CEO 91-31 -- July 19, 1991
CONFLICT OF INTEREST
COUNTY ENGINEER OWNING LAND AND SERVING AS TRUSTEE OF FAMILY TRUST OWNING LAND IN COUNTY
To: (Name withheld at the person's request.)
No prohibited conflict of interest existed under Section 112.313(7)(a), Florida Statutes, where a county engineer serves as co-trustee of a family trust that owns substantial amounts of undeveloped real property located along the proposed routes of county road projects. Given the extensive number and variety of the responsibilities of the department which he heads, the size of the county and the extent of undeveloped property compared to the amount owned by the trust, the county engineer's delegation of authority to subordinates (including, specifically, delegation of authority on matters directly benefiting trust property), and the fact that the trust is not actively engaged in developing property or in other pursuits requiring recurring contacts with the departments headed by the county engineer, his contractual relationship as co-trustee would not create a continuing or frequently recurring conflict or impede the full and faithful discharge of his public duties.
Was a prohibited conflict of interest created where you served as a County Engineer while individually owning real property and serving as a co-trustee of a family trust that owns real property in the County?
Under the circumstances presented, your question is answered in the negative.
Through your letter of inquiry and subsequent correspondence with our staff, we are advised that you were employed by Palm Beach County as the County Engineer from 1973 until recently. You question whether your personal ownership of real property in the County and your serving as one of two co-trustees for a family trust that owns real property in the County presented a conflict of interest prohibited by the Code of Ethics for Public Officers and Employees.
You advise that the trust was established through your father's will, which devised certain property to your mother, established a trust for the remainder of his property, and designated your uncle to serve as personal representative. Although the will designated you and your uncle as co-trustees, you are not a beneficiary of the trust and were not an heir of his estate. Under the terms of the will, your mother has the right to income and principal from the trust; upon her death the principal and accumulated income will pass to her estate, to be disposed of in accordance with her will or by intestate succession.
At the time of your father's death in 1983, he and your uncle owned as tenants in common four parcels of property in Broward County and one 20 acre parcel in Palm Beach County. As personal representative while the estate was open, your uncle disposed of the Broward County properties and made eight land acquisitions in Palm Beach County, acquiring interests in approximately 433 acres of property. When the estate was closed in 1988, you formally were designated as a co-trustee and the estate's interests in these properties were transferred to you and your uncle as co-trustees.
At the time you left your position as County Engineer, the trust owned as a tenant in common with your uncle varying percentages in the following properties: (1) 60 acres consisting of two parcels across an existing road from each other and fronting a road that is scheduled to be extended (Lyons Road); (2) 113 acres at an intersection bounded by the turnpike and two existing roads, one of which is proposed to be extended (Hagen Ranch Road) (the Florida Department of Transportation has taken part of this site for an interchange); (3) 20 acres near an intersection of two existing roads; (4) 163 acres located on an existing road that is scheduled to be extended (Jog Road); (5) 30 acres also located on Jog Road; (6) approximately 55 acres located on Jog Road at a proposed intersection with the proposed extension of another road (Woolbright Road); and (7) the 20 acre parcel originally owned by your father and uncle, located on an existing road approximately 1/4 mile from Jog Road several miles south of the other properties. The trust also owns two five acre homesites in the same area as your uncle's residence.
Since the trust was established, it has made three land acquisitions in Palm Beach County, totaling approximately 18 acres. In addition, on three occasions the County purchased rights of way from properties in the estate or the trust. The County also abandoned a 2 1/2 acre parcel to the family, with dedication of rights of way for Jog Road. Proceeds from the DOT condemnation referenced above were used to make two of the trust's acquisitions. The third property acquisition involved an exchange of property with an electric utility company. You also advise that before the property was turned over to the trust, the family applied for a special exception from the County regarding one of the properties. Similarly, comprehensive land use plan amendments were sought on four parcels.
Except for one farm house, there are no buildings on any of the land; all of the trust's properties have been rented to tenant farmers. Other than land owned by the trust, the trust's assets consist of cash reserves kept in U. S. Treasury bills. The only contemplated sale of land (as opposed to dispositions resulting from condemnation) since 1985 by the estate or trust is a pending contract for the sale of 35 acres; in order to accommodate this sale, the trust applied under County ordinance for the abandonment of an old platted, but unopened, roadway.
You advise that in the County you personally own, in addition to your residence and a time-share unit, a five acre parcel of land that is adjacent to the trust's property described in (6), above. You also have a 1/3 interest as tenant in common with your uncle and the trust in five acres of the property in (6).
As County Engineer, you were responsible for supervising departments that enhance the quality of life in the County by providing services to ensure that public facilities are effectively and efficiently planned, designed, constructed, and maintained. The departments advise the County Commission and other County departments on all engineering, architectural, property, and real estate matters. The departments' operations include road and bridge maintenance; capital project (County buildings) design and construction; development and implementation of an ongoing five year road program, including design, right-of-way, and construction of roads; vehicular and pedestrian traffic control; and transportation planning. Because it does not appear that the road and bridge maintenance, building design and construction, and traffic control functions would impact directly on the property owned by the trust or you, we will focus on the road construction and transportation planning functions of the County and the County Engineer.
You advise that the County's Thoroughfare Plan is the arterial roadway system included in the County's comprehensive plan. The Plan is developed by the Engineering Department, based upon statistical analysis provided by the M.P.O. and computer modeling, to define the traffic-way corridors necessary in the County. The Planning Department must find the Thoroughfare Plan consistent with the overall comprehensive plan, requiring the County Commission to hold a public hearing on the Plan each year before its adoption. Once a roadway is shown on the comprehensive plan, it becomes a candidate to be placed on the list of roads to be built by the Florida Department of Transportation or as a project in the County's road construction program.
Since 1985 the County Commission has adopted annually a series of five-year plans for the construction and expansion of roads in the County. This program requires a certain number of annual lane miles of construction and total number of dollars to be spent in construction. The planning, design, right-of-way acquisition, and construction of these roads are managed by the Engineering Department, which currently is involved with 125 road projects. Each year the Department evaluates a new fifth year, gathering statistical information about the existing system. Department staff, working under the County Engineer's assistant, prepare and present the data to the County Commission for adoption as the proposed new fifth year, working to assemble a balanced road program based on overall needs, consistency with the comprehensive plan, and the anticipated availability of funds in the budget. Your assistant makes the official presentation to the County Commission during the advertised public hearing. Although technically the final product is being recommended by the County Engineer, the actual work product is that of his assistant and the technical staff of the Engineering Department. An extraordinary vote of the County Commission is required to delete any road listed for construction; a majority vote is required to move construction one year within the adopted plan.
The County Engineer is required to manage the entire Department in order to develop a recommended plan and to oversee the management of the implementation of the plan, once adopted. The roadway production division, which reports to the Deputy County Engineer, was delegated full responsibility to carry out design, right-of-way acquisition, and construction.
With the exception of transportation and storm water management, all other elements of the comprehensive plan are developed and administered by departments other than the Engineering Department. For land use issues involving zoning changes, you advise, your Deputy always has represented the Engineering Department. Although the Deputy relies primarily on the land development division and traffic division staff, on complex projects he personally appears before the County Commission to represent the Department's position. You advise that you always delegated this role to your assistant, Deputy, or traffic engineer, because of the complex nature of the issues that arise from requested land use changes.
You advise that the administrative duties of the County Engineer did not allow you the time to become involved in the day-to-day details of the Department, which of necessity were delegated to other professionals. Less than ten percent of your time was spent on the road program and less than two percent on planning and zoning issues. In addition to daily involvement with the County Administrator and County Commissioners, your required attendance at public meetings consumed 30 to 35 percent of your time. Another 20 percent of your time was spent managing major capital projects, such as the construction of courthouses, jails, and airport terminals. Additional time was spent coordinating with federal, State, and local governmental agencies.
Beginning in January of 1987, you filed a series of disclosures with the County Administrator describing the properties which you, your uncle, your uncle as personal representative, and then the trust owned at the time and describing any pending governmental actions affecting the properties. Copies of the disclosures were provided to other County staff, including your assistants, with instructions that activities that would directly affect the properties be administered entirely by them without your personal direction.
On the three occasions when the County purchased rights of way from properties in the estate or the trust, you advise, the family was represented by legal counsel in discussions with the County, you stepped aside when the agenda items came before the County Commission, and all other aspects of the acquisitions were handled routinely. In addition, you advise that when the County abandoned the 2 1/2 acre parcel to the family, with dedication of rights of way for Jog Road, you stepped aside when this agenda item came before the County Commission and that all aspects of the abandonment process were handled routinely.
When the family applied for a special exception from the County regarding one of the properties, the petition was denied at the zoning hearing without any participation by you. You advise that you delegated the engineering aspects of the Department's planning and zoning function to the Deputy County Engineer as a matter of standard procedure. Similarly, comprehensive land use plan amendments were sought on four parcels, without your representation or participation. Proposed land use changes were routinely reviewed by Traffic and Land Development, under your Deputy.
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.
Of particular relevance here is the second part of this prohibition, which concerns contractual relationships that will create a continuing or frequently recurring conflict of interest or impede the full and faithful discharge of public duties. In the case of Zerweck v. State Commission on Ethics, 409 So.2d 57 (Fla. 4th DCA 1982), the court viewed Section 112.313(7)(a) as establishing
an objective standard which requires an examination of the nature and extent of the public officer's duties together with a review of his private employment to determine whether the two are compatible, separate and distinct or whether they coincide to create a situation which "tempts dishonor." [Id., at p. 61.]
Notably, the statute does not prohibit a public employee from having employment or a contractual relationship that would create any conflict of interest whatsoever. The term "conflict of interest" is defined in Section 112.312(6), Florida Statutes, as meaning "a situation in which regard for a private interest tends to lead to disregard of a public duty or interest." The Legislature easily could have phrased the statute as prohibiting "any employment or contractual relationship that would create a conflict of interest," but it clearly has not done so. Rather, the law prohibits only those employments and contractual relationships that will create a continuing or frequently recurring conflict or that would impede the full and faithful discharge of public duties.
This accords with the Legislature's statement of intent underlying the Code of Ethics, expressed in Section 112.311, Florida Statutes:
It is hereby declared to be the policy of the state that no officer or employee . . . of a county . . . shall have any interest, financial or otherwise, direct or indirect . . . or incur any obligation of any nature which is in substantial conflict with the proper discharge of his duties in the public interest. [Section 112.311(5).]
[i]t is also essential that government attract those citizens best qualified to serve. Thus, the law against conflict of interest must be designed as not to impede unreasonably or unnecessarily the recruitment and retention by government of those best qualified to serve. Public officials should not be denied the opportunity, available to all other citizens, to acquire and retain private economic interests except when conflicts with the responsibility of such officials to the public cannot be avoided. [Section 112.311(2).]
We have not yet had an occasion to consider the application of this statute to a situation where a public official's involvement with real property was solely that of a trustee. We are of the opinion, however, that a trustee has a contractual relationship with the trust he serves, which for purposes of the Code of Ethics is designated as a separate "business entity," and with the beneficiaries of that trust.
First, a "contract" is defined as a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty, or as an agreement upon a sufficient consideration to do or refrain from doing a particular lawful thing. 11 Fla. Jur. 2d Contracts, Section 1. In the context of a trust, the trustee exercises certain powers and duties in a fiduciary relationship to the beneficiaries of the trust as designated by the instrument creating the trust. The trustee is entitled to reasonable compensation for services rendered to the trust. Traub v. Traub, 135 So.2d 243 (Fla. 2d DCA 1961). In your situation, we note that the will expressly provides that the trustees "shall receive reasonable compensation for their services," although we have been advised that neither you nor your uncle have accepted any compensation from the trust. Secondly, we note that the term "business entity" is defined in Section 112.312(3), Florida Statutes, to mean any "trust . . . doing business in this state." By including trusts in this manner, we understand the Legislature's intent to have been that trusts should be viewed as entities, with which one could have employment or a contractual relationship, separate and distinct from their trustees and beneficiaries. Finally, it appears to us that such an interpretation is reasonable in the context of ethics legislation, as the fiduciary duties of a trustee present the trustee with a significant personal interest in the operations and assets of the trust, an interest that may conflict with public duties in some cases.
We also conclude that for purposes of the Code of Ethics the trust should be considered to be a "business entity," as it is a trust that is "doing business in this state." The trust has purchased, exchanged, and sold real property, leased it for tenant farming, and has retained agents to represent its interests in connection with its activities. Although we recognize that the phrase "doing business" may be interpreted differently, depending upon the legal context in which it occurs, in the context of ethical standards these types of activities are of such a nature as to potentially give rise to conflicting interests and, in our view, are sufficient to justify our considering the trust as a "business entity" here.
Nevertheless, we conclude that your service as a co-trustee did not create a continuing or frequently recurring conflict of interest or impede the full and faithful discharge of your public duties. In other words, although there were or might be expected to be occasional instances when the authority and responsibilities of the Engineering Department would affect the value of the properties held by the trust, thus bringing your public duties into potential conflict with your duties as a co-trustee, we do not find that these were so frequently recurring or of such a substantial nature as to require you to resign as co-trustee or as County Engineer.
As noted above, the overall scope of your responsibilities as County Engineer entailed managing not just road planning and construction or the review of proposed land use changes, but included managing a Department of over 525 employees who were responsible also for road and bridge maintenance, capital project design and construction, and vehicular and pedestrian traffic control. Even within the areas of road planning and construction and proposed land-use changes, the Department is responsible for decisions affecting every area of the County, not just those where trust property was located. Therefore, even though matters such as the timing and exact location of road construction for certain roads and advice in some instances on land use changes and development approvals could have affected the value of the trust's property, these would have related to a very limited number of issues in comparison to the total number of issues arising in a County that comprises 1,600,000 acres. Although the trust owns sizeable amounts of property, this becomes relatively insignificant in terms of the total size of the County and the large amount of other areas of undeveloped property in the County that also would benefit from road construction.
Furthermore, you took steps to make it clear to your superior and your subordinates that you would not participate in instances involving departmental activities that would directly affect the trust's properties. Under the circumstances presented, it is clear that your delegation of responsibility in these instances did not impede the "full and faithful discharge" of your public duties; these responsibilities had been delegated anyway in the normal course of events resulting from your being required to administer a substantial number and variety of functions.
We also note that the trust is not actively engaged in developing property or in other pursuits requiring recurring contacts with the departments headed by the County Engineer. Therefore, you have not been placed in a position where you, as co-trustee, or the trust regularly sought affirmative action from any of the departments headed by the County Engineer.
Similarly, we do not view your purchase of interests in the two five acre parcels as presenting such a significant and substantial conflict as to be prohibited, despite the fact that their value also may be affected by the work of the Department.
A second issue presented here concerns the sale of right of way to the County. With respect to this issue, Section 112.313(3), Florida Statutes, provides:
DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee of his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:
(a) October 1, 1975.
(b) Qualification for elective office.
(c) Appointment to public office.
(d) Beginning public employment.
We previously have concluded that where a trust sells real property to a county, the trustees of that trust act in a private capacity to sell realty to that political subdivision. See CEO 88-17 (county board of adjustment member realtor and trustee in sale or trade of land to county).
Nevertheless, Section 112.313(12)(e), Florida Statutes, exempts from these prohibitions transactions where
[t]he business entity involved is the only source of supply within the political subdivision of the officer or employee and there is full disclosure by the officer or employee of his interest in the business entity to the governing body of the political subdivision prior to the purchase, rental, sale, leasing, or other business being transacted.
In our view, once a political subdivision has determined where a road will be constructed, its purchase of right of way from each adjoining landowner constitutes a series of purchases from sole sources.
Regarding the County's abandonment of property to the trust, Section 112.313(7)(a) specifically prohibits you from having a contractual relationship with a business entity that is doing business with your "agency." As that term is defined in Section 112.312(2), Florida Statutes, we have concluded that the "agency" of a city or county employee is the department within which he works, rather than the city or county as a whole. See CEO 84-15 and CEO 89-61, for example. Therefore, the trust would not have been prohibited from accepting the abandonment of right of way from the County Commission.
Finally, a concern in any situation where a public official acquires property or an interest in property that may increase in value as a result of decisions made by his agency is whether inside information may have been used or disclosed, in violation of the following prohibitions:
DISCLOSURE OR USE OF CERTAIN INFORMATION.--No public officer or employee of an agency shall disclose or use information not available to members of the general public and gained by reason of his official position for his personal gain or benefit or for the personal gain or benefit of any other person or business entity. [Section 112.313(8), Florida Statutes.]
MISUSE OF PUBLIC POSITION.--No public officer or employee of an agency shall corruptly use or attempt to use his official position or any property or resource which may be within his trust, or perform his official duties, to secure a special privilege, benefit, or exemption for himself or others. This section shall not be construed to conflict with s. 104.31. [Section 112.313(6), Florida Statutes.]
Information submitted with your request indicates that the County's 1980 Comprehensive Plan projected the need to acquire rights of way for the above roads proposed for extension, which shows that information about the projected routes was available to the general public years before the property was acquired. As your inquiry does not indicate any other allegedly "inside" information that could have been used or disclosed in connection with the acquisition of the property, we do not address this issue further.
Accordingly, we find that under the circumstances presented no prohibited conflict of interest existed where you served as County Engineer and as co-trustee of a family trust that owns substantial amounts of real property located along the proposed routes of County road projects.