Advisory Opinion No. 2013-4 Advisory Opinion No. 2013-4 Re: James Bennett QUESTION PRESENTED: The Petitioner, the Director of Economic Development for the City of Providence, a municipal appointed position, requests an advisory opinion concerning his ability to continue serving as the City's non-voting, ex officio member of the ProvPort Board of Directors, and concerning whether ProvPort may pay for the Petitioner's travel expenses relative to the economic development of the Port of Providence. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Code of Ethics does not prohibit the Petitioner, the Director of Economic Development for the City of Providence, from serving as the City's non-voting, ex officio member of the ProvPort Board of Directors, nor from participating in the City's decision-making relative to ProvPort matters. However, given ProvPort's financial interest in the Petitioner's official decision-making, the Code of Ethics prohibits the Petitioner from accepting ProvPort's payment of travel expenses. The Petitioner is the Director of Economic Development for the City of Providence ("the City"), having been appointed by the Mayor to that position in August 2011. As part of his official duties, the Petitioner supervises the staffs of both the Department of Planning and Development ("Planning Department") and the Providence Redevelopment Agency ("PRA"). By virtue of his public position, the Mayor has assigned the Petitioner to be the City's representative and liaison to ProvPort, a domestic non-profit corporation that operates the Port of Providence ("the Port") pursuant to an agreement with the City. The Petitioner represents that in 1994 the City, faced with a substantial budget shortfall and also wishing to maximize the use and value of the City-owned Port, entered into an agreement with a non-profit entity, ProvPort, whereby ProvPort purchased the Port from the City for $16.7 million. Pursuant to the terms of the sale, after thirty (30) years the City has the right to purchase the Port back from ProvPort for the sum of one dollar ($1.00). Given the City's repurchase rights, this "sale" of the Port is sometimes characterized as a 30-year lease. ProvPort's purchase was financed through the sale of bonds backed by the moral obligation of the City to repay bondholders in the event of ProvPort's default. Accordingly, the City has substantial ongoing interests in the Port and in ProvPort's success and decision-making relative to the Port's operations. Consistent with these interests, both the Mayor and City Council are responsible for appointing voting members to the five-person ProvPort Board of Directors.[1] Additionally, the Mayor has historically appointed a member of his administration to act as a liaison to ProvPort by serving ex officio as a non-voting member of the Board of Directors.[2] Since 1994, there have continued to be numerous interactions and relationships between the City and ProvPort, including Planning Department and PRA staff review of compliance with lease, sublease and bond agreements covering the above-described transaction, the Planning Department's administration of a $1.5 million Economic Development Administration grant that benefits ProvPort, and the City's oversight over ProvPort's budget and of an ongoing profit-sharing agreement between ProvPort and the City. Given his supervision of the Planning Department and the PRA, the Petitioner exercises considerable authority and control over all of the above-described interactions between the City and ProvPort. Furthermore, as Director of Economic Development for the City, and an ex officio ProvPort board member, the Petitioner sometimes travels to other states and countries to encourage usage of the Port, an activity that benefits both the City and ProvPort. Given all of these representations, the Petitioner seeks guidance from the Ethics Commission concerning his ability to serve as a non-voting member of ProvPort's Board of Directors. Furthermore, because ProvPort and the City share a common interest in Port usage and development, the Petitioner asks whether the Code of Ethics permits ProvPort to pay for the Petitioner's travel relating to the economic development of the Port. The Code of Ethics prohibits a public employee or official from participating 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. R.I. Gen. Laws § 36-14-5(a). A substantial conflict of interest exists if an employee or official has reason to believe or expect that he, any person within his family, a business associate or an employer will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. Section 36-14-7(a). A business associate is defined as a "person joined together with another person to achieve a common financial objective." Section 36-14-2(3). Previously, the Commission has concluded that public officials are “business associates” of entities for which they serve either as members of the Board of Directors or in other leadership positions that permit them to affect the financial objectives of the organization and, as noted above, the Code requires recusal from participation in decisions that financially impact such business associates. A.O. 2012-25 (Town Council member is business associate of health services organization for which he serves as administrator). See also A.O. 2012-9; A.O. 2011-27; A.O. 2010-25; A.O. 2009-29; A.O. 2009-10; A.O. 2008-35; A.O. 2007-58; A.O. 2007-45. The instant facts represented, though, are distinguishable from those prior advisory opinions in that the instant Petitioner: (1) is a non-voting Director who, for that reason, has no formal say in the financial objectives of the organization; and (2) is serving as a Director in an ex officio capacity as part of his public duties as a City official and not on his own behalf. For these reasons, we do not find that the Petitioner should be considered to be a business associate of ProvPort, and the Code of Ethics does not restrain his ability to either serve in his current ex officio role on the ProvPort Board of Directors or to perform his duties as Director of Economic Development as they relate to ProvPort. Next, the Petitioner asks whether the Code of Ethics permits ProvPort to pay for the Petitioner's travel relating to the economic development of the Port. Persons subject to the Code are prohibited from accepting or receiving any gift or other thing having a fair market value or actual cost that is greater than twenty-five dollars ($25), but in no case having an aggregate fair market value or aggregate actual cost greater than seventy-five dollars ($75) in any calendar year, including but not limited to gifts, loans, rewards, promises of future employment, favors or services, gratuities or special discounts, from an "interested person," without the interested person receiving lawful consideration of equal or greater value in return. Commission Regulation 36-14-5009(b) ("Regulation 5009"). An "interested person" 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(c). As an initial matter, ProvPort is an "interested person" as to the Petitioner. The Petitioner has noted that he supervises the staffs of both the Planning Department and the PRA, which are the City agencies responsible for reviewing ProvPort's compliance with the lease, sublease and bond agreements with the City. The PRA has the authority to approve or reject ProvPort's budget. The Petitioner is personally involved in renegotiating ProvPort's lease/sublease arrangement with the City, and negotiating the lease of additional City properties by ProvPort. ProvPort is an interested person as to the Petitioner because it has a direct financial interest in decisions that the Petitioner is authorized to make, or to participate in making, as part of his official duties. Accordingly, Regulation 5009 applies to prohibit the Petitioner from accepting gifts of travel worth more than $25 directly from ProvPort, an entity that has a financial interest in the Petitioner's official decision-making. It may be that, given the City's and ProvPort's common interests in Port development, they could reach an agreement or amend an existing one to provide for a ProvPort grant or payment to the City to subsidize the Port-related travel of staff who are independently selected by the City for that purpose. See e.g. A.O. 98-20 (Medical Program Director for Department of Corrections prohibited from accepting travel from an agency vendor, but leaving open possibility that such travel may be allowed if the vendor had not designated a particular public official, but instead provided funds to the public entity which independently designated one of its members or employees to attend or participate); A.O. 97-20 (Director of Department of Elderly Affairs prohibited from accepting travel from a vendor, but leaving open question of whether the vendor could make a grant to the agency, which the agency could then expend for travel or to reimburse a selected employee for the travel). However, such payment structure has not been proposed for our consideration of its consistency with Regulation 5009 and the Code of Ethics. In summary, while the Code of Ethics neither prohibits the Petitioner from serving as a non-voting and ex officio member of ProvPort's Board of Directors nor from participating in the City's decision-making relative to ProvPort matters, the Code's gift regulation (Regulation 5009) prohibits the Petitioner from allowing ProvPort to pay for his travel expenses relative to Port issues. Code Citations: 36-14-2(3) 36-14-5(a) 36-14-5(d) 36-14-7(a) Commission Regulation 36-14-5009 Related Advisory Opinions: 2012-25 2012-9 2011-27 2010-25 2009-29 2009-10 2008-35 2007-58 2007-45 98-20 97-20 Keywords: Business associate Gifts Travel [1] Two (2) other members of the Board are appointed by the Port's tenant organization, and the fifth (5th) member is elected by the other four (4) members and serves as Chairperson. None of the Board members are compensated by ProvPort for the performance of their duties. [2] Prior to the Petitioner's ex officio appointment to the ProvPort Board, the City's Director of Finance served in that position.