CONFLICT OF INTEREST; VOTING CONFLICT

COUNTY COUNCILMEMBER PARTICIPATING IN BUSINESS
INCUBATOR PROGRAM FINANCED IN PART BY COUNTY

To:        Name withheld at person's request (Volusia County)

SUMMARY:

Under the particular facts of this opinion, no prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, were a company owned by a county councilmember to apply for or participate in a business incubator program, despite the fact that the county provides a portion of the program's funding, offers space for program facilities, and selects certain members of the program's advisory board. The councilmember will have no employment or contractual relationship with the entity partnering with the county on the funding agreement, and the councilmember is not in a position to influence how his business will be treated should it apply for or participate in the program. However, should the councilmember's business apply for or participate in the program, he will be presented with voting conflicts under Section 112.3143(3)(a), Florida Statutes, regarding measures concerning funding for the program, but not regarding measures concerning the appointment of members to the program's advisory board. Referenced are CEOs 07-15, 07-14, 07-02, 00-12, and 88-52.

QUESTION 1:

Would a prohibited conflict of interest be created under Section 112.313(7)(a), Florida Statutes, were a business owned by a county councilmember to apply for or be accepted into a business incubator program operated by a direct support organization of a State University, if the county is party to a funding agreement concerning the program?

Under the particular circumstances presented, Question 1 is answered in the negative.

Through your letter of inquiry and correspondence with our staff, we are advised that you serve as the County Attorney for Volusia County, and have been authorized to seek this opinion on behalf of . . . of the Volusia County Council, the governing board of the County ("the Councilmember"). You relate that the Councilmember has inquired whether any conflict of interest would arise under Section 112.313(7)(a), Florida Statutes, were he to apply for or accept an opportunity to participate in the University of Central Florida's Business Incubation Program ("the Program") at its site in the County. You indicate the Program provides development services and resources to stimulate the growth of new companies and, in turn, diversify the economy of Central Florida.

You state that the County already has entered into an agreement to provide funding for the Program. This agreement is between the County and the University of Central Florida Research Foundation ("UCFRF"), which you indicate is a direct support organization of the University. Pursuant to the terms of the agreement - which was executed in October 2010 - the County is required to provide UCFRF with $775,000 over a three-year period. The agreement also requires the County to provide space for an incubator facility within Volusia County.¹ Finally, the agreement states the County and UCFRF shall establish a Project Advisory Board which will review operations and funding matters, provide support to the Program's staff, and promote interface between the Program and existing businesses in the community. You indicate the County Council selects four of the eight members of the Advisory Board, while the remaining members are appointed by UCFRF and the County's Department of Aviation and Economic Resources.

However, despite the County's role in funding and providing space, you indicate the County is not involved in the Program's day-to-day operations. In particular, you state the County plays no part in selecting which applicants will be admitted into the Program. You describe the application process as requiring all applicants to submit an application and complete a preliminary class in entrepreneurship. You indicate that - at that point - a selection committee determines which applicants are admitted. Of note, you state the County Council plays no part in appointing the members of the selection committee. You relate the selection committee is comprised of professionals from the community, the Program's site managers, and a representative from the University.

You also indicate that the County's role is similarly limited once a particular applicant is admitted into the Program. You state that once a business is selected, it must sign a client sub-lease agreement - if it wishes to use the office space provided by the County - or an off-site program agreement - if it intends to base its operations elsewhere. The sub-lease agreement is between the businesses and UCFRF while the off-site program agreement is between the businesses and the Program itself; the County is not a party to either type of agreement. You indicate the Program's employees then conduct training and strategy sessions with the business's owner. You state the goal of the Program is to have each business complete the incubation process within 18 to 36 months, at which point the business will leave the Program and continue independently.

Against this context, you relate the Councilmember would like to utilize the Program to assist him in starting a business. You indicate he anticipates forming a limited liability company to serve as the business entity which will participate in the Program. You state any contract related to participation in the Program - such as a client sub-lease agreement or an off-site program agreement - will be executed by the Councilmember on behalf of this limited liability company, not by the Councilmember in his personal capacity. Given these specific facts, you ask whether it would create a conflict of interest under Section 112.313(7)(a), Florida Statutes, for the Councilmember's business to apply for or participate in the Program.

Section 112.313(7)(a), states:

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.

The first part of Section 112.313(7)(a) prohibits the Councilmember from having a contractual relationship with any business entity that is doing business with, or is regulated by, his agency, which would be the Volusia County Council. Therefore, the Councilmember would be prohibited from personally entering into a contract with UCFRF so long as the funding agreement between UCFRF and the County remains in effect.

However, we have found a public officer does not hold employment or a contractual relationship with an entity contracting with his agency when he is employed by or in contract with another business entity (even his own, closely held entity) which is, in turn, doing business with the entity contracting with his public agency. See, for example, CEO 07-02. Here, in the event that the Councilmember applies for and is accepted into the program, you indicate any resulting contractual agreement will be between UCFRF and his limited liability company. Given this situation, we find that the Councilmember will not hold employment or a contractual relationship with UCFRF and, accordingly, no violation of the first part of Section 112.313(7)(a), Florida Statutes, will be created.²

The second part of Section 112.313(7)(a), Florida Statutes, prohibits the Councilmember from having any contractual relationship which would create a continuing or frequently recurring conflict between his private interests and his public duties, or which would impede the full and faithful discharge of his public duties. In the past, we have found a conflict of interest under the second part of Section 112.313(7)(a), Florida Statutes, where public officers apply for loans or grants through programs administered by their own public agencies. See, for example, CEO 00-12 and 88-52. Here, you indicate the Program is currently being funded - at least in part - by the County. However, you also indicate the County Council plays no role in either selecting the Program's participants or managing the Program's day-to-day operations. Moreover, although the County leases space in which the Program may house its participants and operations, it does not appear the County dictates how that space should be used. To the contrary, the sub-lease agreements are between the Program participants and UCFRF, not between the Program participants and the County. Therefore, it does not appear that a prohibited conflict would be created under the second part of the statute.

Accordingly, under the particular facts of this inquiry, we find no prohibited conflict of interest would be created under either part of Section 112.313(7)(a), Florida Statutes, were the Councilmember's business to apply for or participate in the Program.

QUESTION 2:

Would the Councilmember be presented with a voting conflict under Section 112.3143(3)(a), Florida Statutes, regarding measures concerning appointment of advisory board members for a business incubator program, as well as measures affecting funding for the program, while his business is simultaneously applying for or participating in the program?

Under the particular circumstances presented, your question is answered as set forth below.

You also inquire whether the Councilmember will be prohibited by Section 112.3143(3)(a), Florida Statutes,³ from voting on or participating in measures regarding the Program were his business to apply for or be accepted into the Program. In particular, you inquire whether the Councilmember will be prohibited from voting or participating in measures regarding appointing Advisory Board members or altering the language of the funding agreement.

Section 112.3143(3)(a), Florida Statutes, provides:

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.

And, section 112.3143(1)(d), Florida Statutes, defines "special private gain or loss" as "an economic benefit or harm which will inure to the officer," although it clarifies that one consideration when determining if such gain or loss has occurred is "[t]he degree to which there is uncertainty at the time of the vote as to whether there would be any economic benefit or harm to the public officer[.]"

Turning first to whether the Councilmember may vote on selecting Advisory Board members while his business is either applying for or participating in the Program, we find the Councilmember will not be presented with a voting conflict. You indicate that the Advisory Board does not have any choice in what businesses are selected for the Program; a separate selection committee makes these determinations. Accordingly, it does not appear that the Councilmember's role in selecting members of the Advisory Board will influence how his application to the Program will be reviewed. Moreover, even if the Councilmember's application is accepted, the fact that he might have voted for certain members of the Advisory Board does not necessarily mean his business will be given preferential treatment over the other Program participants. The Volusia County Council selects only four of the eight Advisory Board members, meaning that even assuming certain members of the Board are favorably disposed towards the Councilmember, his business is still not certain to receive any type of special treatment. In short, we find it remote and speculative to conclude the Councilmember will experience "special private gain or loss" should he vote on selecting members of the Program's Advisory Board and, thus, that he will not be presented with a voting conflict under Section 112.3143(3)(a), Florida Statutes, regarding selection of Advisory Board members. See, for example, CEO 07-15 and 07-14.

However, turning to whether the Councilmember will be presented with a voting conflict as to altering the language of the Program's funding agreement, we find that he will, at least while his business is expecting to apply for, is applying for, or is participating in the Program. You indicate possible alterations to the funding agreement may include extending or renewing the original agreement, as well as increasing or decreasing the County's funding obligations. Each of these measures will directly affect the Program's financing, which, in turn, will affect the funding available for its participants. For this reason, were the Councilmember to vote on measures concerning the funding agreement, he would be voting on measures inuring to his "special private gain or loss."

Accordingly, we find that the Councilmember will be presented with a voting conflict regarding funding measures, but not regarding Advisory Board selection measures.

ORDERED by the State of Florida Commission on Ethics meeting in public session on October 25, 2013, and RENDERED this 30th day of October, 2013.

____________________________________

Morgan R. Bentley, Chairman

^[1] You indicate the County currently is fulfilling this requirement by leasing approximately 8,000 square feet of space at the Daytona Beach International Airport to UCFRF at a rate of $1 per year.

^[2] However, should the Councilmember enter into any contractual arrangement with UCFRF in his personal capacity, a violation of the first part of Section 112.313(7)(a), Florida Statutes, may be found.

^[3] Section 112.3143(4), Florida Statutes, does not apply to elective officers, such as a County Councilmember.