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Opinion

Opinion EC-COI-88-19

Date: 09/14/1988
Organization: State Ethics Commission

A non-profit corporation which was created to manage and operate cable television access channels is not considered to be a "municipal agency" under section 1(f). In determining when any entity is within the jurisdiction of 268A, the Commission has in past decisions considered the following factors: the means by which it was created (e.g., legislative or administrative action); the entity's performance of some essentially governmental function; whether the entity receives and/or expends public funds; and the extent of control and supervision exercised by government officials or agencies over the entity. EC-COI-88-2; 85-22; 84-65.

Table of Contents

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 typically 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] XYZ does 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 different 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.

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