This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The opinion is based solely on the facts and circumstances as stated below and was approved by the Commission on June 9, 1995.
 
May a municipality apply for and obtain a Community Development Block
Grant (CDBG) to fund an extension of its water system and the relocation
of an existing street due to the expansion of the manufacturing facility of the municipality's major industry when the State requires as part of the CDBG
application process that the municipality and the industry enter into a
"Memorandum of Understanding" that requires the industry to reimburse the municipality the CDBG monies if the industry does not expand and when three members of the municipality's governing board are employees of the industry?
     The Mississippi Ethics Commission is restricted to interpreting and issuing opinions on Sections 25-4-101 through 25-4-109, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890. Therefore, Mississippi laws outside the jurisdiction of the Commission and internal rules and regulations of the local governmental entity are not addressed by this opinion.

     Pertinent facts and circumstances provided by the requestor, absent identifying data, in the form of the requestor's letter dated June 6, 1995, and the proposed "Memorandum of Understanding," by attachment are incorporated into this opinion.
 

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(d), (e), (f)(i)(ii), (g)(ii), (h), (k)(i)(ii), (1), (m) and (p)(i)
states:
 
"(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.
 
(e) 'Compensation' mean money or thing of value received, or to be received,
from any person for services rendered.
 
(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) 'Governmental' 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.

(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).

(1) '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.

(m) 'Person' means any individual, firm, business, corporation, association, partnership, union or other legal entity, and where appropriate a governmental entity.

(p) 'Public servant' means:

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

Code Section 25-4-105(1), (2), (3)(a)(d) and (5) states:

"(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.

(d) Perform any service for any compensation for any person or business after termination of his office or employment is relation to any case, decision, preceding or application with respect to which he was directly concerned or in which he personally participated during the period of his service or employment.

(5) No person may intentionally use or disclose information gained in the course of or by reason of his official position or employment as a public servant in any way that could result in pecuniary benefit for himself, any relative, or any other person, if the information has not been communicated to the public or is not public information."

     The Commission's finding is premised on its understanding of the following facts and circumstances. The ownership of the water system and street remain with the municipality and neither is necessary for the expansion of the industry to occur. The purpose of the extension of the water system is to keep the industry as a customer of the municipality's utility system. The purpose of the relocation of the street is to provide safer and better traffic flow. Both of these functions are within the general authority and responsibility of the municipality.

     Based solely on the facts and circumstances presented by the requestor, the Commission finds that the "Memorandum of Understanding" is in fact required by the CDBG grant to serve as an indemnity agreement with the single objective of protecting the financial interests of the municipality.

     Therefore, the only interest the three board members could have in the "Memorandum of Understanding" is a public interest which is not prohibited by the conflict of interest laws.

     The Commission feels it would be remiss if it did not address the circumstance of three of the five municipal board members being employed by the largest industry in the municipality. Although this particular instance did not result in a conflict of interest, it is probable that similar instances will arise in the future that are in fact conflicts of interest because of the current make-up of the municipality's governing board.

     Also, it appears from the comments in the requestor's letter that the governing authority of the municipality recognizes the potential for conflicts of interest to occur because of the current make-up of the municipality's governing board. However, the Commission strongly cautions the municipal governing board to exercise extreme caution when dealing with this local industry.
 
 

Ronald E. Crowe Executive Director