HomeMy WebLinkAbout13-01 Mayor Becker re Etha HotelTO:
DATE
City of Bozeman
City Attorney's Office
Formal Ethics Opinion 2013 -01
Sean Becker, Mayor
May 20, 2013
Conflict of Interest re: Etha Hotel New Market Tax Credits
Greg Sullivan, City Attornev
Tim Cooper, Staff Attorney
Susan L. Wordal, Staff Attorney
Kyla Murray, StaffAttorney
Ryan McCarty, Staff Attorney
Anna Saverud, Staff Attorney
Whether the City of Bozeman or State of Montana ethics codes restrict your participation in
tonight's Commission action on the Etha Hotel given the possibility that your employer, the
Montana Community Development Corporation, could administer new market tax credits for the
Etha Hotel should the Etha Hotel, at some point in the future, apply for such credits?
ANSWER
Because the Etha Hotel has not, at this time, applied for new market tax credits to be
administered by your employer my opinion is that your participation in tonight's public hearing
and decision on the Etha Hotel project is not restricted by the City of Bozeman's or Montana
State ethics provisions. In addition, it is also my opinion at this time that even if the Etha Hotel
applies for new market tax credits to be administered by your employer based on the information
you provided herein such future relationship between the Etha Hotel and your employer does not
restrict your participation in decisions regarding the Etha Hotel that could come before the City
Commission. Should circumstances change from what you have indicated below I may revise my
opinion.
Nevertheless, given the call to "foster the development and maintenance of a tradition of
responsible, accountable and effective public service" (2.03.460 BMC) I recommend You
disclose at the beginning of tonight's public hearing that the Etha Hotel has inquired with your
employer about the possibility of your gmplover administering new market tax credits on behalf
of the Etha Hotel. In doing so, I suggest you reveal the facts as you presented to me below. In
addition, if you have had any ex parte communications with agents of the Etha Hotel regarding
this or any other issue you must, as with all quasi - judicial decisions disclose those
communications on the record at the beginning of the public hearing.
Street Address: 121 North Rouse Page 1 of 6 Phone: (406) 582 -2309
Mailing Address: P.O. Box 1230 Fax: (406) 582 -2302
Bozeman, Montana 59771 -1230 TDD: (406) 582 -2301
DISCUSSION
You ask whether the City of Bozeman's and Montana ethics laws restrict your participation in
the public hearing and decision on the Etha Hotel's application for a conditional use permit and
certificate of appropriateness with deviations scheduled for Monday, May 20, 2013.
You provided me the following facts regarding your inquiry:
1. You are employed by the Montana Community Development Corporation (MCDC) as a
Small Business Development Center advisor. Your salary and benefits are paid by
MCDC but funded solely by a grant from the Small Business Administration (SBA) to
MCDC. The SBA grant is not related to MCDC's administration of the new market tax
credit program. In addition, the match for your salary and benefits required by the SBA's
grant is raised through fundraising efforts not directly related to the MCDC's new market
tax credit program. The salary and benefits of your immediate supervisor at MCDC is
also funded by the SBA grant. Your salary is not directly or indirectly funded by the
MCDC new market tax credit program.
2. The MCDC is a public benefit corporation incorporated under the laws of the State of
Montana and is a qualified 501(c)(3) non -profit corporation. The MCDC's new market
tax credit program (the Program) is administered by MCDC's vice - president.
3. Your position as a business advisor for MCDC does not provide you access to
electronically stored information or paper files regarding the Program. You stated the
MCDC has initiated firewalls for its electronic files that prevent your access to such files
and all physical documents and files are located in Missoula in a location wherein you are
not granted access.
4. You stated that at the time you were hired by MCDC you informed them of your position
as Mayor for the City of Bozeman and that you and MCDC recognize that you have not
and cannot work on any MCDC project (whether in Bozeman or elsewhere) if there is a
possibility the project may come before the Bozeman City Commission.
5. You stated that all information regarding applications to the Program for tax credits is
administered by MCDC in a confidential manner until closing; meaning, all applications
are kept confidential by the Program staff until closing. As such, you stated you are not
aware of an entity's application for credits until the credits are approved and financing is
complete. You also stated you have no role in the administration of the Program.
6. The MCDC receives fees for its administration of funded NMTC projects and this
administration fee funds the MCDC's NMTC program. Administrative fees collected
from the Program may be used to run general operations of the MCDC.
7. At this point in time, the Etha Hotel is only considering using new market tax credits as a
financing mechanism and has not filed a formal application with MCDC.
8. You stated you heard of the Etha Hotel's interest in the Program through the owner of the
Etha Hotel project, Cory Lawrence, prior to the Etha Hotel's submittal of an application
for their development proposal to the City.
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I note the Bozeman City Commission's decision tonight is in regard only to the Etha Hotel's
application under the City's Unified Development Code (Chpt. 38, BMC) and is unrelated to the
Etha Hotel's possible use of new market tax credits as the City does not have any statutory or
regulatory role in the approval, denial, or administration of the new market tax credit program.
Section 7(a) of the Bozeman City Charter prohibits the use of public office for private gain. The
Charter requires that the Bozeman City Commission implement this restriction through the
adoption of ordinances. The Commission has done so through the City's Code of Ethics, Chapter
2, Article 3, Division 4, BMC.
Likewise, Article XIII, Section 4 of the Montana Constitution requires the Montana Legislature
"provide a code of ethics prohibiting conflict between public duty and private interest for [] all []
local officers []."
Generally, "public confidence requires that municipal officials avoid conflicting interests that
convey the perception that a personal rather than the public interest might affect decision - making
on matters of concern. Officials must be free of even the potential for entangling interests that
will erode public trust in government actions. Thus, it is the potential for conflict, rather than
proof of an actual conflict or of actual dishonesty, that commands a public official to disqualify
himself from acting on a matter of public interest." McQuillan Law of Municipal Corporations §
12:173.22. Conflicts of interest (2012) (emphasis added).
In addition, "the general rule is that there should be strict enforcement of conflict of interest
statutes so as to provide a strong disincentive for officers who might be tempted to take personal
advantage of their public offices. The test for disqualification is fact - sensitive and depends on
whether, under the circumstances, a particular interest had the likely capacity to tempt the
official to depart from his sworn public duty." Id.
As an initial matter, the mere possibility that the Etha Hotel would, at some time in the future,
apply for new market tax credits through MCDC does not, in my opinion, create an actual
current conflict of interest that would restrict your participation in tonight's public hearing. To
require recusal from participation by a public official on a matter where that public official's
participation is required by law (See Sect. 2.03, Bozeman City Charter) a conflict of interest
must be at a minimum a reasonable probability and must be more than tenuous or merely
speculative. Section 1 -3 -221, MCA (That which does not appear to exist is to be regarded as if it
did not exist).
Nonetheless, I will examine your question to determine whether the possibility of a conflict of
interest given the facts as you describe is sufficient to restrict your involvement tonight under the
City's Code of Ethics. I'll then examine your question pursuant to Montana law.
The City's Code of Ethics addresses conflicts of interest and generally requires that "no official
[] shall engage in any employment [] which conflicts with the proper discharge of such
official['s] duties." 2.03.520.A, BMC. In addition, the Code of Ethics specifically prohibits an
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official from
having a financial or personal interest in any transaction] with
the city as
to which
such official
or employee has the
power to take or influence official action. 2.03.520.B,
BMC?
Section 2.03.470.A.10, BMC, defines personal interest as:
any interest in the matter which would affect the action of the official or employee other than a financial
interest, and other than an interest because of membership in, or affiliation with, but not employment by a
social, fraternal, charitable, service, educational, religious, governmental, health service, philanthropic,
cultural, or similar nonprofit institution or organization.
Section 2.03.470.A.6, BMC, defines financial interest as:
any ownership interest, contractual relationship, business relationship, or other interest which will result in
a monetary or other material benefit to an official or employee, either tangibly or intangibly, which has a
value of more than $15.00, other than the official or employee's duly authorized salary or compensation for
the official or employee's services to the city, and which interest is not common to the interest of all other
citizens of the city. The following financial interest shall be imputed to be those of an official or an
employee of the city: that of a spouse or child of an official or employee; that of any prime contractor or
subcontractor of the city, in which the official or employee or any member of the official or employee's
immediate family has any direct or indirect interest as the proprietor, by ownership of stock or partnership
interest.
Because the City doesn't have jurisdiction over the Program, I determine the transaction between
the Etha Hotel and MCDC does not involve a "transaction [] with the city." 2.03.520.B, BMC. I
also etermine that at this time you have neither a personal or financial interest in the Etha Hotel's
possible application to MCDC for new market tax credits that would create the potential for a
conflict of interest under the City's Code of Ethics. The relationship between the Etha Hotel and
MCDC is unrelated to the City's approval of the Etha Hotel under the UDC. Nevertheless, to
address the perception of a conflict in this situation I provide the following.
While you are employed by the MCDC, the funding for your position is independent of the
Program and while your ultimate supervisor is the President of MCDC your direct supervisor is
not involved in Program administration. Moreover, you stated you do not have physical or legal
access to Program documents, including electronically stored information. As such, given the
nature of your employment, and the nature and limitations on your involvement in the Program, I
do not believe your employment by MCDC is an interest that would affect your action regarding
the Etha Hotel's application before the City on May 20th. I believe the possible future
'2.03.470.A.12, BMC defines "Transaction" as "the offer of, or the sale, purchase, or furnishing of, any real or personal property or services, by
or to any person or entity directly or indirectly, as vendor or vendee, prime contractor, subcontractor, or otherwise, for the use and benefit of the
city or of such other person or entity for a valuable consideration"
' Sec. 2.03.520, BMC. - Conflict of interest.
A. No official or employee shall engage in any emalovment or business which conflicts with the proper discharge of such official or
employee's official duties.
B. No official or employee shall have a financial or personal interest, tangibly or intangibly, in any transaction with the city as to which
such official or employee has the power to take or influence official action unless full public disclosure is made. If an official or employee has
any tangible or intangible financial or personal interest in the outcome of any matter coming before the agency of which the official or employee
is a member or by which the official or employee is employed, such official or employee shall publicly disclose on the record of the agency, or to
a superior or other appropriate authority, the existence of such financial or personal interest. An official or employee having such a financial a
personal interest shall not engage in deliberations concerning the matter, shall disqualify himself/herself from acting on the matter, and shall not
communicate about such matter with any person who will participate in the action to be taken on such matter.
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relationship between the Etha Hotel and your employer does rise to the level "to tempt the
official to depart from his sworn public duty."
As to financial interest, you do not have an ownership interest in the Etha Hotel or MCDC; more
importantly, at this time MCDC is not engaged in a contractual relationship with the Etha Hotel.
As such, although the possibility exists that some time in the future the Etha Hotel and MCDC
may have a business relationship, the nature of any such future relationship as you've described
is sufficiently speculative and attenuated that even if such a relationship does come about your
involvement as a business advisor for MCDC is sufficiently restricted by MCDC practices
regarding the Program that you will not receive a monetary or other material benefit from such
relationship.
As for Montana law, it has long been recognized that a public office is "created in the interest
and for the benefit of the public." State ex rel. Bell v. McCullough, 85 Mont. 435, 438, 279 P.
246 (1929). Based on the concept that "[t]he holding of public office or employment is a public
trust" (2- 2- 103(1), MCA), the Montana code of ethics recognizes "that some actions are
conflicts per se between public duty and private interest while other actions may or may not pose
such conflicts devending upon the surrounding circumstances" 2 -2 -101, MCA (emphasis
added). Thus, "it is necessary to look at each particular transaction or relationship in conjunction
with the surrounding circumstances before a determination can be made as to whether or not a
breach has occurred." 45 Mont. Op. Atty. Gen. No. 10 (Mont.A.G.) (1993) (citing 37 Op. Att'y
Gen. No. 104 at 431, 434 (1978)).
Pursuant to Section 2- 2- 121(2)(e), MCA, a state officer or employee may not "perform an
official act directly and substantially affecting to its economic benefit a business or other
undertaking in which he either has a substantial financial interest or is engaged as counsel,
consultant, representative, or agent."
I believe your participation in tonight's action item on the Etha Hotel's does not present a
circumstance where you will directly and substantially benefit from participation as "[t]he
circumstances described in your inquiry do not present a situation in which you, as a public
official, are at risk of advancing your own interests at the expense of the public welfare." 45
Mont. Op. Atty. Gen. No. 10 (1993). Conflict of interest laws are designed "to prevent honest
government agents from succumbing to temptation by making it illegal for them to enter into
relationships which are fraught with temptation." Id., citing United States v. Mississippi Valley
Generating Co., 364 U.S. 520, 549 (1961). That is not the case here.
Given the facts as presented it is my opinion you do not have a legal conflict of interest under
Montana law. In addition, 2 -2 -121, MCA, lists additional acts that are breaches of public duty.
Your situation does not involve any of these delineated acts. As such, I find no violation of the
relevant statutory guidelines found in Title 2, chapter 2, part 1, MCA, pertaining to the state
standards of conduct. Likewise, I found no violations of 7 -5- 4109(1), MCA3.
' 7- 54109, MCA. Control of conflict of Interest. (1) The mayor, any member of the council, any city or town officer, or any relative or
employee of an enumerated officer may not be directly or indirectly interested in the profits of any contract entered into by the council while the
officer is or was in office.
(2) The governing body of a city or town may waive the application of the prohibition contained in subsection (I) for a city or town officer or
employee, or to the relative of an officer or employee, if in an official capacity the officer or employee does not influence the decisionmaking
process or supervise a function regarding the contract in question. A governing body may grant a waiver under this subsection only after publicly
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As the Etha Hotel project moves forward (and should the Etha Hotel apply for new market tax
credits through the MCDC) I suggest you also be aware of other provisions of the City's Code of
Ethics. These include but are not limited to the standards of conduct at 2.03.490, BMC.
This opinion is provided pursuant to my authority under 2.03.630, BMC .4 Pursuant to 2.03.630.13
you may rely upon this opinion in regards to the specific transaction or activity to which this
opinion pertains. In addition, pursuant to 2.03.630.C, BMC if you act in good faith in accordance
with the provisions and findings herein, you may not be subject to prosecution or administrative
action under the City's Code of Ethics. However, I am unable to provide you immunity from
prosecution under state law.
This opinion is issued in my capacity as the City Attorney for the City of Bozeman and done so
on behalf of the City of Bozeman (2.03.630.D, BMC) and is based on facts as they were
represented by you and exist today. If facts change my opinion may change.
I hope you found this helpful. If you have any questions about this matter, please contact me.
=RNEY9S OFFICE
Greg Sullivan
City Attorney
disclosing the nature of the conflict at an advertised public hearing held for that purpose. In determining whether to grant a waiver, the governing
body shall consider the following factors, where applicable:
(a) whether the waiver would provide to a program or project a significant benefit or an essential skill or expertise that would otherwise not be
available;
(b) whether an opportunity was provided for open competitive bidding or negotiation;
(c) whether the person affected is a member of a clearly identified group of persons that is the intended beneficiary of the program or project
involved in the contract; and
(d) whether the hardship imposed on the affected person or the governmental entity by prohibiting the conflict will outweigh the public interest
served by avoiding the conflict.
4 Sec. 2.03.630, BMC. - City attorney opinions.
A. At the request of a person, the city attorney may render an informal or formal advisory opinion with respect to the prospective conduct
of such person. An informal advisory opinion need not be written, and may be provided directly to the requestor of such opinion. A request for a
formal advisory opinion must be in writing and include all the information and documents related to the request. The request for either an
informal or formal advisory opinion must state all the material facts so the city attorney may tender a complete and correct opinion. The city
attorney's formal advisory opinion must be in writing. Nothing in this division shall be construed to prohibit a request for an opinion by any
public servant from the city attorney regarding a potential conflict of interest. Neither a request for an informal or formal advisory opinion, nor
the making of a statement concerning a potential conflict of interest made by a member of the city commission in the come of abstaining from
voting or making a motion of self recusal, shall create a presumption or inference that a public servant actually has a personal interest in the
matter about which the opinion was requested; if the city attorney elects to render an opinion, the city attorney shall, within a reasonable time,
submit a written summary of the opinion to the ethics board for the board's information; if the city attorney declines to render an opinion, nothing
shall preclude the person requesting the opinion from requesting the ethics board for an opinion.
B. Any formal advisory opinion issued pursuant to this section may be relied upon by the person directly involved in the specific
transaction or activity to which such advisory opinion has been issued, and any person directly involved in any specific transaction or activity
which is indistinguishable in all its material aspects from the transaction or activity with respect to which such advisory opinion was rendered.
C. Any person who relies upon a formal advisory opinion pursuant to this section, and who acts in good faith in accordance with the
provisions and findings of such opinion, shall not, as a result to such act, be subject to prosecution under this division or, in the case where the
opinion is exculpatory, be subject to any administrative adverse action a civil action based upon legal authority cited in that opinion.
D. The city attorney's client is the City of Bozeman and not the individual requesting the opinion. No request for an opinion from the city
attorney shall constitute the establishment of an attomey - client relationship with the individual requesting the opinion.
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