CONFLICT OF INTEREST

MEMBER OF GOVERNING BOARD OF WATER MANAGEMENT DISTRICT
HAVING CONTRACTUAL RELATIONSHIP WITH BUSINESS ENTITY APPLYING
FOR COST-SHARE GRANT

To: George T. Reeves, Attorney (Suwannee River WMD)

SUMMARY:

Under the unique circumstances presented, members of the Governing Board of a water management district will not have a conflict of interest under Section 112.313(7)(a), Florida Statutes, if their tenants or businesses apply to their agency for reimbursement of irrigation equipment under a cost-share grant program created by the agency. CEO 88-65, CEO 12-7, and CEO 12-14, are referenced.

QUESTION:

Will a member of the governing board of a water management district (WMD) have a prohibited conflict of interest if he or she has a contractual relationship with an agricultural producer that applies for and receives a cost-share grant from the WMD?

Under the unique circumstances presented, this question is answered in the negative.

According to your inquiry, the Governing Board of a water management district (District/WMD) created a grant program in 2012. The grant program allows eligible agricultural producers who control property within the District to purchase approved improvements at their own expense and, subsequent to the purchase, the District will reimburse seventy-five percent of the cost, to a maximum of $300,000. Approved improvements include retrofitting or modernizing irrigation systems to make them more efficient, saving groundwater in the District. According to you, the upgrades are typically nozzle and end gun changes to irrigation systems, which use less water, and soil moisture probes. In the case of soil moisture probes, the District will also reimburse the service costs of the first few years of monitoring of the probes.

To avail themselves of this program, agricultural producers must submit an application to the District and District staff review the application to ensure the upgrade to be purchased satisfies the goals of the grant program and verify that the agricultural producer is eligible for the grant. Once the staff completes its review, eligible applications are sent to the District's Executive Director or its Governing Board for final approval.¹ Upon that final approval, the District then enters into a contract regarding the reimbursement with the agricultural producer before the agricultural producer makes their purchase and the reimbursement is thereafter issued.

According to you, no eligible applicant has ever been denied reimbursement funding. You state that the District is not placed in the position of prioritizing applications in a competitive environment.

In response to questions from Commission staff, you state that the Governing Board of the District has the authority to change the maximum reimbursement amount and has done so in the past. For example, in April 2019, the District added alternative water supply projects and added variable frequency drives as purchases eligible for cost-share, both reimbursed at seventy-five percent of the cost. In January 2020, the District began allowing cost-share reimbursement for a fourth, fifth, and sixth year of service agreements, reimbursed at a rate of fifty percent of the cost.

You request this opinion on behalf of two members of the Governing Board of the District. One member is not an agricultural producer, but owns property within the District that the member leases to agricultural producers who may attempt to avail themselves of the grant program during the member's tenure on the Governing Board. The other member has, in the past, and may, in the future, be an officer and/or director in the member's family's agricultural company, which may seek to avail itself of the grant program. You ask whether these two members would have a prohibited conflict of interest if their respective tenants or company received a grant from the District.

Analysis under Section 112.313(7)(a), Florida Statutes, is appropriate. It 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.

The first clause of this statute would prohibit a public officer from having any contractual relationship with a business entity that is regulated by or does business with his or her agency. The second clause of this statute would prohibit a public officer from having a contractual relationship that would create a continuing or frequently recurring conflict of interest or would create an impediment to the full and faithful discharge of his or her public duties.

As a predicate to answering your question, we take this opportunity to reaffirm our longstanding interpretation of Section 112.313(7)(a) that an entity is "doing business" with an agency when it has entered into a contract or other legal arrangement under which one party would have a cause of action against the other if a breach or default were to occur. See, e.g., CEO 12-7 (citing CEO 88-65).

We found a conflict of interest and declined to apply any exemption in CEO 12-7. In that opinion, a city's CRA offered a façade grant that provided up to $10,000 to allow applicants to improve the exteriors of buildings. We opined that a CRA board member would have a conflict of interest under Section 112.313(7)(a) if his or her business received a façade grant from the CRA. Similarly, in CEO 12-14, a city's CRA offered redevelopment incentive grants to allow property owners and lessees to make residential, commercial, and business façade improvements and other improvements. The grant program was administered by the staff of the city's Development Services Department, who could approve the grant applications without a vote from the city council or the CRA, and the grants were processed on a first-come, first-served basis. Once again, we opined that the CRA board member would have a conflict of interest if he or she, individually or through his or her businesses, received the grant offered by the CRA.

However, we find the situation you present to be distinguishable from these prior opinions because of the particular nature of the grant program in the context of a water management district. We find that Section 112.316, Florida Statutes, applies to exempt any conflict of interest for the two WMD board members because the narrow and specific circumstances that form the basis of their inquiry indicate the public trust is not jeopardized by allowing their businesses or tenants to apply for the cost-share reimbursement grant.

In coming to that conclusion we rely upon all of the following circumstances, the absence of any one of which would result in our finding of a conflict and also our declining to apply Section 112.316 to negate the conflict.

First, we note that, by its nature, a WMD encompasses many, many thousands of acres of agricultural land and many, many farmers who are similarly situated, some of whom very often are members of the governing board of WMDs, no doubt, in great part due to their familiarity with land and agriculture irrigation and related matters. We do not believe it to be the intent of the law to preclude participation by such farmer-WMD board members in programs available to all other farmers in the WMD, especially where, as here, there is no history of denial of participation or lack of funding for any who apply.

Second, we note that the program's history is void of denial of participation or lack of funding because the program has been structured to accept every eligible application, as judged only by objective criteria, rather than discretionary criteria. There are no discretionary criteria by which to judge the applications and, thus, there is no risk that a WMD board member could leverage the application process to achieve a personal benefit not available to similarly-situated applicants.²

Third, we note that the program is not a competitive environment among applicants. The program is budgeted such that there are ample funds to admit all foreseeable applicants in the geographic jurisdiction of the WMD without risking the program's solvency.

Fourth, we recognize that the public benefit from applicants achieving participation in this program is substantial. The program aims to achieve water conservation by making agricultural producers more efficient in their water usage; to preclude landowning WMD board members from participation would materially reduce the water conservation by reducing substantial amounts of acreage from the program.

Lastly, we note the circumstances unique to a program administered by a water management district. Unlike, for example, a situation involving someone who is both an attorney and a local public official, who could practice in many municipalities other than the one on which he sits on the governing board, an agricultural producer who is a member of a WMD board does not have the ability to move his or her real estate outside of the WMD, the boundaries of which encompass many counties.

For all these reasons together and for as long as all these circumstances are present and maintained, we find that Section 112.316 operates to negate any conflict of interest the two WMD board members would otherwise create under Section 112.313(7)(a) if their business or tenants applied for a cost-share reimbursement grant from their agency. If any of the circumstances upon which we rely change, we encourage you to seek a new opinion from us.

Your question is answered accordingly.³

ORDERED by the State of Florida Commission on Ethics meeting in public session on October 23, 2020, and RENDERED this 28th day of October, 2020.

____________________________________

Daniel Brady, Chair

^[1]In response to a Commission staff inquiry, you inform us that, in practice, the Executive Director, who has contracting authority of up to $30,000, approves the applications and contracts for reimbursement for $30,000 or less with no review or action by the Governing Board. If the cost-share agreement will require the expenditure of more than $30,000 of District funds, then it must be approved by the Governing Board.

^[2]While the WMD board's decision making in the application process is not discretionary, its involvement in the setting of the terms of the program, such as the reimbursement rates or the maximum reimbursement amount, is entirely discretionary. If the WMD board changes any of the program terms, the board members should no longer rely on this opinion and should seek a new opinion.

^[3]The members, however, are subject to the voting conflicts law codified in Section 112.3143, Florida Statutes, regarding any vote (measure/matter) that would inure to their special private gain or loss or to that of any person or entity standing in a relationship to the members as listed in the statute. The members are also subject to the prohibition against misusing one's public position found in Section 112.313(6), Florida Statutes.