Advisory Opinion No. 2021-14 Rhode Island Ethics Commission Advisory Opinion No. 2021-14 Approved: February 9, 2021 Re: Peter Brent Regan, Esq. QUESTION PRESENTED: The Petitioner, the Town Solicitor for the Town of Middletown, a municipal appointed position, requests an advisory opinion regarding whether the Code of Ethics prohibits him from participation in the Middletown Town Council discussions regarding the proposed revision of an ordinance relative to Short-Term Residential Leases, given that the Petitioner and his spouse own property regulated by said ordinance. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, the Town Solicitor for the Town of Middletown, a municipal appointed position, is prohibited by the Code of Ethics from participation in the Middletown Town Council discussions regarding the proposed revision of an ordinance relative to Short-Term Residential Leases, given that the Petitioner and his spouse own property regulated by said ordinance. The Petitioner is the Town Solicitor for the Town of Middletown (“Town” or “Middletown”) and, as such, he is responsible for providing legal advice to the Middletown Town Council (“Town Council”). The Petitioner represents that the Town Council is presently considering revising the Town’s ordinance relative to Short-Term Residential Leases (“Ordinance”), as well as the reclassification of short-term rental properties from residential to commercial and the potential increase of registration fees and taxes for short-term residential properties. The Ordinance currently defines a short-term residential lease as a lease for a term of six (6) months or less, and requires that properties of owners engaging in short-term rentals be registered, for which the owners pay a registration fee each year. The Petitioner informs that, currently, the tax classification of short-term rental properties is governed by R.I. Gen. Laws § 44-5-11.8, which defines residential properties consisting of no more than five (5) dwelling units as “residential,” and residential properties consisting of more than five (5) dwelling units as “commercial.” He states that the Town Council will be considering a proposal to classify residential real estate used for short-term rentals as commercial, regardless of the number of dwelling units. The Petitioner further states that as the commercial tax rate is higher than the residential tax rate, the result will be an increase in real estate tax for those properties. The Petitioner informs that he and his spouse own a two-family house in Middletown that is registered as a short-term rental property as required under the Ordinance. The Petitioner further informs that he and his spouse live in the main unit as their primary residence and rent the second unit which, during the summer months, is rented on a weekly or other short-term basis. The Petitioner represents that there is a total of 186 short-term rental properties registered with the Town. The Petitioner states that his property is one of the 86 short-term rental properties categorized as owner-occupied and is currently not subject of the discussions of the proposed change in the tax classification.[1] However, he further states that he is not certain whether this will remain true throughout the Town Council’s discussions prior to finalizing the revision of the Ordinance and the reclassification of the properties, and whether and how he may be impacted by any final decision of the Town Council. Given this set of facts, the Petitioner request an advisory opinion regarding whether the Code of Ethics prohibits him from participation in the Middletown Town Council discussions regarding the proposed revision of the Ordinance. 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, or any person with his family, or his business associate, or any business by which he is employed, will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. Section 36-14-7(a). The Code of Ethics also 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 member, 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, any person within his family, any business associate, or any business by which the Petitioner is employed or which the Petitioner 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 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 any particular circumstance supports and justifies the application of the class exception, the Ethics 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. The Ethics Commission has previously applied the class exception in a variety of circumstances involving public officials and their real estate holdings. See, e.g., A.O. 2005-22 (applying the class exception and opining that an Exeter 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). However, in prior advisory opinions issued by the Ethics Commission involving situations where it was unclear from the onset whether and how a petitioner or his family member might be impacted by certain discussions and decision-making in which a petitioner sought to participate, the class exception was not applied. See, e.g., A.O. 2018-23 (opining that a member of the Portsmouth Town Council could not participate in the Town Council’s discussions and decision-making relative to mitigating the negative effects caused by the operation of a Town-supported wind turbine on neighboring homes, given that the Petitioner was one of the affected residents and it was unclear at the onset of the Town Council’s discussions how any resolution to the noise and shadow flicker problem will impact the petitioner and that such discussions placed him in a position in which he may participate in defining the groups to be impacted and the extent of the impact); A.O. 2003-58 (opining that the Director of Public Works in the Town of Warren was prohibited from participation in contract negotiations with the Steelworkers Union since it was unclear from the onset of negotiations how the contract would affect his daughter, who was a member of the Steelworkers Union). Here, although the Petitioner is not a member of the Town Council, he is a Solicitor and a public official and as such, his advice on various matters are part of his role as a public official. Providing advice to the Town Council constitutes “official activity” as that term is used in the Code of Ethics. Since it is unclear at the onset of the Town Council’s discussions whether and how the Town Council’s actions might financially impact the Petitioner and his spouse as owners of an owner-occupied short-term rental property, a sub-class of all short-term rental properties, it is the opinion of the Ethics Commission that the class exception is inapplicable here and the Petitioner must recuse from participation in the Town Council’s discussions and decision-making relative to such matters. Recusal shall be consistent with section 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) Other Related Authority: R.I. Gen. Laws § 44-5-11.8 Related Advisory Opinions: A.O. 2018-23 A.O. 2005-22 A.O. 2003-58 Keywords: Class Exception