OPINION NUMBER - 114

ADOPTED - 1988/06/24

SUBJECT - Conflicts of Interest.

REQUESTED BY: Tom Moser, General Manager, Lewis & Clark Natural Resources District.

QUESTION: May a Director of a Natural Resources District be employed as a project operator for a rural water project functioning under the auspices of the Natural Resources District?

CONCLUSION

Yes.

FACTS

We are advised that Lawrence Zavadil of Crofton Nebraska is presently a Director on the Lewis and Clark Natural Resources District Board. He is also a resident of the water project area of the Cedar-Knox Rural Water Project. The rural water project is a special improvement water project which is financed by assessment to its users. Mr. Zavadil was appointed by the NRD to be the liaison director to serve on the project advisory committee which guides the project as a subcommittee of the NRD. The position of project operator will be vacant as of January, 1989 due to a retirement. Mr. Zavadil is interested in applying for the position which is likely to have a salary of approximately $12,000 per year. The selection of the operator will be made after a public announcement of the opening of the position and a full consideration of the applications and interviews. While the advisory committee will make the decision, the decision is subject to the approval of the NRD directors. The concern is with whether or not Mr. Zavadil must resign from his position as director on the NRD Board if he is employed as a project operator.

ANALYSIS

We need first to consider what manner of entity a rural water project is. A review of the statutes affecting natural resources districts reveals that each district has the power and authority to establish improvement project areas within the district for the purpose of carrying out projects authorized by law including rural water projects. Section 2-3252(2). While provision is made for the establishment of an improvement area by the petition of land owners, it is clear that all responsibility for administering the project rests with the Board of Directors of the Natural Resources District. It therefore appears that an employee of the project is in reality an employee of the district. While it may be true that in many cases the water project keeps separate books and accounts from the district, this likely a practice which has developed because the project does not necessarily benefit the district at large, merely those land owners within the project area. Since the land owners of the project area subsidize the project, the separation of funds and records facilitates the accounting process.

Section 49-14,101(3) states that no public official or public employee shall use that person's public office or any confidential information received through the holding of a public office to obtain financial gain, other than compensation provided by law, for himself or herself, a member or his or her immediate family, or a business with which the individual is associated. It is clear that a director is not permitted to use his or her office to secure a financial gain. Therefore, he would be prohibited from using his public office in any way to secure for himself the position of project operator.

Essentially, Mr. Zavadil is seeking to enter into an employment contract with the Natural Resources District. Some employment contracts are governed by Section 49-1499.01. However, inasmuch as this provision is specifically applicable to the employment of immediate family members, we must look to the general statute application. Contracts with a district in which a director of the district has an interest are generally governed by Section 49-14,103.01. Subparagraph 2 of that section provides that no officer (including director of a natural resources district) may have an interest in a contract to which his or her governing body is a party. Subparagraph 3 provides that such an interest is permissible if the interested officer: a) makes a declaration on the record to the governing body responsible for the approving of the contract regarding the nature and extent of his interest prior to the official consideration of the contract; b) does not vote on the matter of granting the contract; c) does not act for the governing body which is a party to the contract as to the inspection or performance under the contract which he or she has an interest. Therefore, compliance with the provisions of Section 49-14,103.01 would permit the director of a Natural Resources District to become employed by the district which he or she helps to direct. While this may be a somewhat troubling conclusion, we note that in the recent past there existed in the Nebraska statutes Section 2-3216. This statute specifically provided that a director of a natural resources district could not be employed by the district. This statute was repealed by the Legislature in 1984 and was not replaced with any other statute which could be construed as prohibiting a director from being employed by his or her own district. This is not to say, however, that the contemplated activity is without limitation.

A director fulfilling a dual role needs to be ever conscious of the provisions of Section 49-14,101(3), violation of which could potentially result in criminal penalties.