CEO 10-5 March 3, 2010

WATER MANAGEMENT DISTRICT GOVERNING
BOARD MEMBER EMPLOYEE/OFFICER OF NONPROFIT
ORGANIZATION LEASING REALTY FROM DISTRICT
UNDER SEALED, COMPETITIVE BIDDING PROCESS

To: Sheryl G. Wood, General Counsel, South Florida Water Management District (West Palm Beach)

SUMMARY:
Under the circumstances presented, the "sealed, competitive bidding" exemption of Section 112.313(12)(b), Florida Statutes, is applicable to negate a prohibited conflict of interest under Section 112.313(7)(a), Florida Statutes, occasioned by a lease between a water management district and a nonprofit organization of which a member of the governing board of the district is an employee and officer. However, the member must comply with the voting conflicts law of Section 112.3143, Florida Statutes, regarding votes/measures of the WMD governing board affecting the organization. CEO 78-18, CEO 85-9, CEO 85-59, CEO 86-24, and CEO 04-5 are referenced.¹

QUESTION:
Is the "sealed, competitive bidding" exemption of Section 112.313(12)(b), Florida Statutes, applicable to negate a prohibited conflict of interest under Section 112.313(7)(a), Florida Statutes, occasioned by a lease between a water management district and a nonprofit organization of which a member of the governing board of the district is an employee and officer?²

Under the circumstances presented, this question is answered in the affirmative.

By your letter of inquiry and additional materials, we are advised that Charles J. Dauray (member) serves as a member of the governing board of the South Florida Water Management District (WMD), a political subdivision of the State created by Chapter 373, Florida Statutes, having been appointed in April 2007. In addition, we are advised that the member is employed as the chairman, chief executive officer, and president of a nonprofit organization whose mission and goals involve the preservation of historical records/artifacts and educational initiatives.³

Continuing, you advise that in 1993, the WMD acquired approximately 1,000 acres from the estate of an individual, to be used for a river restoration project, that a small portion of the acreage (homestead) is not needed for the project because it is above the 100-year flood line, but that the WMD's acquisition of the whole, including the portion not needed, coupled with the WMD's maintenance of the homestead, was required to enable the WMD's acquisition.⁴ Further, you advise that maintaining the homestead has been a substantial financial commitment for the WMD⁵ and that WMD staff have continually pursued involving outside entities in the maintenance.⁶ Also, you advise that as early as September 2008, the member (both as a member and as a private citizen) recognized the importance of preserving the homestead,⁷ but that he has had no involvement in the potential WMD bidding (detailed below) regarding the homestead.

Additionally, you advise that in October 2009, WMD staff submitted to the WMD governing board a resolution authorizing the WMD to lease the homestead to a third party or to enter into a contract with a third party for management of the homestead and that the board approved the resolution (with the member abstaining from the vote, not participating, and filing CE Form 8B, Memorandum of Voting Conflict, regarding the resolution). Further, you advise that the member has not had any involvement in the WMD staff's decision to recommend to the governing board the use of a lease or management agreement regarding the homestead, and that the member has not had any involvement in the staff's determinations regarding any specifications of a proposed lease or management agreement related to the WMD's commitment to perpetual preservation of the homestead. Continuing, you advise that in February 2010, in response to the resolution mentioned above, WMD staff completed a request for bids package (RFB) concerning a potential lease of the homestead, and that the issue date for the RFB will be February 22, 2010, with an inquiry period through March 12, 2010, and a deadline for bid submissions of March 29, 2010, at 2:30 P.M. Also, you advise that, in accord with WMD procurement procedures, all responses to the RFB must be submitted in a sealed envelope or box. And, again, you emphasize that the member has not had any involvement in the WMD staff's decision to use a lease rather than a management agreement, or in the staff's determinations regarding any specifications of the proposed lease.

Thus, you inquire whether a prohibited conflict of interest will be created for the member under the Code of Ethics, if his organization is selected as the lessee, especially regarding applicability of the exemption for "sealed, competitive bidding."

Section 112.313(7)(a), Florida Statutes, is the applicable prohibition within the Code.⁸ It 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 interests and the performance of his or her public duties or that would impede the full and faithful discharge of his or her public duties.

Absent applicability of an exemption, a prohibited conflict would be created for the member under Section 112.313(7)(a) were the organization to lease the homestead from the WMD. The member, as an employee and compensated officer of the organization, would hold employment or a contractual relationship with a business entity⁹ doing business with¹⁰ his public agency.

However, Section 112.313(12)(b), Florida Statutes, provides the following exemption:

. . . no person shall be held in violation of subsection (3) or subsection (7) if:
(b) The business is awarded under a system of sealed, competitive bidding to the lowest or best bidder and:
1. The official or the official’s spouse or child has in no way participated in the determination of the bid specifications or the determination of the lowest or best bidder;
2. The official or the official’s spouse or child has in no way used or attempted to use the official’s influence to persuade the agency or any personnel thereof to enter such a contract other than by the mere submission of the bid; and
3. The official, prior to or at the time of the submission of the bid, has filed a statement with the Commission on Ethics, if the official is a state officer or employee, or with the supervisor of elections of the county in which the agency has its principal office, if the official is an officer or employee of a political subdivision, disclosing the official’s interest, or the interest of the official’s spouse or child, and the nature of the intended business.

Under the circumstances presented, we find that the exemption will apply, finding that each of its requirements will be satisfied. More particularly, the information presented demonstrates that the business (lease of the homestead) will be awarded under sealed, competitive bidding to the lowest or best bidder, it has been represented that the member will timely file the required statement of interest (CE Form 3A), we see no indication that the member has, or will, use or attempt to use his influence to persuade the WMD or its personnel to enter into the lease with the organization, other than by the organization's submission of its bid, and the situation presented does not indicate that the member participated in the determination of the bid specifications or that he will participate in the determination of the lowest or best bidder. As to this last point, we do not find that the member's earlier recognition of the importance of preserving the homestead, his earlier assistance to WMD staff in identifying public entities or foundations that might have been able to maintain the homestead, his attendance at a meeting of WMD staff and Highlands County staff regarding the County's interest, if any, in acquiring the homestead, and other related general conduct of the member regarding the homestead equates to participation in the determination of the bid specifications for the instant, more-recently-formulated bids package seeking a lessee for the homestead. It is evident from the information presented to us that the particulars of the bids package are staff-driven, at the broader direction of the WMD board, and that the board's direction was via a resolution regarding which the member abstained from voting and did not participate.¹¹

Accordingly, we find that the "sealed, competitive bidding" exemption of Section 112.313(12)(b) is applicable to the member's situation as presented,¹² and, thus, that a prohibited conflict will not be created for him under Section 112.313(7)(a),¹³ were an organization of which he is an employee and officer to lease the homestead from the WMD.¹⁴

ORDERED by the State of Florida Commission on Ethics meeting in public session on February 26, 2010 and RENDERED this 3rd day of March, 2010.

^[1] Prior opinions of the Commission on Ethics may be obtained from its website (www.ethics.state.fl.us) or may be obtained directly from the Commission.

^[2] Your inquiry contains three numbered questions, with unnumbered subparts. However, in view of the concrete, factual focus of the inquiry being on the "sealed, competitive bidding" exemption, we have rephrased and consolidated your "questions."

^[3]In addition, you advise that the member has several other professional, business, and service affiliations (apparently not germane to this inquiry) for which he serves as a board member.

^[4]More particularly, you advise that approximately 16.65 acres of the 1,000 was the family's homestead, that 2.73 acres of the homestead is below the 100-year flood line and thus required for the restoration project, and that the WMD has an obligation through the probate court to preserve, in perpetuity, the homestead residence, former schoolhouse, and old cemetery, which are above the 100-year line.

^[5]You advise that the WMD currently contracts with a local entity to provide general caretaking and maintenance services, for an annual cost of $33,250, that the WMD has paid thousands of dollars for repairs of miscellaneous items, such as the porch and roof of the residence, and that other repairs are needed throughout the year.

^[6]For example, you advise that WMD staff, prior to February 2006, progressed to the point of drafting a contract and statement of work with a State university for the development and management of an educational visitors' center at the homestead, but that the contract was not executed.

^[7] You advise that in an effort to make sure an appropriate, capable organization acquired the homestead, the member assisted WMD staff in identifying public entities and foundations capable of appropriate maintenance. Specifically, you advise that the member attended a meeting between WMD staff and staff of Highlands County, to determine whether the County had interest in acquiring the homestead. However, you emphasize that at no time did the member discuss issues of price, whether or not the homestead should be conveyed with conditions/covenants, or details of restoration/maintenance.

^[8] We have not overlooked Section 112.313(3), Florida Statutes, another prohibition contained within the Code and mentioned in your inquiry. Although we have found that this prohibition is not at issue when a private entity rents, leases, or purchases items from a public agency or political subdivision, as opposed to when a private entity rents, leases, or sells items to a public agency (see, e.g., CEO 04-5), as would appear to be the case with the WMD's lease to the organization, or to whatever other bidder is selected, it is unnecessary for us to examine whether the substance of the lease might amount to a purchase of homestead maintenance services by the WMD from the organization or other successful bidder, given our ultimate decision below finding applicability of the sealed, competitive bidding exemption, which negates conflicts under both Section 112.313(3) and Section 112.313(7)(a). Section 112.313(3) provides:

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:

October 1, 1975.
Qualification for elective office.
Appointment to public office.
Beginning public employment.

^[9] We have found a nonprofit organization to be a "business entity." See, e.g., CEO 78-18. Also, see Section 112.312(5), Florida Statutes.

^[10]We have found that a public agency and a business entity are "doing business with" each other when they have entered into a lease, contract, or other arrangement where one party would have a cause of action against the other in the event of a breach or default. See, e.g., CEO 86-24.

^[11] CEO 85-9 (Question 1), CITY COUNCIL MEMBER EMPLOYED BY BANK AGREEING TO PROVIDE LOAN TO CITY, is somewhat supportive of our decision herein, regarding general involvement of a public official in a subject matter not negating potential applicability of the "sealed, competitive bidding" exemption to later actual business. In CEO 85-59, we noted possible future use of the exemption to the city council member/bank employee, despite the fact that he apparently earlier had been involved in general issues regarding whether to fund city sewer improvements with a bond issue or, instead, with a bank loan.

^[12]Of course, looking forward, for the exemption to apply, the member must continue to be uninvolved with WMD work/actions regarding the bids package, and he must follow through with timely filing of CE Form 3A.

^[13] As stated earlier herein, we find it unnecessary to treat in more detail Section 112.313(3). Further, assuming arguendo that the substance of the relationship between the WMD and the organization, if the organization enters into a lease with the WMD, is a purchase of maintenance services by the WMD rather than a lease of realty to the organization, the sealed, competitive bidding exemption also negates conflicts arising under Section 112.313(3).

^[14]Also, the member, as a local, appointed, public officer, must comply with the voting conflicts law codified in Sections 112.3143(3)(a) and 112.3143(4), Florida Statutes, regarding votes/measures of the WMD governing board affecting his employer (principal), the organization, including, but not limited to, votes/measures concerning the bids package. Such compliance is necessary both under the voting conflicts law itself and in order for the sealed, competitive bidding exemption to be applicable. Statutes provide:

VOTING CONFLICTS.—No county, municipal, or other local public officer shall vote in an official capacity upon any measure which would inure to his or her special private gain or loss; which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained, other than an agency as defined in s. 112.312(2); or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of the officer’s interest in the matter from which he or she is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his or her interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes. [Section 112.3143(3)(a), Florida Statutes.]

(4)        No appointed public officer shall participate in any matter which would inure to the officer’s special private gain or loss; which the officer knows would inure to the special private gain or loss of any principal by whom he or she is retained or to the parent organization or subsidiary of a corporate principal by which he or she is retained; or which he or she knows would inure to the special private gain or loss of a relative or business associate of the public officer, without first disclosing the nature of his or her interest in the matter.
(a)        Such disclosure, indicating the nature of the conflict, shall be made in a written memorandum filed with the person responsible for recording the minutes of the meeting, prior to the meeting in which consideration of the matter will take place, and shall be incorporated into the minutes. Any such memorandum shall become a public record upon filing, shall immediately be provided to the other members of the agency, and shall be read publicly at the next meeting held subsequent to the filing of this written memorandum.
(b)        In the event that disclosure has not been made prior to the meeting or that any conflict is unknown prior to the meeting, the disclosure shall be made orally at the meeting when it becomes known that a conflict exists. A written memorandum disclosing the nature of the conflict shall then be filed within 15 days after the oral disclosure with the person responsible for recording the minutes of the meeting and shall be incorporated into the minutes of the meeting at which the oral disclosure was made. Any such memorandum shall become a public record upon filing, shall immediately be provided to the other members of the agency, and shall be read publicly at the next meeting held subsequent to the filing of this written memorandum.
(c)        For purposes of this subsection, the term ‘participate’ means any attempt to influence the decision by oral or written communication, whether made by the officer or at the officer’s direction. [Section 112.3143(4), Florida Statutes.]