This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on July 22, 2005, basing its approval solely on the facts and circumstances stated herein.

 
May a city purchase vehicles or seek maintenance or warranty work on vehicles from a local dealership which employs an alderman?

State law restricts the Mississippi Ethics Commission to interpreting and issuing opinions on Sections 25-4-101 through 25-4-119, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890.  Therefore, this opinion does not address the Mississippi laws outside the Commission’s jurisdiction nor the governmental entity’s internal rules and regulations.

The pertinent conflict of interest laws to be considered here are:

Code Section 25-4-103(a), (d), (h), (k)(i)(ii)(iii)(iv) and (p)(i)(ii)(iii) states:
 

”(a) ‘Authority’ means any component unit of a governmental entity.

(d) ‘Business with which he is associated’ means any business of which a public servant or his relative is an officer, director, owner, partner, employee or is a holder of more than ten percent (10%) of the fair market value or from which he or his relative derives more than One Thousand Dollars ($1,000.00) in annual income or over which such public servant or his relative exercises control.

(h) ‘Governmental entity’ means the state, a county, a municipality or any other separate political subdivision authorized by law to exercise a part of the sovereign power of the state.

(k) ‘Material financial interest’ means a personal and pecuniary interest, direct or indirect, accruing to a public servant or spouse, either individually or in combination with each other.  Notwithstanding the foregoing, the following shall not be deemed to be a material financial interest with respect to a business with which a public servant may be associated:

(i) Ownership of any interest of less than ten percent (10%) in a business where the aggregate annual net income to the public servant therefrom is less than One Thousand Dollars ($1,000.00);

(ii) Ownership of any interest of less than two percent (2%) in a business where the aggregate annual net income to the public servant therefrom is less than Five Thousand Dollars ($5,000.00);

(iii) The income as an employee of a relative if neither the public servant or relative is an officer, director or partner in the business and any ownership interest would not be deemed material pursuant to subparagraph (i) or (ii) herein; or

(iv) The income of the spouse of a public servant when such spouse is a contractor, subcontractor or vendor with the governmental entity that employs the public servant and the public servant exercises no control, direct or indirect, over the contract between the spouse and such governmental entity.

(p) ‘Public servant’ means:

(i) Any elected or appointed official of the government;

(ii) Any officer, director, commissioner, supervisor, chief,  head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the State of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or

(iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.”

Code Section 25-4-105(3)(a) and (4)(d) states:
 

“(3) No public servant shall:

(a) Be a contractor, subcontractor or vendor with the governmental entity of which he is a member, officer, employee or agent, other than in his contract of employment, or have a material financial interest in any business which is a contractor, subcontractor or vendor with the  governmental entity of which he is a member, officer, employee or agent.

(4) Notwithstanding the provisions of subsection (3) of this section, a public servant or his relative:

(d) May be a contractor, subcontractor or vendor with any authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which is a contractor, subcontractor or vendor with any  authority of the governmental entity of which he is a member, officer, employee or agent: (i) where such goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws; or (ii) where the contractual relationship involves the further research, development, testing, promotion or merchandising of an intellectual property created by the public servant.”

Pertinent facts and circumstances provided by the requestor, absent identifying data, are set forth as follows and considered a part of this opinion.
 

We have a newly elected alderman who is employed with the local car dealership.  This dealership on a fairly regular basis, either bids on vehicles the City needs or sells the same without bidding based on a state contract price.  The alderman works as a salesman and has no ownership interest in the dealership nor does he have any management duties.  Further, he will not receive any remuneration or benefit of any type when the City purchases a vehicle from the car dealership.  I suppose he could also abstain from voting on matters affecting the dealership.  However, I am still concerned about this.
 

 
One of the aldermen has now raised the question of whether the dealership should do service and warranty work on vehicles lawfully purchased before the employee/alderman took office. I would appreciate it if you would address this also.

In a follow-up telephone conversation with a member of the Commission’s staff, the requestor provided additional facts. The city has no maintenance or extended warranty contract with the dealership. Any maintenance work would be done on an as-needed basis. Warranty work would be performed under the manufacturer’s warranty and would not result in any payments made by the city to the dealership.

Based solely on the facts and circumstances presented by the requestor, the Commission’s opinion is as follows.

Section 25-4-105(3)(a), Miss. Code of 1972, quoted above, prohibits a business in which a city official has a “material financial interest” from being a contractor, subcontractor or vendor to the city. If the alderman receives an “aggregate annual net income” of Five Thousand Dollars or more, then he definitively has a material financial interest in the dealership, irrespective of his ownership interest. Section 25-4-103(k)(ii), Miss. Code of 1972.

The board of aldermen is the specific “authority” of city government with which the dealership would transact business under these proposed facts, as that term is defined in Section 25-4-103(a). Thus, the only statutory exception which could apply is found in Section 25-4-105(4)(d). To fit the terms of that paragraph, the “goods or services involved [must be] reasonably available from two (2) or fewer commercial sources.” Id. With regard to the purchase and servicing of automobiles, it seems virtually impossible that the product would not be reasonably available from two or more commercial sources. Mere inconvenience does not make availability unreasonable. The Commission has repeatedly found geographic boundaries like city limits and county lines do not necessarily affect reasonable availability. Nor would increased costs incurred by using an alternative source necessarily make the use of that source unreasonable.

With regard to warranty work, the dealership is not a contractor to the city, and the prohibition would not apply. Instead the contract is between the purchaser, the city, and the manufacturer. Presumably, the dealership has a separate agreement with the manufacturer by which the manufacturer reimburses the dealership for warranty work. Thus, the city is free to use the local dealership for work done pursuant to the manufacturer’s warranty on vehicles purchased previously at that dealership or from other dealerships in the future.
 

Scott Rankin
Executive Director