CEO 80-87 -- December 4, 1980

CONFLICT OF INTEREST

COUNTY COMMISSIONER SERVING AS DIRECTOR OF BANK PURCHASING LIEN ASSESSMENT BONDS FROM COUNTY

To: Sanford A. Minkoff, Assistant Lake County Attorney, Tavares

Prepared by: Phil Claypool

SUMMARY:

No prohibited conflict of interest would be created were a county commissioner to serve as director of a bank purchasing lien assessment bonds from the county if the bank would not have a cause of action against the county in the event of a default in payment on the bonds. Although s. 112.313(7)(a), F. S., prohibits a public officer from having a contractual relationship with a business entity which is doing business with his agency, the bank is not deemed to be doing business with the county by purchasing lien assessment bonds because it would not have a cause of action against the county in the event of a default. See CEO 77-36. Rather, the county acts merely as a conduit to allow certain landowners to borrow money from the bank for the improvement of their property and to repay those funds; in the event of default, foreclosure proceedings could be brought against the affected real property, based on the liens which secure payment of the assessments against the property. Additionally, there would be no possibility that the county commissioners could become involved in a conflict of interest in the future if default occurs, since they would not be directors of an entity which has a cause of action against themselves, as commissioners.

QUESTION:

Would a prohibited conflict of interest be created were a county commissioner to serve as director of a bank purchasing lien assessment bonds from the county, when the bank would not have a cause of action against the county in the event of a default in payment on the bonds?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff you advise that James R. Carson, Jr. and C. A. Deems are members of the Lake County Board of County Commissioners and that they also serve as compensated directors of a bank located in the county. You also advise that, pursuant to an act of the Legislature, the county has been granted the power to levy a special assessment against real property in the county, when appropriately petitioned by the landowners in the area which would be assessed. Thus, the county commission may issue lien assessment bonds, which are revenue bonds derived from lien assessments on affected real property, in order to pay for road paving in a particular area. The bonds do not pledge the full faith and credit of the county, you advise, so that, in the event of a default, no holder of the bonds would possess a cause of action against the county. Instead, foreclosure proceedings could be brought against the affected real property, based on the liens which secure payment of the assessments against the property.

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), F. S.]

This provision prohibits a public officer from having a contractual relationship with a business entity which is doing business with his agency. As we find that the subject commissioners have a contractual relationship with the bank which they serve as directors by virtue of their compensated service in that capacity, the remaining question is whether the bank would be "doing business with" the county by purchasing lien assessment bonds.

In CEO 77-36 we found that a bank was doing business with a school board when it purchased capital improvement bonds from the school district because the bank would possess a cause of action against the school district in the event that the district defaulted on the bonds. In the present situation, the bank would not have a cause of action against the county in the event of a default. In effect, the county would be acting merely as a conduit to allow the landowners whose property would be benefited by the paving to borrow money for the improvement of their property from the bank and to repay those funds. Additionally, we note that there would be no possibility that the subject commissioners could become involved in a conflict of interest in the future if default occurs, since they would not be directors of an entity which has a cause of action against themselves, as commissioners.

Accordingly, we find that no prohibited conflict of interest would be created were the subject county commissioners to serve as directors of a bank which has purchased lien assessment bonds from the county.