HomeMy WebLinkAbout2021-11-10 -AIS Ethics Review Board FINAL
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AGENDA ITEM SUMMARY November 15, 2021
City Council-Ethics Review Board
STAFF
Carrie M. Daggett, City Attorney
SUBJECT
Initial discussion of conflicts of interest definitions related to employment relationships of
Councilmembers.
EXECUTIVE SUMMARY
This is the initial meeting of the Ethics Review Board (“Board”) appointed in May 2021. This meeting
was requested for the Board to discuss potential changes to conflicts of interest provisions and
particularly when employment relationships of Councilmembers should constitute a conflict of
interest. The Board may also identify other ethics matters it would like to address at future Board
meetings.
BACKGROUND / DISCUSSION
The City Code (Section 2-569) establishes an Ethics Review Board to assist Councilmembers and
board and commission members in interpreting and applying the City’s ethics provisions. In addition
to considering complaints and rendering advisory opinions, the Code also empowers the Board to
“propose any revisions to the provisions of the Charter or Code or other regulations, rules or policies
of the City pertaining to ethical conduct as the Review Board may deem necessary and appropriate
in the best interests of the City.”
This meeting was scheduled in response to a request at a Council meeting this summer under
“Other Business” initiated by Councilmember Gutowsky. The request was in follow up to discussions
by Council and the Ethics Review Board in 2020 in response to several ethics reviews focused on
the question of when a Councilmember’s employment relationship creates a conflict of interest in
decisions of interest to the employer.
General Background regarding Conflicts of Interest
Article IV, Section 9(b)(3) of the City Charter requires any officer or employee who has, or
whose relative has, a financial or personal interest in any decision of any public body of
which they are a member or to which they make recommendations, to upon discovery
disclose that interest in the manner described and refrain from voting on, attempting to
influence, or otherwise participating in the decision as an officer or employee.
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The Charter defines “financial interest” and “personal interest” as follows (emphasis added):
Financial interest means any interest equated with money or its equivalent. Financial interest shall
not include:
(1) the interest that an officer, employee or relative has as an employee of a business, or as a
holder of an ownership interest in such business, in a decision of any public body, when the
decision financially benefits or otherwise affects such business but entails no foreseeable,
measurable financial benefit to the officer, employee or relative;
(2) the interest that an officer, employee or relative has as a nonsalaried officer or member of
a nonprofit corporation or association or of an educational, religious, charitable, fraternal or
civic organization in the holdings of such corporation, association or organization;
(3) the interest that an officer, employee or relative has as a recipient of public services when
such services are generally provided by the city on the same terms and conditions to all
similarly situated citizens, regardless of whether such recipient is an officer, employee or
relative;
(4) the interest that an officer, employee or relative has as a recipient of a commercially
reasonable loan made in the ordinary course of business by a lending institution, in such
lending institution;
(5) the interest that an officer, employee or relative has as a shareholder in a mutual or
common investment fund in the holdings of such fund unless the shareholder actively
participates in the management of such fund;
(6) the interest that an officer, employee or relative has as a policyholder in an insurance
company, a depositor in a duly established savings association or bank, or a similar interest-
holder, unless the discretionary act of such person, as an officer or employee, could
immediately, definitely and measurably affect the value of such policy, deposit or similar
interest;
(7) the interest that an officer, employee or relative has as an owner of government-issued
securities unless the discretionary act of such owner, as an officer or employee, could
immediately, definitely and measurably affect the value of such securities; or
(8) the interest that an officer or employee has in the compensation received from the city for
personal services provided to the city as an officer or employee.
Personal interest means any interest (other than a financial interest) by reason of which an officer
or employee, or a relative of such officer or employee, would, in the judgment of a reasonably
prudent person, realize or experience some direct and substantial benefit or detriment different in
kind from that experienced by the general public. Personal interest shall not include:
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(1) the interest that an officer, employee or relative has as a member of a board, commission,
committee, or authority of another governmental entity or of a nonprofit corporation or
association or of an educational, religious, charitable, fraternal, or civic organization;
(2) the interest that an officer, employee or relative has in the receipt of public services when
such services are generally provided by the city on the same terms and conditions to all
similarly situated citizens; or
(3) the interest that an officer or employee has in the compensation, benefits, or terms and
conditions of his or her employment with the city.
Applying these definitions to determine whether an officer or employee (or that person’s relative) has
a financial interest is generally a more objective inquiry, since it turns on whether there is a
“foreseeable, measurable financial benefit” to the officer or employee.
In contrast, evaluating whether an officer or employee (or that person’s relative) has a “personal
interest” is generally more difficult, because there is more room for interpretation. The definition
requires an evaluation of whether that person would, in the judgment of a reasonably prudent
person:
1. realize or experience some direct and substantial benefit or detriment;
2. different in kind from that experienced by the general public.
Opinions regarding whether these elements are met in any particular circumstance can vary widely
and as a result this provision does not often provide clear guidance related to the commonly
encountered issue of whether an employment relationship and an employer’s interests constitute a
personal interest.
Employment Relationships and Conflicts of Interest
To define more specifically how the interest of an employer of a City officer gives rise to a conflict of
interest, the simplest approach would be to add clarifying language to the personal interest definition.
Because these definitions are in the Charter, proposing a Charter amendment for voter approval
would be the mechanism for making such a change.
This provision could be revised to make clear that a City official has a personal interest when that
official is a direct employee of an entity or person that has a financial interest in a decision, or when
the employer will experience from that decision a direct and substantial benefit or detriment different
in kind from that experienced by the general public. Consistent with state ethics laws, such a
provision may also need to include any person or organization with which the official is negotiating or
has an arrangement concerning prospective employment. Some jurisdictions impute any financial or
personal interest of an employer to the city official as though it were their own interest. These
approaches would result in a relatively broad application of the personal interest standard.
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Alternatively, the official could be defined to have a personal interest only when the employer (or
prospective employer) has a financial interest in the City decision. Either approach would impute the
interests of the external employer to the City official, but to different degrees.
Other distinctions that Council may want to consider in defining what constitutes a personal interest
include:
The size of the employer;
The type of the employer (for-profit, not-for-profit, governmental);
The number of organizational layers between the City official and the governing body, chief
executive officer, president or owner of the entity that employs the official;
Whether the official’s position is compensated or uncompensated;
Whether it’s practical for the City official to maintain confidentiality of City confidential
information from their employer in the decision-making process; and
Whether the City official’s participation in the City decision will present conflicting loyalties for
the City official.
Next Steps
The Board may wish to discuss these and other ideas and request further research and information
for further discussion at an upcoming Board meeting.
If the Board would like to recommend changes related to this issue and Council agrees to move
these changes forward, Council would need to adopt an ordinance submitting a Charter amendment
to the voters as a called special election (such as a coordinated November election) or a regular
municipal election in an odd-year April. The next regular City election will be April 2023.
Examples of how other jurisdictions address employment-related conflicts of interest are outlined in
the attachment.
ATTACHMENTS
Summary of Selected Sample Provisions from Other Jurisdictions