October 13, 1988

FACTS:


The City Redevelopment Authority (Authority), in order to
further its urban renewal goals, has created ABC Associates, Inc.
(ABC) in conjunction with various cornmunity leaders. Three
individuals from the financial community, three community leaders
and three Authority board members constitute the uncompensated ABC
board. ABC's Executive Director is also the Deputy Executive
Director of the Authority. The ABC Board meets rarely; decisions
are generally accomplished through the efforts of its project
manager, an Authority employee who polls directors by telephone.
The ABC and the Authority share the same offices. ABC does not
employ a staff but rather borrows employees from both the Authority
and the City's Planning Board, and occasionally uses consultants.

ABC was created in part because, as a non-profit corporation,
it is not subject to certain restrictions imposed upon the
Authority. For example:

* The Authority is limited to using one contractor, while ABC
may use several.

* Financing organizations which may be prohibited from funding
redevelopment authorities are permitted to fund a non-profit
corporation.

* ABC can manage properties for longer periods of time than
the Authority.

In addition, the Authority can expedite the home steading
process by using ABC as an interim owner of blighted property,
thereby allowing construction to Begin. The Authority also directs
ABC to submit proposals for certain projects as a way to ensure
proposal quality.


QUESTIONS:


1. Is ABC a "municipal agency" as defined in G.L. c. 268A, s.1
(f)?[1]

2. How does the conflict of interest law apply to Authority/ABC
employees?


ANSWER:


1. Yes.

2. The conflict of interest law applies as discussed below,


DISCUSSION:


1. Municipal Agency


In considering whether a particular entity is a municipal agency
subject to our jurisdiction, the Commission focuses on the
following four factors:

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

2. whether the entity performs some essentially governmental
function;

3. whether the entity receives and/or expends

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public funds; and

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

Certainly, municipal officials were responsible for ABC's
incorporation. However, in making a determination as to
governmental creation, the Commission looks to the impetus for the
creation, rather than merely the affiliation ofthe entity's
organizers. EC-COI-88-19. Previously, governmental creation was
found where a state agency, on its own initiative, resolved to form
a non-profit corporation to further its legislatively mandated
functions. EC-COI-84-147. On the other hand, no governmental
creation was found where a municipality created a non-profit
corporation to fulfill obligations imposed by a contract. EC-COI-
88-19
. The current situation more closely resembles the former
example than the latter. The Authority's administrative decision
to create ABC was prompted by a desire to administer more
effectively its statutory mandate. Redevelopment authority powers
include the planning of workable programs for the development of
the community, general neighborhood renewal plans and community
renewal plans. G.L. c. 121B, s.46. ABC was incorporated to promote
public and private participation in the revitalization of blighted
City neighborhoods. Thus, it can be fairly said that ABC is
performing functions traditionally performed by a redevelopment
authority.

ABC receives funding from the Authority. Moreover, use of
Authority employees and facilities constitutes further substantial
use of public funds. Finally, three Authority board members are on
the ABC board and it is clear that all directors take action only
upon instruction from Authority personnel. For example, proposals
are submitted and withdrawn at the instruction of the Authority,
and board consensus is reached through the efforts of an Authority
employee.

Upon consideration of the impetus for creation, similarity of
purpose, use of public funds, as well as the substantial amount of
governmental control, we conclude that ABC is a municipal agency
and its Board members are municipal employees for the purposes of
the conflict of interest law.


2. Application of the Conflict of Interest Law


ABC's municipal agency status obviates several potential
conflict of interest violations which might ensue from its dealings
with the Authority. Section 17(a) prohibits a municipal employee
from receiving compensation from anyone other than a municipal
agency in relation to any particular matter in which the City has
a direct and substantial interest. As ABC's employees receive
compensation only from other municipal agenties, most frequently
the Authority, in connection with municipal matters, s.17(a) is not
violated. Conversely, as Authority employees receive no
compensation from ABC, no violation occurs. Section 17(c) prohibits
a municipal employee from acting as agent for anyone other than the
municipality in connection with any particular matter in which the
municipality has a direct and substantial interest. ABC and
Authority employees do not violate this provision as they act only
on behalfof the municipality in their respective capacities.

Section 20 prohibits a municipal employee from having a
financial interest in a contract made by a municipal agency.
Authority employees have no financial interest in ABC municipal
contracts; thus, there is no violation. ABC employees,
however, do have a financial interest in their Authority employment
contracts. However, all Authority-affiliated ABC employees are serving in that
capacity by virtue of their Authority positions. We find that their
service as municipal employees for both ABC and the Authority is
connected only to their Authority employment contracts. Therefore,
s.20 is not applicable to ABC/Authority employees. See EC-COI-84-
147
(similar result reached with respect to state agency and
agency-created non-profit corporation).[2]

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

[1] "Municipal agency," any department or office ofa city or town
government and any council, division, board, bureau, commission,
institution, tribunal or other instrumentality thereof or
thereunder. Although, the Commission previously reviewed conflict
of interest provisions with respect to a similar entity in 1985.
EC-COI-85-58, municipal agency jurisdiction was not considered at
that time in light of the representations made by the opinion
filer.

[2] Although the abstention requirements of s.19 will not apply to
official dealings by Authority members in matters in which the ABC,
a municipal agency, has a financial interest, Authority members
must observe the safeguards of s.23. Specifically, they may not use
their official positions to secure unwaranted privileges or
exemptions of substantial value to the ABC, and may not create a
reasonable appearance of undue favoritism towards the ABC.

End Of Decision