CEO 79-6 -- February 22, 1979

CONFLICT OF INTEREST

WATER CONTROL DISTRICT BOARD MEMBERS SERVING AS OFFICER AND EMPLOYEE OF CORPORATION SELLING LAND TO DISTRICT

To: (Name withheld at the person's request.)

Prepared by: Phil Claypool

SUMMARY:

No prohibited conflict of interest would be created were a member of the board of supervisors of a water control district to be either an officer or employee of a corporation selling land to the district for construction of two reservoirs when the only land available for that use is owned by the corporation. A public officer is prohibited by s. 112.313(3), F. S. 1977 from acting in his official capacity to purchase realty from a business entity of which he is an officer; and s. 112.313(7)(a) prohibits a public officer from holding employment with a business entity doing business with his public agency. However, s. 112.313(12)(e) provides certain exemptions from the above prohibitions, including an exemption when "[t]he business entity involved is the only source of supply within the political subdivision of the officer or employee, and there is full disclosure of the officer's or employee's interest in the business entity to the governing body of the political subdivision." As the only land available for construction of the reservoirs is owned by the subject corporation, this exemption is deemed to apply so long as the required disclosure is made.

Neither s. 112.313(3) nor (7), referenced above, serves to prohibit the water control district from purchasing land owned by a trust when trustees and beneficiaries of the trust are principals in a corporation which employs a member of the district board of supervisors and whose president is a member of the board of supervisors, as both the employment and the presidency are with the corporation, not with the business entity (the trust) selling land to the district.

QUESTIONS:

1. Would a prohibited conflict of interest be created were a corporation whose president is a member of a water control district board of supervisors to sell land to the district for use as a reservoir when the only land available for that use is owned by the corporation?

2. Would a prohibited conflict of interest be created were land owned by a trust to be purchased by a water control district for use as a reservoir when trustees and beneficiaries of the trust are principals in a corporation whose president is a member of the district board of supervisors?

3. Would a prohibited conflict of interest be created were a corporation which employs a member of a water control district board of supervisors to sell land to the district for use as a reservoir when the only land available for that use is owned by the corporation?

4. Would a prohibited conflict of interest be created were land owned by a trust to be purchased by a water control district for use as a reservoir when trustees and beneficiaries of the trust are principals in a corporation which employs a member of the district board of supervisors?

Question 1 is answered in the negative.

In your letter of inquiry you advise that the Indian Trail Water Control District covers a large area in western Palm Beach County and functions under Ch. 57-646, Laws of Florida, and Ch. 298, F. S. The district is operated by a board of supervisors which consists of three members elected by the landowners of the district in a one- vote-per-acre election. You also advise that the district presently has an extensive water control plan for which it is arranging financing through a bond issue. This plan has been required of the district by the South Florida Water Management District for water retention, conservation, and water control. The district has no alternative except to promulgate the plan. You also advise that the plan requires the acquisition of two large water retention areas for the construction of two reservoirs within the district. In your letter and in a telephone conversation with our staff, you further advise that, with the exception of two tracts, all of the land in the district has been subdivided into small lots, most of which have been sold to individuals, with roads, canals, and some houses already having been constructed. Therefore, there are only two areas available for the two reservoirs. One of these is owned by a corporation of which the subject board member is president. Finally, you advise that the proposed purchase price of this tract submitted by the corporation is below the market price, with the proposed sale being demonstrably an "arms length" transaction between the corporation and the district.

The Code of Ethics for Public Officers and Employees provides in relevant part:

No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his 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 his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. . . . [Section 112.313(3), F. S. 1977.]

It is apparent that this provision would prohibit the contemplated sale of land to the water control district, as one of the district board members is an officer of the corporation which would be selling to the district. However, the Code of Ethics also provides an exemption to the application of this provision if

[t]he business entity involved is the only source of supply within the political subdivision of the officer or employee, and there is full disclosure of the officer's or employee's interest in the business entity to the governing body of the political subdivision. [Section 112.313(12)(e), F. S. 1977.]

Under the facts you have presented, it appears that if the district is to acquire two tracts of land for the construction of the two reservoirs required by the South Florida Water Management District, and if there are only two tracts of land available for purchase by the district for this purpose, then the owner of each tract would constitute the sole source of supply available to the district.

Accordingly, so long as full disclosure of the subject board member's interest in the corporation is made to the district board, we find that no prohibited conflict of interest would be created were the corporation to sell land to the district for use as a reservoir, when the only land available for that use is owned by the corporation. Commission on Ethics Form 4A has been promulgated by this commission for use in making the disclosure required by s. 112.313(12)(e).

Question 2 is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you advise that the second parcel of land available to the Indian Trail Water Control District for the construction of a second reservoir is owned by a trust. You also advise that the two trustees and some of the beneficiaries of this trust are principals of the corporation of which the subject board member is president. As was the case with the tract referenced in the first question, you advise that the proposed purchase price of this tract is below the market price, with the proposed sale being demonstrably an "arms length" transaction between the trust and the district.

Section 112.313(3), quoted in response to your first question, does not apply under these circumstances as it does not appear that the subject board member has any direct interest in the trust, which is a separate "business entity" from the corporation which he serves as president. Section 112.312(3), F. S. 1977. Nor would s. 112.313(7)(a), prohibiting a public officer from having any employment or contractual relationship with a business entity which is doing business with his agency, be applicable under the facts you have outlined.

We find that no prohibited conflict of interest would be created were land owned by a trust to be purchased by the water control district for use as a reservoir where trustees and beneficiaries of the trust are principals in the corporation whose president is a member of the district board of supervisors.

Question 3 is answered in the negative.

In your letter of inquiry you advise that ____ is an employee of the same company referenced in question 1. The Code of Ethics for Public Officers and Employees provides in relevant part:

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 is an officer or employee . . . . [Section 112.313(7)(a), F. S. 1977.]

It is apparent that this provision would prohibit the subject board member from being employed by a corporation which is selling a tract of land to the water control district. However, s. 112.313(12)(e), quoted in response to your first question, operates as an exemption to subsections (3) and (7) of that section.

For the reasons stated in our response to your first question, we find that a prohibited conflict of interest would not be created were a corporation which employs a member of a water control district board of supervisors to sell land to the district for use as a reservoir when the only land available for that use is owned by the corporation. The disclosure referenced in our answer to that question also should be made in this case.

Question 4 is answered in the negative.

This question is substantially the same as your second question. It is our understanding that the subject board member has no employment or contractual relationship with the trust which would be selling land to the district for use as its second reservoir; therefore, s. 112.313(7)(a) does not apply.

We find that no prohibited conflict of interest would be created were land owned by a trust to be purchased by a water control district for use as a reservoir when trustees and beneficiaries of the trust are principals in a corporation which employs a member of the district board of supervisors.