Request By:
Hon. James G. Tripp
Attorney at Law
P.O. Box 827
10 Court Street
Mt. Sterling, Kentucky 40353
Opinion
Opinion By: Steven L. Beshear, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of July 27 on behalf of the Mt. Sterling Urban Renewal & Community Development Agency which recently acquired a parcel of real estate to be developed as a Community Center. The Urban Renewal Agency Board has decided that since it would have a limited existence it would be advisable to set up a separate private, nonprofit organization to manage and operate the Community Center established pursuant to Chapter 273 KRS. All the real and personal property of the Community Center would be transferred to the nonprofit organization and all operating funds regardless of the source would be channeled to the corporation including funding from the Urban Renewal Agency. Also included would be funds appropriated by the city and county as well as state grants. One of the proposals concerning the makeup of the corporate's Board of Directors would include a member of the city council as well as a member of the Urban Renewal Agency. Under the circumstances you raise the following questions:
"A. Does it constitute a conflict of interest or is it illegal or improper under applicable law for a member of a City Council to serve as a member of a Board of Directors of a non-profit corporation established to operate a community center in the same city when such corporation will be funded in part by an Urban Renewal Agency in that city and may be funded in part by the city government?
B. Does it constitute a conflict of interest or is it illegal or improper under applicable law for a member of the Board of Directors of an Urban Renewal Agency to serve on the Board of Directors of a non-profit corporation for establishment of a community center which is funded in part by that Urban Renewal Agency?"
Assuming that the Agency was established as an independent agency of the city pursuant to KRS 99.350, a serious question would appear concerning the power of the Agency to divest itself of the statutory obligation to administer the Urban Renewal Act which includes, of course, the acceptance of loans and grants from public and private sources for the purpose of developing the area involved. We refer you to powers and duties of the Agency mentioned in KRS 99.350, 99.360 and 99.400. We are also attaching a copy of OAG 83-230 which bears on this question.
On the other hand, and in answer to your questions, the fact that a member of the city council and a member of the Urban Renewal Agency are selected to serve as directors of the nonprofit corporation would not create any conflict of interest or any incompatibility irrespective of the fact that city funds and Agency funds are channeled to the corporation. A conflict of interest, if any exists, would be based on a common law conflict which evolves where the officer receives some pecuniary gain which would be against public policy. See Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936). The court in this case pointed out that the disqualifying interest must be pecuniary or proprietary in which the officer stands to gain or lose something.
Since it is obvious that such officers would not derive pecuniary gain by serving in both capacities, any possible common law conflict of interest would be eliminated and their services on the corporation's Board of Directors would be valid in our opinion. We also might mention that since the private corporation is not a public agency no statutory or constitutional incompatibility would exist as they would not be serving in two public offices at the same time that violates Section 165 of the Constitution and KRS 61.080.