Request By:
A. David Blankenship, Counsel
Paintsville Utilities Commission
Opinion
Opinion By: Daniel Cameron, Attorney General; James M. Herrick, Assistant Attorney General
Opinion of the Attorney General
The Paintsville Utilities Commission ("Commission") asks this Office whether, consistent with prohibitions against conflicts of interest, Commission employees may privately negotiate with a contractor for the purchase of the vehicles at the end of the Commission's lease of those vehicles.
As a leased vehicle approaches the end of its lease term, the contractor replaces it with a new vehicle after assigning a fair market value to the old vehicle and disposing of it by sale on the open market or otherwise. According to the Commission, the difference between the sale price and any balance remaining on the lease "is rolled into the [Commission's lease] program regardless of who purchases the vehicle." If permitted, the contractor would entertain purchase offers from the Commission's employees.
While the contractor has authorized the Commission "to set the sales price in the case of an employee," the Commission says that it would not "be inclined to do so." Thus, this opinion presumes that such transactions would be negotiated independently between the contractor and the employee. This opinion also assumes that those purchasers would be Commission employees who do not have procurement authority or administrative authority over the relevant contract, rather than commissioners, officers, 1or employees with authority in relation to the relevant contract.
First, State law does not prohibit the proposed transaction under the facts described. KRS 82.083(4)(g) prohibits the sale of city property to a city officer or employee. But the vehicles leased by the Commission are the sole property of the contractor and not owned by the city. Thus, KRS 82.083 does not apply. Furthermore, KRS 45A.455(1), which prohibits employees with procurement authority from participating directly in any matter in which they have a financial interest, does not apply because the City of Paintsville has not adopted the Model Procurement Code. Cf . KRS 45A.343(1) (permitting a local public agency to adopt portions of the Model Procurement Code); KRS 45A.735(1) (same).
Second, there does not appear to be any common law conflict of interest that would preclude the proposed transaction. The former Court of Appeals previously described common law conflicts of interest principles:
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 . . . 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.
Commonwealth ex rel. Vincent v. Withers , 98 S.W.2d 24, 25 (Ky. 1936).
Here, in negotiating the sale of a vehicle, the contractor would presumably know that the purchaser was an employee of the Commission, with which it has a contract. This might create an appearance that the transaction was not entered into at arm's length. Nevertheless, if the Commission is not involved in negotiating the sale price, and if the purchaser is not a commissioner, an officer, or an employee with procurement authority or administrative authority over the relevant contract, the transaction would not constitute an inherent common law conflict of interest.
This Office has noted that "[a] public officer may not place himself in a position where his private interest conflicts with his public duty." OAG 93-33 (citing
Hous. Auth. of City of New Haven v. Dorsey , 320 A.2d 820 (Conn. 1973)). Under the Commission's contractual arrangement with the contractor, the net proceeds of a sale are applied back to the Commission's lease program. Thus, the lower the purchase price paid by the employee, the less money would accrue to the Commission for use in leasing future vehicles. This would render the pecuniary interest of the employee in such a transaction, to some degree, adverse to that of the Commission. But if the Commission has authorized certain employees to enter into independent purchase transactions with the contractor, the employees would not have a public duty to maximize available funds for the lease program, unless they were commissioners, officers, or employees responsible for procurement or administration of the contract. Thus, such purchases would not pose an inherent conflict of interest under common law principles.
For these reasons, under the facts presented by the Commission, this Office is unaware of any statutory or common-law prohibition that would forbid the Commission's employees from purchasing vehicles previously leased by the Commission from the contractor. However, commissioners, officers, or employees having procurement authority or administrative authority over the contract should not engage in such transactions.
Finally, the Commission also asks whether the proposed transactions would conflict with local ethics ordinances. The City of Paintsville has adopted two municipal ethics ordinances, Paintsville Code of Ordinances § 39.10 and § 39.11, which prohibit certain conduct by city officers and employees. But the City of Paintsville has established a Board of Ethics that can render advisory opinions interpreting municipal ethics ordinances. 2Thus, this Office declines to render an opinion on the interpretation and application of those ordinances.
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