CEO 85-9 -- January 24, 1985

CONFLICT OF INTEREST

CITY COUNCIL MEMBER EMPLOYED BY BANK AGREEING TO PROVIDE LOAN TO CITY

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

SUMMARY:

No prohibited conflict of interest was created where a city council member is employed by a bank which has agreed to provide a loan to the city for a sewer project in anticipation of bonds being issued for the project, where no money was lent to the city before the agreement expired, as the bank was not "doing business with" the city. Loans entered into between the bank and the city prior to the time the councilman took office would be "grandfathered in" under CEO's 79-29, 77-36, 76-118 and 75-195.

QUESTION 1:

Was a prohibited conflict of interest created where you, a city council member, are employed by a bank which agreed to provide a loan to the city for a sewer project in anticipation of bonds being issued for the project, but where no money was lent to the city before the agreement expired?

This question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you have advised that you serve as Deputy Mayor and member of the City Council of the City of St. Cloud, and that you are employed as an Assistant Vice President in the consumer loan department of a local bank. You also have advised that in 1983 the City Council passed a resolution providing for the improvement of the municipal sewer system and the issuance of bonds to pay for the improvements. Before the bonds could be issued, however, the Council determined that it was necessary to proceed immediately with the improvements and passed a second resolution authorizing the borrowing from the bank which employs you of a sufficient amount to make the improvements immediately. You advise that you abstained from voting on that resolution.

You further advise that at that time your employer was the only bank within the City which could have provided a loan of the size requested by the City without going over its legal lending limit. However, the City did not require a loan from the bank, and the agreement expired at the end of 1984. Although the agreement was renewable, the City chose to seek bids for a new loan commitment, which has been entered into recently with another bank.

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

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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1983).]

This provision prohibits a city council member from being employed by a business entity which is doing business with the city. We previously have advised that a local elected official should not serve as an officer, employee, or director of a bank which is lending money to his agency. See CEO 79-29, CEO 77-36, CEO 76-118 and CEO 75-195. However, in this case we find that the bank did not do business with the City. Although, the City adopted a resolution authorizing a loan from the bank, no money was borrowed by the City.

Accordingly, we find that no prohibited conflict of interest was created by virtue of your employment with a bank which agreed to provide a loan to the City, where no money was lent to the City before the agreement expired. For future reference please note the competitive bidding exemption discussed in CEO 79-29, which would permit your employer to loan money to the City so long as the terms of that exemption are met.

QUESTION 2:

Does a prohibited conflict of interest exist where you, a city council member, are employed by a bank which has a loan outstanding to the city entered into prior to your election to the city council?

In a telephone conversation with our staff you have advised that the bank which employs you has lent money to the City under an agreement entered into approximately two years before you were elected to the City Council in 1984. In the opinions referenced in our response to your first question we advised that loans entered into between an official's agency and his bank prior to the time he became a member of the agency do not violate the Code of Ethics or require him to resign either position. Accordingly, this question also is answered in the negative.