Request By:
Mr. David W. Van Bibber
Executive Director
Princeton Urban Renewal and Community
Development Agency
P.O. Box 287
Princeton, Kentucky 42445
Opinion
Opinion By: David L. Armstrong, Attorney General; Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising a question concerning a possible conflict of interest situation involving a member of your Urban Renewal and Community Development Agency.
The member in question became a member of the agency on August 6, 1982 and attended his first agency meeting on August 24, 1982. He was not involved in any way in the planning and design of the project in question, the grant application, the real property acquisition or the planning for the resale of the acquired real property. During these stages of the project the member in question was an owner-occupant of the development area at 531 N. Donnivan Street but his property was not acquired or rehabilitated because it was in good condition. All plans and policies for the redevelopment of the development area had already been formulated and approved when the member in question took office.
The agency presently owns two parcels of land which it cannot use because they are too small to be redeveloped. The agency, therefore, is contemplating selling these properties so that they can be added to other parcels and, perhaps, be redeveloped at some future time. The plan to sell these lots was devised before the person in question became a member of the agency and the plan contemplates the sale of part of the land to the member in question.
Your question is whether the proposed sale of the land to the agency member creates a conflict of interest situation.
Your Urban Renewal and Community Development Agency was created pursuant to KRS 99.330 to 99.510. KRS 99.350(7) sets forth the prohibited conflicts of interest relative to agency members. That statute provides as follows:
"No officer or employe of the community, or of the agency, who in the course of his duties is required to participate in the formulation of plans or policies for the redevelopment of a development area or to approve such plans or policies, shall acquire any interest in any property included within a development area within the community. If any such officer or employe owns or has financial interest, direct or indirect, in any property included within such a development area he shall immediately disclose, in writing, such interest to the agency and to the council and such disclosure shall be entered in the minutes of the agency and of the council. Failure to so disclose such interest shall constitute misconduct in office. No payment shall be made to any member or officer of any agency for any property or interest therein acquired by the agency from such member or officer unless the amount of such payment is fixed by court order in eminent domain proceedings, or unless such payment is unanimously approved by the council."
The statute in part refers to an officer of an agency who participates in the formulation of plans or policies or one who approves plans or policies. While it may be that the member in question did not participate in the plan to sell the property the fact remains that the contemplated sale or transaction has not yet been consummated. The contract or sale would be consummated while he is a member of the agency and final approval of the sale to the member would be granted by the agency of which he is now a member. One of the elements of a conflict of interest is that the interest must exist at the time the contract is made. Thus, if the contract was made before the person became a member of the agency no conflict of interest would be created because of his subsequent appointment to the agency. See
Collinsworth v. City of Catlettsburg, 236 Ky. 194, 32 S.W.2d 982 (1930).
The statute also refers to acquiring an interest in property within a development area. While the property to be sold was at least initially within the development area it may be that from a technical standpoint it is not now within such an area.
We have not found a reported Kentucky case interpreting the provisions of KRS 99.350(7). However, after examining the statute and considering the basic purpose behind this and other conflict of interest statutes it would be our opinion that the statute is broad enough to preclude the member of the agency from purchasing, during his term of office, property from the agency of which he is a member.
Conflicts of interest may exist, of course, pursuant to statutory provisions but where there are no controlling statutory provisions, there can still be common law conflicts of interest. Consider, for example, the authorities mentioned in OAG 81-204, OAG 80-198 and OAG 73-9, copies enclosed. Note particularly what the court said in
Commonwealth ex rel. Vincent v. Withers,, 266 Ky. 29, 98 S.W.2d 24, 25 (1936), which would appear to exclude the contemplated transaction involving the agency member:
"It is a salutary doctrine that he who is interested 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. Falling within the principle are contracts with firms in which the member of the municipal body is a partner or a corporation of which he is an officer, or sometimes only a stockholder or employee.
Byrne & Speed Coal Co. v. City of Louisville, 189 Ky. 346, 224 S.W. 883;
Douglas v. Pittman, 239 Ky. 548, 39 S.W.2d 979. Furthermore, it is not material that the self-interest is only indirect or very small." (Emphasis added.)