Request By:
Honorable Donald Stepner
Attorney at Law
P.O. Box 861
421 Garrard Street
Covington, Kentucky 41012
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of May 15 in which you, as city attorney for the city of Union [a sixth class city], initially seek an opinion concerning a possible conflict of interest with respect to a member of the board of trustees of the city who is also a member of the board of directors of a volunteer fire department under the following situation:
"The City of Union wishes to enter into a ten year lease with the Union Volunteer Fire Department, a non-profit organization, for the use of the fire department's training room facilities. In exchange for use of the fire department's training room for the City's regularly scheduled and special meetings and public hearings, the City would pay Four Thousand Three Hundred ($4,300.00) Dollars to have the driveway in front of the leased premises blacktopped. The amount paid for the blacktopping of the driveway would be the total consideration paid and would be allocated over the term of the lease.
"However, one of the members of the Board of Trustees of the City of Union is also on the Board of Trustees of the Volunteer Fire Department. . . ."
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"In light of the fact that both parties will benefit from entering into the Lease and this individual will have no personal pecuniary gain from this transaction, despite the individuals two positions, the Lease's validity may not be subject to challenge. Nevertheless, your opinion on this matter would be of assistance."
Based on the facts presented, we do not believe a conflict of interest would exist in view of the fact that the member of the board of trustees in question would have no pecuniary interest in the contract which is the essential criteria in determining a conflict of interest generally. We do believe however that the board member should not be present and participate in voting on the contract. His mere presence and abstention as you know would be counted with the majority, either for or against the execution of the contract. Payne v. Petrie, Ky., 419 S.W.2d 761 (1967).
As a basis for our conclusion that no conflict of interest would exist, we initially refer you to McQuillin, Mun. Corps., Vol. 10, § 29.97, which reads as follows:
". . . it is generally held that whenever a public officer enters into a contract the execution of which may make it possible for his personal interests to become antagonistic to his faithful discharge of a public duty, such contract will be held void as against public policy. . . ."
Next referring to the case of Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936), the Court of Appeals declared:
"It is a salutary doctrine that he who is intrusted with the business of others cannot be allowed to make such business an object of profit to himself. This is based upon principles of reason, of morality, and of public policy. These are principles of the common law and of equity which have been supplemented and made more emphatic by the foregoing and other statutory enactments. Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091, 17 Ky. Law Rep. 933. In their application and operation it is impossible to lay down any definite rules defining the nature of the interest of the officer, or indicating the line between that which is proper and that which is unlawful. In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something. . . ." (Emphasis added).
See also the late case of McCloud v. City of Cadiz, Ky. App., 548 S.W.2d 158 (1977).
Regarding the lease, you raise a question concerning whether or not the city must advertise for bids pursuant to KRS 424.260 for the material and equipment to be used on the driveway of the leased premise.
Assuming that the city is responsible for blacktopping the driveway, making it necessary for it to obtain by contract the necessary materials and equipment to do the job, we believe that KRS 424.260 would be applicable since this statute applies to all purchases of material and equipment by a city.
According to your letter the cost of construction would be $4300 which is of course considerable higher than the $2500 maximum purchase that may be made without competitive bidding. We wish to call your attention, however, to the fact that the 1978 legislature increased this maximum to $5000 [House Bill 33] effective June 17. So assuming that the contract for material and equipment would not be executed until after that date, no bids of course would be required.
With reference to your third question, you have failed to give us sufficient information as to the actual question you wish to raise and, as a consequence, we cannot answer it.