CEO 88-41 -- June 9, 1988

VOTING CONFLICT OF INTEREST

COUNTY COMMISSIONER VOTING ON LOCATION

OF POWER PLANT OF CORPORATION OWNED IN PART BY

CORPORATION OF WHICH HE IS A DIRECTOR

To: (Name withheld at the person's request.)

SUMMARY:

A county commissioner is prohibited by Section 112.3143, Florida Statutes, from voting on matters relating to the construction of a power plant by an electrical cooperative which is owned by 11 other cooperatives, where the commissioner serves as a compensated director of one of the 11 cooperatives. The cooperative of which the commissioner is a director is a "principal by whom he is retained." As that cooperative is one of 11 which would benefit from the construction of the power plant in the county, decisions enabling the construction of the plant would inure to the special gain of that cooperative.

QUESTION:

Is a county commissioner prohibited by Section 112.3143, Florida Statutes, from voting on matters relating to the construction of a power plant by an electrical cooperative which is owned by 11 other cooperatives, where the commissioner serves as a compensated director of one of the 11 cooperatives?

Your question is answered in the affirmative.

In your letter of inquiry you advise that .... serves as a member of the Hardee County Board of County Commissioners. You also advise that he serves as a member of the board of directors of an electric cooperative, a nonprofit corporation created and operated under Chapter 425, Florida Statutes. As a director, he receives reimbursement for mileage to meetings and receives a small fee for each meeting attended.

You further advise that the cooperative is one of 11 which own another cooperative. The board of directors of that cooperative consists of 22 members, two selected by each of the 11 cooperatives. The subject Commissioner is not a director of that cooperative, which is attempting to build a power plant within the County. The construction of the power plant probably will require land use decisions by the Board of County Commissioners, you advise.

In a telephone conversation with our staff, the attorney for the cooperative of which the Commissioner is a director advised that the 11 cooperatives are distribution cooperatives which provide electricity to their customers through their own distribution lines. The 11 formed a generating cooperative from which they buy their electricity. The generating cooperative, which either generates the electricity or buys it from other sources, would like to build another plant in the State. Based on a study by consultants of environmental impact, cost of land, and location of transmission lines, the generating cooperative chose as the best site a location in either south Polk County or north Hardee County. In order to construct the generating plant, he advised, rezoning of property to be purchased by the cooperative would be likely, as well as the approval of several State agencies, such as the Public Service Commission and the Department of Environmental Regulation.

The attorney for the cooperative also advised that although the cooperative encompasses approximately 10 counties, it serves only about 14,000 customers. Of the 11 cooperatives, he estimated that two or three were smaller and that the remaining seven or eight served more customers. The three largest cooperatives serve over 100,000 customers each, he advised. Because the generating cooperative is a nonprofit corporation, it declares no dividends. However, at the end of each fiscal year the generating cooperative declares capital credits to the 11 cooperatives based on the amount of electricity purchased by each during that year. The capital credits are carried on the books of the cooperative and are not paid out until 15 to 17 years later.

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

No county, municipal, or other local public officer shall vote in his official capacity upon any measure which inures to his special private gain or shall knowingly vote in his official capacity upon any measure which inures to the special gain of any principal, other than an agency as defined in s. 112.312(2), by whom he is retained. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of his interest in the matter from which he is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his 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. However, a commissioner of a community redevelopment agency created or designated pursuant to s. 163.356 or s. 163.357 or an officer of an independent special tax district elected on a one- acre, one-vote basis is not prohibited from voting. [Section 112.3143(3), Florida Statutes (1987).]

This provision prohibits a county commissioner from voting on a measure which inures either to his special private gain or to the special gain of a principal by whom he is retained.

Directors of a corporation ordinarily occupy a quasi-fiduciary relationship toward the corporation and its stockholders; they are required to exercise good faith in the exercise of their powers in the interests of the corporation, and as to third persons they are agents of the corporation. See 8 Fla. Jur. 2nd Business Relationships, Sections 295 and 296. Therefore, as the Commissioner is compensated for his service as a director of the cooperative, we find that the cooperative is a principal by whom he is retained. As he does not serve as a director of the generating cooperative, however, we do not conclude that the generating cooperative also is a principal by whom he is retained.

Thus, the question presented is whether the land use decisions the County Commission will be called upon to make, which would allow the generating plant to be built in the County, would inure to the special gain of the distribution cooperative of which the Commissioner is a director. As these decisions would be sought by the generating cooperative, it seems clear that they would inure to the special gain of that cooperative. We also conclude that these decisions would inure to the special gain of the 11 distribution cooperatives which own the generating cooperative because they stand to gain through the decreased costs of electricity which would result from locating the power plant in the County.

In CEO 85-31 we advised that a county housing finance authority member would not be prohibited from voting on the sale of bonds to finance a development project proposed by a limited partnership, where the national brokerage firm which employed him owned an interest in the partnership through an extensive succession of subsidiary corporations and partnerships. Here, however, the distribution cooperatives directly own the generating cooperative. In CEO 85-41, we advised that a county commissioner was not prohibited from voting on matters affecting a development project of a large, publicly held corporation where his spouse was a beneficiary of a trust which owned shares of stock in that corporation. In that case, the trust held 600 of the approximately 174 million outstanding shares of stock in the corporation. In contrast, here the distribution cooperative is one of a class of 11 which stand to benefit from locating the power plant in the preferred area.

Accordingly, we find that the subject Commissioner is prohibited by Section 112.3143, Florida Statutes, from voting on matters relating to the construction of the power plant while he serves as a director of one of the 11 cooperatives which own the cooperative seeking to build the plant.