined that the HAP contract would be between the Commissioner—acting in his private capacity as a landlord—and the County’s Housing Assistance Office, which was directly regulated by the County Commission. Because the Housing Assistance Office was considered a part of the Commissioner’s agency, we found the circumstances were sufficient to constitute a violation of the first part of Section 112.313(7)(a). Here, however, that prohibition is not triggered as the HAP contract will not place the employee’s company in business with or under the regulation of the employee’s agency.
We note that you have included a copy of a monthly report in the submitted materials.
While Section 112.316, Florida Statutes, has been used to “grandfather” in contractual relationships with business entities doing business with a public employee’s agency, it is not necessarily applicable to negate a conflict under the second, as opposed to the first, part of Section 112.313(7)(a). See CEO 97-15.
The term “political subdivision” is more expansive than the term “agency” and can include the entire county where a public employee serves. See Section 1.01(8), Florida Statutes.
While Section 112.313(3) expressly grandfathers in certain contracts, it does not appear the employee qualifies for this statutory exemption because any HAP contract between the employee’s company and the County will be executed after the employee began public employment.
The employee’s scenario is distinguishable from cases where there is a “no strings attached” relationship between the public employee’s company and the public employee’s agency. For example, in CEO 04–6, we advised a city councilmember that he could accept private employment from an economic development council receiving city funds without having a prohibited conflict of interest. Essential to that opinion was the fact that the economic development council was free to use the city funds as desired by its board of directors and, therefore, it had no obligation towards the city. Here, by contrast, the employee’s company would incur certain obligations towards the County by entering into the HAP contract and the County could take legal action, including recovery of overpayments, if the employee’s company failed to meet them.