CEO 86-14 -- February 20, 1986

CONFLICT OF INTEREST

CITY COUNCIL MEMBER OR EMPLOYEE SERVING ON BOARD OF DIRECTORS OF CORPORATION LEASING HOSPITAL FACILITIES FROM CITY

To: Mr. John C. Wolfe, Chief Assistant City Attorney, City of St. Petersburg

SUMMARY:

No prohibited conflict of interest would be created were a city council member or employee to serve on the board of directors of a corporation which leases hospital facilities from the city and operates a hospital using the leased facilities, or on the board of trustees of a nonprofit corporation which is the holding company for the corporation which leases the hospital facilities. As the directors and trustees of these corporations would not receive any compensation for their services, they would have no employment or contractual relationship with a business entity which could violate Section 112.313(7), Florida Statutes. Nor would service on the board of trustees or board of directors violate Section 112.313(3), Florida Statutes, as neither corporation is leasing or selling any realty, goods, or services to the city.

QUESTION:

Would a prohibited conflict of interest be created were a city council member or employee to serve on the board of directors of a corporation which leases hospital facilities from the city and operates a hospital using the leased facilities, or on the board of trustees of a nonprofit corporation which is the holding company for the corporation which leases the hospital facilities?

Your question is answered in the negative.

In your letter of inquiry you advise that the City of St. Petersburg currently leases certain hospital facilities to a nonprofit corporation incorporated under Chapter 617, Florida Statutes; the nonprofit corporation operates a hospital using these facilities. Under a proposed reorganization, the nonprofit corporation would be reincorporated under Chapter 607, Florida Statutes, and would have as its stated purposes nonprofit types of activities. The stock from this corporation would be held by a nonprofit corporation organized under Chapter 617, Florida Statutes, which would hold the stock of several other corporations, at least one of which would be a corporation having "for profit" purposes stated in its articles of incorporation.

In order to accomplish the reorganization, the City intends to amend its lease agreement. The amendment, in part, would allow a City Council member or employee to serve on the board of directors of the Chapter 607 corporation and on the board of trustees of the nonprofit holding corporation.

The current lease was entered into between the City and the nonprofit corporation in 1983. Under it, the City agreed to lease the hospital and all improvements for a term of 50 years for nominal rent and in consideration of the hospital, medical, and ancillary services capable of being provided by the nonprofit corporation to the City's residents. At the expiration of the lease, the tenant is to surrender the premises and transfer to the City all fixtures, equipment, and inventory used in the operation of the hospital.

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).]

This provision prohibits a public officer or employee from having any employment or contractual relationship with a business entity which is doing business with his agency. You have advised that neither the directors nor the trustees of the corporations will receive any compensation for their services. For this reason, we find that a City Council member or employee serving on the board of directors or board of trustees of these corporations would not have any employment or contractual relationship with the corporations. See CEO 83-70, CEO 82-10, and CEO 80-32.

The Code of Ethics also provides:

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(c) Appointment to public office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes (1985).]

This provision prohibits a public officer or employee from acting in an official capacity to purchase or lease any realty, goods, or services for his agency from a business entity of which he is a director. In addition, it prohibits a public officer or employee from acting in a private capacity, which we have interpreted to include acting as a director of a corporation, to lease or sell any realty, goods, or services to his agency. See CEO 81-27 and CEO 81-73.

Clearly, the City is not leasing any realty from the nonprofit corporation or its successor corporation; nor is any realty being leased to the City under the lease agreement. Therefore, the only remaining question is whether the nonprofit corporation or its successor is selling any services to the City. We are of the opinion that under the lease agreement neither corporation would be considered to be selling any services to the City.

Typically, we have found a sale of services to an agency where the agency has paid or contracted to pay for services to be received by the agency. Examples of the sales of services have included maintenance and repair services (CEO 82-71), legal services (CEO 81-50), accounting services (CEO 83-58), construction contracting services (CEO 83-29), banking services (CEO 83-81), investment counseling services (CEO 81-32), and utility service (CEO 81-62). In addition, we have found a sale of services where an agency contracts to pay funds to an entity to provide services for a designated clientele of the agency. See CEO 82-9. In contrast to these examples, the City is not paying for services to be received by the City. Nor has the City under its lease agreed to pay funds to an entity to provide services for a designated clientele, as was the situation involving the Department of Health and Rehabilitative Services in CEO 82-9.

Accordingly, we find that no prohibited conflict of interest would be created were a City Council member or employee to serve on the board of directors of a corporation which leases hospital facilities from the City or to serve on the board of trustees of a nonprofit corporation which is the holding company for that corporation.