CONTRACTS: OFFICERS’ INTEREST IN: HQUSING AND REDEVELOPMEN'I`

AUTHORITIES: Housing and Redevelopment Authority _Commissioner is not prohibited from

performing work on projects approved by authority if notice and nonparticipation requirements
of Minn. Stat. § 469.009 (1992) are met. Minn. Stat. §§ 469.009, 471.87 (1992)

90

(Cr. Rcf. 430)

June 9, 1994

Ernest .I. Danflinger
315 Fourth Street
Farmington, Mn 55024

Dear Mr. Darflinger:

In your.letter to the office of the Attorney General, you set forth substantially the
following:

FAC'I`S

Under Minn. Stat. §469.003 (1992), each city in this state may establish a
Housing and Redevelopment Authority (HRA). A Housing and Redevelopment
Authority is composed of five commissioners appointed by the mayor with the
approval of the governing body of the city.

The City of Farmington has established a Housing and Redevelopment Agency.
Under the powers granted to in Minn. Stat. §469.012 (1992), the Farmington
HRA selects projects for redevelopment and enters into contracts with developers

One of the current Farmington HRA commissioners is the owner and operator of
a cabinet manufacturing business. This commissioner has stated his intent to bid
on cabinet work for the developments which are the subject of Farmington HRA
contracts for approved projects.

You ask substantially the following questions:
QUESTION ONE
Do the conflict of interest provisions set forth in Minn. Stat. §469.009 (1992) and
Minn. Stat. §471.87 (1992) prohibit this Commissioner from bidding on and participating in
projects approved by the Farmington HRA?
OPINION

Subject to the conditions set forth below. we answer your question in the negative Prior

to 1981, a commissioner of a Housing and Redevelopment Authority was prohibited from

Ernest J. Danflinger
Page 2

June 9, 1994

having any interest, direct or indirect. in any contract or proposed contract in connection with
any project. Minn. Stat. § 462.431 (1980`) ln 1981. that absolute prohibition was replaced by
Minn. Stat. § 462.432, which adopted a notice and non-participation requirement for situations
in which official actions of a commissioner or employee could substantially affect "his
financial interests, or those of a business with which he is associated." Act of May 4, 1981,
ch. 79. 1981 Minn. Laws 313-315. Thus it appears to have been contemplated that, after
1981, commissioners might lawfully have a personal interest in projects or contracts approved
by the HRA. Those notice and non-participation provisions are now contained in Minn. Stat.
§ 469.009 (1992). That section provides ing Lia that a potential conflict ot` interest is present
when:

...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.

The statute requires a commissioner who has a potential conflict of interest to disclose
that potential conflict to the commissioners of the Authority in writing no later than one week
after the commissioner becomes aware of the potential contiict. That commissioner is further
prohibited from attempting to influence any employee in any matter related to the action or
decision in question, cannot take part in the action or decision. and shall not be counted toward
a quorum during the portion of any meeting of the Authority in which the action or decision is
to be considered

ln addition to the disclosure and non-participation requirements pertaining generally to
actions or decisions of the Authority, Sectron 469.009. subd. 3, specifically provides:

A commissioner or employee of an Authority w@ knowingly talg:§ part in any
manner in making any sale, lease, or contract in the commissioner’s or
employee’s official capacity in which the commissioner or employee has a
personal financial interest is guilty ot` a gross misdemeanor.

(Emphasis addedl.

Ernest J. Danflinger
Page 3

June 9, 1994

Therefore. it appears to be further contemplated that HRA commissioners may have a
personal financial interests in sales. leases. or contracts of the Authority, but, in such cases,
may not knowingly participate in their official capacities. 'I`his approach differs from that
taken in Minn. Stat. § 471.87 (1992). which applies generally to public officers That section

provides:

to_ take pgt in any manner in making any sale. lease. or contract in official
capacity shall n_o_t voluntarilv have a nersonal financial interest in that sale. lease
or contract or personally benefit financially therefrom. Every public officer who
violates this provision is guilty of a misdemeanor.

(Emphasis added).

Our office has previously held that this prohibition applies whenever an officer is
"authorized to take pa't" in making a contract and may not be avoided by the officer
voluntarily abstaining from participation E, gg, Ops. Atty. Gen. 90a December 29, 1958;
901~3¢5 February 25, 1954.

In seeking to resolve the apparent contlict, we turn to the rules of statutory construction,
as set forth by the Legislature. ln particular. Minn. Stat. § 645.26. subd. l (1992) provides:

When a general provision in a law is in conflict with a special provision in the
same or another law, the two shall be construed. if possible. so that effect may be
given to both. If the conflict between the two provisions be irreconcilable the
special provision shall prevail and shall be construed as an exception to the
general provision. unless the general provision shall be enacted at a later session
and it shall be the manifest intention of the legislature that such general provision
shall prevail.

Where two statutes contain general and special provisions which seemingly are in
conflict. the general provision will be taken to affect only such situations within its general
language as are not within the language of the special provision Ehlert v. Graue, 292 Minn.
393. 195, N.W.2d 823. 826 (1972); Nathan v. St. Paul MLMI lns. Co., 243 Minn. 430,

Emest J . Danflinger
Page 4
June 9 , l 9 9 4

68 N.W.Zd 385, (1955). Thus in our view. the "special" notice and non-participation
provisions of Minn. Stat. § 469.009 will apply to specific circumstances where a commissioner
or affiliated organization has a personal interest in. or intends to participate in, a project or
contract to be approved by the HRA.

Another arguable approach to the same result may be to observe that. by virtue of the
language contained in Section 469.009. a commissioner who knows, or has reason to know of
a personal conflict of interest in an HRA project is simply not "authorized to take part"
officially in making contracts associated with that project. and is thus not technically within the
prohibition of Section 471 .87.

From either perspective. we conclude that a commissioner may enter contracts in his or
her private capacity upon HRA projects, if the notice and non-participation requirements of
Section 469.009 are met. In that regard, while the commissioners business will not be one of
the developers whose projects will be directly approved by the HRA. it is possible that the
commissioner could end up participating in the project through the bidding process conducted
by the developer. The statute not only prohibits a commissioner from participating in
decisions where the commissioners later participation is certain. but also prohibits
participation in decision making when the likelihood is indirect. Therefore, in our view, the
commissioner should follow the disclosure and non-participation provisions set forth in Minn.
Stat. §469.009 whenever the commissioner intends to bid on work to be performed in a
development project. if the commissioner were to contemplate bidding on work connected
with a large portion of the HRA's projects. he would then be precluded from participating
officially as a commissioner in connection with those projects. ln such circumstances, the
commissioner would be. in large part. ineffectual as a member of the HRA. Therefore. if the
commissioner proposes to bid for work on a significant portion of the HRA-approved projects.

he should consider resigning from his official position.

Emest J. Danflinger
_Page 5
June 9, 1994

The problem you present is just one indication of the need for legislative clarification of
the rules governing "conflicts of interest" in general and in government contracting in
particular. The absolute criminal prohibition of Minn. Stat. §471.87 against any public
officer having any personal financial interest in, or gaining personal financial benefit however
slight from, contracts. even as modified by the a_d g series of exceptions contained in
Section 471.88, stands in contrast to other statutory provisions. such as the notice and
non-participation requirements contained in Section 10A.07 applicable to certain state and
metropolitan local officials and in Section 469.009 discussed above. See also Lenz v. Coon
Creek Watershed Dist, 278 Minn. l, 153 N.W.Zd 209 (1967) and E.T.O.. lnc. v. 'l`own of
Marion, 375 N.W.Zd 815 (Minn. 1985) which discuss the common rule of disqualification of

 

public officials from participating in certain non-contract actions wherein they have a personal
interest. 1

There is no question that opportunity. or even the public perception of opportunity, for
self-dealing by public officials must be carefully avoided. However. it is submitted that not
every "personal financial interest" is of sufficient magnitude to support an absolute criminal
prohibition against a public officer holding or continuing to hold office if a proposed
"contract“ affecting that interest may arise. Furthermore, in light of the severe consequences
imposed for violation of the prohibitions of Sections 471.87 and 469.009. subd. 3, we believe

that public officials are entitled to clearer directions concerning wheri. and how. their personal

 

l. lt is not always clear whether the action before a public body is a "contract“ subject to
Section 471.87 or another sort of action which should be evaluated under the criteria
discussed in Leg. See also Minn. Stat. §§ 469.098 (Economic Development Authority).
469. 113 (Area Redevelopment Agencies)

Ernest J. Danflinger
Page 6

interests may permissibly intersect with those of a government agency with which they serve.

Very truly yours,

HUBERT H. HUMPHREY III
Attorney General

KENNETH E. RASCHKE, IR.
Assistant Attorney General

(612) 297-1141

KER:sr.es?