CONFLICT OF INTEREST

COUNTY COMMISSION MEMBER EMPLOYEE OF NOT-FOR-PROFIT
PARTY TO AGREEMENTS WITH VARIOUS LOCAL GOVERNMENT ENTITIES

To: Names withheld at persons' request (Osceola County)

SUMMARY:

A prohibited conflict of interest would be created under Sections 112.313(3) and 112.313(7)(a), Florida Statutes, were a corporation which employs a county commission member to contract with the county to provide services associated with a performing arts center. The member would be acting in a private capacity to provide items to the county, he would hold a contractual relationship with a business entity doing business with his public agency, and the "sole source" exemption would not be applicable. The conflict could be negated were the corporation to secure the contracts through sealed, competitive bidding, pursuant to Section 112.313(12)(b), Florida Statutes. However, no prohibited conflict of interest would be created under Section 112.313(3) or Section 112.313(7)(a) were the corporation to provide services to a municipality located within the county. CEOs 89-51, 96-7, 07-11, 09-18, 10-7, 15-2, 16-8, 18-3, 18-12, and 18-16 are referenced. ¹

QUESTION 1:

Would a prohibited conflict of interest be created were a not-for-profit corporation which employs a County Commission member to enter into a contracts with the County regarding a City-owned performing arts center?

Question 1 is answered in the affirmative.

In your letter of inquiry and supplemental information provided to our staff, you state that you have been authorized to seek this opinion on behalf of a member of the Osceola County Board of County Commissioners. You relate that in his private capacity the Commissioner is employed as the Executive Director of Osceola Arts, a not-for-profit corporation formed with the mission to promote, cultivate, and foster interest and participation in the arts by providing affordable and accessible programs and facilities that encourage artistic expression. You indicate that as Executive Director, the Commissioner is a salaried employee who has no ownership interest in Osceola Arts, but plays a primary role in the development of contracts maintained by the organization. You state that Osceola Arts is the only not-for-profit arts organization in Osceola County, and serves as the only Local Arts Agency for the County, as listed by the Department of State's Division of Cultural Affairs. You relate that the County is contemplating the formation of an agreement, or possibly several agreements, between the City of Kissimmee, Osceola County, and Osceola Arts. You state that while this idea is in its infancy, the agreement(s) would essentially consist of Osceola County granting Tourist Development Tax money for the reconstruction of the City-owned Civic Center into a Performing Arts Center and for the enhancement of performing arts within the community.² Following the completion of the renovation project, the parties are contemplating retaining Osceola Arts, via contract for a period of thirty years, to manage the Performing Arts Center. You state that the management services contemplated would consist of overseeing the daily operations of the Performing Arts Center and booking the facility, once constructed.

Relevant prohibitions are contained in Sections 112.313(3) and 112.313(7)(a), Florida Statutes, which provide:

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:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes.]

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. [Section 112.313(7)(a), Florida Statutes.]

Section 112.313(3) contains two prohibitions, the first of which prohibits the Commissioner from purchasing, renting, or leasing realty, goods, or services for his own agency from a business entity of which he or his spouse or child is an officer, partner, director, proprietor, or the owner of a "material interest."³ The second part of Section 112.313(3) prohibits the Commissioner from acting in a private capacity to rent, lease, or sell any realty, goods, or services to his own political subdivision or to any agency of that political subdivision. Section 112.313(7)(a) prohibits the Commissioner from holding employment or a contractual relationship with a business entity if the business entity is subject to the regulation of, or is doing business with, his public agency.

The prohibition of the first part of Section 112.313(3) is not applicable to the instant situation, as you relate that neither the Commissioner, his spouse, nor his child hold any ownership, leadership, or governance position within Osceola Arts. Regarding the second part of Section 112.313(3), we find that were the Commissioner's employer, Osceola Arts, to enter into contracts with the Osceola County Commission to provide services regarding the renovation and maintenance of the Performing Arts Center, a prohibited conflict of interest would be created as he would be acting in his private capacity (i.e., on behalf of the not-for-profit corporation) to rent, lease, or sell services to his agency.⁴

In addition, we find that a prohibited conflict of interest also would be created for the Commissioner under the first part of Section 112.313(7)(a) were Osceola Arts (the member's private employer) to enter into contracts with Osceola County, inasmuch as the not-for-profit would be a business entity⁵ doing business with (by virtue of the grants and contracts formed between the County and the not-for-profit) the Osceola County Commission (his public agency).⁶ CEO 18-16.

You also inquire about the potential applicability of the "sole source" and "sealed competitive bidding" exemptions set forth in Sections 112.313(12)(b) and (e), Florida Statutes, respectively, to negate the conflict of interest. The relevant portions of Section 112.313(12) provide:

(12) EXEMPTION.—. . . . In addition, no person shall be held in violation of subsection (3) or subsection (7) if:

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(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.

***

(e) The business entity involved is the only source of supply within the political subdivision of the officer or employee and there is full disclosure by the officer or employee of his or her interest in the business entity to the governing body of the political subdivision prior to the purchase, rental, sale, leasing, or other business being transacted.

Section 112.313(12)(e), Florida Statutes—the "sole source" exemption—provides an exemption from conflicts of interests under Sections 112.313(3) and 112.313(7)(a) when the public officer's business is the only source of supply of a particular good, service, or realty within the political subdivision and where there is full disclosure by the public officer of his interest in, or employment with, the business entity to the governing body (e.g., County Commission) prior to the transaction. See for example, CEO 18-16, CEO 18-3, and CEO 16-8.

In the instant matter, the County, rather than merely seeking to acquire a certain interest or use in realty, services, or other items, is seeking to establish a series of multifaceted, enforceable relationships between itself, the City of Kissimmee, and Osceola Arts, which will enable the County to use Tourist Development Tax money to reconstruct the Civic Center into a Performing Arts Center, to retain Osceola Arts to manage the Performing Arts Center once completed, and to take additional steps (potentially including the renovation of Osceola Arts' privately-owned campus) to enhance performing arts within the community. In CEO 09-18, analyzing similar facts, we found that the exemption was inapplicable to ameliorate conflicts arising from contemplated contractual relationships between a city and the business of a city council member, where the relationship involved a series of agreements designed to "remake" the harbor area of the city, and which extended far beyond the entity's interest in merely making a rental, lease, or sale of particular sole source items to the local government. Further, with respect to the County's retention of Osceola Arts for the purposes of managing the Performing Arts Center, you relate that the contemplated services would consist of daily operations and the booking of the facility, once constructed. Although Osceola Arts is the only not-for-profit arts organization within the County, the services sought are commonplace and may be performed by a myriad of for-profit or not-for-profit business entities located within the political subdivision. See CEO 18-218-12. As such, we find that the sole source exemption is not applicable.

However, another exemption found in Section 112.313(12)(b)—the "sealed competitive bidding" exemption—may be applicable. This exemption applies when the business between a public officer's company and his or her agency or political subdivision is conducted under a system of sealed, competitive bidding to the lowest or best bidder, and neither the public officer nor his or her spouse or child participate in determining the bid specifications or in awarding the bid, and the officer files the appropriate disclosure prior to or at the time that the bid is submitted.⁷ You indicate in your responses to our staff's inquiries that the County's activities regarding the renovation and maintenance of the Performing Arts Center as well as the commitment of additional funds to private or public entities to enhance performing arts within the community may be accomplished by one universal or several separate contracts. Provided that a contract which would otherwise give rise to a conflict of interest under Section 112.313(3) or 112.313(7)(a) (i.e., contracts involving Osceola County and Osceola Arts) satisfies all of the requirements of Section 112.313(12)(b), this exemption could apply to negate the conflicts of interest detailed herein.⁸

Question 1 is answered accordingly.

QUESTION 2:

Would a prohibited conflict of interest be created were the not-for-profit corporation which employs the County Commission member to enter into agreements solely with the City regarding a City-owned performing arts center?

Question 2 is answered in the negative.

In your letter you query, in the alternative, whether a prohibited conflict of interest would be created were the Osceola County Commission to grant Tourist Development Tax funds to the City of Kissimmee for its use in connection with the creation and maintenance of a Performing Arts Center within the City. In such a scenario, you advise that the grant of funds would be made by the County to the City for use at the discretion and direction of the Kissimmee City Commission as to the Performing Arts Center and the enhancement of performing arts in the community. You further state that such a grant of funds by the County would not involve any funds earmarked for the City's retention of any for-profit or not-for-profit service providers or vendors. However, subsequent to the grant of funds to the City, the City Commission may thereafter elect to contract with suitable service providers, which may include Osceola Arts.

As to the grant of Tourist Development Tax funds by the County to the City of Kissimmee, such a grant must comport with requirements of Chapter 125, Florida Statutes, applicable to the authorized use of Tourist Development Tax revenues⁹ but is not implicative of a conflict of interest arising under either Section 112.313(3) or Section 112.313(7)(a). As to contracts or agreements entered into between the City of Kissimmee and Osceola Arts, we find that no prohibited conflict of interest would arise under the facts involved herein. In prior advisory opinions, we have found that the agency of a county commissioner is the county commission (see CEO 12-13) and the political subdivision that is a county includes the county itself, as well as offices and agencies of the county. See CEO 89-51, CEO 12-13, and Article VIII, Section (1)(a) and (d), Florida Constitution. With respect to Section 112.313(3), Florida Statutes, because the City of Kissimmee is an agency and political subdivision different from Osceola County, were the Commissioner's private employer (Osceola Arts) to enter into agreements with the City, he would not be acting in a private capacity to rent, lease, or sell any realty, goods or services to his own agency (the Osceola County Commission) or to the political subdivision of which he is an officer (the County). As to Section 112.313(7)(a), Florida Statutes, were the City to enter into agreements with Osceola Arts, no prohibited conflict of interest would arise, as the Commissioner would hold an employment relationship with a business entity doing business with the City, not with his agency.¹⁰

Question 2 is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on June 7, 2019, and RENDERED this 12th day of June, 2019.

____________________________________

Guy W. Norris, Chair

^[1]Prior opinions of the Commission on Ethics can be viewed at www.ethics.state.fl.us.

^[2]You further indicate that the provision of Tourist Development Tax money to enhance arts initiatives within the County may also include funds provided to Osceola Arts to renovate its privately-owned campus.

^[3]A "material interest" is defined in Section 112.312(15), Florida Statutes, to mean a direct or indirect ownership of more than five percent of the total assets or capital stock of any business entity.

^[4]Previously, we have found that a public officer acts in a private capacity when he or she is personally involved in contract negotiations or similar sales efforts towards his or her own agency. See CEO 12-13, CEO 09-18, and CEO 96-7.

^[5]"Business entity" is defined in Section 112.312(5) to include any corporation doing business in Florida and in advisory opinions has been found to include both for-profit and not-for-profit corporations. See CEO 07-11.

^[6]Under the situations presented we are unable to conclude that the exemption to conflicts under Section 112.313(7)(a), found in Section 112.313(15), Florida Statutes, would apply. And assuming in argument that the exemption would apply, it does not exempt conflicts of interest under Section 112.313(3). Section 112.313(15) 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.

^[7]CE Form 3A has been promulgated for this purpose. All forms referenced are available at www.ethics.state.fl.us.

^[8]Importantly, this exemption only applies in the context of sealed, competitive bidding, as opposed to a Request for Proposals (RFP), Request for Qualifications (RFQ), or other methods of procurement that might be referred to as "bidding." See CEO 15-2.

^[9]See Section 125.0104, Florida Statutes.

^[10]Nevertheless, and without in any way intending to suggest doubt as to the member's personal integrity, we bring to your attention Sections 112.313(6) and 112.313(8), Florida Statutes, which prohibit the member from corruptly using his position or the resources thereof, or using "inside information," for the purpose of benefitting himself or any other person or business entity. Further, the member must comply with the requirements of Section 112.3143(3)(a), Florida Statutes, and satisfy all procedures set forth in CE Form 8B, regarding Osceola County Commission votes/measures, if any, which may inure to the special private gain or loss of himself, Osceola Arts (i.e., his employer and, thus, a "principal by whom [he is] retained"), or other persons or entities listed in the statute.