Advisory Opinion No. 2017-23 Rhode Island Ethics Commission Advisory Opinion No. 2017-23 Approved : May 23, 2017 Re: The Honorable Jeremiah T. O ’ Grady QUESTION PRESENTED : The Petitioner, a state legislator serving in the Rhode Island House of Representatives, a state elected position, who in his private capacity is employed by a private non-profit community development organization, requests an advisory opinion regarding whether he may participate in legislative activities and decision-making regarding tax legislation impacting deed-restricted affordable rental housing, given that his private employer develops and owns such housing. RESPONSE : It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a state legislator serving in the Rhode Island House of Representatives, a state elected position, who in his private capacity is employed by a private non-profit community development organization, is not prohibited by the Code of Ethics from participating in legislative activities and decision-making regarding tax legislation impacting deed-restricted affordable rental housing, given that the circumstances justify the application of the class exception as set forth in R.I. Gen. Laws § 36-14-7(b) . Furthermore, t he Petitioner is prohibited from lobbying or representing his private employer before the General Assembly while holding state office and for a period of one (1) year thereafter. The Petitioner is a member of the Rhode Island House of Representatives ( “ House of Representatives ” ). In his private capacity, the Petitioner is employed as the Director of Operations and Asset Management for Olneyville Housing Corporation d/b/a ONE Neighborhood Builders ( “ ONE Neighborhood Builders ” ), a private 501(c)(3) non-profit community development organization that develops and renovates real estate, including affordable housing, and engages in various community building activities in Providence. The Petitioner represents that he is responsible for overall office operations and real estate project development, preparation of subsidy applications, communication with financial institutions, and contract negotiations with vendors. The Petitioner represents that there have been repeated attempts in the legislature to modify R.I. Gen. Laws § 44-5-13.11 (“section 44-5-13.11”) relative to the municipal assessment and taxation of deed-restricted affordable housing. The Petitioner states that a change in the statute would financially impact his private employer as to its deed-restricted affordable rental housing. The rents charged for such units are capped by law to remain at a level that is affordable to low-income families. As a result, owners of such properties, like ONE Neighbor Builders, are unable to pass increases in property taxes along to tenants. ONE Neighborhood Builders is one of at least 150 entities which collectively own 22,600 deed-restricted affordable rental units in the State of Rhode Island. [1] The Petitioner represents that, currently, there are several bills pending before the General Assembly impacting deed-restricted affordable housing units and he seeks guidance from the Ethics Commission on whether he may participate in legislative activities and decis ion-making regarding these bills, given that his private employer develops and owns such units. The Commission ’ s review of each piece of legislation is set forth below. 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). A substantial conflict of interest exists if an 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). 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 business by which he is employed or which he represents. Section 36-14-5(d). However, section 36-14-7(b) of the Code of Ethics, sometimes referred to as the “ class exception, ” states that a public official will not have an interest which is in substantial conflict with his official duties if any benefit or detriment accrues to him or any business by which he is employed or which he represents “ 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 or lesser extent than any other similarly situated member of the business, profession, occupation or group, or the significant and definable class of persons within the business, profession, occupation or group. ” When determining whether any particular circumstance supports and justifies the application of the class exception, the Commission considers the totality of the circumstances. Among the important factors 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. 1. House Bill 5912 (2017) House Bill 5912 proposes an amendment to section 44-5-13.11 which would increase the maximum allowable tax rate, from eight percent (8%) to twelve percent (12%), for a subset of residential properties that are part of Section 202 or Section 811 Federal Supportive Housing Programs, or project-based Section 8 housing. As to this bill, the Ethics Commission does not need to undertake a class exception analysis because the Petitioner specifically represents that his employer will not be financially impacted by the legislation. House Bill 5912 relates only to residential properties that are part of Section 202 or Section 811 Federal Supportive Housing Programs, or project-based Section 8 housing. The Petitioner represents that his employer does not own such housing. Accordingly, regardless of whether this legislation passes or fails, the assessment and taxation of the type of deed-restricted affordable housing owned by the Petitioner ’ s employer remains unchanged. 2. Senate Bills 125 and 128 (2017) Senate Bills 125 and 128 also propose amendments to section 44-5-13.11, in this case by increasing the maximum allowable tax for all qualifying low income housing from eight percent (8%) to ten percent (10%). Additionally, Senate Bill 128 proposes that tax assessments be based on a property ’ s prospective, rather than previous year ’ s, gross scheduled rental income. These amendments would impact the Petitioner’s employer. Therefore, the Ethics Commission will review the totality of the circumstance to determine whether the application of the class exception is appropriate. Here, ONE Neighbor Builders owns 330 of approximately 22,600 deed restricted affordable rental units. ONE Neighborhood Builders is a member of a class of a minimum [2] of 150 owners of deed-restricted affordable rental units. Furthermore, each member of the class would be equally impacted by Petitioner ’ s participation in and vote on a tax increase relative to such units. Considering the totality of the circumstances and prior advisory opinion in this regard, it is the opinion of the Ethics Commission that the specific facts of this case justify the application of the class exception as set forth in section 36-14-7(b) of the Code of Ethics. Accordingly, the Petitioner is not prohibited by the Code of Ethics from participation in discussions and decision-making relative to Senate Bills 125 and 128, notwithstanding that his private employer develops and owns housing impacted by these bills. See A.O. 2014-12 (applying the class exception allowing a Town Council member to participate in the Town Council ’ s consideration of proposed comprehensive plan and zoning ordinance amendments, notwithstanding that the petitioner owned one of 124 residences that received abutter ’ s notices); A.O. 2005-22 (applying the class exception and opining that a Town Council member could participate in a proposed tax freeze ordinance for all property owners aged 65 and over, notwithstanding that his spouse was over 65 and could benefit from the tax freeze, because 250 to 300 other property owners would be similarly impacted by the ordinance); A.O. 2003-57 (opining that a state senator was permitted to participate in the Rhode Island Senate ’ s consideration of legislation concerning the state pension plan, of which he was a member, given that the legislation would affect all state employees and all teachers in the state). Finally, the Petitioner is seeking the guidance of the Ethics Commission regarding whether he may “lobby” the General Assembly regarding the aforementioned tax legislation impacting deed-restricted affordable rental housing. Section 36-14-5(e) ( “ section 5(e) ” ) of the Code of Ethics prohibits a public official from representing himself or any other person or entity before any state or municipal agency of which he is a member or by which he is employed. For example, in Advisory Opinion 2003-2, the Ethics Commission opined that a State Representative was prohibited by section 36-14-5(e) from lobbying or otherwise representing his private employer before either chamber of the General Assembly. Accordingly, applying the provisions of section 5(e), it is the opinion of the Ethics Commission that the Petitioner is prohibited from representing or lobbying on behalf of his private employer before the General Assembly while holding state office and for a period of one (1) year thereafter. 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) § 36-14-5(e) § 36-14-7(a) § 36-14-7(b) Other Related Authority § 44-5-13.11 Related Advisory Opinions : A.O. 2014-12 A.O. 2005-22 A.O. 2003-57 A.O. 2003-2 Keywords : Class Exception Financial Interest Private Employment [1] This information was obtained from Rhode Island Housing and is based only on entities, both for profit and non-profit, that have loans with Rhode Island Housing. The total number of entities that own deed-restricted affordable rental units is more likely higher, given that there are other financial institutions that provide loans for the construction of such housing. [2] See FN 1, supra.