CEO 93-29 -- September 2, 1993

CONFLICT OF INTEREST

CITY COMMISSIONER AND CITY ATTORNEY

HAVING INTEREST IN MORTGAGE ENCUMBERING PROPERTY

BEING CONSIDERED FOR PURCHASE BY CITY

To: Mr. Laurence Feingold, City Attorney (Miami Beach)

SUMMARY:

No prohibited conflict of interest would be created under either Section 112.313(3) or 112.313(7)(a), Florida Statutes, where a city attorney and city commissioner own interests in a mortgage encumbering property the city is considering purchasing. If the city purchases the property, it will buy it from the present owner, not the city attorney or the city commissioner. Also as long as the mortgage held by the city attorney and city commissioner is satisfied prior to the city's taking title, neither the city attorney nor the city commissioner will have a contractual relationship with a business entity doing business with the city. However, because of the Commissioner's interest in the mortgage, as well as those of his son and business associates, which could be satisfied as a result of the city's purchase of the property encumbered by the mortgage, he should abstain from any votes involving the property and file the required memoranda of voting conflict pursuant to Section 112.3143(3), Florida Statutes. CEO's 85-47 and 76-45 are referenced.

QUESTION 1:

Would a prohibited conflict of interest exist were you, the city attorney, and a member of the city commission to own an interest in a mortgage encumbering property which the city is considering for purchase?

Your question is answered in the negative, under the circumstances presented.

In your letter of inquiry and in telephone conversations with our staff, you relate that you and City Commissioner Abe Resnick both own an interest in a mortgage which was given for a piece of property when it was sold years ago. As such, you and the Commissioner, as well as the other partners in the matter, now receive payments from the present owner of the property. You also relate that you anticipate receiving payments on the mortgage through February 1995, when it is due to be satisfied. Further, you relate that the property encumbered by the mortgage is located within the City's Historic District and that in the near future the City Commission will be considering the purchase of several parcels of property for inclusion within the project referred to as the "Historic Convention Village." The parcel for which you and the Commissioner (and the other partners) hold the mortgage is one of the parcels being considered for purchase by the City. Although you and the Commissioner have removed yourselves from all involvement in the Historic Convention Village project, you question whether the situation creates a conflict of interest prohibited by the Code of Ethics for Public Officers and Employees.

The first provision implicated is Section 112.313(3), Florida Statutes, which 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 of 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 or when such offices are on property wholly or partially owned by the legislator. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes (1991).]

This provision prohibits public officers and employees from acting in their official capacity to purchase realty or services from a business entity in which they are partners or in which they own a material interest, and it also prohibits public officers and employees from acting in a private capacity to sell any realty or services to the political subdivision which they serve.

Here, since it appears that the City, if it decides to acquire the property, will not be acquiring it from the partnership that holds the mortgage, it does not appear that the acquisition will violate Section 112.313(3), Florida Statutes, because the partnership owns no interest in the property other than as a mortgagee. Therefore, the partnership would not be selling any service or realty to the City, and no conflict of interest would be created under Section 112.313(3), Florida Statutes.

Also implicated is Section 112.313(7)(a), Florida Statutes, which provides:

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 statute prohibits public officers and employees from having contractual relationships with business entities doing business with their agency, and it also prohibits them from having contractual relationships which create continuing or frequently recurring conflicts between their private interests and the performance of their public duties, or which impede the full and faithful discharge of their public duties.

In CEO 76-45, we opined that Section 112.313(7)(a), Florida Statutes, prohibited a city commissioner from holding a mortgage on property to be sold to the city. However, where the commissioner supplied a satisfaction of mortgage prior to the city's taking title, no conflict of interest was deemed to exist. Here, it is anticipated that the City will not assume the mortgage encumbering the property and will acquire the property free of any liens or encumbrances. However, because no negotiations over the property have yet been entered into between the seller and the City, it is too early to know how any transaction will be structured. Nonetheless, if, as in CEO 76-45, the partnership provides a satisfaction of mortgage to the property owner selling the property to the City, then no conflict of interest would exist under Section 112.313(7)(a), Florida Statutes, because the partnership, which includes you and the Commissioner, would not be doing business with the City. Should it develop that it is in the City's interest to acquire the property subject to the mortgage held by the partnership, then we suggest that you seek another opinion.

Question 1 is answered accordingly.

QUESTION 2:

Would a City Commissioner be prohibited by Section 112.3143(3), Florida Statutes, from voting on matters involving the proposed purchase of property where both he and his son own interests in the mortgage encumbering the property?

Question 2 is answered in the affirmative.

You relate that the Commissioner, as a partner in the partnership holding the mortgage on the property, owns a 9.94% interest in the mortgage. Additionally, his son also has a 9.94% interest in the mortgage. You question whether he would be faced with a voting conflict of interest where he is called upon to vote on matters involving the acquisition of the property.

Section 112.3143(3), Florida Statutes, provides as follows:

No county, municipal, or other local public officer shall vote in his official capacity upon any measure which would inure to his special private gain; which he knows would inure to the special private gain of any principal by whom he is retained or to the parent organization of subsidiary of a corporate principal by which he is retained, other than an agency as defined in s. 112.312(2); or which he knows would inure to the special private gain of a relative or business associate of the public officer. 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. [Section 112.3143(3)(a), Florida Statutes (1991).]

This statute prohibits a local public officer from voting on a measure which would inure to his special private gain; which he knows would inure to the special private gain of any principal by whom he is retained or to the parent organization or subsidiary of a corporate principal by which he is retained; or which he knows would inure to the special private gain of a relative or business associate.

Here, you have advised that the Commissioner would benefit from the City's purchase of the property as a result of a satisfaction of mortgage on the property. For the same reason, it follows that the Commissioner's son, who is a "relative" pursuant to Section 112.3143(1)(b), Florida Statutes, would also benefit. Finally, the Commissioner's partners, who are his "business associates" pursuant to Section 112.312(4), Florida Statutes, would similarly benefit if the City purchases the property. Although the mortgage is presently due to be paid off in February 1995, it would likely be paid off sooner if the City purchases the property. Thus, this situation is unlike that presented in CEO 85-47, where we opined that a city commissioner employed by a developer who held a mortgage on property being considered for annexation was not faced with a voting conflict when voting on a petition to annex the property. There, the commissioner did not know of the mortgage at the time he voted, and at that time, Section 112.3143(3) prohibited a municipal officer from "knowingly voting upon any measure which inures to the special gain of any principal . . . by whom he is retained." It also appeared there to be too remote and speculative to determine whether the developer would benefit from the annexation of the property. Here, because the Commissioner would clearly benefit from the mortgage being paid off, as would his son and business associates, we conclude that the Commissioner's interests in the mortgage compel his abstention from any vote involving the property.

Question 2 is answered accordingly.