CEO 94-21 -- June 2, 1994

CONFLICT OF INTEREST

AIRPORT AUTHORITY MEMBER'S COMPANY LEASING

AIRPLANE TO SUBLESSEE OF FIXED-BASE OPERATOR

AND MEMBER PERSONALLY RENTING PLANE

To: Jon D. Morris, Member, Gainesville-Alachua County Regional Airport Authority

SUMMARY:

No prohibited conflict of interest exists under Section 112.313(7)(a), Florida Statutes, where a corporation owned by a member of an airport authority leases an airplane to a flight school that subleases airport facilities from a fixed base operator doing business with the authority and where the member occasionally rents the plane back from the flight school for his personal use. While the lease of the plane would not constitute a contractual relationship between the member and the flight school, the rentals would, and, while the flight school is not doing business with the authority it is subject to its "regulation." However, since the airplane lease, the business between the authority and the fixed base operator, and the lease between the FBO and the flight school were entered into prior to the member's appointment to the authority, Section 112.316, Florida Statutes, serves as a "grandfather clause" to negate any prohibited conflict. CEO's 93-13, 93-11, 92-27, 91-42, 91-28, 88-43, 87-83, 82-15, 82-14, 81-47, 81-37, 79-1, 74-8 and In re WALTER STOTESBURY, 14 F.A.L.R. 1017 (Fla. Comm. on Ethics 1991), are referenced.

QUESTION:

Does a prohibited conflict of interest exist where a corporation wholly owned by you, a member of an airport authority, leases an airplane to a flight school which subleases and utilizes airport facilities leased by the authority to a fixed-base operator, and where you individually rent the plane from the flight school?

Your question is answered in the negative, under the circumstances presented.

By your letter of inquiry, accompanying materials, additional information and materials sent by your attorney, additional written documents relevant to your inquiry, and telephone conversation between you and our staff and between your attorney and our staff, we are advised that you serve as a member of the Gainesville-Alachua County Regional Airport Authority ("Authority"), a dependent special district created pursuant to Chapter 86-469, Laws of Florida, having been appointed in the summer of 1993. The Authority was created for the purpose of operating the airport and airport facilities of Gainesville Regional Airport, we are advised, and is empowered, among other things, to lease the airport and airport facilities or any part thereof upon such terms and conditions as it deems proper.

Pursuant to that power, the Authority leased (prior to your appointment to the Authority) a portion of the airport facilities to a corporation ("FBO") to operate a general aviation fixed base service center, with the lease specifying the minimum requirements that the fixed base operator must meet and providing the Authority with the option to cancel the lease if the minimum requirements are not met, we are advised. Further, we are advised, the Authority adopts rules for the operation of the airport and is empowered to enforce and administer the rules, which are known as FBO Minimum Standards ("Minimum Standards"), which apply generally to anyone using airport facilities.

The FBO subleased (also prior to your appointment to the Authority) a portion of its airport premises to a company ("flight school") which operates a flight-training school at the airport, we are advised. The sublease provides that it was contingent upon approval of the Authority of the terms and conditions thereof and that the flight school has the responsibility for and duty to manage the guidance, parking, and tie-down of arriving aircraft on the "East Ramp" adjacent to the subleased property in accordance with the Minimum Standards.

Further, we are advised that you are president and sole owner of a corporation which owns a single-engine airplane that it leases to the flight school and that your corporation's only endeavor is ownership of the airplane. You advise that you use the airplane for business and pleasure transportation and that, in order to defer some of the costs of operation, storage, and maintenance of the airplane, it has been leased to the flight school since before your appointment to the Authority. Under the airplane lease arrangement, the plane is used as a rental aircraft, and the flight school has complete control over the operation of the aircraft, determining who uses the plane and the procedures for rental, you advise. Further, you advise, you must schedule and rent the plane when you use it and you rent the plane as an individual rather than as an agent for your corporation. You add that the company makes no money from your rentals of the plane due to the lease arrangement and that other persons renting the plane do not receive the same terms because of the lease arrangement.

You advise that a question has arisen as to whether your corporation's contract with the flight school is a violation of Section 112.313(7)(a), Florida Statutes, which involves considering whether the flight school is subject to the regulation of or is doing business with the Authority because of the flight school's sublease with the FBO.

You maintain that it is clear that the lease between the Authority and the FBO qualifies as "doing business with the Authority." However, you also maintain that Authority approval of the flight school's sublease with the FBO was the only term of the sublease which involved the Authority and that, once approved, the Authority had no other action to take with regard to the sublease and that therefore the flight school is not "doing business with the Authority." Further, you maintain that the flight school's covenant to conduct its operations in accordance with the Minimum Standards does not make it subject to the regulation of the Authority, that the covenant is equivalent to a covenant by any lessee to comply with the zoning and building codes of a city or to comply with the environmental laws of the United States, the State, or local government, and that such covenants do not make lessees subject to the regulation of the named agencies any more than any other member of the general public. Further, you add that the Minimum Standards are rules promulgated by the Authority and apply to all users of the airport, that any amendments or changes to the Minimum Standards would apply to all users generally, and that therefore the flight school is not subject to regulation by the Authority any more than a lessee who covenants with a landlord to comply with the environmental laws is subject to regulation by DEP.

Section 112.313(7)(a), Florida Statutes, provides:

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.

Absent the applicability of an exemption under Section 112.313(12), Florida Statutes, or a "grandfathering" under Section 112.316, Florida Statutes, this provision would prohibit your holding a contractual relationship with any business entity which is subject to the regulation of or is doing business with the Authority--your public agency.

As to your situation, we find nothing in your materials that indicates that the flight school is doing business with the Authority. Rather, it appears that the flight school is doing business with the FBO, a separate business entity that in turn is doing business with the Authority. In the past, we have found that such situations do not amount to "doing business" between the business entity with which a public official holds a contractual relationship and his public agency. This consistently has been our interpretation. See, CEO 93-13, CEO 92-27, CEO 91-42, CEO 91-28, CEO 88-43, CEO 81-47, CEO 79-1, and all of the other opinions referenced therein. Further, under our precedent, it is possible that you would not be viewed as holding a contractual relationship with the flight school by virtue of your corporation's lease of the plane to the flight school. Instead, you would be viewed as holding a contractual relationship with your corporation, and your corporation (a separate business entity distinct from you, personally) would hold a contractual relationship with the flight school. See the opinions noted above. Nevertheless, your rental of the plane from the flight school as an individual would amount to a contractual relationship between you and the flight school.

Therefore, the issue is whether the flight school, a business entity with which you hold contractual relationships by virtue of your personal rental of the plane, is "subject to the regulation of" the Authority. Early in our history, in CEO 74-8, we adopted a definition of the phrase at issue and followed the view of opinions of the Attorney General defining "regulation" to mean "prescribing the manner in which a thing is to be done." In that opinion, we went on to find that a company would not be subject to the regulation of a city in which the company owned land, "unless the operations of such company were subject to the control or authority of the city."

While it is true, as you point out, that there are proprietary or commercial contractual aspects to the state of affairs between the Authority and the FBO, between the FBO and the flight school, and between the Authority and the flight school, we are of the opinion that the situation is also one of "regulation" of the FBO and of the flight school (the FBO's sublessee) by the Authority. In previous opinions, we have found franchisees of governmental entities to be regulated by the governmental entity by virtue of the franchise agreement or other regulations. See CEO 93-11, CEO 92-27, CEO 87-83, CEO 82-15, and CEO 81-37. Certainly the regulations (Minimum Standards) present under your scenario prescribe the manner in which fixed base operations are to be structured or conducted. These prescriptions are applicable to the flight school as well as to the FBO. We reach this conclusion because the Minimum Standards expressly apply to, inter alia, "the use of any land or facility on said Airport" and define "person" to mean "any person, firm, general or limited partnership, corporation, trust or association making application for, leasing or using any land or facility at the Airport" and because the terms of the lease between the FBO and the Authority (which references and incorporates the Minimum Standards) apply to the FBO and "its tenants and sublessees" and provide that "[a]ll the terms, conditions and covenants of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto." See FBO/Authority lease, pages 20 and 24. In essence, we find that "regulation" can be redundant to similar or parallel contractual obligations or requirements.

Nevertheless, your situation must be viewed in light of Section 112.316, Florida Statutes, which 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 duties to the state or the county, city, or other political subdivision of the state involved.

In past opinions, including one involving a member of an airport authority (CEO 82-14, involving an authority member's corporation leasing a building from the authority), we have applied this statute as a "grandfather clause" to exempt business transactions occurring prior to the public official's taking office, reasoning that the official had no public duties that could have been impeded or compromised prior to his taking office. Since you were not a member of the Authority at the time of the inception of the lease of the plane to the flight school, the lease between the FBO and the Authority, and the sublease, we find that your situation is grandfathered in and does not violate Section 112.313(7)(a).

Further, please note that Section 112.313(12)(j), Florida Statutes, exempts situations where the goods or services purchased (i.e. aircraft rental) from a business entity which is subject to the regulation of the Authority are purchased under terms and for a price available to similarly situated members of the general public and the Authority member makes full disclosure to the Authority prior to the transaction. However, it does not appear to us that your existing rental situation would fall under this exemption, as the terms available to you are not also available to the general public.

We believe our findings are consistent with our findings in other matters involving the Authority [CEO 93-13 and In re WALTER STOTESBURY, 14 F.A.L.R. 1017 (Fla. Comm. on Ethics 1991), affirmed without opinion as Stotesbury v. State Commission on Ethics, 597 So. 2d 294 (Fla. 1st DCA 1992)].

Accordingly, we find that under the circumstances presented a prohibited conflict of interest does not exist where your corporation leases an airplane to a sublessee of a tenant of the Authority and you personally rent the plane from the sublessee.