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HomeMy WebLinkAbout10.a. Declaration of Potential Conflict of Interest CITY OF ROSEMOUNT EXECUTIVE SUNIlKARY FOR ACTION PORT AUTHORITY MEETING DATE: �N , � AGENDA ITEM: DECLARATION OF POTENTIAL AGENDA SECTION: CONFLICT OF INTEREST MEMBERS ISSUES PREPARED BY: JOHN MILLER, AGENDA NO. ECONOMIC DEVELOPMENT COORDINATOR 10 . A. ATTACHMENTS: DECLARATION OF POTENTIAL APPROVED BY: CONFLICT OF INTEREST, CORRESPONDENCE FROM STEPHEN BUBAL In a statement dated August 3 , 1994 Commissioner McMenomy has identified a potential conflict of interest . RECONIl�2ENDED ACTION: MOTION to include Commissioner McMenomy' s statement in the minutes of the August 16, 1994, Port Authority meeting. PORT AUTHORITY ACTION: , � , DECLARATION OF POTENTIAL CONFLICT OF INTEREST I,the undersigned,being the duly elected and acting Mayor of the City of Rosemount and also a Commissioner of the Rosemount Port Authority hereby declare that I am aware that an organization with which I am or may become affiliated with is reasonably likely to become a participant in a project or development that will be affected by decisions of Port Authority and its board of commissioners,and by decisions of the City Council. I fuRher declare that any project herein described is in[he preliminary talk stage at the present time and that no commitments have been made by any party involved to the best of my knowledge, information and belief. Said talk involves a site at the Rosemount Business Park,or in the alternative,a site at Carlson Tractor&Equipment Company(The southwest quadrant of Highways 3 and Dakota County 42)for a motel and restaurant,and other future commercial development. I further declare that some of the discussion known to me involves the fact situation more particularly described in the letter attached as E�►ibit A from Holmes&Graven,Rosemount City Attorneys,dated July 27th, 1994,but the project as it may develop, may take other forms. I further declare that I do not have and do not expect to have any financial interest in the subject project, in whatever form it may take,but, since my father and other family members are involved in various capacities, it is possible that this may change. I further declare that if there is any change,I will forthwith disclose my personal interest,and take whatever action may be appropriate and advisable in order that I remain in full compliance with the laws of the State of Minnesota and the ordinances of the City of Rosemount. I anticipate that assistance in development of any portion of the project herein described will be requested of the Port Authority, using its powers as a housing and redevelopment authority under Minnesota Statutes, Section 469.001 to 469.047(the "HRA Act"). Pursuant to Section 469.009 of the HRA Act, I hereby submit this statement of potential conflict of interest and request that it be entered in the minutes of the PoR Authority at its meeting on , 1994. Further, I will not attempt to influence any City personnel or Port Authority personnel in any manner related to the above described matter,wilt not take part in any action or decision related to that matter,and will not be counted toward a quorum during the portion of any meeting of the City Council or Port Authority Board of Commissioners in which that matter is to be considered. DA'TED: August 3, 1994. Edward B. McMenomy Mayor-City of Rosemount and Commissioner-Rosemount Port Authority � " • HOLMES & GRAVEN . CHARTERED Attorneys at I.aw 470 Pillsbury Ceoter,Minneapdis,Minnesota 55402 ROBERT C.LONG ROBERT A.ALSOP (612)337-9300 RONALD H.BATTY LAURA K.MOLLET STEPHEN J.Bus[1L Facaimile(612)337-9310 � BwRBARA[,.POB7wOOD JOHN B.DEAN � MAAY G.DOBBINS JAME.4 M.STROMII�;N JAMES J.THOMSON,JR. STFFANIE N.GALEY LARRY M.WERTHEtM CORRINE A.HE[NE BONN[E L.WQ,KINS JAMES S.HOLMES GARY P.WINTER DAV[DJ•KENNEDY �TTER'S DII2ECT DIAL _ JOHN R.LARSON � (612) 337-9228 DAVID L.GBwvEN(192AI9v1) WELL[NGTON H.LAW OF COUNSEL CHARLES L.LEFEVEItE �JUl Z/ 1994 ROBERT C.CARLSON JOHN M.LEFEVRE,JR. Y � � ROBERT L.DAVID30N ROBERT J•LINDALL T.JAY SALMEN Mayor Edward McMenomy RECEIVED City of ftosemount P.O. Box 510 Rosemount, I�Iiv 5506� JUL 2 81994 RE: Conflict of Interest Question ClTY Ur nvo��v�uuNT Dear Ed: You asked us to advise whether your relationship to a project that may come before the Rosemount Port Authority poses conflict of interest problems under Minnesota law, and if so how such conflicts can be addressed. I understand the facts to be as follows. You currently serve as a Port Authority commissioner. The Port Authority acquired certain property (the "Development Property") in the City for future commercial or industrial development. Company A, with which you currently have no financial or contractual relationship, proposes to acquire the Development Property from the Port Authority in order to construct a motel on that site. Presumably, Company A will enter a development agreement with the Port Authority. Company A, in turn, proposes to convey the Development Property to Company B, which is owned by your father, and with which you currently have no financial or contractual relationship. That conveyance will take the form of a "like-kind exchange" for certain property in another city. Company B will assume the developer's rights in the development agreement (presumably with the Port Authority's consent) and develop the motel on the Development Property. Company A will own the exchanged property in another City. At some time after the development agreement is approved and the land transaction is complete, you may acquire an interest in Company A. You do not intend to have any financial interest in Company B, which will own the motel. However, Company C, in which you currently have a financial interest, may enter a contract with Company B after the motel is completed, to manage the motel. I also understand that no proposal has been made to the Port Authority by Company A or B or by you, and that no Authority action of any kind has yet been requested by any party. There are two possible conflict of interest provisions that might apply to this situation. The first is Minnesota Statutes, Section 469.009, which governs housing and redevelopment authorities (HRAs) . Under the State legislation and City enabling resolution that created the Port Authority, the Authority has all the powers SJH73736 R8230-1 EXHIBIT A r ♦ • Mayor Edward McMenomy July 27, 1994 Page 2 of both a port authority and an HRA. If a project is carried out under HRA powers, one can reasonably conclude that the HRA conflict provisions govern actions related to that project. Thus, the first analysis assumes that the motel project is developed under HRA powers, i.e, by creating a "redevelopment project" under Sections 469.001 to 469.047 (the "HRA Act") . Under the HRA Act, a commissioner must disclose potential conflicts of interest before making any decision or taking an action. A conflict of interest is present if the commissioner "knows or has reason to know that the organization with which the commissioner . . . is affiliated is or is reasonably likely to become a participant in a project or development which will be affected by the action or decision." Minnesota Statutes, Section 469.00, subd. 1. Within one week after the comtnissioner becomes aware of the potential conflict, he or she must submit to the board a written statement describing the matter and the potential conflict. Further, a commissioner who "knowingly takes part in any manner in making any sale, lease, or contract in the commissioner's . . . official capacity in which the commissioner . . . has a personal financial interest is guilty of a gross misdemeanor." Section 469.009, subd. 3. Thus, a commissioner must both disclose potential conflicts before taking "actions" or making "decisions," and abstain from discussions and votes relating a sale lease or contract in which he or she has a financial interest. Whether or not your possible relationship to the motel project constitutes a conflict under this statute, the prudent course would be to file the required disclosure statement and abstain from any discussions regarding the project and any contracts related to it. The statement should be filed within one week after the project is formally or informally brought to the Authority by Company A or B. Taking these actions will "cure" any potential conflict under the HRA Act. The second possible conflict provision appears in Minnesota Statutes, Section 471.87, which provides that any "public officer who is authorized to take part in any manner in making any sale, lease, or contract in official capacity shall not voluntarily have a bersonal financial interest in that sale, lease, or contract or personally benefit financially therefrom." Violation of that provision is a gross misdemeanor and renders the contract void. The significance of this provision is that it applies whenever the officer is "authorized to take part" in making the contract. That is, the conflict may not be avoided simply by abstaining from discussions or votes; the officer must resign or avoid the financial interest. The Minnesota Attorney General has ruled that the HRA Act provision, which permits the officer to serve if the disclosure and abstention rules are satisfied, supersedes Section 471.87 when the conflict occurs in the HRA context. As noted above, it is reasonable to conclude that a Port Authority commissioner, exercising the Authority's HRA powers, is entitled to all the rights and obligations of HRA commissioners under the HRA Act. SJH73734 R8230-1 � Mayor Edward McMenomy July 2?, 1994 Page 3 However, if the HRA Act provision does not apply to a Port Authority commissioner, the question remains whether the facts here fall within the conflict prohibited under Section 471.87. Arguably, they do not. First, the prohibition only applies to a personal financial interest in a sale, lease or contract. Here, the only sale or contract to which the Authority is a party will be the development agreement between the Port Authority and Company A, and most likely an assignment of that agreement to Company B. At the time of that agreement and assignment, you will have no financial interest in either Company A or Company B. The fact that your father owns Company B does not, by itself, mean that you have a financial interest in Company B's contracts. Assuming there �re no separate contracts or agreements regarding the motel project between you and your father, any financial benefit you might receive from a contract involving Company B {for example, by inheritance) is remote and speculative. Likewise, the fact that you may later have a financial interest in Company A does not seem to fall within the prohibited financial interest under the statute. You will not have an interest in Company A when it enters a contract with the Port Authority. If you later obtain an interest in Company A, you will not benefit financially from the prior contract, assuming that any financial arrangements you make with the Company are "arms length" and upon terms that would be available to any investor in the company. This conclusion also assumes that, at the time the motel project is approved, there is no separate agreement (written or oral) regarding the terms of your investment in Company A at some future date. Finally, the fact that Company C may enter a management contract with Company B does not constitute a prohibited financial interest. Company C will have no contract with the Port Authority at any time. The management contract will presumably be based on fair market value for management services received. That you have an interest in Company C will not result in a financial benefit to you from any contract which you are "authorized to take part" in making in your official capacity as a Port Authority commissioner. To sum up, the situation you describe reasonably falls within the purview of the HRA Act conflict rules. You will satisfy those rules by disclosing the potential conflict described here and abstaining from all discussions and votes on the matter. Even if the HRA statute does not apply, in our reasoned view the facts described here do not create a prohibited financial interest within the meaning of Minnesota Statutes, Section 471.87. Therefore, disclosure and abstention will adequately address any potential conflict. If you have further questions about this issue, please contact me or Charlie LeFevere. Ve truly ours, Step J. ubul cc: Tom Burt Charlie LeFevere 9JH7373d RS230-1