ADVISORY OPINION #188

 

Subject: Conflicts of Interest; Interest in a Contract

 

Requested by: Glenn D. Johnson, Joint Antelope Valley Authority and Barbara Morley, Lower Platte South Natural Resources District

 

Question Presented: Does a director of an NRD have an interest in a contract with her governing body if the potential contract is between the director and an Interlocal Agency of which the NRD is a member?

 

Conclusion: No.

 

Facts: The Lower Platte South Natural Resources District (NRD) has entered into an agreement with the City of Lincoln (City) and the University of Nebraska (University) pursuant to the Interlocal Cooperation Agreement Act.  See §§13-801 to 13-827 of the Nebraska Statutes.  The agreement creates the Joint Antelope Valley Authority (JAVA).  JAVA is charged with carrying out the Antelope Valley Project.  The Antelope Valley Project is a multi-purpose project consisting of flood protection, transportation and roads, and community revitalization.  JAVA is governed by an administrative board which consists of one representative from the City, one from the University, and one from the NRD.  The representative from the NRD is its General Manager, Glenn D. Johnson.

 

JAVA is in the process of acquiring the land necessary for the construction of the project.  Morley is a director of the NRD.  She is not a member of the administrative board of JAVA.  She is the owner of a house that was not listed as a proposed acquisition when the plan was submitted for approval by the federal government, the City, the University, and the NRD.  Upon the completion of public hearings, the property was added to the acquisition list at the request of the City as a potential site for park expansion.

 

By written agreement, the City is acting on behalf of JAVA to acquire land for the various components of the project.    The City is currently negotiating with landowners.  Any agreements for the acquisition of land would need to be approved by the JAVA Administrative Board.  In the event that a settlement

 

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cannot be reached with the landowner, the JAVA Administrative Board may decide to commence condemnation proceedings.

 

Morley wishes to know if the provisions of §49-14,103.01(8) apply to this potential land acquisition.

 

Analysis: Section 49-14,103.01 of the Nebraska Political Accountability and Disclosure Act generally provides that “officers” may not have an interest in a contract with the governing body on which they serve.  The term “officer” includes “a member of the board of directors of a natural resources district.” See §49-14,103.01(1)(a).   Section 49-14,103.01 establishes exceptions to the prohibition if certain procedures are followed.  Section 49-14,103.01(3) provides that the prohibition against having an interest in a contract does not apply if the interested officer:

 

(a) Makes a declaration on the record to the governing body responsible for approving the contract regarding the nature and extent of his or her interest prior to official consideration of the contract;

(b) Does not vote on the matters of granting the contract, making payments pursuant to the contract, or accepting performance of work under the contract, or similar matters relating to the contract, except that if the number of members of the governing body declaring an interest in the contract would prevent the body with all members present from securing a quorum on the issue, then all members may vote on the matters; and

(c) Does not act for the governing body which is party to the contract as to inspection or performance under the contract in which he or she has an interest.

 

Section 49-14,103.01(8) provides as follows:

 

           (8) Nothing in this section shall prohibit a director of a natural resources district from acting as a participant in any of the conservation or other general district programs which are available for like participation to other residents and landowners of the district or from granting, selling, or otherwise transferring to such district any interest in real property necessary for the exercise of its powers and authorities if the cost of acquisition thereof is equal to or less than that established by a board of three registered, licensed, certified residential, or certified general real estate appraisers or by a court of competent jurisdiction in an eminent domain proceeding.

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District payments to a director of a natural resources district of the fair market value for real property owned by him or her and needed for district projects, or for cost sharing for conservation work on such director's land or land in which a director may have an interest, shall not be deemed subject to this section.

 

Stated simply, the noted statute provides that an officer may not have an interest in a contract with his or her governing body unless there is public disclosure of the interest; the officer abstains from participating or voting on the matter and the officer does not act on behalf of the governing body.  In the case of an NRD director selling land to the NRD, there are additional requirements for establishing a fair value for the land. 

 

In the event of an acquisition of the NRD director’s land by JAVA, does the director have an interest in a contract with the NRD?   In our opinion, the answer is no.

 

Section 13-804(2) of the Interlocal Cooperation Act provides that any two or more public agencies may enter into agreements with each other for joint or cooperative action.  Section 13-804(3)(b) provides that the agreement shall specify the “general organization, composition, and nature of any separate legal or administrative entity created by the agreement together with the powers delegated to the entity.”

 

As to the Interlocal Cooperation Act, Attorney General Opinion #96087 states:

 

The intent of the Act is to authorize "public agencies" to enter into cooperative agreements for the joint exercise of their powers to efficiently provide services and facilities. Any agreement entered into for this purpose may establish a separate legal entity and the agreement is required to specify the organization, composition, and nature of any legal or administrative entity created. See Neb. Rev. Stat. § 13-804 (Cum. Supp. 1996).

 

JAVA is a government body which is separate and distinct from the three governmental entities that formed it.  Section 4.02.01 of the Interlocal agreement signed by the parties provides that “JAVA shall constitute a separate administrative entity, exercising the public powers granted by this Agreement and acting on behalf of The Three Partners.”   We note also that section 4.05.2 of the agreement confers upon JAVA “the right to acquire property including by condemnation if necessary.”

 

 

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The NRD director does not serve on the Administrative Board of JAVA.  The approval of the NRD is not needed for JAVA to acquire land.  Therefore, if JAVA and the NRD director enter into a contract for the sale of her land, she would not have an interest in a contract with her governing body.  The agreement would not be subject to the provisions of §49-14,103.01.

 

Summary: A member of the board of directors of a Natural Resources District does not have an interest in a contract with the NRD if the member sells land to a separate legal entity created pursuant to the Interlocal Cooperation Act, even if the NRD is part of the agreement which created the Interlocal entity.

 

ADOPTED as an advisory opinion pursuant to Section 49-14,123(10) and Title 4, Chapter 1, Rules of Practice and Procedure.  As provided in Section 49-14,123(10), this advisory opinion shall be binding upon the Commission unless amended or revoked concerning the person or public body who requested the opinion and acted in reliance thereon in good faith unless material facts were omitted or misstated by the person in the request for the opinion.

 

DATED the ____ day of March 2004

 

NEBRASKA ACCOUNTABILITY AND DISCLOSURE COMMISSION

 

 

 

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John Bergmeyer, Chairman