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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/22/2020 - CONFLICTS OF INTEREST AND THE ETHICS REVIEW PROCESDATE: STAFF: December 22, 2020 Carrie Daggett, City Attorney WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Conflicts of Interest and the Ethics Review Process for Complaints about Councilmembers. EXECUTIVE SUMMARY THIS ITEM HAS BEEN AMENDED. The purpose of this item is to discuss potential Charter and Code amendments about conflicts of interest and the ethics review process for complaints against Councilmembers. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What feedback do Councilmembers have about possible amendment of the Charter to modify the definition of personal interest to address Councilmember employer interests? 2. What direction do Councilmembers have for the City Attorney regarding establishing an alternate Ethics Review Board process to hear ethics complaints against Councilmembers? BACKGROUND / DISCUSSION During 2019 and 2020, several ethics complaints were filed against City Councilmembers. As a result, there have been several Ethics Review Board meetings, prompting discussion of how the ethics review process might be improved and of whether the standards for conflicts of interest should be revised. Filing ethics complaints against City Councilmembers resulted in the delay of City Council action on time -sensitive matters, which seemed to fuel interest and motivation in filing ethics complaints. In considering these recent complaints, the Ethics Review Board discu ssed and expressed interest in further evaluating whether the City’s current conflicts of interest standards adequately define and guide the determination of conflicts of interest that may arise in dealings with the City by a Councilmember’s employer. The Ethics Review Board also discussed whether City Councilmembers themselves should evaluate whether other City Councilmembers committed an ethics violation and suggested that the Council further discuss that issue. General Background 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 he or she is a member or to which he or she makes 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. The Charter defines “financial interest” and “personal interest” as follows (emphasis added): December 22, 2020 Page 2 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, defin itely 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 employe e, 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: (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 December 22, 2020 Page 3 (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. Ethics Review Process: 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. The functions of the Board are: (1) To review and investigate complaints of unethical conduct filed against Councilmembers or board and commission members by any person; (2) To review and investigate actual or hypothetical situations involving potential conflicts of interest presented by individual Councilmembers or board and commission members; (3) After review and investigation, to render advisory opinions or interpretations pertaining to such complaints or inquiries under the relevant provisions of the Charter and Code and the applicable provisions of state law, if any, and to make written recommendations to the City Council and any affected board or commission concerning the same; and (4) 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. The Board consists of three Council-appointed Councilmembers and one alternate member. Complaints are considered by the Board except that: ➢ If a complaint alleges a violation by two or more members of the Board, an alternate Board comprised of all unnamed Councilmembers hears the complaint; and ➢ If a complaint names five or more Councilmembers, a seven-member alternate Board selected at random by the City Clerk from the membership of City boards and commissions hears the complaint. A violation of a City Charter ethics provision constitutes a criminal misdemeanor and a person convicted of a misdemeanor is subject to fine or imprisonment or both. Under the Charter an official convicted of a City Charter violation becomes ineligible for City elected or appointed office or employment for two years. Other Municipal Ethics Systems: Other Colorado municipalities handle ethics complaints in a variety of way s. Some simply apply state ethics laws for local government officials and do not exercise home rule authority on this topic. Other municipalities, like Fort Collins, implemented standards and procedural guidance in their own municipal charters and codes. (See Attached Chart). Those that have exercised their home rule authority generally have established ethics committees or rely on their city attorney or outside counsel and judges to handle complaints. State Law Ethics Provisions: Colorado law provides a number of ethics provisions for local government officials, including Colorado Revised Statutes: Sections 24-18-102 through -105 and Section 24-18-109. December 22, 2020 Page 4 In addition, in 2006 Colorado voters approved an initiated measure frequently referred to as “Amen dment 41,” which added Title XXIX to the Colorado Constitution entitled Ethics in Government Amendment (Title XXIX). To summarize, Title XXIX: ➢ bans public officials including local government officials from receiving gifts and other items of value regardless of whether the gifts and other items of value are connected with their public duties; ➢ provides that receipt of a thing of value by the spouse or dependent of a local government official is prohibited in many circumstances unless equal or greater valu e is given in return; ➢ creates as a penalty an amount double the amount of the gift or thing of value which must be paid to the jurisdiction whose public trust was breached; ➢ creates an Independent Ethics Commission (IEC) to hear and decide on complaints of violations of Title XXIX by any covered official; ➢ provides that any county or municipality may adopt ordinances or charter provisions with respect to ethics matters that are more stringent than any of the provisions contained in this article; and ➢ provides that its requirements do not apply to home rule counties or home rule municipalities that have adopted charters, ordinances, or resolutions that address the matters covered by this article. Modifying the Charter’s Personal Interest Definition During recent discussions about ethics complaints, Councilmembers have expressed interest in putting in place an ethics rule that more clearly establishes the threshold for when employment by a party interested in a City matter results in a conflict of interest. The definition of “financial interest” excludes the interest that an officer, employee or relative has as an employee of a business in a decision, when the decision financially benefits or otherwise affects the employer but entails no foreseeable, measurable financial benefit to the officer, employee or relative. The definition of “personal interest” turns on whether the officer or employee, or their relative, 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. Applying the financial interest standard has been more straightforward than applying the personal interest standard, perhaps because financial interests can be easier to identify and there are so many types of benefits or detriments that can occur. In order to define more specifically how the interest of an employer 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. December 22, 2020 Page 5 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. 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 is practical for the City official to maintain confidentiality of C ity 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. If Council is ready to move forward with a Charter amendment proposal for the April 2021 regular municipal election, an ordinance submitting an amendment based on the discussion at the Work Session will be included on the January 5, 2021, Council agenda in order to allow for timely completion of the submitting ordinance. Modifying the Process for Considering Complaints Against Councilmembers To address concern about Councilmembers hearing ethics complaints against their Council colleagues and provide more separation from the Council for that decision, the Council could amend the Code to use an alternate Ethics Review Board formed by randomly selecting seven board and commission members to hear them. The random selection from a large pool of potential Board members would reduce the appearance of Council influence over the composition of the Board and outcome of the Board’s review. Under the current provision, those selected by the City Clerk may decline to participate. The opinion of the alternate Board is not presented to Council for adoption. The Ethics Review Board was established through Ordinance No. 112, 1989. The alternate Ethics Review Board was added to the Code in 1993 with the adoption of Ordinance No. 17, 1993. The alternate Ethics Review Board provisions were updated in 2002, through the a doption of Ordinance No. 110, 2002. A Code change to expand the use of this form of alternative Ethics Review Board would build on the existing Code language and this change in the process would likely have relatively low-cost impacts. Other means of appointing an alternative ethics review body could include: ➢ Council appointment of community members to serve as the ethics review body; December 22, 2020 Page 6 ➢ Council appointment of a committee that would in turn appoint members of an alternate ethics review body to hear complaints filed against Councilmembers. The members of either body could be City officials or employees or members of the public. Some examples of this approach require that at least some members of the ethics review body have ethics or legal expertise or former judicial experience; ➢ Retention of the services of an independent judicial officer to serve as the decisionmaker on complaints filed against Councilmembers; and ➢ Use of intergovernmental arrangements to use officials and judges from other municipalities to review and decide complaints filed against Councilmembers. Each of these approaches offers varying benefits and disadvantages that Council would likely want to explore more fully prior to moving forward with a revision to the process. The costs and administrative burdens of these more significantly different approaches have not been assessed and if Council is interested in pursuing these options more research and information gathering would be needed. While it is difficult to predict the number and frequency of ethics complaints against Councilmembers, the number of ethics opinions stemming from complaints (whether against one or more Councilmembers or board or commission members) has been relatively low, totaling roughly one every ten years. The vast majority of ethics opinions have been advisory opinions responding to requests for guidance rather than decisions to address complaints. Next Steps: Based on the concerns and interests identified during the Work Session discussion, if Councilmembers are generally ready to move forward with a Charter amendment proposal for the April 2021 regular municipal election, an ordinance submitting an amendment reflecting the approach discussed at the Work Session will be included on the January 5, 2021, Council agenda in order to allow for timely completion of the submitting ordinance. Code changes to provide for the use of an alternate Ethics Review Board for all ethics complaints against Councilmembers can come forward at any time and will be scheduled for Counc il consideration if the Work Session discussion suggests that Councilmembers are ready to move forward with such a change. ATTACHMENTS 1. Colorado Municipalities Ethics Processes (PDF) 2. Powerpoint presentation (PDF) December 16, 2020 1 Colorado Municipalities Ethics Processes Municipality 2020 Notes Link(s) Alamosa ADOPTED Ethics Code, Mayor decides ethics violations Process calls for City council to address it if possible, then referred to Mayor https://cityofalamosa.org/ wp- content/uploads/2020/02 /2020-City-Council-Policy- Manual.pdf Aurora ADOPTED Ethics Code, Municipal Court decides ethics violations There is a panel of three retired judges to review complaints https://library.municode.c om/co/aurora/codes/cod e_of_ordinances?nodeId= PTIICOOR_CH1GEPR_ARTI ICOET Avon ADOPTED Municipal Ethics Code, AND City/Town Council handles Ethics Enforcement Council is responsible for enforcement, city attorney may investigate https://library.municode.c om/co/avon/codes/home _rule_charter_and_code? nodeId=CD_TIT2ADPE_CH 2.30TOCOET Denver ADOPTED Municipal Ethics Code, Nomination Committee appointed to select Ethics board, which handles Ethics Enforcement Ethics board appointed by nomination committee screens complaints and has authority to consider in confidence and dismiss if unwarranted. https://library.municode.c om/co/denver/codes/cod e_of_ordinances?nodeId= TITIIREMUCO_CH2AD_AR TIVCOET_S2-52DE Durango ADOPTED Municipal Ethics Code, AND Municipal Ethics Enforcement Entity Board of Ethics comprised of five Council- appointed community members https://library.municode.c om/co/durango/ordinanc es/code_of_ordinances?n odeId=859798 Edgewater ADOPTED Municipal Ethics Code, BUT NO Municipal Ethics Enforcement Entity Violation is criminal misdemeanor under Charter. https://library.municode.c om/co/edgewater/codes/ municipal_code?nodeId= HORUCHCOEDCO_EDHOR UCH_ARTVIICOET ATTACHMENT 1 December 16, 2020 2 Frisco ADOPTED Municipal Ethics Code, AND City/Town Council handles Ethics Enforcement “As appropriate,” the Town Attorney may refer a case to the Town Manager instead of the Town Council https://www.friscogov.co m/wp- content/uploads/2017/08 /15-Code-Of-Ethics.pdf Hayden ADOPTED Ethics Code, City/Town Attorney serves as Municipal Ethics Enforcement Entity Town Prosecutor empowered to bring a civil action or proceeding at law or in equity for a judgment enjoining any violation of the provisions of the Code of Ethics https://library.municode.c om/co/windsor/codes/ch arter_and_municipal_cod e?nodeId=TOWIHORUCH_ ARTVCOET Lone Tree ADOPTED Ethics Code, City/Town Attorney serves as Municipal Ethics Enforcement Entity City Attorney is ethics officer, if the complaint is against them then city council appoints https://library.municode.c om/co/lone_tree/codes/ municipal_code?nodeId=C H2ADPE_ARTVIICOET_S2- 7-30DE Monte Vista ADOPTED Municipal Ethics Code, AND City/Town Council handles Ethics Enforcement City council enforces all elected/appointed officials and city manager enforces employees https://library.municode.c om/co/monte_vista/code s/municipal_code?nodeId =CH2AD_ART12COET_S2- 12-10DE Pueblo ADOPTED Municipal Ethics Code, AND City/Town Council handles Ethics Enforcement Council President or VP investigates complaints against elected officials https://library.municode.c om/co/pueblo/codes/cod e_of_ordinances?nodeId= TITIAD_CH9COET Yuma ADOPTED Municipal Ethics Code, BUT NO Municipal Ethics Enforcement Entity Mayor investigates, presents to city attorney and council, city attorney advises https://codelibrary.amleg al.com/codes/yumaco/lat est/yuma_co/0-0-0-590 ATTACHMENT 1 December 22, 2020Ethics Standards and Review BoardCarrie Daggett, City Attorney ATTACHMENT 2 Questions/Direction Sought1. What feedback do Councilmembers have about possible amendment of the Charter to modify the definition of personal interest to address Councilmember employer interests?2. What direction do Councilmembers have regarding establishing an alternate Ethics Review Board process to hear ethics complaints against Councilmembers?2ATTACHMENT 2 Ethics Review Over the Years• Ethics Complaints:• From 1982 through 2018: 6 Complaints (one every 6 years)• In 2019 and 2020: 9 Complaints (4.5 per year)• Advisory Ethics Opinions:• From 1982 through 2018: 59 Advisory Opinions (.61 per year)• In 2019 and 2020: 3 Advisory Opinions (.67 per year)3ATTACHMENT 2 Ethics Review Over the Years4ATTACHMENT 2 Recent Focus on Employment • Recent high incidence of ethics complaints focused specifically on the interest that a Councilmember has as an employee:• Repeated inquiries about employment with Colorado State University in connection with disputed CSU projects• Councilmembers participating in Ethics Review Board discussion of these complaints expressed interest in Council review of the conflicts of interest standard to evaluate whether change would be beneficial• Personal (not directly financial) interest as the key concern5ATTACHMENT 2 Recent Focus onComplaints Against Councilmembers• Recent high incidence of Ethics Review Board consideration of ethics complaints directed against members of Council• Ethics Review Board composition – all Councilmembers – raised objections and accusations by the public about objectivity• Councilmembers participating in Ethics Review Board discussion of these complaints expressed interest in Council consideration of alternative decisionmaker for complaints against Councilmembers6ATTACHMENT 2 Defining Conflicts of Interest7ATTACHMENT 2 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 he or she is a member or to which he or she makes recommendations, upon discovery to: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.8ATTACHMENT 2 Financial Interest -- Defined•Financial Interest means any interest equated with money or its equivalent. • Several interests are specifically excluded; two examples are:• An interest of an officer/employee/relative as an employee of a business or holder of an ownership interest in a business, when the decision of interest financially benefits or otherwise affects the business but entails no foreseeable, measurable financial benefit to the officer/employee/relative• An interest as a nonsalaried officer or member of a nonprofit corporation or association9ATTACHMENT 2 Personal Interest -- Defined•Personal Interest means any interest (other than a financial interest) of an officer/employee/relative that would, in the judgment of a reasonably prudent person, lead them to realize or experience some direct and substantial benefit or detriment different in kind from that experienced by the general public. • Specifically excluded are:• An interest as a board member of a governmental, nonprofit, educations religious, charitable, fraternal or civic organization • An interest in the receipt of public services on the same terms as all similarly situated citizens • An interest in compensation, benefits or terms of City employment10ATTACHMENT 2 Employer’s Interest as a Personal Interest Defined• Current standard is: “some direct and substantial benefit or detriment different in kind from that experienced by the general public” • If more explicit direction regarding the impact of an employer’s interest is desired, Charter amendment required• Some options for change (if change desired):• Financial or Personal Interest of employer = personal interest of City decisionmaker• Narrow scope of this by considering factors like directness of relationship between employment and employer’s interest in Council decision• Narrow scope of this by type of employer or type of employment11ATTACHMENT 2 Charter Amendment Process• Council must place Charter amendments on the ballot by ordinance to allow publication of notice no less than 60 days before the election • For April 2021 election, Charter amendment ordinances will be presented to Council on first and second reading in January 2021• Council may wish to take more time to develop proposed amendment of conflicts definition prior to submitting to voters• Development of 3 to 4 Charter amendments about other topics for the April election is currently underway12ATTACHMENT 2 Ethics Review Board Structure13ATTACHMENT 2 Ethics Review Board• Formed as a Committee in 1981; added to the City Code in 1989.• Three members of Council and an alternate; generally appointed for two-year terms after each election.• Functions include:• Hear complaints of unethical conduct filed against Councilmembers and board and commission members• Review and investigate actual or hypothetical potential conflicts, and render advisory opinions and recommendations• Propose revisions to the Charter or Code or related regulations, rules or policies, pertaining to ethical conduct14ATTACHMENT 2 Alternate Ethics Review BoardIf a complaint alleges a violation by two or more members of the Board (butfewer than five), an alternate Board comprised of all unnamedCouncilmembers hears the complaint; andIf a complaint names five or more Councilmembers, a seven-memberalternate Board selected at random by the City Clerk from the membership ofCity boards and commissions hears the complaint.15ATTACHMENT 2 Alternate Ethics Review Board Options• Current Alternate Board (comprised of randomly selected board/commission members) only for when complaint names five or more Councilmembers • Ethics Review Board and process are in City Code, so ordinance amending Code required to change• Some options for change (if change desired):• Make current Alternate Board apply to all complaints against Councilmembers• Form a standing Council-appointed Board to include community members• Designate judicial or legal expert or panel to investigate and decide complaints16ATTACHMENT 2 Questions/Direction Sought1. What feedback do Councilmembers have about possible amendment of the Charter to modify the definition of personal interest to address Councilmember employer interests?2. What direction do Councilmembers have regarding establishing an alternate Ethics Review Board process to hear ethics complaints against Councilmembers?17ATTACHMENT 2