CONFLICT OF INTEREST; VOTING CONFLICT

CITY COUNCIL MEMBER ALSO PRESIDENT OF CHAMBER OF COMMERCE

To: Name withheld at person’s request (Seminole)

SUMMARY:

The exemption found in Section 112.313(15), Florida Statutes, operates to negate the conflict of interest existing under Section 112.313(7)(a), Florida Statutes, for a member of a city council who is the president of a chamber of commerce, if the chamber receives a grant from the city. No prohibited conflict of interest under Section 112.313(7)(a) is created for the council member if the chamber receives in-kind services or a one-day permit to dispense alcohol from the city. No voting conflict would be created under Section 112.3143(3)(a), Florida Statutes, if the city council member votes on the city’s millage rate. A voting conflict would be created were the council member to vote on a city budget which includes a line-item appropriation funding a grant for the chamber, on a one-day permit to dispense alcohol, on donation of in-kind services to the chamber, or on a redevelopment plan for a commercial complex where the chamber holds an unexpired lease for its office space.

QUESTION 1: ¹

Does a prohibited conflict of interest exist where you, a member of a City Council, are employed as the president of a Chamber of Commerce receiving an annual grant from the City?

Under the circumstances presented, this question is answered in the negative, provided your employment with the chamber is in accord with the requirements of the exemption in Section 112.313(15), Florida Statutes, and provided that you are completely divorced from any lobbying of the city council.

You write that you are a newly-elected member of the Seminole City Council and your three-year term began November 18, 2014. You state that you also are the president of the Seminole Chamber of Commerce, employment you have held since June 2011 and which compensates you with a salary. Historically, the City has, in its annual budget, funded a grant of $20,000 to the Chamber. You write that the Chamber’s annual budget for 2015 is set at $179,000, of which $110,000 is derived from membership dues and fundraising activities. You elaborate that the grant will fund projects, rent, and other major expenses and that the expenditure of the grant is tracked with accounting software. You state that the grant is unnecessary to fund your salary and that your salary would remain unchanged if the Chamber did not receive the grant from the City. Under these circumstances, you ask whether your public office and private employment coincide to create a prohibited conflict of interest.

Section 112.313(7)(a), Florida Statutes, states:

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.

Also relevant, Section 112.313(15), Florida Statutes, provides:

ADDITIONAL EXEMPTION.—No elected public officer shall be held in violation of subsection (7) if the officer maintains an employment relationship with an entity which is currently a tax-exempt organization under s. 501(c) of the Internal Revenue Code and which contracts with or otherwise enters into a business relationship with the officer’s agency and:

(a) The officer’s employment is not directly or indirectly compensated as a result of such contract or business relationship;

(b) The officer has in no way participated in the agency’s decision to contract or to enter into the business relationship with his or her employer, whether by participating in discussion at the meeting, by communicating with officers or employees of the agency, or otherwise; and

(c) The officer abstains from voting on any matter which may come before the agency involving the officer’s employer, publicly states to the assembly the nature of the officer’s interest in the matter from which he or she is abstaining, and files a written memorandum as provided in s. 112.3143.

The first part of Section 112.313(7)(a) prohibits a public officer from having employment or a contractual relationship with a business entity doing business with his agency. The second part prohibits a public officer from having any employment or contractual relationship that would 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.

When a public officer is employed by an organization that receives a grant from his agency, the public officer has employment with an entity doing business with his agency—the Commission consistently opining that when an entity receives a grant from an agency, the entity and agency are doing business with one another. See, among others, CEO 77-65 and CEO 90-76. Thus, without more, you would have a conflict under the first part of Section 112.313(7)(a).

There is, however, an exemption to this prohibition that can apply in your case, provided all of the exemption’s requirements are adhered to. Section 112.313(15) exempts an elected public officer from business-based conflicts under the first part of Section 112.313(7)(a) if his private employment is with an entity that is tax-exempt under Section 501(c) of the Internal Revenue Code and his employment and conduct meet the requirements of Section 112.313(15)(a), (b), and (c). According to the information you provided us, the Chamber is a 501(c)(6) tax-exempt entity, the grant does not directly or indirectly fund your salary and your salary would remain unchanged if the Chamber did not receive the grant, and you did not participate in the City Council’s decision to make the grant, as that occurred prior to your election. Therefore, Section 112.313(15) is satisfied, assuming you abstain from voting on any matter that may come before the City Council involving the Chamber,² disclose the nature of the conflict, appropriately file a conflict memorandum, and do not participate in the discussion or communicate regarding the issue with any officer or employee of the City when the grant is readdressed in future votes.

The second part of Section 112.313(7)(a) prohibits a public officer from having employment or a contractual relationship that creates 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.³ In CEO 89-29, we found there would be a conflict of interest under the second part of Section 112.313(7)(a) were a city commissioner who also was an executive director of a chamber of commerce to lobby his own agency on behalf of the chamber. On that topic, we wrote:

In our view, lobbying activities include not only actual contact through physical attendance at meetings of City officials and employees, the submission of written materials, and personal communications with City officials and employees in an effort to encourage the passage, defeat, or modification of any measure before the City Commission, but also directing the activities of those who will contact the City, participating in setting the strategies of whom to contact and what to say, and assisting in preparing amendments to documents in support of the Chamber’s positions. In other words, a city commissioner should not be banned from being employed by an entity which engages in lobbying the city on a regular basis regarding issues of the nature described here, but his employment should be completely separated from the lobbying activities of his employer.

CEO 89-29 (emphasis added).

In your letter, you write, “The Chamber of Commerce has in the past, and will probably in the future, take positions on City issues of general interest in the community which have impact on the business community.” When this occurs, you should not be among those representatives of the Chamber lobbying the City Council, and you should tailor your Chamber role to be divorced from Chamber lobbying concerns as set forth in CEO 89-29. Assuming you conform your conduct in this way, you will not have a conflict arising from the second part of Section 112.313(7)(a).

Your question is answered accordingly.

QUESTION 2:

Would a voting conflict of interest be presented for you regarding a vote on the City’s budget, which contains a line-item appropriation for a $20,000 grant to your employer?

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

You write that the annual budget for the City of Seminole is approximately $15,000,000. Within that budget, there is an appropriation for funding a $20,000 grant to the Chamber. You inquire whether a vote on the budget will pose a voting conflict for you.

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

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(1)(d), Florida Statutes, defines “special private gain or loss” as:

an economic benefit or harm that would inure to the officer, his or her relative, business associate, or principal, unless the measure affects a class that includes the officer, his or her relative, business associate, or principal, in which case, at least the following factors must be considered when determining whether a special private gain or loss exists:

1. The size of the class affected by the vote.

2. The nature of the interests involved.

3. The degree to which the interests of all members of the class are affected by the vote.

4. The degree to which the officer, his or her relative, business associate, or principal receives a greater benefit or harm when compared to other members of the class.

The 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, his or her relative, business associate, or principal and, if so, the nature or degree of the economic benefit or harm must also be considered.

The language of the statute codifies an analysis we have used for more than 30 years. In CEO 77-129, we said:

In our view, whether a measure inures to the special private gain of an officer or his principal will turn in part on the size of the class of persons who stand to benefit from the measure. Where the class of persons is large, a special gain will result only if there are circumstances unique to the officer or principal under which he stands to gain more than the other members of the class. Where the class of persons benefiting from the measure is extremely small, the possibility of special gain is much more likely. [Citations omitted.]

Thus, for example, in CEO 77-57, we advised a school board member whose wife was employed as a teacher that he did not have a voting conflict when voting on matters involving all teachers in the district, and in CEO 87-18, we concluded that a planning commissioner was not required to abstain from voting on a comprehensive plan amendment that would have affected 29,000 acres even though his principal was leasing 300 acres of the affected area.

We have also opined, using “size of the class” considerations, that votes on an annual budget that included an appropriation for a council member’s employer would not inure to the special private gain of the employer where the budgets were sufficiently large as to dwarf the specific appropriation to the employer. See, for example, CEO 88-20 and CEO 04-6. However, we find here that such an application of the “size of the class” analysis—as a comparison of two dollar amounts—is inappropriate. In the first instance, a dollar amount cannot be described as an affected “class.” Beyond that, application of the analysis in that manner would mean that a direct award of funds, which would create a clear voting conflict if taken up alone, would be permissible simply because it was included in a list of other appropriations.

Although it may not be true for other votes, in the context of a budget vote by a governing body, the affected class consists of the constituents of that governing body, for whose nominal, if not actual, benefit the tax dollars are spent. While this is a very large class, the impact of such a measure on any one individual or entity will often be disparate and hard to quantify. In contrast, the benefit to your employer here is direct, identifiable, and specific, and application of the factors identified in Section 112.3143(1)(d) leads us to conclude here that the gain is “special.”

The nature of the interests involved is a factor under the statute, and it is inescapable that a $20,000 funding source is significant to any entity, but especially to one with a total budget of $179,000. The Chamber’s benefit also differs in degree from that experienced by other members of the class, in that while most constituents of the City receive incidental or indirect benefits from the funding of the various programs in the budget, the Chamber receives a direct and immediate benefit. Funding for a specific grant is qualitatively different than funding for public programs which affect all constituents to a greater or lesser extent.

Therefore, we find that a vote as to the City’s budget, which includes a line-item appropriating $20,000 for the Chamber’s grant, would result in a special private gain for the Chamber, requiring you to declare a voting conflict, abstain from voting, and timely file a CE Form 8B, Memorandum of Voting Conflict. To the extent that our opinion herein is in conflict with our views expressed or noted in CEO 88-20, CEO 04-6, or other prior opinions of ours concerning votes on budgets as a whole, we recede from those prior opinions.⁴

In addition, to vote on the budget would deprive you of the exemption found in Section 112.313(15) and discussed in Question 1. That exemption—which negates the existence of a conflict of interest that would require your choosing between your public office and your private employment as long as the Chamber and the City are doing business—requires that the officer “abstains from voting on any matter which may come before the agency involving the officer’s employer.”

Notwithstanding the foregoing, we find that if the appropriation were bifurcated from the main budget vote, no voting conflict would be created with respect to the main budget, nor would the Section 112.313(15) exemption be lost. With respect to the vote on the separated appropriation of grant funding to the Chamber, you would be required to abstain, announce your conflict, refrain from participation, and file a CE Form 8B.

Your question is answered accordingly.

QUESTION 3:

Does a prohibited conflict of interest exist where you are employed as the president of the Chamber of Commerce and the Chamber receives in-kind services from the City at annual community events?

Under the circumstances presented, this question is answered in the negative, provided you tailor your role in accordance with CEO 89-29, as discussed in Question 1.

You write that the Chamber of Commerce operates annual community events—your inquiry lists Kids Appreciation Day, a Holiday Parade, Directory Sponsorship, and a Golf Tournament—and the City has historically provided in-kind services for those annual events. You state that those in-kind services include “City Staff, Public Works, Roadway Maintenance, and City Equipment as well as police and emergency personnel.” You write that the City is under no obligation to provide any in-kind services to the Chamber, that the Chamber would have no cause of action against the City if the City decided not to provide in-kind services to the Chamber, and that the Chamber is under no obligation to provide any services or consideration back to the City. Under these circumstances, you ask whether your public office and private employment coincide to create a prohibited conflict of interest for you.

Once again, analysis under Section 112.313(7)(a) is appropriate. Regarding the first part of Section 112.313(7)(a), when a public officer maintains employment with an organization that merely receives in-kind services from his agency, we have found that the entity is not doing business with his agency. In CEO 88-20, we opined that the receipt of in-kind services by an entity from an agency did not constitute “doing business” because there was no obligation owed to the agency by the entity and one would not have a cause of action against the other if the agreement defaulted, as the transaction was merely a donation of property or services. See also CEO 04-6. Here, the in-kind services are donated with no obligations flowing between the City and the Chamber. Therefore, you will not be presented with a prohibited conflict of interest arising from the first part of Section 112.313(7)(a) when the Chamber receives in-kind services from the City.⁵

Regarding the second part of Section 112.313(7)(a), a public official is prohibited from holding employment or a contractual relationship that creates 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. Assuming you can tailor your role in conformance with CEO 89-29, as discussed in Question 1, above, then you will not be presented with a conflict under the second part of Section 112.313(7)(a).

Therefore, we find that if the Chamber of Commerce receives in-kind services from the City, it will not create a prohibited conflict of interest for you.

QUESTION 4:

Does a prohibited conflict of interest exist where you are employed as the president of the Chamber of Commerce and the Chamber receives a one-day permit from the City Council to dispense alcohol at the chamber’s annual golf tournament?

Under the circumstances presented, your question is answered in the negative, provided you tailor your role in accordance with CEO 89-29, as discussed in Question 1.

You write that the Chamber of Commerce has, in previous years, asked the City Council for and has received a one-day permit to dispense alcohol at its annual golf tournament. Your letter implies that the Chamber will continue to make this request annually for future golf tournaments. Under these circumstances, you ask whether your public office and private employment coincide to create a prohibited conflict of interest for you.

The first part of Section 112.313(7)(a), quoted above, also prohibits a public officer from having a contractual relationship with an entity that is subject to the regulation of his agency.

In CEO 11-6, we opined that mere approval or denial of changes of property use or proposals of property construction by the clients of a member of a city’s planning and zoning board (PZB) did not make those clients subject to the regulation of the PZB, as it was considered to be “incidental and passive regulation.” Similarly, in your case, where the City Council will only approve or deny an application for a one-day permit, we find that this is only incidental and passive regulation, not making the Chamber subject to the regulation of the City Council, particularly since you informed Commission staff that the arm of City government charged with regulatory enforcement over the Chamber’s compliance with the permit is the City Code Enforcement Board. Because your agency, the City Council, is not the agency charged with monitoring the compliance of the Chamber with respect to its one-day permit to dispense alcohol, we do not find that you have a contractual relationship with an entity that is subject to the regulation of your agency.

As stated earlier, the second part of Section 112.313(7)(a), prohibits a public officer from holding employment or a contractual relationship that creates 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. Assuming you can tailor your role in conformance with CEO 89-29, as discussed in Question 1, above, then you also will not be presented with a conflict under the second part of Section 112.313(7)(a).

Under these circumstances, you will not be presented with a prohibited conflict of interest if the Chamber receives a one-day permit to dispense alcohol.

QUESTION 5:

Would a voting conflict of interest be presented for you regarding a vote on the City’s millage rate?

Your question is answered in the negative.

You write that the City’s millage rate is a source of its budgetary funds and that the City Council sets the millage rate. You express concern in your inquiry that the millage rate generates revenue, a portion of which is used for grants or in-kind services that benefit the Chamber of Commerce. You inquire whether you may vote on the millage rate.

The institution of a millage rate, in and of itself, does not impact the Chamber in any “special” way. It is the funding of the grant, not the millage rate, that could create a “special” benefit for the Chamber, and nothing in your materials suggests the grant to the Chamber has any impact on the millage rate. Therefore, we find that there is no special private gain or loss, as would be required under Section 112.3143(3)(a), for you or any principal by which you are retained resulting from the millage rate, and, thus, no voting conflict of interest arising therefrom.

QUESTION 6:

Would a voting conflict of interest be presented for you regarding a vote to grant the Chamber a one-day permit to dispense alcohol, a vote to donate in-kind City services to Chamber annual events, or a vote on a measure to approve or deny a redevelopment plan for a commercial complex where the Chamber presently holds an unexpired lease for its office space?

Your question is answered in the affirmative.

As discussed in Questions 3 and 4, the Chamber historically has received in-kind services from the City at its annual community events and has received a one-day permit to dispense alcohol at its annual golf tournament. You ask whether future votes to award the in-kind services and one-day permit will create a voting conflict of interest for you.

Additionally, you write that the Chamber of Commerce holds a multi-year lease for its office space and that the lease has not yet expired. The office space is within a parcel containing a larger commercial complex and the owner/developer wishes to demolish the complex and redevelop it. To do this, the owner/developer must approach the City Council “to seek preliminary consensus of the proposed re-development concept as a predicate to the preparation of a formal development agreement in accordance with Chapter 163, Florida Statutes.” You ask whether you may vote on the proposed redevelopment agreement.

Section 112.3143(3)(a) will apply. This section prohibits an elected local officer from voting on matters that will inure to his own special private gain or loss, or to that of a principal by which he is retained, and requires disclosure and filing regarding such matters.

As you are a compensated president of the Chamber of Commerce, the Chamber is a principal by which you are retained. The votes under consideration here have the potential to create, eliminate, or offset expenditures or losses and the potential to generate revenue for the Chamber. These economic benefits and detriments are special private gains or losses as addressed by Section 112.3143(3)(a). Beyond that, the terms of the exemption to the conflict law found in Section 112.313(15) require that you abstain from any matter involving your employer. Therefore, you must abstain from voting on these matters, disclose your conflict before the vote, and file a conflict memorandum within 15 days of the vote.

QUESTION 7:

Does the Code of Ethics prohibit you from participating in the discussion leading to a vote?

Your question is answered in the affirmative.

For each scenario detailed in your letter, you ask whether you may participate in the discussion leading to the votes previously discussed.

Section 112.3143(4) provides:

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. […]

Section 112.313(15) provides an exemption from the conflicts law that applies to you as long as, among other things:

[t]he officer abstains from voting on any matter which may come before the agency involving the officer’s employer, publicly states to the assembly the nature of the officer’s interest in the matter from which he or she is abstaining, and files a written memorandum as provided in s. 112.3143.

Section 112.313(15)(c), Florida Statutes.

Section 112.3143(4) operates only as to appointed officials’ participation in the discussion of matters in which they have a voting conflict. As an elected official, Section 112.3143(4) does not limit your participation in the discussion of any voting matter. However, participation in such discussion relating to a vote on any matter involving the Chamber would eliminate your eligibility for the exemption in Section 112.313(15), as discussed in Question 1, above, leaving you without any exemption to the conflict arising from Section 112.313(7)(a).⁶

Your questions are answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on March 6, 2015, and RENDERED this 11th day of March, 2015.

____________________________________

Linda McKee Robison, Chair

^[1] The numbering of questions herein does not reflect the numbering in the inquiry. In some instances, questions were rephrased or combined. However, all questions of the inquiry are addressed herein.

^[2]This would include votes on a budget that includes an appropriation or grant or other benefit to the Chamber, as will be further discussed in Question 2.

^[3]The exemption in Section 112.313(15) applies only to vitiate conflicts arising from the first part of Section 112.313(7)(a), as described above. The exemption will not apply to conflicts arising from the second part of Section 112.313(7)(a). See CEO 10-3 and CEO 14-21.

^[4]Examination of our application of the “size of the class” analysis in contexts other than budget issues is not necessary in responding to the questions raised herein, and our receding from CEO 88-20 and CEO 04-6 should not be read as calling into question our application of the analysis in other contexts.

^[5]Even if this were not so, the exemption of Section 112.313(15) could apply to negate the conflict.

^[6]At one point in your inquiry, you ask whether you may participate in “the discussion of the issue concerning funding, participation, and support of various community projects.” Your ability to vote on and discuss these matters is fact specific and will require individual consideration; you are welcome to contact the Commission on Ethics for such analysis in the future.