Cincinnati Situation V - Officials Entering Into Contracts with Their City
The family firm's $100 million development takes this matter beyond
ordinary conflicts, due to state and local laws on officials entering into public contracts with their city. What makes this issue far more
serious than an ordinary conflict, which can be dealt with responsibly through
recusal, is that both state and local law require the official to choose
between his government position and an interest in a public contract.
It is this far more drastic remedy that has recently escalated emotions
surrounding the council member's situation.<br>
<br>
The state rule is <a href="http://codes.ohio.gov/orc/2921.42" target="”_blank”">R.C.
2921.42(A)(3)</a>, which prohibits an official from having a "position
of profit in the prosecution of" a public contract with the city. The
local rule is <a href="http://library.municode.com/index.aspx?clientId=19996&stateId=35&stateN…; target="”_blank”">Cincinnati
Municipal
Ordinance</a> §101-01, which reads in part, "<span id="TI_C101_s101-1">A member of council shall not be interested in any
contract with the city" and then says, in an odd way, that anyone who
is so interested in a contract forfeits his seat.</span><br>
<br>
The first issue is whether receiving tax
increment financing (TIF) money and a tax abatement from the city would
constitute a public contract. That issue was dealt with in a state EC
advisory opinion two years ago, in a matter involving another
Cincinnati council member (the advisory opinion is attached; see
below). Courts had previously found that a city's designation of a
development
as a TIF is effectively the city's purchase of economic or community
development and, therefore, is a public contract.<br>
<br>
The big difference
between the 2008 case and the current case is that the past council
member's interest in the developer was as a member of an LLC,
effectively a partner, while the current council member has no direct
ownership interest in the developer.<br>
<br>
The second issue then is, whether family ownership in a developer for
which
the council member works is sufficient to be considered a "position of
profit" or an interest in the public contract. At first blush, one
would have to say No. These provisions are clearly intended to prevent
an official from entering into a contract
authorized by himself or by the body on which he sits. There is nothing
said about family or other indirect interests or benefits. In fact, the
2008
advisory opinion, in interpreting the term "position of profit"
expressly speaks of a financial benefit "which is a definite and direct
result of the public contract."<br>
<br>
The council member's benefit would come from any reward he would
get from the company for bringing in the public contract, something
that is indefinite, unless some commission, bonus, raise, or promotion
has already been promised; from the satisfaction of benefiting his
father and uncle; and from the other indirect benefits listed in my
<a href="http://www.cityethics.org/content/cincinnati-situation-ii-conflicts-and…; target="”_blank”">blog post on indirect benefits</a> in this situation. However, such
indefinite and indirect benefits do not seem to have been
contemplated by the state legislature in drafting these provisions.<br>
<br>
Although the use of the term "interest" in the local ordinance does not
require the stronger "position of profit," it still does not expressly
include indefinite or indirect benefits. However, the interest of an
employee or family member of principals
benefiting from a public contract might be considered sufficient.<br>
<br>
But whatever the laws say, the appearance of impropriety is strong
here. The
question is, is recusal sufficient to deal responsibly with this
appearance of impropriety, whatever the law might be? Is it ever
acceptable for the company a council member works for, or for a company
run by his immediate family, to seek to enter into a contract with the
city?<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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