CEO 85-60 -- January 9, 1986

(AMENDED OPINION)

CONFLICT OF INTEREST

COUNTY COMMISSIONER ENTERING INTO JOINT VENTURE TO ESTABLISH FITNESS AND REHABILITATION CENTER WITH NONPROFIT CORPORATION OPERATING PUBLIC HOSPITAL

To: Mr. Steve H. Gilman, Member, Marion County Board of County Commissioners, Ocala

SUMMARY:

No prohibited conflict of interest would be created were a county commissioner to enter into a joint venture with a nonprofit corporation to establish and operate a fitness and rehabilitation center where members of the county hospital district which oversees the work of the nonprofit corporation are appointed by the county commission. Under Section 112.313(7)(a), Florida Statutes, the nonprofit corporation is neither doing business with nor subject to the regulation of the county commission. As none of the proposed matters is expected to come before the county commission, there would be no recurring conflict or employment that would impede the full and faithful discharge of the county commissioner's duties.

QUESTION:

Would a prohibited conflict of interest be created were you, a county commissioner, to enter into a joint venture with a nonprofit corporation which operates the local public hospital to establish a fitness and rehabilitation center?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you have advised that you are a practicing physician and a member of the Marion County Board of County Commissioners. You also advise that you intend to organize a fitness/wellness center to serve not only fitness enthusiasts but also those persons requiring medically directed health maintenance and rehabilitation. You plan to be the medical director of the center and expect to have referrals from local physicians. Some patients who would enter the programs will be referred from the two local hospitals, one of which is owned by a for-profit corporation and the other of which is owned by the Marion County Hospital District and leased to a private, nonprofit corporation.

You have advised that you had discussed this matter with the administrators of the public hospital and you have agreed to undertake the project as a joint venture. Presently, it is intended that the nonprofit corporation will build and finance the facilities and you (or your corporation) will lease the facilities with payments being applied to the debt and including a profit for the hospital. Upon retirement of the entire debt, the hospital and you jointly will own the facilities.

The District Board will not have the authority to approve the joint venture, as the nonprofit corporation will fund the construction of the facilities and will be the entity involved with you. You advise that no public funds will be involved in the construction of the facilities and that you do not expect County funding for indigents to be involved. Finally, you advise that none of these matters is expected to come before the County Commission.

Pursuant to a special act of the Legislature, the County Commission appoints the Board of Trustees of the Hospital District and is authorized to remove Trustees only for cause. The board of directors of the nonprofit corporation is composed of the seven members of the District Board of Trustees and eight citizens appointed by the corporate board of directors and ratified by the County Commission. The ratification process allows the County Commission to decline to ratify the first person nominated for a vacancy for any reason, but allows the Commission to decline the second and third nominations only for cause; the fourth individual nominated must be ratified by the Commission.

The County Commission also has the authority to levy a one mill tax for District operational purposes and a one mill tax for bond indebtedness of the Hospital District. However, the County Commission has no authority to levy taxes for the benefit of the nonprofit corporation. Presently the County has no contractual agreements with the corporation. The County is obliged under Chapter 154, Florida Statutes, to pay for the medical treatment of indigents in the County and does pay the for-profit hospital and the nonprofit corporation through the Hospital District on an invoice basis only for such treatment.

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).]

The first part of this provision prohibits a County Commissioner from having a contractual relationship with a business entity which is doing business with or is subject to the regulation of the County Commission.

As a joint venturer in this project, you clearly will have a contractual relationship with the nonprofit corporation which operates the hospital for the Hospital District. However, under the circumstances presented, we find that the nonprofit corporation is neither doing business with nor subject to the regulation of the County Commission.

Both you and the County Attorney have advised that prior to your service on the County Commission, the County wanted to stop the District from leasing the public hospital to a nonprofit corporation. The Hospital District filed suit in response, and in settlement of the suit the County and the District agreed that the District could lease the hospital to a nonprofit corporation and agreed upon the terms of such a lease. In addition to other provisions, the lease provides for the appointment of the board of directors of the nonprofit corporation, requires the board of directors to comply with the public meetings and public records laws, authorizes the County Commission to approve out-of-the-county projects of the corporation, and requires that audited financial statements be provided to the County Commission annually. In addition, the lease provides that the nonprofit corporation shall use ad valorem tax revenues only for indigent care, ambulance services, and other purposes permitted by Florida law.

At the present time, we have been advised, the County Commission does not levy any taxes for District operational purposes or bond indebtedness. The only tax revenues which are provided to the nonprofit corporation by the County go to reimburse part of the expenses of indigent care, as provided by Chapter 154, Florida Statutes. We do not consider the County to be "doing business with" the nonprofit corporation merely because the County assists in paying for medical treatment of indigents as required by law.

In previous opinions CEO 81-25, CEO 76-112 and CEO 76-199 we have advised that the authority to appoint and remove board members does not constitute "regulation" within the contemplation of Section 112.313(7)(a), Florida Statutes. Nor do we find that the County Commission has such a degree of control over the finances of the nonprofit corporation as to make the corporation "subject to the regulation of" the Commission.

Although the County Commission has the authority to appoint a minority (seven) of the members of the board of directors, the Commission can only ratify the appointment of the remaining eight directors, and even that authority is extremely limited by the settlement between the County and the District. The County has the indirect authority to remove the seven directors for cause by removing them as Trustees of the District, but has no authority whatsoever to remove the remaining eight directors. The County Attorney has advised that the County has no authority to approve the budget of the nonprofit corporation and has no other direct authority over the finances of the hospital. Although the County can levy taxes for the operations and indebtedness of the District, the County has no authority to do so for the nonprofit corporation. As noted above, County payments for services rendered to indigents are made both to the for-profit hospital and to the nonprofit corporation.

Finally, we are of the opinion that your relationship with the nonprofit corporation would not present a continuing or frequently recurring conflict of interest or impede the full and faithful discharge of your duties as a County Commissioner. You have advised that you do not expect any matter concerning the project to come before the County Commission. Under the terms of the lease of the hospital the County Commission's authority over the nonprofit corporation basically is limited to the appointment process, as described above. We have not found that the power to appoint and remove would preclude employment with one's appointees and we are of the view that the limited appointment and removal power of the County Commission here would not prohibit you from engaging in this project with the nonprofit corporation.

Accordingly, we find that no prohibited conflict of interest would be created were you to enter into a joint venture with the nonprofit corporation which operates the public hospital owned by the Hospital District to establish a fitness and rehabilitation center.