City of San Antonio, Texas

Ethics Advisory Opinion No. 51

February 5, 2001

Issued By: City Attorney’s Office

Whether the company in which a member of the Planning Commission owns more than 10% may contract with various entities.

A member of the Planning Commission has asked whether a company in which he has an ownership interest may contract with certain entities, including, but not limited to, the Bexar Metropolitan 911 District. The following facts are presented:

A member of the Planning Commission owns a 10% interest in a construction company amounting to more than $10,000. The company is seeking a contract with the Bexar Metropolitan 911 District (“the District”) for services related to its 911 Call Center. The contract is to be awarded by competitive bid. Moreover, the company is interested in seeking contracts for construction services with the VIA Metropolitan Transit (“VIA”), and the Alameda Theater/Smithsonian at the Farmer’s Market. Each of these prospective contracts is to be awarded by competitive bid. At no time will the member appear before the Board of Appeals or the Planning Commission with respect to any of these three (3) contracts.

The issue is whether the company in which the member has an ownership interest may contract with the District, VIA, and/or the Alameda Theater/Smithsonian. Under Chapter 171 of the Texas Local Government Code and the Ethics Code of the City of San Antonio, a member of the Planning Commission is an “official” as that term is used in each. As an official, the member is required to follow the standards of conduct set forth in both the state statute and the Code.

Section 171.003 of the Local Government Code prohibits an official from knowingly participating in a matter if action on the matter will have a special economic effect on the business entity in which the official has a substantial interest. An official has a substantial interest in a business entity if, in the previous year, he receives more than 10% or more of his gross income from the entity. Moreover, the action must have a special economic effect on the business entity.

To that end, the Attorney General has stated that the language of Section 171.004(a)(1), requiring an official to file an affidavit where conflict exists, “is broadly written and does not require that the business entity have a direct interest in the matter. It only requires that the action on the matter have a special economic effect on the business entity.” Op. Tex. Att’y Gen. No. DM-309 (1994). If the official’s action may have such an effect, he should err on the side of avoiding a conflict of interest and complete an affidavit stating the nature and extent of the interest with the official recordkeeper of the governmental entity. Failure to knowingly file an affidavit is a criminal offense.

The City’s Ethics Code reiterates this standard of conduct, stating that a City official may not take official action that he knows is likely to have an effect on, among others, his economic interest or the economic interest of a business entity in which he holds an economic interest. An economic interest “includes, but is not limited to, legal or equitable property interests in land, chattels, and intangibles, and contractual rights having more than de minimis value” and must be one that is distinguishable from the effect on the public in general. Should such occur, the City official is required to recuse himself immediately, refraining from any further participation in the matter, and disclose in writing to the City Clerk the economic interest.

In the instant case, it is unlikely that the individual would be required to take action as a member of the Commission on a matter involving either his company and/or one of these three agencies. However, should the situation arise, the member must recuse and disclose the matter to the City Clerk, in writing, thereby avoiding any question of conflict.

Prohibited Financial Interest in Contract. Part B, Section 10 prohibits City officers from having a financial interest in a contract with the City or its agencies. Under this section, a City officer includes, among others, “members of any board or commission which is more than advisory in function.” A board or commission is more than advisory in function where the decisions of said commission are appealable to the City Council. All other commissions are advisory as the decisions they render have no binding force other than to provide the information supporting the commission’s recommendation(s). Because the Planning Commission is empowered to “prepare, recommend and administer rules and regulations pertaining to subdivisions and to platting in territory outside the City limits [ ]” under the City Charter, decisions for which are appealable to the City Council, it is more than advisory in nature, and its members are City officers for the purposes of this section.

To be in violation of this section, the City officer must have a financial interest in a contract with the City. A financial interest, includes, but is not limited to, being a party to a City contract. In the instant case, should the member’s construction company result in the lowest bidder, the contract would be between the company and the participating entity, the District, VIA, and/or the Alameda/Smithsonian, none of which are City agencies.

A City agency is one created through passage of an ordinance by the City of San Antonio and which “performs sovereign functions of the City for the benefit of the public [ ].” The District is created pursuant to Chapter 772 of the Texas Health and Safety Code to facilitate and improve emergency communication procedures among local governmental entities; VIA is created pursuant to Chapter 451 of the Texas Transportation Code to provide public transportation services for the citizens of Bexar County. Neither of these two entities performs its functions on behalf of the City. Rather, each is a separate governmental body empowered to act accordingly.

The third entity, the Alameda/Smithsonian, is a non-profit corporation. The City does, however, anticipate executing a contract with this corporation for services related to the construction of the Smithsonian at the Farmers Market. Given these facts, a member of the Commission would be in violation of the Ethics Code if the company in which he has the requisite financial interest is paid for its services resulting from any contract between the City and the Alameda/Smithsonian.

SUMMARY

A Planning Commission member must abide by the standards as set forth in Chapter 171 of the Local Government Code and the Ethics Code, including recusal and disclosure should he be required to take official action on a matter that may confer an economic benefit distinguishable from the public in general on a business entity in which he holds an economic interest. Moreover, the company in which he owns an interest amounting to 10% or more of the company may not contract with an entity receiving funds pursuant to a City contract if such services result from the City contract. The company may, however, contract with other governmental entities that are not City agencies as prohibited by the Ethics Code of the City of San Antonio.

Under the present fact scenario, a company in which a member of the Planning Commission owns more than 10% interest may contract with Bexar Metropolitan 911 District and the VIA Metropolitan Transit. The company may not, however, contract with the Alameda/Smithsonian.

FRANK J. GARZA

City Attorney