CEO 91-42 -- July 19, 1991
CONFLICT OF INTEREST; VOTING CONFLICT OF INTEREST
COUNTY HEALTH FACILITIES AUTHORITY MEMBERS
TRANSACTING BUSINESS WITH HOSPITAL SEEKING
BOND APPROVALS FROM AUTHORITY
To: (Name withheld at the person's request.)
SUMMARY:
Members of a county health facilities authority have not violated Section 112.313(7)(a), Florida Statutes, where their companies have transacted business with a hospital receiving bond financing through the authority. Although Section 112.313(7)(a), Florida Statutes, prohibits officers from having employment or contractual relationships with business entities doing business with their public agencies, here the officers' employment or contractual relationships are with their corporations, and the corporations have the contractual relationships with the hospital. CEO's 91-28, 90-47, 88-43, 88-24, 87-85, 86-2, 82-9, 81-47, and 79-1 are referenced. There is no violation of Section 112.3143(3), Florida Statutes, when an authority member votes on a bond issue sought by the hospital, as the hospital is not a principal which retains the authority member. Moreover, the possibility of benefiting from increased business with or purchases by the hospital is remote and speculative. CEO's 88-31, 86-59, and 86-44, are referenced.
QUESTION 1:
Does a prohibited conflict of interest exist where businesses owned by three members of a health facilities authority do business with a hospital, where the hospital seeks bond issues from the authority?
Under the circumstances presented, your question is answered in the negative.
In your letter of inquiry you advise that in 1982 . . . ., . . . ., and . . . . were appointed by the Martin County Board of County Commissioners to serve as members of the Martin County Health Facilities Authority after its creation by resolution pursuant to Chapter 154, Part III, Florida Statutes. All three individuals continue to serve in that capacity. You advise that members of the Authority serve without compensation and that the Authority has met approximately 22 times since its creation.
Further, you advise that the Authority was created primarily as a conduit for nonprofit health care corporations to obtain tax free bonds. A nonprofit hospital can obtain the benefits of non-taxable financing through the Authority, which has the power to approve or disapprove health facility bond issues. The Authority exercises no other regulatory responsibilities over facilities seeking bond issues. We are advised that since its inception, the only health facility to apply to the Authority for bond issues has been Martin Memorial Hospital Association, Inc.
Martin Memorial Hospital Association, Inc. is a Florida not-for-profit corporation which owns and operates Martin Memorial Hospital, a 336 bed hospital located in Stuart. It is the only hospital in Martin County, we are advised, and as the county's largest employer, it employs approximately 1,950 persons. On four separate occasions, the hospital has sought approval of bond issues from the Authority to finance hospital projects consistent with Chapter 154, Part III, Florida Statutes. In each instance the Authority adopted a resolution approving the bond issue, and the bond issue was validated pursuant to judicial proceedings in accordance with Chapter 75, Florida Statutes.
With regard to the business transactions between the Authority members and the hospital, you advise that the first Authority member is a principal in an incorporated air-conditioning and electrical contracting business. In April 1981, the business donated labor and materials for electrical lighting installed at a new helicopter pad located at the hospital, receiving no compensation in this instance. In April 1987, the electrical contracting business was employed as a subcontractor by a general contractor hired by a corporation affiliated with the hospital. The company received compensation from the contractor totaling $19,710 for the electrical and air conditioning work it provided as a subcontractor. In November 1988, a general contractor working for the hospital employed the contracting business as a subcontractor to perform air conditioning duct work, and the contractor paid the company $1,200.
With regard to the second Authority member, we are advised that he is president of a corporation which sells propane gas and related products. The hospital is equipped to use either fuel oil or propane gas, and uses the least expensive fuel as controlled by market conditions, supplies, and prices. We are advised that the determination as to which fuel to use and where it should be purchased has been delegated by the hospital administrator to a department head and purchasing agent.
Concerning the third Authority member, you relate that he owns an incorporated printing business. The preparation and printing of hospital forms constituted the major portion of the printing supplied to the hospital by the company. Sales to the hospital were handled by a sales representative and a purchasing agent at the hospital. In 1990, the company advised the hospital that it would no longer provide the printing services that it had since the late 1960's, as the company was discontinuing printing forms.
You question whether the foregoing constitute conflicts of interest under Section 112.313(7)(a), Florida Statutes, which 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.
This provision prohibits a public officer from having a contractual relationship with a business entity which is doing business with, or regulated by, the officer's agency. It also prohibits contractual relationships which create continuing or frequently recurring conflicts between the officer's private interests and the performance of his public duties or which impede the full and faithful discharge of his public duties.
As it is clear that the Authority does not regulate the hospital, the issue then is whether the Authority and the hospital are doing business. In at least two previous opinions by this Commission, we have determined that bond financing between a governmental entity and the entity receiving the bond proceeds constitutes "doing business" for purposes of Section 112.313(7)(a), Florida Statutes. See CEO 86-2 and CEO 87-85. Therefore, members of the Health Facilities Authority would be prohibited from having contractual relationships with business entities obtaining bond financing through the Authority.
You question whether Martin Memorial Hospital Association, Inc., a non profit corporation, is considered a "business entity" for purposes of Chapter 112, Part III, Florida Statutes. Section 112.312(3), Florida Statutes, defines "business entity" as:
[A]ny corporation, partnership, limited partnership, proprietorship, firm, enterprise, franchise, association, self-employed individual, or trust, whether fictitiously named or not, doing business in this state.
We believe this definition is sufficiently broad to encompass Martin Memorial Hospital Association, Inc. See also CEO 88-24 and CEO 82-9, wherein we determined that nonprofit corporations were "business entities" for purposes of this provision. Therefore, it is our opinion that Section 112.313(7)(a), Florida Statutes, prohibits individuals serving on the Martin County Health Facilities Authority from having employment or contractual relationships with Martin Memorial Hospital Association, Inc.
Under the circumstances presented, however, each of the Authority members had employment or contractual relationships with their corporations, and it was their corporations which transacted business with the hospital. We consistently have opined that it is not a violation of Section 112.313(7)(a), Florida Statutes, when the public officer's company, not the officer individually, has a contractual relationship with a business entity which is doing business with the officer's agency. See CEO 91-28, CEO 88-43, CEO 81-47, and CEO 79-1, and all of the opinions referenced therein.
With regard to the three Authority members who are the subject of this opinion, we are of the view that the second member has not violated the first portion of Section 112.313(7)(a), Florida Statutes, where his propane gas company sold gas to the hospital, based upon the rationale discussed above. See CEO 91-28, CEO 88-43, CEO 81-47, and CEO 79-1. It is clear from the information provided to us that it was the company, not the individual, which sold propane gas to the hospital. Nor does it appear that the second portion of Section 112.313(7)(a), Florida Statutes, was violated, as there is no indication that his employment or contractual relationship with the gas company was one which created a continuing or frequently recurring conflict between his private interests and the performance of his public duties or which impeded the full and faithful discharge of his public duties.
Our rationale in finding no conflict on the part of this member is equally applicable to the third Authority member. See CEO 91-28, CEO 88-43, CEO 81-47, and CEO 79-1. Therefore, we find that he did not violate the first portion of Section 112.313(7)(a), Florida Statutes, by having a contractual relationship with his corporation, which supplied printing services for the hospital. Nor is there any indication that his relationship with his printing company and his service on the Authority created a continuing or frequently recurring conflict, or created a situation which impeded his responsibilities as a member of the Health Facilities Authority.
Finally, we conclude that the first member has not violated the first portion of Section 112.313(7)(a), Florida Statutes, as he did not individually contract with Martin Memorial Hospital Association, Inc.; nor under the facts presented did his electrical contracting company. In the first instance his company donated labor and materials to the hospital and received no compensation, and we have opined that the donation of services does not constitute "doing business." CEO 90-47. Additionally, in the other two instances the company was employed as a subcontractor, and in those situations we do not find the statute to have been violated based upon the rationale contained in CEO 91-28 and the opinions cited therein. Nor do we view this situation as one where the individual's employment or contractual relationship with his company created a continuing or frequently recurring conflict between his private interests and the performance of his public duties as a member of the Health Facilities Authority, or as one which impeded the full and faithful discharge of his public duties. We therefore conclude that this member has not violated Section 112.313(7)(a), Florida Statutes.
Accordingly, we find that no prohibited conflict of interest was created where the subject Authority members had employment or contractual relationships with their companies, and where their companies transacted business with a hospital obtaining bond issues through the Authority.
QUESTION 2:
Are health facilities authority members prohibited by Section 112.3143(3), Florida Statutes, from voting to approve a bond issue, where the members' companies have contractual relationships with the business entity seeking the bond?
Your question is answered in the negative.
Regarding voting conflicts of interest by local officials, the Code of Ethics 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.]
This provision prohibits local officials from voting upon measures which inure to their special private gain or to the private gain of principals by whom they are retained.
Although Martin Memorial Hospital Association, Inc. transacts or has transacted business with the businesses owned by the Authority members, we do not consider the hospital to be a principal by whom they are retained.
Moreover, you advise that none of the subject Authority members or their companies received any special benefit by voting to approve the four bond issues for Martin Memorial Hospital Association, Inc. In other opinions by this Commission, we have determined that when potential benefits resulting from a vote are speculative or remote at the time the vote is cast, Section 112.3143(3), Florida Statutes, is not violated. See CEO 88-31, CEO 86-59, CEO 86-44, and the opinions referenced therein. Where the possibility of any increased business with or purchases by the hospital was remote and speculative at the time the specific votes occurred, we find that the subject Authority members did not violate Section 112.3143(3), Florida Statutes.
We are advised that you also have sought an opinion from the Attorney General concerning Section 154.207(9), Florida Statutes, and whether this provision would preclude members of the Authority from voting upon any matter affecting a health facility when the member "receives income from" the health facility. Although Section 154.207(9), Florida Statutes, is not within our jurisdiction to construe, we are of the opinion that its effect would be cumulative to the requirements of Section 112.3143(3), Florida Statutes. In other words, if the Attorney General concludes that the members were required to abstain under Section 154.207(9), this would be true notwithstanding the fact that Section 112.3143(3) did not require their abstention.
Accordingly, Section 112.3143(3), Florida Statutes, was not violated by the subject members of the Martin County Health Facilities Authority, when they voted to approve bond issues benefiting Martin Memorial Hospital Association, Inc., and where companies owned by the Authority members transacted business with the hospital.