ADVISORY OPINION NO. 07-049-E

May 11, 2007

The Mississippi Ethics Commission issued this opinion on the date shown above in accordance with Section 25-4-17(i), Mississippi Code of 1972, as reflected upon its minutes of even date. The Commission is empowered to interpret and opine only upon Article IV, Section 109, Mississippi Constitution of 1890, and Article 3, Chapter 4, Title 25, Mississippi Code of 1972. This opinion does not interpret or offer indemnity from liability for any other laws, rules or regulations. The Commission based this opinion solely on the facts and circumstances provided by the requestor as restated herein. The indemnity provided under Section 25-4-17(i) is limited to the individual who requested this opinion and to the accuracy and completeness of these facts.

I. LAW

The pertinent Ethics in Government Laws to be considered here are as follows, to wit:

Section 109, Miss. Const. of 1890.

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.

Section 25-4-103, Miss. Code of 1972.

(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.

(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.

(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.

(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.

(l) “Pecuniary benefit” means benefit in the form of money, property, commercial interests or anything else the primary significance of which is economic gain. Expenses associated with social occasions afforded public servants shall not be deemed a pecuniary benefit.

(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.

(q) “Relative” means the spouse, child or parent.

Section 25-4-105, Miss. Code of 1972.

(1) No public servant shall use his official position to obtain pecuniary benefit for himself other than that compensation provided for by law, or to obtain pecuniary benefit for any relative or any business with which he is associated.

(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:

(b) May be a contractor or vendor with any authority of the governmental entity other than the 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 or vendor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.

(c) May be a subcontractor with any authority of the governmental entity other than the 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 subcontractor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent where the primary contract is let to the lowest and best bidder after competitive bidding or 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.

II. FACTS

Facts provided by the requestor are set forth below, with identifying information redacted, and are considered a part of this opinion.

I am writing to request advisory opinions in order to advise me as a business owner concerning various projects that my privately owned business may in the future wish to perform for other governmental agencies and private entities located in [my home] County, Mississippi. I have reviewed Mississippi Constitution Section 109 as well as Section 25-4-101 et seq. of the Mississippi Code of 1972 and have some concerns about whether there are any ethical issues which might arise if my privately owned business performs copying services or sells supplies for different entities and would appreciate your advisory opinion.

In 1992 my wife and I incorporated [our business]. At that time, we purchased [a printing business] and [a paper business]. [The printing business] is a printing and office supply store, and [the paper business] is a gift and novelty store. Both businesses operate [in the City]. Both businesses were well established at the time we incorporated and purchased them in 2002. From before 2002 and continuing after that time, [the printing business] and [the paper business] has performed printing projects for various entities within the County and the area and has sold products as well. The business has succeeded because we work hard to provide quality products and prompt service at a reasonable price. I am writing out of an abundance of caution because I have heard of various elected officials running afoul of the Ethics in Government laws. I do not believe there will be any ethical issue with [our corporation] transacting business with most of the entities set forth in this letter, but there might be a select few that give you concern.

This letter will attempt to break down the contracting parties into different categories. There are a large number of businesses listed here, but you will see below that they can be placed in groups of like businesses and I am guessing that your answer to each category of business will be the same for each individual business listed. Although the letter specifically discusses whether there would be any ethical issues with [the printing business], I am also concerned about [the paper business], which is also owned and operated by [our corporation]. Thus, even though I specifically mention [the printing business], I would appreciate your assuming the possibility of commercial transactions by [our corporation], whether [the printing business] or [the paper business].

(1) Entities Created by City and County.

I am no expert on Ethics in Government, but I tend to think this category will give you the greatest concern. In this category are entities which are created pursuant to an Interlocal Cooperation Agreement between [the City] and [the County]. There are many of these within the County, but two that have requested to do business with [the printing business] are: (a) [City]-[County] Public Library; and (b) [City]-[County] Recreation Authority. These two entities are created by the City Council and the County Board of Supervisors through an Interlocal Cooperation Agreement between the two. The City and County are referred to as the “Governing Body” but both entities have their own separate Boards of
Directors.

The City owns the [City]-[County] Public Library building and provides funding per year in the approximate amount of $216,000. The [City]-[County] Recreation Authority services parks and provides recreational opportunities for residents of the City and the County. The City owns a Park in [the City] and other athletic facilities within the City and provides funding in the amount of $530,645 plus payments on a bond obligation. For both of the entities described above, the City Council and the County Board of Supervisors share in the responsibilities of appointing Board members. However, once the financial contribution to these two entities is made by the City, their autonomous Boards determine in its own method how and where to expend money.

Both of these entities were customers of [the printing business] for many years before I was elected. I am wondering whether continued business, now that I am a councilman, would constitute any sort of indirect financial interest that might violate either Section 109 of the Mississippi Constitution or §25-4-105 of the Mississippi Code or some other ethics in government code section.

(2) [City] Light & Water Department.

Similarly, the City owns the [City]-Light & Water Department (CLWD). However, the CLWD has a separate budget, is governed by a separate Board of Directors, has a separate Executive Director, has separate legal counsel and is not directly or indirectly supervised by the Mayor and City Council of the City. The City is the “governing authority,” but the City does not fund CLWD or appropriate money from its funds for CLWD use or approve the budget for CLWD. Rather, CLWD is funded by utility revenue. CLWD maintains its own separate books, records, and has separate employees. The employees of the CLWD have a different employee handbook than the City and in no wise answers to the City for the acts of its employees. CLWD maintains its own separate insurance coverage covering its general liability and property as well as its own separate Workers Compensation policies and coverage. From time to time over the past years, they have requested that [the printing business] perform services or sell products to CLWD. I am wondering whether continuing such transactions, if entered into now that I am a City Councilman, would constitute a violation of Section 109 of the Mississippi Constitution or
§25-4-105 of the Mississippi Code.

[In subsequent correspondence the requestor provided the following additional information about the CLWD at the Commission’s behest.]

The City is defined as the "governing authority" in the City Code. However, we have always considered the CLWD to be a separate legal entity, that can sue and can be sued. The City Council appoints the CLWD Board of Commissioners. CLWD's Board actions are not advisory. There is no appeal to the City Council from the CLWD Board. The City is not involved in setting utility rates from which the CLWD derives its funding. CLWD sets its own utility rates (together with TVA and I believe PSC oversight and approval). In the interest of full disclosure, the City pays CLWD for the City's utility use. CLWD uses the City's diesel fuel and reimburses City for City's cost. CLWD pays the City certain
payments in lieu of taxes.

(3) Entities with whom the City Contracts.

The City also has a contract with the [City]-[County] Humane Society. The Humane Society is a private non-profit corporation run by its own separate Board of Directors. Pursuant to separate contracts with the City and the County, the Humane Society accepts animals seized by the respective animal control officers and each governmental entity pays the Humane Society fixed sum per year. The City pays the [City]-[County] Humane Society approximately $60,000 a year for these animal care services. In the event their organization calls upon [the printing business] to produce print materials or provide other services, I’m wondering whether such a transaction would violate Section 109 of the Mississippi Constitution or §25-4-105 of the Mississippi Code.

(4) Main Street [Organization].

I also seek your guidance with regard to Main Street [Organization]. Main Street [Organization] is, according to the Secretary of State’s website, a non-profit corporation. It might be considered quasi-governmental given the level of funding that it receives from government agencies. It receives approximately $20,000 from the City and sponsors [a Festival] which is held each year in downtown. In the past years, Main Street has often called upon [the printing business] to produce brochures other such documents for various promotional things. My wife also serves as a member of the Board of Directors of the Main Street [Organization]. She is not compensated in any respect for her service on the Main Street [Organization] Board of Directors. I am wondering whether the fact that the City provides money to Main Street and/or whether [my wife] being on the Board of Directors violates Section 109 of the Mississippi Constitution or §25-4-105 of the Mississippi Code.

(5) [City]-[County] Economic Development Link.

I’m also wondering whether or not I have a conflict in any respect with the [City]-[County] Economic Development Link. Since this organization was originally set up through a merger of the [City] Chamber of Commerce and the [City]-[County] Economic Development Association, and long before its creation, the City Council has had individual members of the Council and the Mayor serve on the Board of Directors. I’m somewhat concerned with whether or not, as a City Council person, I can serve on the Board of Directors of the [City]-[County] Development Link and then to vote as a City Councilman
to fund the Link. Service on the [City]-[County] Development Link Board is not paid in any respect and I derive no pecuniary benefit from being on the Board although I imagine I have fiduciary duties to the Link Board. Also, I would appreciate your advisory opinion on the issue of whether I would have an ethical conflict if the Link were to seek to transact business with [the printing business].

(6) [City]-[County] Emergency Management E-911.

[City]-[County] E-911 is governed by a separate Board of Directors who are appointed by the County Board of Supervisors but frequently includes as one of its Board members the Chief of Police. The E-911 Board is funded through surcharges on telephone bills as described and provided for in Section 19-5-313 of the Mississippi Code, but in the distant past it has been my understanding that the City might have appropriated additional money to the E-911 Board. However, it has not done so in quite some time. Please advise if you feel it would be a violation of the Ethics in Government laws for [the printing business] to provide services or supplies to this entity.

(7) Non-Profit Agencies Funded by City.

The next category of entities with which I request your advisory opinion relate to non-profit
charitable organizations and philanthropic entities that are funded in part by contributions from the City. These include the following entities which receive an annual appropriation by the City:

1. [Local] Chapter of American Red Cross;
2. Contact Help Line;
3. Retired Senior Volunteer Program (RSVP);
4. Greater [City] Learning Center;
5. Boys and Girls Club of [City];
6. Safehaven;
7. [City] Arts Council; and

Each of these entities receives funding from the City Council and we vote during the budget process of each year on the amount of the appropriation, if any, to be given to these entities. I am wondering whether by voting on a contribution to these entities, I am in any way causing myself an ethical problem if [the printing business] were to be called upon to transact business with any of these entities.

(8) [City]-[County] Convention and Visitor’s Bureau.

The next entity with which I am concerned is the [City]-[County] Convention & Visitors Bureau. This is an entity that is not directly funded through any discretion on the part the City Council. A local and private Bill passed by the Mississippi Legislature authorizes an additional two percent (2%) over the normal sales tax to be charged on sales by certain restaurants and hotels within the City. This sales tax revenue is then paid by the particular merchant to the State of Mississippi, delivered to the City, who then pays it to the Convention & Visitors Bureau pursuant to the local and private bill. Although the City
Council does have some input into the appointment of CVB Board members, it is otherwise an autonomous board. I would therefore request your advisory opinion about whether I would be in violation of the ethics in government laws for [the printing business] to provide printing services or sell other products to the Convention & Visitors Bureau.

(9) [Local Manufacturer].

The City pays money for some sort of loan that was taken out to assist a local startup business with its initial costs. The City pays on a bonded indebtedness for and on behalf of [a local manufacturing corporation] an amount in the approximate neighborhood of $13,021. This debt came into existence before I was elected councilman. I am therefore requesting your opinion about whether you see any ethics in government issues with [the printing business] providing copying services or selling any sort of product to [this manufacturer] as a result of a contribution made by the City of this loan which contract was entered into before I was elected to the City Council.

(10) Nonprofit Agencies Not Funded by City.

The next category of business with which I would request your advisory opinions are unaffiliated governmental entities or private non-profit corporations or agencies of the State that receive no funding from the City. These include:

1. United Way;
2. [Local] Community College;
3. County Schools;
4. [City] Municipal Separate School District;
5. County Building Inspection Department;
6. County Maintenance Department;
7. [City] Historic Foundation;
8. The Good Samaritan Clinic;
9. [Engineering Firm] (City Engineer for City);
10. County Justice Court;
11. [Local Public] University;
12. Mississippi Math & Science School;
13. North Mississippi Contract Procurement Center;
14. Tennessee-Tombigbee Waterway & Development Authority;
15. Community Counseling;
16. Office of the District Attorney;
17. [Neighboring] County School System; and
18. County Port Authority.

The City in no wise provides any funding to any of the above mentioned entities, does not appoint their Board members, and with the exception of [the engineering firm], does not have any contractual relationship with any of them. I would respectfully request that you give an advisory opinion about whether any ethical issues arises with me if [the printing business] transacts business with any of these entities.

If you have any other questions or comments that I’ve not properly addressed in this request for an advisory opinion, I would certainly welcome your questions and will strive to obtain immediate answer to additional follow-up questions you may have.

III. ANALYSIS

(1) Entities Created by City and County.

Section 109, Miss. Const. of 1890, and its statutory parallel, Section 25-4-105(2), Miss. Code of 1972, both quoted above, prohibit a member of a public board from having any direct or indirect interest in a contract with the government which is funded or otherwise authorized by that board during his or her term or for one year thereafter. Frazier v. State, ex rel. Pittman, 504 So.2d 675, 693 (Miss. 1987). A city councilman is prohibited from having an interest in a contract with a governmental entity or authority which is funded by the city council. Because the city council provides significant funding for the [City]-[County] Public Library and the [City]-[County] Recreation Authority, the city councilman’s businesses are prohibited from doing business with either authority during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2).

(2) [City] Light & Water Department.

Because the city council does not fund the Light and Water Department and does not approve its budget, no violation of Section 109 and Section 25-4-105(2) will occur if the city councilman’s businesses do business with the Light and Water Department. Nevertheless, other restrictions do apply. The Light and Water Department is an autonomous “authority” of city government, as defined in Section 25-4-103(a). A city councilman is prohibited from having a “material financial interest” in a business which is a contractor, subcontractor or vendor to the city, pursuant to Section 25-4-105(3)(a). However, certain exceptions to this restriction are codified in Section 25-4-105(4). The councilman may “have a material financial interest in a business which is a contractor or vendor with any authority of the governmental entity other than the authority” he serves, so long as the “contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.” See Section 25-4-105(4)(b). Additionally, the councilman may “have a material financial interest in a business which is a subcontractor with any authority of the governmental entity other than the authority” he serves, so long as the “the primary contract is let to the lowest and best bidder after competitive bidding or 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.” See Section 25-4-105(4)(c). Therefore, the councilman’s businesses may do business with the Light and Water Department if and only if the circumstances comply with the conditions set forth in the above cited exceptions.

(3) Entities with whom the City Contracts.

Although the Humane Society is a private non-profit corporation, the same rule applies to it as to the [City]-[County] Public Library and the [City]-[County] Recreation Authority discussed under topic number 1. Because the city council provides significant funding for the Humane Society, the city councilman’s businesses are prohibited from doing business with the Humane Society during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2). If the city council ceases funding the Humane Society, then the prohibition will end.

(4) Main Street [Organization].

The Main Street Organization is comparable to the Humane Society because it is a private non-profit corporation receiving funds from the city council. Like the Humane Society, the city councilman’s businesses are prohibited from doing business with the Main Street Organization during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2) because the city council provides significant funding for the Main Street Organization. If the city council ceases funding the Main Street Organization, then this particular prohibition will end.

Because the councilman’s spouse “is not compensated in any respect for her service on the Main Street [Organization] Board of Directors,” no violation of Section 109 and Section 25-4-105(2) should arise from her uncompensated service on that private board. However, the councilman is prohibited from voting on or otherwise participating in the approval of payments from the council to the Main Street Organization so long as his wife serves on the Board of Directors. Pursuant to Section 25-4-105(1), Miss. Code of 1972, no public servant may use his position in government to obtain pecuniary benefit for a “business with which he is associated.” The term “business” is defined in Section 25-4-103(c) in part as “a nonprofit corporation or other such entity, association or organization receiving public funds.” The term “business with which he is associated” is defined in Section 25-4-103(d) in part as “any business of which a public servant or his relative is [a] director.” (emphasis added) Thus, the Main Street Organization is a business with which the councilman is associated, and he must recuse himself from any action by the city which would benefit the Main Street Organization.

To recuse himself the councilman must leave the council meeting before the matter comes before the council, and he must not return until after the discussion and/or vote has occurred. The councilman must also avoid debating, discussing or taking action on the subject matter during official meetings or deliberations and also avoid discussing the subject matter with staff or any other person. An abstention is considered a vote with the majority and is not a recusal. Furthermore, the minutes of the meeting should state the recusing member left the room before the matter came before the public body and did not return until after the vote.

(5) [City]-[County] Economic Development Link.

The Economic Development Link is similar to the Humane Society and the Main Street Organization discussed under topics 3 and 4. Like those organizations, the city councilman’s businesses are prohibited from doing business with the Economic Development Link during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2) because the city council provides significant funding for the Economic Development Link. If the city council ceases funding the Economic Development Link, then this particular prohibition will end.

Like the Main Street Organization, the Economic Development Link will be a business with which the councilman is associated so long as he is a director of that organization. Consequently, the councilman must recuse himself from any action by the city which would benefit the Economic Development Link so long as he continues to serve as a director of the organization. Because the councilman “is not paid in any respect and ... derive[s] no pecuniary benefit from being on the [Economic Development Link] Board,” no violation of Section 109 and Section 25-4-105(2) should arise from his uncompensated service on that private board.

(6) [City]-[County] Emergency Management E-911.

An emergency communications district created by a board of supervisors pursuant to Section 19-5-313, Miss. Code of 1972, is an “authority” of county government, as defined in Section 25-4-103(a). It is not funded by the city council. Therefore, the councilman’s businesses are not prohibited from doing business with the emergency communications district (E-911 commission) since it is an “authority” of a separate “governmental entity” which is not funded by the city council. See also Section 25-4-103(h).

(7) Non-Profit Agencies Funded by City.

Like the other private sector organizations discussed under topics 3, 4 and 5, the city councilman’s businesses are prohibited from doing business with nonprofit entities funded by the city during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2). If the city council ceases funding a nonprofit entity, this particular prohibition will end for that entity.

(8) [City]-[County] Convention and Visitor’s Bureau.

The CVB is analogous to a municipal separate school district in that it is a separate governmental entity which is funded by the city council on a non-discretionary basis, pursuant to the local and private legislation. The Mississippi Supreme Court has held that where a governmental board has no discretion in funding another governmental entity, no violation of Section 109 and Section 25-4-105(2) will occur if a member of that board contracts with the separate governmental entity. Frazier at 700-701. Therefore, the councilman’s businesses are not prohibited from doing business with the Convention and Visitor’s Bureau.

(9) [Local Manufacturer].

Unlike the general appropriations of money discussed above, this payment by the city council is for a specific purpose. More particularly, the city “pays on a bonded indebtedness for and on behalf of [a local manufacturing corporation] an amount in the approximate neighborhood of $13,021.” Because this payment would not fund or authorize transactions between the manufacturing corporation and the councilman’s businesses, no violation of Section 109 and Section 25-4-105(2) should arise if the councilman’s businesses do business with the manufacturing corporation.

(10) Nonprofit Agencies Not Funded by City.

These facts indicate no potential for a violation of the Ethics in Government Laws if the councilman’s businesses do business with any of the eighteen entities listed, except for one. While the city’s engineering firm does not receive “funding” from the city in the same sense as the other entities discussed above, the firm certainly has a contract with the city and receives appropriations of money authorized by the city council. If the councilman’s businesses do business with the city’s engineering firm, the councilman will likely acquire a prohibited interest in the contract between the city and the firm. Therefore, the city councilman’s businesses are prohibited from doing business with the city’s engineering firm during the councilman’s tenure in office or within one year thereafter, pursuant to Section 109 and Section 25-4-105(2). If the city council ceases to contract with that firm, then this particular prohibition will end for that firm.

MISSISSIPPI ETHICS COMMISSION



BY: Tom Hood, Executive Director and
Chief Counsel