CONFLICT OF INTEREST

SCHOOL BOARD REAL ESTATE TRANSACTIONS WITH A CREDIT UNION THAT
DOES BUSINESS WITH SCHOOL BOARD MEMBERS AND WITH A SCHOOL
BOARD EMPLOYEE

To: Jeff McInnis, Esq. (Okaloosa County School Board)

SUMMARY:

Under the particular circumstances presented, due to the applicability of the "sole source" exemption found in Section 112.313(12)(e), Florida Statutes, a prohibited conflict of interest would not be created under Sections 112.313(3) or 112.313(7)(a), Florida Statutes, were the School Board to purchase property from a credit union where a School Board Member serves on the Credit Union's Board of Directors and several other School Board Members do business and hold accounts with the Credit Union. The "sole source" exemption will also apply were a School Board employee to sell a parcel of real property to the School District. CEO 21-7, CEO 20-13, CEO 20-1, CEO 11-2, CEO 10-4, CEO 08-4, CEO 05-14 and CEO 91-31 are referenced.

QUESTION 1:

Would a prohibited conflict of interest be created were the School Board to purchase a parcel of land from a Credit Union, where one School Board Member is on the Credit Union's Board of Directors, and several other School Board Members are also Credit Union Members and do business with the Credit Union?

Under the particular circumstances presented, your question is answered in the negative.

In your role as attorney for the Okaloosa County School Board, you inquire on behalf of several of its members. You explain that the School Board is considering a purchase of real property currently owned by the Okaloosa County Teachers Federal Credit Union ("the Credit Union"). This property is vacant and contiguous to the campus of Baker School, a K-12 public school in Baker, Florida. You have further explained that, with the Credit Union's permission, the property is currently being used by Baker School for student and special event parking on a daily basis. You also stated that the property's topographical characteristics make it immediately available for the construction of a parking facility.

In addition, you have stated that for its parking facility, the school requires a parcel of land that is contiguous to the existing campus to promote student safety by avoiding the need for students to leave school property when walking between the parking facility and the school's campus. You have consulted a realtor to explore the possibility of purchasing different parcels of land that are contiguous with the campus, but none of them are for sale. There is one undeveloped parcel of land that is contiguous with the campus, which has already been purchased by the School Board for future expansion, but the only portion of that undeveloped parcel that is conducive to the construction of a parking lot is too far from the stadium and classroom buildings to provide reasonable access to those parts of the campus. Having assessed all available property, the School District's Facilities Department has determined that no other parcel of land satisfies all of the School Board's criteria for the parking facility.

You also stated that one School Board Member was recently appointed to the Board of Directors of the Credit Union ("the Board of Directors"). You state that the Board of Directors approved of the property's sale to the School Board months before this School Board Member was appointed to the Board of Directors. That School Board Member, along with several other School Board members, are also members of the Credit Union who maintain accounts and/or do business with the Credit Union. With this factual background, you inquire as to whether the School Board may purchase the parcel of land from the Credit Union.

Relevant to your inquiry, Section 112.313(3), Florida Statutes, provides:

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 first part of this provision operates to prevent a public employee from acting in his or her public capacity as a purchasing agent, or a public officer acting in his or her official capacity, to "purchase, rent, or lease any realty, goods, or services" for his or her agency from any business entity in which he or she is an officer or director or in which the employee or officer or his or her spouse or child owns a material interest.¹ The second part of this subsection prevents a public employee or officer from acting in his or her private capacity to rent, lease, or sell any realty, goods, or services to his or her political subdivision or any agency of his or her political subdivision. In the scenario you present, and in the absence of an exemption (discussed below), the School Board member who is on the board of directors of the Credit Union will have a conflict of interest under Section 112.313(3) because she will be acting in a private capacity, as a director of the Credit Union, to sell real property to her political subdivision, the School District.

Also relevant to this inquiry, Section 112.313(7)(a), Florida Statutes, 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 clause of this statute prohibits a public officer or employee from having any employment or contractual relationship with a business entity or an agency that is regulated by or is doing business with his or her agency. The second clause of this statute prohibits a public officer from having employment or 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. According to Zerweck v. State Commission on Ethics, 409 So. 2d 57 (Fla. 4th DCA 1982), the second clause is designed to prohibit a situation that creates a "temptation to dishonor" one's public responsibilities. The statute is entirely preventative and does not require an actual transgression to occur for a conflict of interest to be found. See CEO 05-14. For purposes of this statute, uncompensated service as a Director of the Credit Union does not constitute a contractual relationship. See CEO 21-7, Question 1, and CEO 20-13. However, membership in a credit union, or otherwise doing business with a credit union, is a contractual relationship. Therefore, each School Board member that is a Credit Union member or does business with the Credit Union has a contractual relationship with the Credit Union. Furthermore, real estate transactions constitute "doing business." Therefore, if the Credit Union sells the property to the School Board while several School Board members have contractual relationships with the Credit Union, the prima facie conflicts of interest become apparent.

An exemption, however, provided in Section 112.313(12)(e), Florida Statutes, would negate the conflicts under Sections 112.313(3) and (7)(a) and make the sale permissible, so long as the Credit Union is the sole source of supply. In this regard, Section 112.313(12)(e) states:

. . . no person shall be held in violation of subsection (3) or subsection (7) if: . . . (e) [t]he 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.

The Commission has applied this exemption in the past to negate facially-apparent conflicts of interest under Section 112.313(3) and (7)(a). In CEO 20-1, the Commission applied the exemption to permit a City Councilmember, in his capacity as the managing member of an LLC, to sell real estate to the City because no other property on the market satisfied all of the City's criteria for expanding its offering of public parking. In CEO 10-4, the Commission applied the exemption to negate the application of Section 112.313(3) where a county commissioner's husband owned a material interest in a property, so long as the county had determined that "there [was] a need for the specific property to be acquired." See CEO 10-4 (citing CEO 91-31). In CEO 11-2, the Commission again applied the exemption to negate the applications of Sections 112.313(3) and (7)(a) in a land sale/use context to allow a member of the governing board of a water management district to sell the rights to water storage, water release, and related water management activities on his more-than-15,000-acre property after the staff of the water management district determined that the property presented specific and unique circumstances that made this property preferable to all others.

In this case, the School District's Facilities Department has assessed all available property and determined that no other parcel of land satisfies all of the School Board's criteria for the parking facility it needs. This parcel is contiguous to the existing school campus, is of the appropriate size for a parking facility, and its topographical characteristics make it available for immediate construction. We therefore find that the "sole source" exemption of Section 112.313(12)(e) negates the conflict of interests that would arise for the Board members in question under Sections 112.313(3) and 112.313(7)(a). However, the School Board Member that sits on the Board of Directors, and all School Board Members that are Credit Union Members or do business with the Credit Union, must complete and file CE Form 4A (Disclosure of Business Transaction, Relationship, or Interest) prior to the sale.

Though we find that the "sole source" exemption applies, you should also be aware of Section 112.3143(3)(a), Florida Statutes, which 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.

Although Section 112.313(12)(e) operates to negate the conflicts of interest arising from Sections 112.313(3) and (7)(a), it does not alleviate obligations arising from Section 112.3143, Florida Statutes, pertaining to voting conflicts. Section 112.3143(3)(a), Florida Statutes, operates to prohibit local public officers from voting on matters that will inure to their special private gain or loss or where they know it will inure to the special private gain or loss of a principal by whom they are retained. We have consistently found that one is retained for their service when they are compensated or otherwise receive consideration. See CEO 08-4, Question 4. Here, the School Board Member serving on the board of directors of the Credit Union is not compensated for her service. Therefore, the Credit Union is not a principal by whom she is retained and, thus, votes that inure to the special private gain or loss of the Credit Union will not pose a voting conflict for her.

QUESTION 2:

Would a prohibited conflict of interest be created for a School Board employee were the School Board to purchase a second parcel of land from the employee?

Under the particular circumstances presented and limited to the facts of this opinion only, this question is also answered in the negative.

You also made an ethics inquiry on behalf of an employee of the School Board. You have further explained that Baker School also needs to acquire real property to be developed into a baseball field. You aver that there are two additional parcels that are contiguous to the school's campus, neither of which are large enough by themselves to accommodate a baseball field and its ancillary facilities, but they can be accommodated if the two parcels are combined. One of these parcels is owned by a School Board employee, namely an Online Data Technician in the District's School Safety Department. Furthermore, you state the topographical characteristics of the undeveloped parcel of land referenced in Question 1 above are not conducive to the construction of a baseball field.

The answer to this question relies heavily on the analysis laid out in the response to Question 1, above. Student safety is a concern for traveling to and from the baseball field just as it is for the parking lot. Thus, according to the requestor, the School Board needs to purchase land that is contiguous to the existing campus to develop the baseball field. Furthermore, these two parcels, when taken together, are of sufficient size to accommodate the field. The requestor has consulted with a realtor to find other available options for sale, but there are no properties for sale that meet the School Board's criteria. We therefore find that the "sole source" exemption also applies to negate any potential conflicts of interest arising from this scenario for this School Board employee under Sections 112.313(3) and 112.313(7)(a), Florida Statutes. As described above, this employee will also need to fill out and file a CE Form 4A.

Your inquiry is answered accordingly.

ORDERED by the State of Florida Commission on Ethics meeting in public session on December 1, 2023, and RENDERED this 6th day of December, 2023.

____________________________________

Ashley Lukis, Chair

^[1]Section 112.312(15) defines "material interest" as greater than five percent ownership.