CEO 87-79 -- October 29, 1987
CONFLICT OF INTEREST
COMMUNITY DEVELOPMENT DISTRICT SUPERVISOR
OWNING BONDS ISSUED BY DISTRICT GUARANTEED BY
PARENT COMPANY OF DISTRICT'S DEVELOPER
To: (Name withheld at the person's request.)
No prohibited conflict of interest exists where a member of the board of supervisors of a community development district owns revenue bonds issued by the district which are unconditionally guaranteed by a parent corporation of the developer of the district. Under the circumstances, the supervisor's contractual relationship as a bondholder and creditor of the district would not impede the full and faithful discharge of his public duties and therefore would not violate Section 112.313(7), Florida Statutes. CEO 85-58 is distinguished.
Does a prohibited conflict of interest exist where a member of the board of supervisors of a community development district owns revenue bonds issued by the district which are unconditionally guaranteed by a parent corporation of the developer of the district?
Your question is answered in the negative.
Through your letter of inquiry and a telephone conversation with our staff, we have been advised that .... serves as a member of the Board of Supervisors of the Dunes Community Development District, which has been created pursuant to Chapter 190, Florida Statutes. The District has issued revenue bonds for the purpose of funding the construction of an intracoastal waterway bridge. The subject member of the Board of Supervisors has purchased some of the bonds on the open market at the same retail price charged to the rest of the public.
The bonds are payable from revenues which consist mainly of tolls derived from the bridge project and certain payments made to the trustee pursuant to debt service payment agreement. The parent corporation of the parent company of the developer which petitioned for the creation of the District has agreed to unconditionally guarantee the full and prompt payment of the principal, interest, and premium due on the bonds, as well as all expenses and charges incurred by the trustee in enforcing the guaranty.
The Code of Ethics for Public Officers and Employees provides in relevant part:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP. -- 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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1985).]
In CEO 85-58 we advised that this provision would prohibit a water control district supervisor from owning bonds which had been issued by the district. There, we found that the supervisor's contractual relationship as a bondholder/creditor of the district, where he would have a cause of action against the district in the event of a default, would impede the full and faithful discharge of his public duties.
Under the present circumstances, however, it is clear that under the guaranty provided by the parent corporation the bondholders will be entitled to receive full and prompt payment of any amount due them in the event of a default from the parent corporation. Therefore, the Board member and other bondholders would have no reason to initiate any suit against the District upon default, because payments would be made under the terms of the guaranty. On this basis, we conclude that the Supervisor's ownership of the bonds would not impede the full and faithful discharge of his public duties to the Development District.
Accordingly, we find that no prohibited conflict of interest exists where a Supervisor of the Community Development District owns revenue bonds issued by the District which are guaranteed by a parent corporation of the developer of the District.