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 continue to contract with a fuel service company in which a newly elected alderman is an officer, director and stockholder?

Your opinion request to the Office of the Attorney General dated June 14, 2005, was referred by that Office to the Mississippi Ethics Commission on July 18, 2005, as your request involves the above issue that concern the Mississippi conflict of interest laws.

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:

Constitutional Section 109 states:
 

No public officer or member of the legislature shall be interested, directly or indirectly, in any contract with the state, or any district, county, city, or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member, during the term for which he shall have been chosen, or within one year after the expiration of such term.

Code Section 25-4-103 (a), (c), (f)(i)(ii), (g)(ii), (h), (i), (k)(i)(ii), and (p)(i) states:
 

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

(c) ‘Business’ means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, holding company,  self-employed individual, joint stock company, receivership, trust or other legal entity or undertaking organized for economic gain, a  nonprofit corporation or other such entity, association or organization receiving public funds.

(f) ‘Contract’ means:

(i) Any agreement to which the government is a party; or

(ii) Any agreement on behalf of the government which involves the payment of public funds.

(g) ‘Government’ means the state and all political entities thereof, both collectively and separately, including but not limited to:

(ii) Municipalities.

(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.

(i) ‘Income’ means money or thing of value received, or to be received, from any source derived, including but not limited to, any salary, wage, advance, payment, dividend, interest, rent, forgiveness of debt, fee, royalty, commission or any combination thereof.

(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).

(p) ‘Public servant’ means:

(i) Any elected or appointed official of the government.”

Code Section 25-4-105(2), (3)(a) and (4)(d) states:
 

“(2) No public servant shall be interested, directly or indirectly, during the term for which he shall have been chosen, or within one (1) year after the expiration of such term, in any contract with the state, or any district, county, city or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member.

(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.
 

This is a request for you to give an opinion in writing, pursuant to Section 7-5-25 of the Mississippi Code of 1972, Annotated.

On June 7, 2005, I was elected as alderman of the town.  I am an officer, director and stockholder of a fuel service corporation.  Other officers, directors and stockholders are my brother and my mother.  The town is a customer of my fuel service corporation.

The corporation provides 24 hour fuel service, with the capability of billing the town monthly.  Its key pump system enables the town police department to track each officer’s usage by assigning each of them a key.  This system is used by the fire department as well, to refuel fire trucks, when they return from calls in the middle of the night.

Pricing is determined by averaging the price of fuel brought into the bulk plant, then, computing the selling price.  Each key holder is charged the same price, regardless of whether the key holder is an individual, business, or governmental agency.  The only difference in price to government agencies is the tax break that they are entitled to.

The fuel service corporation has no input on the usage, nor does it do any special pricing or bidding for the town.  Key pumps are read the last Tuesday of the month, and the fuel service corporation does not even know how much fuel is used until then.

Would you please determine if any conflict exists and advise me.

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 vendor to the city. As the requestor is one of only three owners and stockholders in the fuel service company, he definitively has a material financial interest in the company. Section 25-4-103(k)(ii), Miss. Code of 1972.

The board of aldermen is the specific “authority” of city government with which the fuel service company transacts business, 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 fuel, it is virtually impossible that the product would not be reasonably available from two or more commercial sources. Mere inconvenience does not make availability unreasonable. Also, this 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.

Therefore, the city’s current contract with the requestor’s fuel service company is prohibited by Code Section 25-4-105(3)(a).

The requestor is also advised that Constitutional Section 109 and Code Section 25-4-105(2)(a), will absolutely prohibit the board of aldermen from entering into a contract with the requestor’s fuel service company during his term of office and for one year after the requestor’s term of office ends.

The requestor is advised that a recusal or an abstention will not prevent a violation of Constitutional Section 109 and Code Section 25-4-105(2)or (3)(a).  Even without a board member’s vote, the authorization by the member’s board nonetheless results in a contract in which the board member has a prohibited interest.
 
 

Scott Rankin
Executive Director