Advisory Opinion No. 2000-74

Re: Westerly Housing Authority

QUESTION PRESENTED

The petitioner, Westerly Housing Authority, a municipal agency, requests an advisory opinion as to whether its Commissioners, who are also members of the Westerly Housing Association, a non-profit association, may vote to donate funding to that non-profit association.

RESPONSE

It is the opinion of the Rhode Island Ethics Commission that the Code of Ethics prohibits Westerly Housing Authority Commissioners, municipal appointed officials, from participating in the discussion or vote to donate funding to the Westerly Housing Association, a non-profit association, since they are members of the Board of Directors of the Association and, therefore, they and the Association are business associates. If, however, the Housing Authority is not able to achieve a quorum because of the recusals required by the Code of Ethics, the Rule of Necessity would allow the participation of one or more members, notwithstanding their conflict of interest, so as to achieve a quorum. However, consistent with the Rule of Necessity as interpreted by this Commission and the courts, the Commissioner selected to participate should be the individual whose interest would be affected least by his participation in the matter. Additionally, the participating Commissioner should make public disclosure of these facts and of the basis upon which he believes he can objectively participate and vote in the matter at issue, all prior to his participation and voting in connection with same.

The Westerly Housing Authority includes five members appointed by the Town Council. The Housing Authority’s charter states that its authority is to provide housing for the elderly and low-income individuals. Three of the Housing Authority Commissioners are also unpaid members of the Board of Directors of the Westerly Housing Association, a non-profit organization. The Westerly Housing Association’s purpose is to help provide cost-effective housing and assisted living for the elderly. The Westerly Housing Association is seeking a loan of $10,000 from the Housing Authority to defray architectural costs in developing a proposal. A representative of the Housing Association advised that it would be seeking funding (from sources other than the Authority), potentially in the tens of millions of dollars to complete the project and that he is unaware and believes unlikely that any other entity will be competing for these types of funds in Westerly due to the nature and complexity of the project. Additionally, he represented personally that the Association members would not financially benefit by virtue of the project.

Under the Code of Ethics, the members of the Authority may not participate in any matter in which they have an interest, financial or otherwise, which is in substantial conflict with the proper discharge of their duties in the public interest. See R.I. Gen. Laws §§ 36-14-5(a), 36-14-7(a). Pursuant to R.I. Gen. Laws § 36-14-5(d), the members are also prohibited from using their public position or confidential information received through their position to obtain financial gain, other than that provided by law, for themselves, a business associate, or any business in which the member is employed or which the member represents.

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. If an official has such a leadership position, the Commission has required the official to recuse him or herself if the interests of the organization would be affected by an action to be taken by his or her public agency. See A.O. 98-44 (opining that a Commissioner of Fire Safety Code Board of Appeal and Review should not participate in appeals involving property owned by the International Association of Firefighters (Local 799) and the Providence Firefighters Realty Corporation since the petitioner, who held a position with both entities that would permit him to affect the financial objectives of the organization, had a business association relationship with the organizations that triggered the prohibitions set forth in R.I. Gen. Laws §36-14-5(a)); A.O. 96-75 (advising three members of the General Assembly who also served as members of the Board of Directors of local hospitals to recuse themselves from hospital issues since they had a business association with the local hospitals); A.O. 95-59 (advising a member of the Smithfield School Committee to recuse himself from a vote concerning a community organization if the official’s association with the organization allowed him to affect the financial objectives of the organization); and A.O. 98-76 (concluding that a Narragansett Town Councilor should not participate in appropriating funding for the Chamber of Commerce since she served on its Board of Directors).

Here, the Commission concludes that Housing Authority Commissioners may not participate in the Authority’s consideration of the Westerly Housing Association’s funding request. As members of its Board of Directors, the Commissioners have a business association with the Westerly Housing Association that triggers the prohibitions set forth in R.I. Gen. Laws §§ 36-14-5(a), 5(d) and 5(f). We note that although related, the purposes of the two entities diverge in some respects. Since the Westerly Housing Association is not assuming the governmental functions of the Housing Authority, it must be considered a separate entity. Notice of recusal should be filed with both the Housing Authority and the Ethics Commission pursuant to R.I. Gen. Laws § 36-14-6.

However, in Advisory Opinion 92-1, this Commission recognized a "Rule of Necessity" exception for situations where recusals inhibited governmental process. In that opinion, we concluded that, where three members of the Smithfield Zoning Board of Review were required to recuse themselves from the consideration of a petition submitted by the Elks Lodge thereby preventing the Board from considering a matter at issue for lack of a necessary quorum established by the Supreme Court, one affected member could participate and/or vote on the matter at issue provided that, prior to the consideration of the petition, the three affected members conferred among themselves to select the member whose relationship with Elks would least likely influence his or her decision.

In the instant case, recusals would prevent the Authority from taking any action on the Westerly Housing Association’s instant request. We note that this matter is different than that presented by Advisory Opinion 98-127 (concluding a Town Councilor’s recusals on whether to provide indemnification for himself would not sufficiently inhibit governmental processes so as to warrant an exception under the Rule of Necessity or otherwise). The Association’s request may be consistent with the Housing Authority’s specific or general purposes. Based on its past advisory opinions, the Commission concludes that where a majority of commissioners must recuse themselves based upon their membership on the Board of Directors of the Westerly Housing Association, an affected Commissioner necessary to establish a quorum may participate in the Authority’s decision. To fulfill the quorum requirement, the affected Commissioners should decide between themselves which individual’s interest would be affected least by his participation. For example, as between an officer and non-officer member of the Association, the non-officer member should be the one to participate. Additionally, the participating Commissioner should make public disclosure of his relationship with the Westerly Housing Association, and, notwithstanding that relationship, the basis upon which he believes he can objectively participate and vote in the matter at issue, all prior to his participation and voting in connection with same.

Code Citations:

36-14-5(a)

36-14-7(a)

36-14-6

Related Advisory Opinions:

99-82

98-127

98-43

97-55

96-77

96-65

93-51

93-31

92-1

81-33

Keywords:

Non-profit association

Recusal

Rule of necessity