CEO 85-58 -- September 3, 1985

CONFLICT OF INTEREST

WATER CONTROL DISTRICT SUPERVISOR OWNING BONDS ISSUED BY DISTRICT

To: Mr. Robert C. Salisbury, Attorney for Indian Trail Water Control District

SUMMARY:

A prohibited conflict of interest exists where a member of the board of supervisors of a water control district owns one or more improvement bonds issued by the district. The supervisor's contractual relationship as a bondholder/creditor of the district would impede the full and faithful discharge of his public duties, in violation of Section 112.313(7), Florida Statutes. CEO 77-36 is referenced.

QUESTION:

Does a prohibited conflict of interest exist where a member of the board of supervisors of a water control district owns one or more improvement bonds issued by the District?

Your question is answered in the affirmative.

In your letter of inquiry you advise that Mr. Andrew Woytovech serves as a member of the Board of Supervisors of the Indian Trail Water Control District. You also advise that pursuant to a water management plan for an area of the District, the District sold improvement bonds in order to finance the necessary construction included in the plan. The bond underwriter purchased the bonds from the District at a fixed price and then made a public re-offering of the bonds to retail and institutional customers. The price of the bonds to retail customers was the same, but the price to institutional customers was lower because of the volume of bonds purchased by them.

You also advise that the subject member of the Board of Supervisors purchased one or more of these improvement bonds as a retail customer at the same price as other retail customers. The bonds are not secured by a lien on lands in the District located within the area for which improvements were made. In the event of a default by the District in payments on the bonds, all of the bondholders would have a cause of action against the District, which probably would be brought by one or more of the large block-holders of the bonds in the form of a class action suit.

The Code of Ethics for Public Officers and Employees provides in relevant part:

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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1983).]

Under this provision we advised in CEO 77-36 that a school board member could not be employed by a bank which purchased bonds issued by the school district, where the bank would possess a cause of action against the school district in the event of a default on the bonds. Our conclusion in that opinion was that the school board member would be employed by a business entity which is doing business with the school district.

As a public officer should not be employed by a business entity which has purchased bonds issued by his agency, we are of the opinion that a prohibited conflict of interest also would be created were the public officer himself to own bonds issued by his agency. In other words, we conclude that the subject supervisor's contractual relationship as a bondholder/creditor of the District who would have a cause of action against the District in the event of a default would impede the full and faithful discharge of his public duties, in violation of Section 112.313(7), Florida Statutes.

Accordingly, we find that a prohibited conflict of interest exists where a supervisor of a water control district owns one or more improvement bonds issued by the District.