No prohibited conflict of interest is created under Section 112.313(7)(a), Florida Statutes, where a city employee who manages a department which provides loans to qualified homeowners sells five properties he owns to buyers who obtain financing from the city. The employee's contractual relationship with the buyers would not impede the full and faithful discharge of his public duties, as the buyers are the primary beneficiaries of the loans, loans are made using objective criteria which cannot easily be manipulated, the employee would remove himself from all matters involving his purchasers' loan applications, and, historically, there have been funds available to meet demand.
Would a prohibited conflict of interest be created were an employee in a city's affordable lending program to sell real property to buyers who obtain financing through the employee's department?
Your question is answered in the negative, subject to the caveat noted below.
In your letter of inquiry, you write that you seek this opinion on behalf of Thomas K. De Yampert, who is employed by the City as a manager in its Department of Housing and Community Development. You write that his department facilitates affordable lending for residential owner-occupied properties located in the City and that it operates much like a bank: originating, underwriting, and servicing loans. As a manager, the employee is ultimately responsible for approving or denying loan applications based upon the recommendations of the department's finance officers.
Apart from his City employment, the employee owns five properties in the City—four with houses and one vacant lot. He has owned them as income properties but is currently marketing them for sale and questions whether he can sell the properties to buyers who obtain financing through the affordable lending program he manages. You suggest the following safeguards could be implemented to protect the integrity of the loans: 1) the employee would sell the property at the market rate as documented by an appraisal acceptable to the first mortgage lender; and 2) the employee would be completely removed from the loan approval process as well as all communications and transactions between the buyer and City staff.
The ethics statute applicable to your inquirey is Section 112.313(7)(a), Florida Statutes, which provides:
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 or she 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 or her private interests and the performance of his or her public duties or that would impede the full and faithful discharge of his or her public duties.
Section 112.313(7)(a) prohibits a public employee from having contractual relationships with a business entity or agency doing business with or regulated by the City. It also prohibits a public employee from having contractual relationships which create continuing or frequently recurring conflicts between private interests and the performance of public duties, or which impede the full and faithful discharge of public duties. Because it is contemplated that the employee would sell the properties to persons, not business entities, the first part of Section 112.313(7)(a) is inapplicable. Thus, the question is whether selling property to individuals who obtain financing from the City creates a conflict of interest under the second part of Section 112.313(7)(a), Florida Statutes.
In CEO 78-70, Question 4, we opined that a prohibited conflict of interest was created under the second part of Section 112.313(7)(a), where a relocation officer with a city's redevelopment department leased a residence to a person relocated by his agency. There, we stated:
Such an arrangement provides the opportunity for and strongly suggests to the public that a department employee has benefited privately because of his public position, whereas the Legislature has recognized that '[i]t is essential to the proper conduct and operation of government . . . that public office not be used for private gain other than the remuneration provided by law.'
In CEO 88-2, we opined that Section 112.313(7)(a) was violated where a city rental rehabilitation program employee applied for a loan to rehabilitate rental property through the program in which he worked. In that opinion, we concluded that a conflict was created because the employee was directly involved in the administration of the program under which he would obtain the loan, the loan did not predate the employee's city employment, he was competing with other applicants for loan proceeds, and the loan clearly benefited the employee by enabling him to rehabilitate his property.
Conversely, in CEO 84-95, we concluded that a junior college trustee would not violate Section 112.313(7)(a) by hiring a student to work at his law firm through the college's work/study program.There, we observed that participating in the program benefited the student more than the trustee and, because of a historical lack of participation by area businesses, the trustee was not "competing" with other employers to participate in the program.In that opinion, Section 112.316, Florida Statutes, was applied to "construct out" the existence of a possible conflict. Section 112.316 provides:
CONSTRUCTION.--It is not the intent of this part, nor shall it be construed, to prevent any officer or employee of a state agency or county, city, or other political subdivision of the state or any legislator or legislative employee from accepting other employment or following any pursuit which does not interfere with the full and faithful discharge by such officer, employee, legislator, or legislative employee of his;or her duties to the state or the county, city, or other political subdivision of the state involved. [Section 112.316, Florida Statutes.]
This holding was also cited in CEO 98-19, where we opined that a housing authority tenant board member could receive a scholarship endowed by the housing authority without violating the Code of Ethics. We noted there that the tenant board member was otherwise eligible for the scholarship, the program itself was widely publicized, her scholarship did not deprive other eligible recipients of scholarships, and continuing oversight by the housing authority was not required. Your question is answered accordingly.
Information provided by the City indicates that, while the funds for home buyer assistance are limited, the City has never exhausted all available funds in any one year. You also advise that qualifying for a loan is based on objective criteria and that the decision to grant a loan cannot be easily influenced by the preferences of the evaluator. The City's loan program is intended to provide homeownership assistance to persons/households whose income is up to 150 percent of median family income. These persons will benefit more than the employee, who can sell his property to any buyer who is willing and able to pay his price regardless of where they obtain financing. For these reasons, and in contemplation of the conditions that the selling price cannot exceed the appraised value and that the employee will remove himself from all matters involving loans to purchasers of his five properties, we conclude that the Code of Ethics would not be violated where the employee sells these five properties to purchasers who obtain financing from the City's affordable lending program. This opinion would not extend to a situation where a city employee routinely buys and sells properties financed by his agency, however, as regularly buying and selling properties could result in a "frequently recurring" conflict prohibited under Section 112.313(7)(a).
Finally, as we observed in CEO 80-93, while we have no reason to believe that loans to these purchasers would be handled any differently from other loans, Section 112.313(6), Florida Statutes, would be violated were the employee to use his position in any manner to obtain special consideration for the buyers of his five properties.
Accordingly, under these limited circumstances, we find that no prohibited conflict of interest would be created were a city employee who manages the city's affordable lending program to sell five properties to buyers who obtain financing from the city.
ORDERED by the State of Florida Commission on Ethics meeting in public session on December 4, 2003 and RENDERED this 9th day of December, 2003.
Richard L. Spears