CEO 87-87 -- April 28, 1988

CONFLICT OF INTEREST

CITY REGIONAL UTILITY EMPLOYEE

OWNING PRIVATE WATER COMPANY

To: Mr. Berdell Knowles, Manager, Rates and Financial Planning Section, Strategic Planning Department, Gainesville Regional Utilities, Gainesville

SUMMARY:

No prohibited conflict of interest would be created under Section 112.313(7), Florida Statutes, were a city regional utilities employee to acquire a private water supply and distribution company serving customers outside the city limits. Under the circumstances presented, the company is not doing business with or regulated by the city, and such ownership would not create a continuing or frequently recurring conflict between the employee's private interests and the performance of his public duties or impede the full and faithful discharge of his public duties. CEO 78-93 is referenced.

QUESTION:

Would a prohibited conflict of interest be created were you, the manager of the rates and financial planning section of the strategic planning department of a city regional utilities, to acquire a private water company which serves customers outside the city limits?

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

In your letter of inquiry you advise that you are the Manager of the Rates and Financial Planning Section of the Strategic Planning Department, City of Gainesville Regional Utilities (GRU). GRU provides electric, water, and wastewater utilities service to most of the residences and businesses in the City and the geographical area surrounding the City. In your role as Manager, you advise, you are responsible for rate recommendations and strategic financial analysis for GRU. The authority which you have relating to the establishment of policy is limited to making recommendations and managing the resources allocated to your functional area. You advise that any policy recommendations that you make are reviewed by the GRU Director of Strategic Planning, the General Manager, and the City Manager before the decision to enact or implement those policies is made by the City Commission.

You further advise that you are considering the acquisition of a private water company which is regulated by the County Commission, the Florida Department of Environmental Regulation, and the St. Johns River Water Management District. This private water company is a community water supply and distribution system which serves approximately 328 residential customers located in an area near the southeastern boundary of the City limits. To date, GRU has not expressed interest in providing water or wastewater service in the private water company's service area. However, in a telephone conversation with our staff you advised that some of the company's customers purchase electricity from GRU.

You advised that County policy precludes any further extensions of service by the private water company. When our staff requested a copy of this policy, you advised that although this policy was presently unwritten, you would document the policy. You later advised that you had discovered that the private water company is not totally prohibited from making extensions but has agreed that it would make extensions only to serve new locations if such extensions were approved by GRU. You state that GRU could serve a new location if it so desired. The private water company, therefore, could serve a new location if GRU did not have facilities in place or did not want to construct facilities to serve the location. You advised that any decision to allow the company to make an extension would be made by the GRU Director of Water and Wastewater Engineering. In the past, the company obtained an opinion from the Director of Water and Wastewater Engineering which supported the company's position that a particular customer would be better served by the company. Since you have no influence in the development of such opinions, you probably would seek similar opinions in the future if you were to acquire the company and new service was requested of the company by a citizen. You further advise that any extensions by the company would have to be approved by the County as the company is regulated by the County and uses County right-of-way. In making this decision, one of the factors the County considers is whether its citizens would be better served by GRU or the private company. In a telephone conversation with our staff you explained that this approval by the County relates to the issuance of construction permits.

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 (1985).]

The first part of this provision prohibits a public employee from having any employment or contractual relationship with a business entity which is subject to the regulation of, or is doing business with, his agency. In previous opinions we have advised that ownership of a business entity constitutes an employment or contractual relationship with that entity. See CEO 78-93. Here, the private water company is not regulated by GRU. Nor are the company and your agency doing business with each other.

Section 112.313(7)(a), Florida Statutes, also prohibits a public employee from having 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. In our view, the ownership of the private water company which you propose would not create such a conflict. Zerweck v. State Commission on Ethics, 409 So.2d 57, 61 (Fla. 4th DCA 1982), explained that Section 112.313(7)(a) requires a review of a public officer's duties and private employment "to determine whether the two are compatible, separate and distinct or whether they coincide to create a situation which 'tempts dishonor.'"

According to your job description, you prepare and make presentations of financial, operating, and planning reports to utility management and the City Commission; you also participate in the development of administrative and operating policies and procedures and departmental budgets. You direct the preparation of rate, load, financial, and operating studies; long and short range financial, operating, and facilities plans; and studies to determine the need for additional equipment and facilities. You also are required to serve as a liaison with other individuals within GRU, outside consultants, and key individuals within other utilities and agencies.

Thus, it appears that you are in a position through your public employment to influence policy which could impinge on your private interests. However, you have advised that the private water company does not have the capacity to expand its current service area nor does it want to invest in additional capacity in order to expand. In particular, you have advised that in order to expand, the company would have to increase the amount it has been permitted to pump by the Water Management District and would need to construct new mains from the plant to the new customers, since any new customers would be located at the geographic extremities of the distribution system. You state that the cost of one main probably would exceed $80,000.

Therefore, it appears that under current circumstances extensions of service which might compete with GRU are unlikely. You have offered to stipulate that the company would initiate no activity to extend its service area without first seeking another opinion. We agree with that stipulation. We also suggest that you should seek a further opinion in the event that GRU were to become interested in acquiring the company, as Section 112.313(3), Florida Statutes, which presently prohibits a public employee from acting in a private capacity to sell realty, goods, or services to his own agency, would prohibit you from selling the private water company to GRU.

In addition, we note the possibility that you would have access to information about which the general public would be unaware, arising out of your role in the planning functions of GRU and out of your responsibilities as liaison with outside consultants and individuals within other utilities and agencies. As this information potentially could be of value to the private water company, we would caution you that Section 112.313(8), Florida Statutes, provides:

DISCLOSURE OR USE OF CERTAIN INFORMATION. -- No public officer or employee of an agency shall disclose or use information not available to members of the general public and gained by reason of his official position for his personal gain or benefit or for the personal gain or benefit of any other person or business entity.

Accordingly, we find that under the circumstances presented no prohibited conflict of interest would be created were you, the manager of the rates and financial planning section of the strategic planning department of a city regional utilities, to acquire a private water company which serves customers outside the city limits.