CONFLICT OF INTEREST

MEMBER OF CITY COMMISSION ENTERING INTO CONTRACTUAL
RELATIONSHIP WITH CITY TO RECEIVE PROPERTY
IMPROVEMENT PROGRAM FUNDS

To: Name withheld at person's request (Margate)

SUMMARY:

A prohibited conflict of interest would be created under 112.313(7)(a), Florida Statutes, where a City Commissioner receives funds from the City through its property improvement program. The Commissioner would have a contractual relationship with an agency—the City Manager's Office—that is regulated by the City Commission. Referenced are CEO 20-9, CEO 18-4, CEO 12-14, CEO 08-1, CEO 00-12, CEO 95-28, CEO 89-21, and CEO 77-88.

QUESTION:

Will a member of a city commission have a prohibited conflict of interest if she receives funds through the city's property improvement program?

This question is answered in the affirmative.

In your letter of inquiry and additional information provided to our staff, you indicate you are inquiring on behalf of a City Commissioner whether she will have a prohibited conflict of interest were she to receive funding through a property improvement program recently launched by the City. To analyze your inquiry, it is first necessary to explain the genesis of the program and how the City allocates funds through it.

You explain that, in April 2022, the City Commission—including the City Commissioner on whose behalf you are seeking this opinion—passed a resolution by which the City agreed to accept over $10 million in federal funds being offered through the American Rescue Plan Act of 2021. The funds were only to be used for certain municipal and public purposes, with the goal of benefitting the City's citizens and residents. You relate the City then began exploring allowable options for these funds, and that, at a duly-noticed City Commission meeting in September 2022, the possibility of using a portion of them to develop a property improvement program was presented.

The purpose of the program, according to the materials that you provided, was to encourage property and business owners to restore, renovate, and improve their properties, thereby improving the City's visual quality and attractiveness, and increasing property values. Through the proposed program, the City would provide funds to reimburse qualified applicants for certain fixed improvements to the exteriors of their properties, and for any minor interior work necessary to be included as part of a comprehensive exterior renovation.^[1] You indicate the entire City Commission provided input to the City Manager during the meeting concerning the amount of funding that might be allocated toward the program, who would be eligible to apply, and what types of improvements would qualify for reimbursement.

You relate the City Manager incorporated the Commission's feedback into specific guidelines, and, at a subsequent City Commission meeting held in October 2022, the City Commission unanimously passed a resolution approving the program and allocating $1.5 million of American Rescue Plan Act funding towards it.

In terms of how the program operates, you indicate the program is offered City-wide, meaning all property owners, residential and commercial, are able to apply. You state a single-family or multi-family (individual owned) homesteaded property may receive a 50% reimbursement grant of up to $10,000 for eligible improvements.^[2] You relate the process by which a homesteaded property owner may apply is the following: (1) an applicant submits a program application online, identifying the particular improvements to be made; (2) the application is reviewed by the Assistant to the City Manager, the City's Business Development Coordinator, and one other temporary employee; (3) the application is then sent to the City Manager for final approval or denial; (4) if approved, the applicant personally pays to have the improvements made; (5) the applicant then submits to the City certain required documentation demonstrating the expenditures for the improvements and confirms the issuance of any final permits and certificates of completion/occupancy; and (6) the City reimburses the applicant directly.

You emphasize several things about the application and reimbursement process. First, the program is only designed for new projects, meaning any improvements already completed are ineligible for funding. Second, even if an application is approved, no formal agreement, lien, loan agreement, or other type of document is executed between the applicant and the City. Third, if an applicant meets the program's eligibility criteria, the allocation of funds is nondiscretionary and automatic. That being said, from what you indicate, the program's financial resources are finite, as the City has allocated only $1.5 million in funding towards it. And, fourth, the City Manager and his staff are solely responsible for reviewing the applications and allocating the funds.

Turning to the specific inquiry at issue here, you indicate the City Commissioner in question owns a residential single-family home within City limits that is identified as her homestead. Given her eligibility, you state she would like to receive reimbursement funds through the program for certain improvements that she will make to her property. You relate she has not contracted for or made any of these improvements to her property yet—which would render them ineligible for reimbursement—but will do so if her application is approved. You also relate she has already submitted an application to the program, which was accepted under the condition that it not be granted until she receives an opinion from the Commission on Ethics regarding whether her participation in the program constitutes a prohibited conflict of interest. Importantly, you indicate the total amount of funding requested by the applications already received by the City Manager's Office—including the Commissioner's—will deplete the full $1.5 million allotted to the program, meaning that, if all of the applications received are granted in full, there will be no funds left to offer future applicants. Due to the potential exhaustion of funds, you indicate the City is no longer accepting applications to the program.

Section 112.313(7)(a), Florida Statutes, is the statute most relevant to your inquiry. It states:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIOSHIP.—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, any 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 the statute prohibits the City Commissioner from having a contractual relationship with a business entity—or an agency—if that entity or agency is doing business with, or is subject to the regulation of, the Commissioner's agency. For purposes of Section 112.313(7)(a), the "agency" of a city commissioner is the city commission. See CEO 18-4 and CEO 08-1, Question 2. The question then is whether—in the event that the City Commissioner's application to the program is approved—she will have a contractual relationship with a business entity or agency that is engaged in a business or regulatory interface with the City Commission.

Concerning whether a contractual relationship will exist, you indicate program applicants will not have any written agreements, liens, or loan agreements with the City, even if their applications are approved, and will not be required to execute any documents with the City. That being said, simply because there will be no written agreement with the City does not definitively mean there will be no contractual relationship for purposes of Section 112.313(7)(a). We have adopted the substantive law of contract in determining the meaning of the term "contractual relationship," and have cited the following definition when interpreting the phrase:

[a]ny agreement between two or more persons which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement, and mutuality of obligation. [Black's Law Dictionary, Fifth Edition (1979)]^[3]

See CEO 95-28 and CEO 89-21. In CEO 89-21, we cited alternate, but similar, definitions providing:

The term 'contract' has been defined as a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. Another definition is that a 'contract' is an agreement upon a sufficient consideration to do or refrain from doing a particular lawful thing. [11 Fla. Jur. 2d Contracts, Section 1.]

Under these definitions, we find a contractual relationship will exist for purposes of Section 112.313(7)(a) once a program application is approved. At that point, and based on the promise of reimbursement funding, the program applicant will be induced to use his or her private funds to hire contractors, builders, and workers to make improvements to his or her property. If the City then chooses not to reimburse the applicant, despite the initial approval of the application and the applicant's good faith reliance on the City's guarantee of funds, it appears the applicant likely would have legal grounds to demand that the City provide the funding. We note a similar arrangement for reimbursement funding was found to be a contractual relationship in CEO 20-9, which concerned a member of the governing board of a water management district owning a business that was applying to the district for reimbursement of irrigation equipment under a cost-share grant program.

Of course, this contractual relationship will not be sufficient to trigger the prohibition in Section 112.313(7)(a) unless it is with a business entity or agency doing business with or being regulated by the City Commission. Here, from what you describe, program applications are reviewed by the City Manager's staff and then approved by the City Manager, who directs the allocation of funds to recipients. In short, the program appears to create a contractual relationship between the applicant and the City Manager's Office, which is the entity involved in approving and disbursing funds. This is all that is needed to constitute a conflicting contractual relationship for the City Commissioner under the first part of Section 112.313(7)(a), as she will have a contractual relationship (through the approval of the application) with an agency (the City Manager's Office) subject to the regulation of her agency (the City Commission).^[4]

In the past, when similar circumstances have arisen for members of local governing bodies, we have found a conflict of interest under Section 112.313(7)(a). For example, in CEO 12-14, Question 1, we analyzed whether Section 112.313(7)(a) would prohibit a city commissioner—who also was sitting as a board member of a community redevelopment agency—from applying for and receiving redevelopment incentive grants. The grant programs were created by the community redevelopment agency, were administered by staff of the city's redevelopment division, and were available to, among others, owners or lessees of residential properties. We found a prohibited conflict of interest would exist for the city commissioner under the first part of Section 112.313(7)(a) if she received the grant funding because, by receiving the grants, she would be entering into a contractual relationship with a city department overseen by her agency, the city commission.

Similarly, in CEO 00-12, we found a prohibited conflict of interest would be created under the first part of Section 112.313(7)(a) were a county commissioner to apply, in his private capacity as a landlord, for State Housing Assistance Program (SHIP) funds being administered by the county's community development department. We emphasized the conflict would occur because, in the event that the funding was approved, the county commissioner would have a contractual relationship with a department subject to the county commission's oversight.

And, finally, in CEO 77-88, we addressed a county commissioner who wanted to enter into a contractual relationship, in his private capacity as a landlord, with a county housing assistance office pursuant to payment program sponsored, in part, by the U.S. Department of Housing and Urban Development. Because the county housing assistance office was subject to the regulation of the board of county commissioners, we found the county commissioner would be in violation of the first part of Section 112.313(7)(a) were he to enter into the contract.

The scenario that you present is similar to those addressed in these earlier opinions. In each of them, as here, a member of the governing board of a political subdivision sought to enter into a contractual relationship to receive funding from a department or unit of local government overseen by his or her agency. Consistent with those opinions, the reasoning of which adopted herein, the City Commissioner's proposed acceptance of the program funds meets the elements of the first part of Section 112.313(7)(a), and, therefore, would present a prohibited conflict of interest.

It is worth noting, though, that these opinions involved a public officer serving on the governing body of the political subdivision in question. If a public officer serves on a subordinate board of the political subdivision, and is applying for funding from another board or governmental unit within the political subdivision over which he or she has no regulatory oversight, the statutory prohibition will not be at issue. This is explained in CEO 12-14, Question 1, which addressed whether a board member of a city redevelopment area could apply for an incentive grant administered by a separate city department over which his board had no control. In that circumstance, we concluded the first part of Section 112.313(7)(a) would not apply, as the board member's contractual relationship would not be with an agency regulated by his board.

Nor do these opinions prohibit a member of a governing board of a political subdivision—such as the City Commissioner here—from merely appearing before a subordinate board on his or her own behalf, assuming the appearance does not lead to contractual relationship with that subordinate board. We acknowledge that members of governing boards of local political subdivisions may have personal needs to appear before subordinate boards, and Section 112.313(7)(a) does not prohibit them from making such appearances on their own behalf. In the event that the governing board member enters into a contractual relationship with the subordinate board, though, the statute will apply.

That being said, under the facts presented here, we find the first part of Section 112.313(7)(a) will apply were the City Commissioner to receive funding from the City through the Property Improvement Program. We acknowledge that, in the past, and when warranted by unique circumstances, we have found Section 112.313(7)(a) will not preclude a governing board member from receiving funds through a program administered by his or her agency. However, such determinations hinged upon narrow and specific circumstances that are not present here, such as guaranteed funding for all who apply and no potential for denying anyone the ability to participate. See CEO 20-9. We decline to recognize such unique circumstances here, especially considering that the funding for the program is finite and near exhaustion, and, as such, disbursing funds to the City Commissioner means that not all applications submitted after her own will be granted or even considered. And while we recognize that Section 112.316, Florida Statutes,^[5] also has been used in certain situations to negate the strict application of the first part of Section 112.313(7)(a), we decline to apply it here, given the unique circumstances presented by this particular program, and her involvement in the program's creation.

Your question is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on March 10, 2023, and RENDERED this 15th day of March, 2023.

____________________________________

Glenton "Glen" Gilzean, Jr., Chair

^[1]The materials that you provide indicate eligible improvements include, among others, exterior painting, exterior lighting, signage, landscaping, driveway improvements, roof repair or replacement, and structural repair.