Opinion 2008 - 2


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Exceptions (contracts entered into prior to municipal service) -- Interests in Contract (town board member providing hauling services as sole proprietor)

GENERAL MUNICIPAL LAW §§ 801, 802 (1) (h): A newly elected town board member has an interest in a contract between the town and the board member, as a sole proprietor, under which the board member picks up road salt and delivers the salt to a town storage facility. If the contract was entered to before the board member was elected to office, the exception in General Municipal Law § 802 (1) (h) applies and the interest is not prohibited. The board member would be required, however, to disclose the interest in accordance with General Municipal Law § 803. In addition, the board member would have a prohibited interest in renewals of the existing contract, or in subsequent contracts between the town and himself or herself as sole proprietor unless another exception in General Municipal Law § 802 were to apply. The town should consult its code of ethics to determine whether it contains any pertinent provisions. Even if not required by the town's code of ethics, the board member should not participate in town board discussions or decisions relating to the hauling contract, including but not limited to, discussions or decisions pertaining to auditing claims under the contract.

You ask whether a newly elected town board member would have a prohibited interest in a contract between the town and the board member, as a sole proprietor, under which the board member picks up road salt and delivers the salt to a town storage facility. You indicate that the contract between the town and the board member was entered into before the board member was elected to office. 1

Article 18 of the General Municipal Law (§ 800 et seq.) contains provisions of law that relate to conflicts of interest of municipal officers and employees, including town officers and employees (General Municipal Law § 800 [4], [5]). Pursuant to General Municipal Law § 800 (3), a municipal officer or employee has an "interest" in any contract with his or her municipality if, among other things, the officer or employee receives a direct or indirect pecuniary or material benefit as a result of that contract. Unless an exception set forth in General Municipal Law § 802 applies, an interest in a contract is prohibited if the officer or employee, individually, or as a member of a board, has any of the following powers or duties listed in General Municipal Law § 801: (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties.

Any contract willfully entered into in which there is a prohibited interest is null, void and wholly unenforceable (General Municipal Law § 804), and any officer or employee who willfully and knowingly violates the provisions of article 18 of the General Municipal Law "shall be guilty of a misdemeanor" (General Municipal Law § 805). If an officer or employee has, will have or later acquires an interest in a contract or other agreement, the nature and extent of that interest generally must be disclosed in writing to his or her immediate supervisor and to the governing body of the municipality as soon as the officer or employee has knowledge of the interest or prospective interest (General Municipal Law § 803 [1]). The written disclosure must be included in the official record of the governing body's proceedings (id.).

In this instance, the consideration received by the board member, as a sole proprietor, under the hauling contract with the town would constitute a pecuniary or material benefit as a result of that contract. Therefore, the board member would have an interest in the contract. Unless an exception applies, that interest would be prohibited because the town board has powers and duties listed in General Municipal Law § 801 in connection with the contract (see e.g. Town Law §§ 20[1], [3], 34, 118, 119). 2

General Municipal Law § 802 (1) (h) provides an exception for a contract in which a municipal officer or employee has an interest if the contract was entered into prior to the time the officer or employee was elected or appointed. This exception, however, does not apply to any renewal of such a contract. Moreover, disclosure of the interest in the contract, in accordance with General Municipal Law § 803, still would be required
(cf. General Municipal Law § 803 [2]).

Based on the facts presented, the board member's interest in the hauling contract is not prohibited because the contract was entered into prior to the board member's election to office. The board member, however, is required to disclose the interest in accordance with General Municipal Law § 803. In addition, the board member would have a prohibited interest in renewals of the existing contract, or in subsequent contracts between the town and himself or herself as sole proprietor, unless another exception in General Municipal Law § 802 were to apply.

Even though an exception in General Municipal Law § 802 applies here, the town should consult its code of ethics to determine whether it contains any pertinent provisions. Codes of ethics must address certain specified subjects and may regulate conduct that is not expressly prohibited by General Municipal Law, article 18 (General Municipal Law § 806 [1]). We believe that a municipal code of ethics could include a provision that requires municipal governing board members to recuse themselves from municipal governing board discussions, and abstain from voting on matters, relating to contracts in which they have an interest that is not prohibited because of the applicability of an exception in General Municipal Law § 802 ( see 2008 Ops St Comp No. 2008-1).

Further, we note that court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions that, although not constituting a literal violation of article 18 of the General Municipal Law, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest self-interest, partiality or economic impropriety ( see e.g. Zagoreos v Conklin , 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation & Taxpayers Assn. v Town Bd. of Tuxedo , 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman , 122 Misc 2d 531, 471 NYS2d 521; see also Parker v Town of Gardiner Planning Bd. , 184 AD2d 937, 585 NYS2d 571, lv denied 80 NY2d 761, 592 NYS2d 670; Cahn v Planning Bd. of the Town of Gardiner , 157 AD2d 252, 557 NYS2d 488). Based on these decisions, we believe that, even if not required by the town's code of ethics, the board member should not participate in town board discussions or decisions relating to the hauling contract, including but not limited to, discussions or decisions pertaining to auditing claims under the contract.

Accordingly, a newly elected town board member has an interest in a contract between the town and the board member, as a sole proprietor, under which the board member picks up road salt and delivers the salt to a town storage facility. Since the contract was entered to before the board member was elected to office, the exception in General Municipal Law § 802 (1) (h) applies and the interest is not prohibited. The board member is required to disclose the interest in accordance with General Municipal Law § 803. In addition, the board member would have a prohibited interest in renewals of the existing contract, or in subsequent contracts between the town and himself or herself as sole proprietor unless another exception in General Municipal Law § 802 were to apply. Although an exception in General Municipal Law § 802 applies here, the town should consult its code of ethics to determine whether it contains any pertinent provisions. Even if not required by the town's code of ethics, the board member should not participate in town board discussions or decisions relating to the hauling contract, including but not limited to, discussions or decisions pertaining to auditing claims under the contract.

 

May 12, 2008

John W. Vogel, Esq., Town Attorney
Town of Sparta

1 We are informed that the contract involved an expenditure below the monetary threshold for competitive bidding under General Municipal Law § 103. In that case, the contract was subject to the town's procurement policies and procedures adopted pursuant to General Municipal Law § 104-b. These policies and procedures must provide, among other things, that when competitive bidding is not required by law, alternative proposals or quotations will be secured by requests for proposals, written or verbal quotations, or other methods that further the purposes of section 104-b, except in limited circumstances (see General Municipal Law §104-b[2][b], [f]). For purposes of this opinion, we assume that the contract was let in accordance with such policies and procedures.

2 The letter of inquiry notes that certain highway related contracts may be entered into by the town superintendent of highways without prior town board approval ( see e.g. 1992 Ops St Comp No. 92-43, at 109; 24 Ops St Comp No. 68-886, at 829). However, in those instances, while the town board would not necessarily have the power to negotiate, prepare, authorize or approve the contract, it would have other powers and duties listed in General Municipal Law § 801 in connection with such a contract.