September 14, 1988

 

FACTS:


A Cable Company (Cable) and the Mayor of a city (Mayor), as
the issuing authority, executed an agreement whereby Cable was
granted the renewal cable television license for the City. Among
other provisions, Cable agreed to make available channels for
public, educational and local municipal access programming.
License Agreement (hereinafter LA) Cable also agreed to provide
the City or its designated access agent with a onetime cash grant
in acknowledgement of the City's acceptance of responsibility for
all access and local programming responsibilities. In addition,
Cable provided the City with a onetime equipment facilities
grant.

The agreement provided that either the City or a designated
nonprofit access corporation[1] be responsible for the management
and operation of the access channels. Cable agreed to cooperate
with both the City and the corporation in the operation of the
access channels. Id.

Articles of Organization were filed with the Secretary of
State forming XYZ, a nonprofit corporation. The Mayor chose the
initial board of directors and the executive director. A new
board was elected by the standing board, pursuant to the
corporate bylaws. The corporate purposes as set forth in the
Articles include assisting in the provision of public and
educational access on the cable system in the City. Upon XYZ's
incorporation, the City transferred to it the two Cable grants
for use in setting up and operating the public and educational
access channels. You are the attorney for XYZ.
 


QUESTION:


Is XYZ a "municipal agency" as defined by Chapter 268A, s.1
(f)?
 


ANSWER:


No.
 


DISCUSSION:



Page 210

The conflict of interest law defines municipal agency as "any
department or office of a city or town government and any
council, division, board, bureau, commission, institution,
tribunal or other instrumentality thereof or thereunder," G.L. c.
268A, s.1(f)(1986 ed.). The Commission has previously concluded
that the application of the conflict of interest law cannot be
conditioned on the organizational status of an entity. In the
Matter of Louis L. Logan,
1981 Ethics Commission 40,45. Thus,
XYZ's corporate structure is not enough to exempt it from the
definition of municipal agency. Previously, the Commission has
focused on the following four factors in determining an entity's
status for the purposes of Chapter 268A

(1) the means by which it was created (e.g., legislative or
administrative action);

(2) the entity's performance of some essentially
governmental function;

(3) whether the entity receives and/or expends public funds;
and

(4) the extent of control and supervision exercised by
government officials or agencies over the entity. EC-COI-
88-2; EC-COI-85-22; EC-COI-84-65
.

Based on the following consideration of these factors, we find
the indicia of government insufficient to render a municipal
agency as defined in s.1(f).


1. Creation:


Balancing several factors, we conclude that XYZ was not
governmentally created. The Mayor's selection of the Board of
Directors and the Executive Director suggests a degree of
municipal involvement in XYZ's organization. Also, the status of XYZ
as a permanent entity distinguishes it from those temporary, ad
hoc
advisory committees which the Commission has regarded as
exempt from the definition of state or municipal agencies.[2]
Compare EC-COI-82-81 (task force formed with guidelines outlining
goals and timetables); EC-COI-80-49 (advisory committee organized
to complete objective within 60 days). However, these factors go
to the composition of XYZ, rather than the impetus for its
creation. As stated, the agreement contemplated the City's
designation of a nonprofit corporation to manage the access
channels. Toward that end, XYZ was organized. Thus, the corporation
stemmed from a contract between Cable and the Mayor. The
Commission has previously addressed the status of entities
created by several methods, although never one created pursuant
to contract

We exercised jurisdiction over entities formed pursuant to an
Act of Congress, state legislation, resolution, and Executive
Order. EC-COI-83-74; EC-COI-88-16; EC-COI-84-147; EC-COI-84-55.
Compare EC-COI-84-65
(beneficial trust created pursuant to an
individual's will determined to be private, rather than public,
entity); EC-COI-83-3 (task force established by Executive Office
determined private entity). Thus, the presence of a law, rule or
regulation is necessary. EC-COI-82-81. We do not find that an
entity stemming from a private contract rises to that level,
notwithstanding the participation of governmental officials in
organizational efforts.


2. Governmental Functions:


We conclude that XYZ does not perform functions inherently
governmental in nature. Previously, the Commission found
governmental functions where those functions were contemplated by
either state or federal legislation. See EC-COI-83-74
(implementation of the Federal Job Training and Partnership Act);
EC-COI-84-55 (implementation of National Health Planning and
Resources Development Act); EC-COI-85-147 (functions required by Act
establishing the University of Massachusetts). XYZ's activities are
the fulfillment of an obligation undertaken by the City through
contract, rather than one imposed by constitutional or legislative
authority. Indeed, Cable supplied the funds in acknowledgement of
the acceptance by the City or its agent of all programming
responsibilities. Thus, there is a strong argument that XYZ is
performing Cable's, rather than the City's, functions.

XYZ assists in the provision of public and educational access
in the City's cable television system. "Access" is defined as the
right of any City resident to use designated facilities, equipment
and/or channels of the system. The corporation provides information
and instruction to City citizens, coordinates and schedules
production and transmission on the access channels, and implements
new programming as the need arises. In the first few months of
programming, XYZ broadcast various municipal meetings and hearings,
school sporting events, Memorial Day ceremonies, and civic award
banquets.

While broadcasts of such municipal activities can be
characterized as a public service, they are not mandated
activities. The fact that a private entity performs a function
which serves the public does not make its acts governmental
functions. See Rendell Baker v. Kohn, 457 U.S. 830,842(1982) (in
deciding a claim under 42 U.S.C. 1983, court held that performance
of public function does not render entity a governmental actor).
At the federal level, governmental action is found when the
challenged entity performs functions that have been traditionally
the exclusive prerogative of the federal government. San Francisco
Arts and Athletics, Inc. v. Olympics Committee
, 1075. Ct.
2971, 2985(1987) (U.S. Olympic Committee's performance of public
service does not render it a governmental actor, as coordination
of amateur sports not a traditional governmental function). Public
television scheduling and production are neither traditional nor
exclusive roles of government.

Page 211


3. Public Funds:

 

XYZ is currently funded by the two Cable grants outlined
above.[3]  Upon execution of the agreement, Cable paid the funds to
the City, which held same until the incorporation of XYZ. Thus, the
City was a conduit for the transfer of private funds to XYZ.[4]

In addition, Cable paid other monies in the form of license fees
to the Issuing Authority under the Agreement. Those fees can be
likened to similar monies paid in exchange for governmental
privileges, the proceeds of which are public funds. See e.g. G.L.
c. 156B
, s.114(a) (fee for incorporation); G.L. c. 159A, annotation
9 (fee for driver's license). The Cable grants were paid, not to
the government to obtain a privilege, but to a nonprofit
corporation in exchange for services. Thus, the grants are
distinguishable from monies more typicaily regarded as representing
public funds. See 47 U.S, c. 562(g) (b) (Federal-Communications Act
defining cable "franchise fees" and providing that such fees do not
include payments made in support of public access).


4. Municipal Government Control:


There is little, if any, evidence of municipal governmental
control over XYZ's operations. The Mayor's appointment of the
original board of directors does not in and of itself indicate that
he has a supervisory role in the activities of the corporation. The
corporate bylaws provide that subsequent directors and officers
shall be elected annually by the current Board. XYZ has full
discretion in the operation and management of the access channels.
The scope of the corporation's powers and purposes are delineated
in its Articles of Organization, which do not provide for reporting
requirements to the Mayor. Likewise, both the bylaws and the
agreement itself make no reference to government supervision of the
corporate activities. No formal contract or agreement between XYZ and
the City exists.[5]  XYZdoes not use municipal staff or facilities in
its daily operations.

In summary, we find that XYZ was neither governmentally created
or publicly funded. Moreover, there is no exercise of governmental
control or performance of inherently governmental functions.
Therefore, XYZ is considered a private entity for the purposes of G.L.
c. 268A and does not come within the jurisdiction of the State
Ethics Commission.

---------------

[1] The corporation it defined as "the independent nonprofit
corporation established to manage public access in the City and
funded by licensee."

[2] Although XYZ was organized without a termination date, the
lease term is ten years.

[3] After depletion of grant funds, XYZ will generate its own
operating costs through promotions and advertising.

[4] Although the City was in initial receipt of the grants, there
is no indication of commingling. Compare: EC-COI-81-77 (where
monies from private funds are commingled and are by statute under
control and management of a governmental entity, they are to be
treated at governmental funds). Evidence that the City used the
funds in the interim may lead to a dtfferent result.

[5] Were there in fact XYZ/City correspondence which suggests
a degree of control over XYZ in exchange for transfer of the grants,
our finding as to governmental control may be altered.

 

End Of Decision