City of San Antonio, Texas

Ethics Advisory Opinion No. 74

June 15, 2003

Issued By: City Attorney’s Office

 

I. Issue

 

May a member of the San Antonio Local Development Company (SALDC) lease retail space from the City of San Antonio?

 

II.  Prohibited Interests in Contracts

 

A member of the San Antonio Local Development Company (SALDC) has inquired whether he may lease retail space from the City of San Antonio.  A lease with the city is a contract under which the city would agree to provide space for the individual’s business and the individual would agree to pay rent.

 

The Section 141 of the City Charter and Part B, Section 10 of the City Ethics Code (currently codified in Ethics Code Section 2-52) prohibit certain city officers and employees from having a financial interest, direct or indirect, in any contract with the city. An officer or employee is presumed[1] to have a prohibited financial interest in any contract to which the officer or employee is a party. The officer or employee is also presumed to have a prohibited interest if any of the following are parties to a city contract:

 

1)  the officer or employee’s spouse, parent, child or other family member within the first degree of consanguinity or affinity;

 

2)  a business entity in which the officer or employee, or his or her parent, child or spouse, directly or indirectly owns:

 

(A) ten (10) percent or more of the fair market value of the business entity, or

 

(B) ten (10) percent or more of the fair market value of the business entity; or

 

            (4) a business entity of which any individual or entity discussed above is a

 

                        (A) subcontractor;

 

                        (B) a partner; or

 

                        (C)  a parent or subsidiary business entity.

           

Application of Section 141 of the Charter and Part B, Section 10 of the Ethics Code (currently codified in Ethics Code Section 2-52) is limited to city officers and higher-level employees who must submit annual financial disclosure statements under Part G of the code (currently codified in Ethics Code Section 2-73).  “Officers” include “a member of a board or commission that is more than advisory in nature.”  Ethics Code Part B, Section 10(e) (currently codified in Ethics Code Section 2-52(e)(2)).. 

 

The San Antonio Local Development Company is a corporation comprised of 33 members called trustees, appointed by City Council.  Eleven of the 33 trustees are selected to serve as directors.  The trustees are responsible for, among other things, packaging, issuing, closing and servicing of Small Business Administration (SBA) 504 Loans. The goal is to assist in the growth and development of small business concerns to combat community deterioration by disbursing funds provided by the SBA.  The board, therefore, is more than advisory in nature and its trustees are “officers” of the city for purposes of the “prohibited contracts” provision of the City Charter and Ethics Code. 

 

The SALDC trustee and his family fully own their retail business.  Because of the trustee’s position as a city officer, a contract between the City and the trustee, his family or the family business would create a prohibited interest for the trustee. Section 141 of the City Charter provides that willful violation constitutes “malfeasance in office,” the penalty for which is forfeiture of office. The contract also becomes voidable by the City Manager or the Council.  

 

III.  Conclusion

 

The trustee cannot both serve as a trustee on SALDC and have an interest in a contract with the city.  He must, therefore, forego seeking a contract with the city to avoid violating Section 141 of the Charter.  Further, even if he were to leave his position on the board, he would still be prohibited from having an interest in a contract with the city.  The prohibition continues to apply to discretionary contracts for one year after the official or employee leaves city service.Ethics Code Part C, Section 4(a) (currently codified in Ethics Code Section 2-58(a)).

 

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[1] Part B, Section 10 of the City Ethics Code was amended on May 19, 2003 to designate these interests as presumed direct or indirect interets in contracts.  If the officer or empoyee believes that he or she does not have an actual financial interest in a contract, either direct or indirect, that person may apply to the Ethics Review Board ffor a determination on the issue.  Part B, Section 10(c) (currently codified in Ethics Code Section 2-52(c)). Alao, if a contract is in place at the time the person becomes subject to the “prohibited interest in contracts” provisions, the contract may remain in effect until the contract expires. Part B, dection 10(d) (currently codified in Ethics Code Section 2-52(d)).

           



[1]  Part B, Section 10 of the City Ethics Code was amended on May 29, 2003 to designate these interests as presumed direct or indirect interests in contracts.    If the officer or employee believes that he or she does not have an actual financial interest in a contract, either direct or indirect, that person may apply to the Ethics Review Board for a determination on the issue.   Part B, Section 10(c).   Also, if a contract is in place at the time the person becomes subject to the “prohibited interest in contracts” provisions, the contract may remain in effect until the contract expires.  Part B, Section 10(d).