Advisory Opinion No. 2012-3 Advisory Opinion No. 2012-3 Re: The Honorable Donald R. Grebien QUESTION PRESENTED The Petitioner, the Mayor of the City of Pawtucket, a municipal elected position, requests an advisory opinion regarding whether City officials are prohibited by the Code of Ethics from soliciting donations to fund the salary for a new permanent position of Economic Development Director, from private businesses, foundations and individual philanthropists, some of which may be located within, or do business with, the City. RESPONSE It is the opinion of the Rhode Island Ethics Commission that City of Pawtucket officials are prohibited by the Code of Ethics from soliciting donations to fund the salary for a new permanent position of Economic Development Director, from private businesses, foundations and individual philanthropists who are located within, or do business with, the City. FACTS The Petitioner is the Mayor of the City of Pawtucket (“City”), having been elected in November 2010. He represents that he would like to implement a “public-private partnership” to fund a new full-time position of Economic Development Director (“EDD”). He informs that the EDD would be a mayoral appointment, serving at the pleasure of the Mayor. He advises that this position would be directly subordinate to his Director of Administration. He states that the EDD’s duties would include, but would not be limited to, the following: Pursuing successful advancement of projects deemed vital to economic development; Initiating, developing and growing contacts and relationships with expanding and new businesses; Acting as point person to businesses for assistance with planning, zoning and permitting; Interfacing with private, nonprofit agencies, on behalf of the City, regarding historic preservation, downtown growth, tourism, historical parks, and the arts; Assisting and advising businesses on property leases and acquisitions, land use and environmental issues, and evaluating business and growth prospects; and Working with key City officials, including the Mayor, Planning Director and other agencies involved in economic growth and development. The Petitioner represents that in order to fund the position of EDD, his Director of Administration would engage in a “broad-based solicitation” of potential contributors comprised primarily of private businesses, foundations and philanthropists located both inside and outside of the City, including some past, present and potentially future City vendors. In particular, the Petitioner notes that “the donated funds may come from a number of the businesses that the [EDD] may interact with as part of his or her duties and functions[.]” Cognizant that “[i]t may appear at first blush that the monetary donations would affect or benefit one individual personally since the monies received by the City would ultimately be used to the pay the salary of the [EDD’s] position[,]” the Petitioner notes that the EDD would take no part in the solicitation process. The Petitioner contends that the funds would be solicited for the public purpose of providing the City with a new public official whose work would ultimately benefit the City at large. In order to avoid potential conflicts of interest, the Petitioner represents that if the EDD was faced with having to advocate for or exercise discretion over an individual or entity that had been solicited or contributed support, the EDD would seek an advisory opinion to address the conflict prior to taking any official action or, in the alternative, might recuse from taking official action and refer such decisions to the Director of Administration. DISCUSSION: As an initial matter, the Commission understands the City’s difficult financial position described by the Petitioner, and is mindful of the benefits that may come with the creation of a full-time position devoted to economic development. The Commission also appreciates the Petitioner’s willingness to explore alternative and non-traditional ways to fund the EDD position. Nevertheless, we are constrained to conclude that the method of solicitation described in the Petitioner’s request for an advisory opinion runs counter to both the spirit and letter of the Code of Ethics. When the people of Rhode Island voted in 1986 to amend their Constitution to create the Ethics Commission, included in the enabling language was a statement of intent meant to guide the Ethics Commission in its adoption of a code of ethics. This statement reads: The people of the State of Rhode Island believe that public officials and employees must adhere to the highest standards of ethical conduct, respect the public trust and the rights of all persons, be open, accountable and responsive, avoid the appearance of impropriety, and not use their position for private gain or advantage. R.I. Const. art. III, sec. 7. Although these aspirational words are not, themselves, enforceable provisions of the Code of Ethics, the Ethics Commission will utilize them to help guide its interpretation of the Code’s various provisions described and applied below. 1. Regulation 5009 – Prohibited Activities – Gifts The Code’s provision relating to gifts, Commission Regulation 36-14-5009 (“Regulation 5009”), provides that no public official shall accept a gift valued at more than twenty-five dollars ($25) from an “interested person,” which is defined as a person or a representative of a person or business “that has a direct financial interest in a decision that the person subject to the Code of Ethics is authorized to make, or participate in the making of, as part of his or her official duties.” Regulation 5009(b) and (c). Further, a public official may not accept any reward or promise of future employment in return for or based on any understanding or expectation that his vote, official action, or judgment will be influenced. R.I. Gen. Laws § 36-14-5(g). The Commission has previously found that Regulation 5009 does not prohibit donations by interested parties to a city or town where no individual official would receive a personal financial benefit from the donations at issue. See A.O. 2001-12 (Regulation 5009 would not prohibit the Town of Johnston from accepting a donation of a dais or rescue boats to be used by Town departments, because the donations were earmarked for the use of the Town and not for the benefit of any particular Town official); A.O. 99-111 (Regulation 5009 did not prohibit the Town of Johnston from accepting the donation of a rescue vehicle from a municipal vendor who was an “interested person” as to various Town officials, because the donation was to the Town itself and did not confer a financial benefit on any individual public official); A.O. 99-17 (Regulation 5009 did not prohibit the Rhode Island Building Officials Association from accepting the donation of space at a home show from the Rhode Island Builders Association, because the donation of space was provided to the Building Officials Association, rather than to individual to public officials). In contrast to the aforementioned opinions, the Commission more recently opined in Advisory Opinion 2007-28 that the University of Rhode Island Coastal Resources Center (“URI/CRC”) could not accept and utilize a proposed donation from the O’Neill Properties Group to partially fund the URI/CRC’s development of the Aquidneck Island Special Area Management Plan (“SAMP”), given that O’Neill had proposed projects in the subject area and had a direct financial interest in the SAMP process. In particular, the petitioner represented that O’Neill’s donation would be used, in part, to fund the salaries of the URI/CRC employees who would be developing the SAMP. Those employees, similar to the EDD in the present matter, were so-called “soft money” employees, dependent upon fundraising efforts and private contributions for their continued paid employ. As such, the Commission found that the rationale outlined in Advisory Opinions 2001-12 and 99-111 did not apply because there was a likely financial benefit to individual URI/CRC employees who were making decisions in the SAMP process. Therefore, the Commission concluded that the URI/CRC’s acceptance and use of funds donated by a developer with a direct financial interest in the outcome of the SAMP process, and with the express directive that the donation fund the SAMP process, including the salaries of the employees making decisions in the SAMP process, would clearly constitute an appearance of impropriety and run afoul of the intent of Regulation 5009. In the present matter, the Petitioner proposes to solicit donations from private foundations, businesses, and individual philanthropists located both inside and outside of the City, including some past, present and potentially future City vendors. Furthermore, the proposed contributors include businesses that the EDD may interact with as part of his or her official duties and functions. Such vendors and businesses are “interested persons” as to the various City officials who may make decisions regarding the businesses, including the Director of Administration and the EDD. Accordingly, it is the opinion of the Ethics Commission that Regulation 5009 prohibits the Petitioner’s proposal because the person serving as EDD would receive a direct financial benefit, in the form of a salary, from the donations of interested persons under the Code of Ethics. 2. Regulation 5011 – Prohibited Activities – Transactions with Subordinates Commission Regulation 36-14-5011 (“Regulation 5011”), entitled “Transactions with Subordinates,” generally prohibits persons subject to the Code of Ethics from engaging in financial transactions with persons or businesses under their supervision and authority. Regulation 5011(a) reads, in pertinent part: No person subject to the Code of Ethics shall engage in a financial transaction, including . . . giving or receiving loans or monetary contributions, including charitable contributions, with a subordinate or person or business for which, in the official’s or employee’s official duties and responsibilities, he or she exercises supervisory responsibilities, unless (1) The financial transaction is in the normal course of a regular commercial business or occupation, (2) The subordinate or person or business described above offers or initiates the financial transaction, or (3) The financial transaction involves a charitable event or fundraising activity which is the subject of general sponsorship by a state or municipal agency through official action by a governing body or the highest official of state or municipal government. The regulation also expressly states that the term “subordinate” includes contractors and consultants. Regulation 5011(c). Regulation 5011 recognizes that individuals and businesses which are subject to the authority of a public official may feel pressured or coerced into making an unwanted contribution if solicited by that public official or his or her representative. The question presented by this Petitioner falls squarely within Regulation 5011 in that it asks whether public officials on the Mayor’s staff may solicit contributions from, among others, persons and businesses who seek such officials’ assistance and/or are subject to such officials’ decision-making, supervision, or discretion. However, the question presented also arguably invokes the third exception to Regulation 5011, requiring the Commission to consider whether the solicitation involves a charitable or fundraising event under the general sponsorship of the City. Under this analysis, and assuming that the solicitations are the subject of general sponsorship of the City through the official action of the Mayor, the central question is whether the fundraising activity is for a public purpose. In prior advisory opinions, the Commission has opined that public agencies may engage in a broad-based solicitation of certain private individuals and entities, including vendors, where the solicitation is intended for a public, rather than private, purpose. For example, in Advisory Opinion 2009-15, the Commission opined that the Pawtucket Department of Planning and Redevelopment could solicit fundraising donations to support the Pawtucket Arts Festival from vendors with whom the City currently did business. There, the Commission found that the intended solicitation was for a public purpose because it benefited the Arts Festival, a public event to which the City provided considerable funding and support personnel. Moreover, there was no personal benefit to any individual City official. See also A.O. 2001-59 (concluding that the Code of Ethics did not prohibit the Rhode Island Bridge and Turnpike Authority from soliciting donations from its vendors and others in the community to help defray the costs of a post-conference historical and technical tour of Rhode Island, provided that there was broad-based solicitation of local individuals, organizations and businesses, and not just of persons or entities currently doing business with the Authority, because the intended solicitation was for the benefit of the Authority itself, and as such, constituted a public purpose). Unlike the Commission’s past advisory opinions applying Regulation 5011, including those cited above, where the Commission relied on representations that proposed solicitations did not financially benefit any particular public official but only furthered a more general public purpose, the solicitation proposed by this Petitioner is designed to yield a direct financial benefit to a public official in the form of a salary. Notably, none of the previous advisory opinions regarding solicitation have ever found that the funding of an individual’s salary constituted a public purpose. As previously mentioned, the Commission acknowledges the Petitioner’s contention that the City at large will benefit from the establishment of the new permanent EDD position. However, such a resulting general benefit to the City cannot override the fact that this proposed solicitation will primarily result in a direct financial benefit to the person serving as EDD. Accordingly, the Commission concludes that this solicitation is prohibited by Regulation 5011 insofar as it is directed at individuals and businesses that have or seek to do business with the City, or that are subject to the City’s authority or supervision. In the absence of additional facts regarding the scope of the solicitation and based upon the conclusion that the solicitation is for a private purpose, the Commission will not opine as to whether the proposed solicitation was sufficiently broad-based. 3. Business Associates Finally, even if the Commission opined that the proposed solicitation complied with the aforementioned provisions of the Code of Ethics, we find that the EDD’s reliance on area businesses to fund his salary would place him in an untenable conflict of interest when interacting with and advocating for such businesses as required by his stated duties and responsibilities. Under the Code of Ethics, a public official may not participate in any matter in which he has an interest, financial or otherwise, that is in substantial conflict with the proper discharge of his duties or employment in the public interest. Section 36-14-5(a). Additionally, the Code prohibits a public official from using his public office or confidential information received through his public office to obtain financial gain for himself, his family, his business associate, or any person by which he is employed or whom he represents. Section 36-14-5(d). A public official must also recuse from participating in his agency’s consideration of a matter in which his business associate appears or presents evidence or argument. Regulation 36-14-5002. A business associate is defined as “a person joined together with another person to achieve a common financial objective.” Section 36-14-2(3). A person is defined as “an individual or a business entity.” Section 36-14-2(7). In the present matter, the person serving as the EDD, and any individual or business entity that responds to the solicitation, have the common interest and financial objective of maintaining funding for the EDD position in the City of Pawtucket. Yet, the EDD’s duties would include evaluating projects and plans submitted by such benefactors, and acting as a point person for them to assist with planning, zoning and permitting. Given his financial dependence on these donors, the person serving as EDD would be required to recuse from any of his duties that involve or financially impact them. Such recusal is necessary to avoid the appearance of impropriety and to combat the suggestion that the donations were intended to impermissibly influence the EDD’s judgment and decision-making. CONCLUSION: In summary, it is the opinion of the Ethics Commission that City of Pawtucket officials are prohibited by the Code of Ethics from soliciting donations to fund the salary for the new permanent position of Economic Development Director, from private businesses, foundations and individual philanthropists who are located within, or do business with, the City, given that the proposed solicitation does not comport with the Code of Ethics, particularly Commission Regulations 36-14-5011 and 36-14-5009. Code Citations: § 36-14-2(3) § 36-14-2(7) § 36-14-5(a) § 36-14-5(d) § 36-14-5(g) § 36-14-7(a) Commission Regulation 36-14-5002 Commission Regulation 36-14-5009 Commission Regulation 36-14-5011 R.I. Const. art. III, sec. 7 Related Advisory Opinions: A.O. 2009-15 A.O. 2007-28 A.O. 2001-59 A.O. 2001-12 A.O. 99-111 A.O. 99-17 Keywords: Business Associate Donations Gifts Public-Private Partnerships Transactions with Subordinates Solicitation Vendors