Advisory Opinion 2024-14

Rhode Island Ethics Commission 

Advisory Opinion No. 2024-14

Approved: April 9, 2024

Re: Neal Murphy

QUESTION PRESENTED:

The Petitioner, a member of the New Shoreham Town Council, a municipal elected position, requests an advisory opinion regarding whether he is prohibited by the Code of Ethics from participating in Town Council discussions and voting regarding a proposed ordinance regulating residential short-term rental properties, given that his mother is a short-term rental property owner who would be subject to the ordinance if it passes.

RESPONSE:

It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a member of the New Shoreham Town Council, a municipal elected position, is not prohibited by the Code of Ethics from participating in Town Council discussions and voting regarding a proposed ordinance regulating residential short-term rental properties, notwithstanding that his mother is a short-term rental property owner who would be subject to the ordinance if it passes, given that the circumstances herein justify the application of the class exception set forth in R.I. Gen. Laws § 36-14-7(b).

The Petitioner is a member of the New Shoreham Town Council, having been elected to that position in November 2022. He states that the Town Council is preparing to vote on whether to pass an ordinance regulating residential short-term rental properties in the town.[1]  The ordinance, which would apply equally to all residential short-term property owners, includes sections addressing the following: registration and inspection of dwelling units; occupancy location, limits, and other requirements; obligations of both short-term rental property owners and renters; the designation of a local representative who is authorized by the owner to, among other things, respond to renter and neighborhood questions or concerns; and the penalty for violations of the ordinance.  The Petitioner represents that the fee for registration of each dwelling unit would be set by the Town Council.  The Petitioner further represents that, although the amount of the registration fee does not appear in the ordinance, it is likely to be a flat fee of $250 for all owners of short-term rental properties, of which the Petitioner estimates there are 1,000.

The ordinance states that it shall apply to all rental dwelling units within the town, with the exception of the following: (1) hotels and rooming houses; (2) group homes, community residences and family day care homes; and (3) licensed rental rooms.  The Petitioner states that the goal of the ordinance is to provide town officials with a more accurate count of the number of short-term rental properties in the town, including those without realtor involvement; ensure that building safety codes are in place for all short-term rental properties; and to make certain that short-term rental property owners are paying the 1% mandatory annual rental tax that was approved by the General Assembly in 2004.  The Petitioner explains that the town currently has no formal way of knowing who is collecting rental income, because rental income disclosure has been left to the discretion of owners.  He adds that the town has relied on the honor system for the submission by short-term rental property owners of the 1% mandatory annual rental tax. 

The Petitioner states that, in his private capacity, he owns and operates an inn in town.  He further states that the inn is open year-round and has ten rooms available to guests.  The Petitioner represents that the town’s “bed and breakfasts” and inns are specifically excluded from the subject ordinance because they fall under the category of “hotels and rooming houses” which are already subject to registration and regulation.  The Petitioner states that his mother owns a house in the town that was purchased in the 1960s.  He further states that his mother has rented her house during the same four to five weeks in June and July every year for approximately the last twenty years and plans to continue to do so.  The Petitioner adds that his mother does not use a realtor or reservation platform because she rents to the same families every year.  The Petitioner states that his mother owns one of the approximately 1,000 short-term rental properties whose owners would be subject to the ordinance if it passes.

The Petitioner represents that the ordinance will soon come before the Town Council for a vote.  He further represents that when it does, there will be no discussion about potential revisions to the ordinance, but only a vote taken on whether it should pass in its current form.  He states that he would like to participate in the upcoming vote on whether to pass the ordinance.[2]  It is under this set of facts that the Petitioner seeks guidance from the Ethics Commission regarding whether he may do so.

A person subject to the Code of Ethics may not participate in any matter in which he has an interest, financial or otherwise, which is in substantial conflict with the proper discharge of his duties in the public interest.  R.I. Gen. Laws § 36-14-5(a).  A substantial conflict of interest occurs if a public official has reason to believe or expect that he, any person within his family, his business associate, or any business by which he is employed or which he represents, will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity.  R.I. Gen. Laws § 36-14-7(a).  Additionally, § 36-14-5(d) prohibits a public official from using his position, or confidential information received through his position, to obtain financial gain, other than that provided by law, for himself, any person within his family, his business associate, or a business by which he is employed or which he represents. 

Section 36-14-7(b) of the Code of Ethics, often referred to as the “class exception,” states that a public official will not have an interest which is in substantial conflict with the proper discharge of his official duties if any benefit or detriment accrues to any person within his family “as a member of a business, profession, occupation or group, or of any significant and definable class of persons within the business, profession, occupation or group, to no greater extent than any other similarly situated member of the business, profession, occupation or group, or of the significant and definable class of persons within the business, profession, occupation or group.”

When determining whether particular circumstances justify the application of the class exception, the Ethics Commission considers the totality of those circumstances.  Among the important factors to be considered are: 1) the description of the class; 2) the size of the class; 3) the function or official action being contemplated by the public official; and 4) the nature and degree of foreseeable impact upon the class and its individual members as a result of the official action. 

The Ethics Commission has previously applied the class exception in a variety of circumstances involving elected officials who were concerned with their ability to participate in discussions and voting on ordinances, legislation, and regulations.  For example, in Advisory Opinion 2016-27, the Ethics Commission opined that a member of the Jamestown Town Council could participate in discussions and voting relative to a proposed ordinance that would require residential landlords in Jamestown to file an emergency contact form; complete an annual filing; disclose contact information; potentially pay a filing fee; and face penalties for noncompliance, notwithstanding that the petitioner owned rental property that would be subject to the proposed ordinance.  That petitioner owned one of 500 residential rental properties located in Jamestown to which the ordinance would apply equally.  See also A.O. 2023-26 (applying the class exception to allow a state representative to participate in General Assembly discussions and voting on proposed legislation that would limit the renewal fee for a pharmacist license to $250 biennially, notwithstanding that the petitioner was a pharmacist who would be impacted by the legislation, because the class of persons who would be impacted by the legislation, if passed, included all pharmacists seeking renewal of the Rhode Island license, the total number of which was estimated to be between 1,000 and 2,000); A.O. 2018-26 (applying the class exception to allow a member of the Westerly Town Council to participate in discussions and voting relative to the town’s Harbor Management Plan’s mooring regulations imposing a flat yearly mooring rate to all owners, notwithstanding that the petitioner’s spouse owned property with mooring rights, because the financial impact upon the petitioner’s spouse would be the same as that upon the other approximately 700 waterfront property owners with mooring rights).

Here, the class includes all owners of the approximately 1,000 residential short-term rental properties in New Shoreham.  The official action being contemplated is the Petitioner’s participation in the discussion and vote on an ordinance which would directly financially impact his mother to no greater extent than any other individual member of the class.  The Petitioner represents that the registration fee would likely be $250 for all property owners.  He also states that the ordinance would allow town officials to make certain that all residential short-term rental property owners are paying the 1% mandatory annual rental tax.  Accordingly, it is the opinion of the Ethics Commission that the specific facts of this case justify the application of the class exception set forth in § 36-14-7(b) of the Code of Ethics and that the Petitioner may participate in the discussions and voting on the subject ordinance.  However, in the unlikely event that the Town Council’s discussions veer into revision of the ordinance in ways that would impact the Petitioner’s mother individually, or as a member of a much smaller class or subclass of residential short-term rental property owners, the Petitioner must either recuse from participation or seek additional guidance from the Ethics Commission.  Any recusals shall be made consistent with the provisions of R.I. Gen. Laws § 36-14-6.

This Advisory Opinion is strictly limited to the facts stated herein and relates only to the application of the Rhode Island Code of Ethics. Under the Code of Ethics, advisory opinions are based on the representations made by, or on behalf of, a public official or employee and are not adversarial or investigative proceedings. Finally, this Commission offers no opinion on the effect that any other statute, regulation, ordinance, constitutional provision, charter provision, or canon of professional ethics may have on this situation. 

Code Citations:           
§ 36-14-5(a)    
§ 36-14-5(d)    
§ 36-14-6         
§ 36-14-7(a)    
§ 36-14-7(b)                

Related Advisory Opinions:               
A.O. 2023-26  
A.O. 2018-26  
A.O. 2016-27

Keywords:       
Class Exception

[1] The Petitioner included a copy of the proposed ordinance with his letter requesting this advisory opinion.

[2]The Petitioner has recused from participation in discussions and decision-making about the proposed ordinance since his telephone conversation with Ethics Commission staff in September 2023.  During that telephone conversation, it became clear that the Petitioner had a potential conflict of interest because his mother is the owner of a residential short-term rental property who would be subject to the ordinance if it passes.  Without a proposed draft of the ordinance available last September, no analysis could be performed which might have led to an opinion that the class exception applied to allow the Petitioner’s participation.