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Opinion EC-COI-88-24

Date: 10/13/1988
Organization: State Ethics Commission

A non-profit corporation created by a city redevelopment authority is considered a "municipal agency." In balancing the factors stated in 88-19, above, the Commission concluded that the corporation was primarily created to help the authority in performing its functions, used public funds, and was subject to substantial government control. Employees of the authority who work for the corporation are therefore subject to sections 17 and 23. NOTE: MBTA v. SEC added a fifth factor.


The City Redevelopment Authority (Authority), in order to further its urban renewal goals, has created ABC Associates, Inc. (ABC) in conjunction with various community 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 homesteading 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.


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?


1. Yes.

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


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 of the 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 agencies, 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 behalf of 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 of a 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 unwarranted privileges or exemptions of substantial value to the ABC, and may not create a reasonable appearance of undue favoritism towards the ABC.


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